UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-K

Annual Report Pursuant to Section


RANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2009
or 15(d)
of the Securities Exchange Act of 1934 

For the fiscal year ended April 30, 2007 

£TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 000-14851


Investors Real Estate Trust
(Exact name of Registrant as specified in its charter)


North Dakota

45-0311232

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

12 Main


3015 16th Street South
SW, Suite 100
Minot, North Dakota 58701
(Address of principal executive offices)


701-837-4738
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

Common Shares of Beneficial Interest (no par value) - NASDAQ Global Select Market
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (no parvalue)-
NASDAQ Global Select Market


Securities registered pursuant to Section 12(g) of the Act:
None

________________________________ 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.o Yes  þ No 

oYesþNo
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.o Yes  þ No 

oYesþNo
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.
þYesoNo

2009 Annual Report


Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
oYesoNo
þ Yes  o No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. þo

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, (as definedor a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). 

Act.

o Large accelerated filer

þ Accelerated filer

o Non-accelerated filer

o Smaller reporting Company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No

oYesþNo
The aggregate market value of the Registrant’s outstanding common shares of beneficial interest held by non-affiliates (i.e., by persons other than officers and trustees of the Registrant as reflected in the table in Item 12 of this Form 10-K, incorporated by reference from the Registrant’s definitive Proxy Statement for its 20072009 Annual Meeting of Shareholders) was $463,628,772$561,436,684 based on the last reported sale price on the NASDAQ Global Select Market on October 31, 2006.

2008.

The number of common shares of beneficial interest outstanding as of June 29, 2007,30, 2009, was 48,581,306.

63,460,743.

References in this Annual Report on Form 10-K to the “Company,” “IRET,” “we,” “us,” or “our” include consolidated subsidiaries, unless the context indicates otherwise.

Documents Incorporated by Reference: Portions of IRET’s definitive Proxy Statement for its 20072009 Annual Meeting of Shareholders to be held on September 18, 200715, 2009 are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) hereof.


2007
2009 Annual Report 2



INVESTORS REAL ESTATE TRUST

INDEX

PAGE

PART I

Item 1.    Business....................................................................................................................................................

5

Item 1A. Risk Factors..............................................................................................................................................

11

10

Item 1B. Unresolved Staff Comments................................................................................................................

20

Item 2.    Properties..................................................................................................................................................

20

21

Item 3.    Legal Proceedings....................................................................................................................................

30

31

Item 4.    Submission of Matters to a Vote of Security Holders......................................................................

30

31

PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities...................................................................................................................................................

30

31

Item 6.    Selected Financial Data.........................................................................................................................

32

33

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations...

32

34

Item 7A. Quantitative and Qualitative Disclosures about Market Risk........................................................

52

55

Item 8.    Financial Statements and Supplementary Data...............................................................................

53

56

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....

53

56

Item 9A. Controls and Procedures........................................................................................................................

53

56

Item 9B. Other Information...................................................................................................................................

56

58

PART III

Item 10.  Trustees, Executive Officers and Corporate Governance...............................................................

Governance

56

58

Item 11.  Executive Compensation......................................................................................................................

56

58

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

56

58

Item 13.  Certain Relationships and Related Transactions,, and Trustee Independence............................

Independence

56

58

Item 14.  Principal Accountant Fees and Services.............................................................................................

56

59

PART IV

Item 15.  Exhibits, Financial Statement Schedules............................................................................................

57

59

Exhibit Index............................................................................................................................................................

57

59

Signatures..................................................................................................................................................................

59

61

Report of Independent Registered Public Accounting Firm and Financial Statements..............................

F-1 to F-41


2007
2009 Annual Report3

Index

Special Note Regarding Forward Looking Statements

Certain statements included in this Annual Report on Form 10-K and the documents incorporated into this document by reference are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include statements about our belief that we have the liquidity and capital resources necessary to meet our known obligations and to make additional real estate acquisitions and capital improvements when appropriate to enhance long term growth; and other statements preceded by, followed by or otherwise including words such as “believe,” “expect,” “intend,” “project,” “plan,” “anticipate,” “potential,” “may,” “will,” “designed,” &ldq uo;estimate,“estimate,” “should,” “continue” and other similar expressions. These statements indicate that we have used assumptions that are subject to a number of risks and uncertainties that could cause our actual results or performance to differ materially from those projected.

Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:

•   

the economic health of the markets in which we own and operate multi-family and commercial properties, in particular the states of Minnesota and North Dakota, or other markets in which we may invest in the future;

•   

the economic health of our commercial tenants;

•   

market rental conditions, including occupancy levels and rental rates, for multi-family residential and commercial properties;

•   

our ability to identify and secure additional multi-family residential and commercial properties that meet our criteria for investment;

•   

the level and volatility of prevailing market interest rates and the pricing of our common shares of beneficial interest;

•   

financing risks, such as our inability to obtain debt or equity financing on favorable terms, or at all; and 

•   

compliance with applicable laws, including those concerning the environment and access by persons with disabilities. 

disabilities; and

the availability and cost of casualty insurance for losses.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of this Annual Report on Form 10-K and the other documents we file from time to time with the Securities and Exchange Commission (“SEC”).

In light of these uncertainties, the events anticipated by our forward-looking statements might not occur. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause our actual results to differ materially from those contemplated in any forward-looking statements included in this Annual Report on Form 10-K should not be construed as exhaustive.

2007

2009 Annual Report4

Index


PART I

Item 1. Business

Overview

Investors Real Estate Trust (“IRET” or the “Company”) is a self-advised equity Real Estate Investment Trust (“REIT”) organized under the laws of North Dakota. Since our formation in 1970, our business has consisted of owning and operating income-producing real estate properties. We are structured as an Umbrella Partnership Real Estate Investment Trust or UPREIT and we conduct our day-to-day business operations thoughthrough our operating partnership, IRET Properties, a North Dakota Limited Partnership (“IRET Properties” or the “Operating Partnership”). Our investments consist of multi-family residential properties and commercial office, medical, industrial and retail properties. These properties are located primarily in the upper Midwest states of Minnesota and North Dakota. For the twelve months ended April 30, 2007,2009, our real estate investments in these two states accounted for 69.8%68.5% of our total gross revenue. Our principal executive offices are locate dlocated in Minot, North Dakota. We also have officesan office in Minneapolis, Minnesota, and Omaha, Nebraska, and property management offices in Omaha, Nebraska; Kansas City, Kansas andKansas; St. Louis, Missouri. 

Missouri and Jamestown, North Dakota.

We seek to diversify our investments among multi-family residential and office, medical, industrial and retail properties. As of April 30, 2007,2009, our real estate portfolio consisted of:

•    69

77 multi-family residential properties, containing 9,3979,645 apartment units and having a total real estate investment amount net of accumulated depreciation of $400.1$426.8 million;

•    64

67 office properties containing approximately 4.85.0 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $492.2$498.6 million;

•    34

49 medical properties (including senior housing/assisted living facilities)housing) containing approximately 1.72.3 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $250.0$345.9 million;

•    13

18 industrial properties (including miscellaneous commercial properties) containing approximately 2.02.9 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $67.0$95.2 million; and

•    37

33 retail properties containing approximately 1.5 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $99.4$100.2 million.

Our residential leases are generally for a one-year term. Our commercial properties are typically leased to tenants under long-term lease arrangements. As of April 30, 2007,2009, no single tenant accounted for more than 10% of our total rental revenues.

2007 Annual Report 5

Structure

We were organized as a REIT under the laws of North Dakota on July 31, 1970.

Since our formation, we have operated as a REIT under Sections 856-858 of the Internal Revenue Code of 1986, as amended (the “Code”), and since February 1, 1997, we have been structured as an UPREIT. Since restructuring as an UPREIT, we have conducted all of our daily business operations through IRET Properties. IRET Properties is organized under the laws of North Dakota pursuant to an Agreement of Limited Partnership dated January 31, 1997. IRET Properties is principally engaged in acquiring, owning, operating and leasing multi-family residential and commercial real estate. The sole general partner of IRET Properties is IRET, Inc., a North Dakota corporation and our wholly-owned subsidiary. All of our assets (except for qualified REIT subsidiaries) and liabilities were contributed to IRET Properties, through IRET, Inc., in exchange for the sole general partnership interest in IRET Properties. As of April 30, 2007,2009, IRET, Inc. owned a 70.9% inter est74.3% interest in IRET Properties. The remaining ownership of IRET Properties is held by individual limited partners.


2009 Annual Report 5
Index

Investment Strategy and Policies

Our business objective is to increase shareholder value by employing a disciplined investment strategy. This strategy is focused on growing assets in desired geographical markets, achieving diversification by property type and location, and adhering to targeted returns in acquiring properties.

We generally use available cash or short-term floating rate debt to acquire real estate. We then replace such cash or short-term floating rate debt with fixed-rate secured debt, typically in an amount equal to 65.0% to 75.0% of a property’s appraised value.debt. In appropriate circumstances, we also may acquire one or more properties in exchange for our common shares of beneficial interest (“common shares”) or for limited partnership units of IRET Properties (“limited partnership units” or “UPREIT Units”), which are convertible, after the expiration of a minimum holding period of one year, into cash or, at our sole discretion, into our common shares on a one-to-one basis.

Our investment strategy is to invest in multi-family residential properties, and in office, medical, industrial and retail commercial properties that are leased to single or multiple tenants, usually for five years or longer, and are located throughout the upper Midwest. We operate mainly within the states of North Dakota and Minnesota, although we also have real estate investments in South Dakota, Montana, Nebraska, Colorado, Idaho, Iowa, Kansas, Michigan, Missouri, Texas and Wisconsin.

In order to implement our investment strategy we have certain investment policies. Our significant investment policies are as follows:

Investments in the securities of, or interests in, entities primarily engagedin real estate activities and other securities. While we are permitted to invest in the securities of other entities engaged in the ownership and operation of real estate, as well as other securities, we currently have no plans to make any investments in other securities.

Any policy, as it relates to investments in other securities, may be changed by a majority of the members of our Board of Trustees at any time without notice to or a vote of our shareholders.

Investments in real estate or interests in real estate. We currently own multi-family residential properties and/or commercial properties in 13 states. We may invest in real estate, or interests in real estate, located anywhere in the United States; however, we currently plan to focus our investments in those states in which we already have property, with specific concentration in Minnesota, North Dakota, Nebraska, Iowa, Colorado, Montana, South Dakota, and Kansas. Similarly, we may invest in any type of real estate or interest in real estate including, but not limited to, office buildings, apartment buildings, shopping centers, industrial and commercial properties, special purpose buildings and undeveloped acreage. Under our Third Restated Trustees’ Regulations (Bylaws), however, we may not invest more than 10.0% of our total assets in unimproved real estate, excluding property being developed or property where development wil lwill be commenced within one year.

2007 Annual Report 6

It is not our policy to acquire assets primarily for capital gain through sale in the short term. Rather, it is our policy to acquire assets with an intention to hold such assets for at least a 10-year period. During the holding period, it is our policy to seek current income and capital appreciation through an increase in value of our real estate portfolio, as well as increased revenue as a result of higher rents.

Any policy, as it relates to investments in real estate or interests in real estate may be changed by our Board of Trustees at any time without notice to or a vote of our shareholders.

Investments in real estate mortgages. While not our primary business focus, from time to time we make loans to others that are secured by mortgages, liens or deeds of trust covering real estate. We have no restrictions on the type of property that may be used as collateral for a mortgage loan; provided, however, that except for loans insured or guaranteed by a government or a governmental agency, we may not invest in or make a mortgage loan unless an appraisal is obtained concerning the value of the underlying property.  Unless otherwise approved by our Board of Trustees, it is our policy that we will not invest in mortgage loans on any one property if in the aggregate the total indebtedness on the property, including our mortgage, exceeds 85.0% of the property’s appraised value.  We can invest in junior mortgages without notice to, or the approval of, our shareholders.  As of April 30, 2007,2008 and 2009, we had no junior mor tgagesmortgages outstanding.  We had two contracts for deed outstanding as of April 30, 2008, with a combined balance of

2009 Annual Report6
Index

approximately $541,000, net of reserves, due to us. We had one contract for deed outstanding as of April 30, 2007,2009, with a balance of $411,000approximately $160,000, net of reserves, due to us.

Our policies relating to mortgage loans, including second mortgages, may be changed by our Board of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders.

Policies With Respect to Certain of Our Activities

Our current policies as they pertain to certain of our activities are described as follows:

Cash distributions to shareholders and holders of limited partnership units. One of the requirements of the Internal Revenue Code of 1986, as amended, for a REIT is that it distribute 90% of its net taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. We intend to continue our policy of making cash distributions to our common shareholders and the holders of limited partnership units of approximately 65.0% to 90.0% of our funds from operations and to use the remaining funds for capital improvements or the purchase of additional properties. This policy may be changed at any time by our Board of Trustees without notice to, or approval of, our shareholders. We have increased our cash distributions every year since our inception 3739 years ago and every quarter since 1988.

Issuing senior securities. On April 26, 2004, we issued 1,150,000 shares of 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series A preferred shares”). Depending on future interest rate and market conditions, we may issue additional preferred shares or other senior securities which would have dividend and liquidation preference over our common shares.

Borrowing money. We rely on borrowed funds in pursuing our investment objectives and goals. It is generally our policy to seek to borrow up to 65.0% to 75.0% of the appraised value of all new real estate acquired or developed. This policy concerning borrowed funds is vested solely with our Board of Trustees and can be changed by our Board of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders. Such policy is subject, however, to the limitation in our Bylaws, which provides that unless approved by a majority of the independent members of our Board of Trustees and disclosed to our shareholders in our next quarterly report along with justification for such excess, we may not borrow in excess of 300.0% of our total Net Assets (as such term is used in our Bylaws, which usage is not in accordance with GAAP, “Net Assets” means our total assets at cost before deducting depreciation or other non-cash reser ves,reserves, less total liabilities). Our Bylaws do not impose any limitation on the amount that we may borrow against any one particular property.  As of April 30, 2007,2009, our ratio of total real estate mortgages to total real estate assets was 72.2%72.7% while our ratio of total indebtedness as compared to our Net Assets (computed in accordance with our Bylaws) was 149.6%141.8%.

Offering securities in exchange for property. Our organizational structure allows us to issue shares and to offer limited partnership units of IRET Properties in exchange for real estate. The limited partnership units are convertible into cash, or, at our option, common shares on a one-for-one basis after a minimum one-year holding period. All limited partnership units receive the same cash distributions as those paid on common shares. Limited partners are not entitled to vote on any matters affecting us until they convert their limited partnership units to common shares.

2007 Annual Report 7

Our Articles of Amendment and Third Restated Declaration of Trust does not contain any restrictions on our ability to offer limited partnership units of IRET Properties in exchange for property. As a result, any decision to do so is vested solely in our Board of Trustees. This policy may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders. For the three most recent fiscal years ended April 30, we have issued the following limited partnership units of IRET Properties in exchange for properties:

 

(in thousands)

 

 

2007

 

2006

 

2005

Limited partnership units issued

 

6,705

 

1,072

 

1,996

Value at issuance

$

51,365

$

10,964

$

20,071

 

  (in thousands) 
  2009  2008  2007 
Limited partnership units issued  362   2,309   6,705 
Value at issuance $3,730  $22,931  $62,427 
Acquiring or repurchasing shares. As a REIT, it is our intention to invest only in real estate assets. Our Articles of Amendment and Third Restated Declaration of Trust does not prohibit the acquisition or repurchase of our common or preferred shares or other securities so long as such activity does not prohibit us from operating as a REIT under the Code. Any policy regarding the acquisition or repurchase of shares or other securities is vested solely in our

2009 Annual Report7
Index

Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders.

During fiscal year 2007,2009, we did not repurchase any of our outstanding common shares, preferred shares or limited partnership units, except for the redemption of a nominal amount of fractional common shares held by shareholders, upon request. 

request, and except for the redemption for cash of 15,758 limited partnership units from a limited partner of the Operating Partnership.

To make loans to other persons. Our organizational structure allows us to make loans to other persons, subject to certain conditions and subject to our election to be taxed as a REIT. All loans must be secured by real property or limited partnership units of IRET Properties. Our mortgage loanloans receivables (including contracts for deed), net of reserves, totaled $399,000approximately $160,000 as of April 30, 2007,2009, and $409,000$541,000 as of April 30, 2006. 

2008.

To invest in the securities of other issuers for the purpose of exercisingcontrol. We have not, for the past three years, engaged in, and we are not currently engaging in, investment in the securities of other issuers for the purpose of exercising control. Our Articles of Amendment and Third Restated Declaration of Trust does not impose any limitation on our ability to invest in the securities of other issuers for the purpose of exercising control. Any decision to do so is vested solely in our Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders.

To provide summary reports to our shareholders. We also have a policy of mailing summary quarterly reports to our shareholders in January, April, July, and October of each year. The quarterly reports do not contain financial statements audited by an independent registered public accounting firm. This policy of providing a summary quarterly report to our shareholders is not required by our organizational documents and may be changed by a majority of our Board of Trustees at any time without notice to or a vote of our shareholders. 

Information about Segments

We currently operate in five reportable real estate segments: multi-family residential, office, medical (including senior housing/assisted living facilities)housing), industrial (including miscellaneous properties) and retail. For further information on these segments and other related information, see Note 11 of our consolidated financial statements, and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K.

2007 Annual Report 8

Our Executive Officers

Set forth below are the names, ages, titles and biographies of each of our executive officers as of July 1, 2007. 

2009.

Name

Age

Title

Thomas A. Wentz, Sr.

71

73

President and Chief Executive Officer

Timothy P. Mihalick

48

50

Senior Vice President and Chief Operating Officer

Thomas A. Wentz, Jr.

41

43

Senior Vice President

Diane K. Bryantt

43

45

Senior Vice President and Chief Financial Officer

Michael A. Bosh

36

38

Secretary and General Counsel

Kelly A. Walters

46

Vice President

Thomas A. Wentz, Sr. is a graduate of Harvard College and Harvard Law School, and has been associated with us since our formation on July 31, 1970. Mr. Wentz was a member of our Board of Trustees from 1970 to 1998, Secretary from 1970 to 1987, Vice President from 1987 to July 2000, and has been President and Chief Executive Officer since July 2000. Previously, from 1985 to 1991, Mr. Wentz was a Vice President of our former advisor, Odell-Wentz & Associates, L.L.C., and, until August 1, 1998, was a partner in the law firm of Pringle & Herigstad, P.C.

Timothy P. Mihalick joined us as a financial officer in May 1981, after graduating from Minot State University. He has served in various capacities with us over the years and was named Vice President in 1992. Mr. Mihalick has served as the Chief Operating Officer since 1997, as a Senior Vice President since 2002, and as a member of our Board of Trustees since 1999.

Thomas A. Wentz, Jr. is a graduate of Harvard College and the University of North Dakota School of Law, and joined us as General Counsel and Vice President in January 2000. He has served as a Senior Vice President of Asset Management and Finance since 2002 and as a member of our Board of Trustees since 1996. Prior to 2000, Mr. Wentz was a shareholder in the law firm of Pringle & Herigstad, P.C. from 1992 to 1999. Mr. Wentz is a member of the American Bar Association and the North Dakota Bar Association, and he is a Director of SRT Communications, Inc. Mr. Wentz is the son of Thomas A. Wentz, Sr.


2009 Annual Report8
Index

Diane K. Bryantt is a graduate of Minot State University, joined us in June 1996, and served as our Controller and Corporate Secretary before being appointed to the positions of Senior Vice President and Chief Financial Officer in 2002. Prior to joining us, Ms. Bryantt was employed by First American Bank, Minot, North Dakota.

Michael A. Bosh joined us as Associate General Counsel and Secretary in September 2002, and was named General Counsel in September 2003. Prior to 2002, Mr. Bosh was a shareholder in the law firm of Pringle & Herigstad, P.C. Mr. Bosh graduated from Jamestown College in 1992 and from Washington & Lee University School of Law in 1995. Mr. Bosh is a member of the American Bar Association and the North Dakota Bar Association.

Kelly A Walters joined IRET in October of 2006 as Vice President of Capital Markets and New Business Development. Prior to joining IRET, Mr. Walters spent ten years as Senior Vice President of Magnum Resources, Inc., a privately held real estate investment and operating firm, based in Omaha, NE, and from 1993 through 1996, he was a senior portfolio manager with Brown Brothers Harriman & Co. in Chicago, IL. Prior to 1993, Mr. Walters spent five years as the Investment Manager at Peter Kiewit and Sons, Inc. in Omaha, NE.  Mr. Walters earned his undergraduate degree in finance at the University of Nebraska at Omaha, and received his MBA from the University of Nebraska. 

Employees

As of April 30, 2007,2009, we had 5981 employees.

Environmental Matters and Government Regulation

Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred in connection with

2007 Annual Report 9

any contamination. In addition, some environmental laws create a lien on a contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. These laws often impose liability without regard to whether the current owner was responsible for, or even knew of, the presence of such substances. It is generally our policy to obtain from independent environmental consultants a “Phase I” environmental audit (which involves visual inspection but not soil or groundwater analysis) on all properties that we seek to acquire. We do not believe that any of our properties are subject to any material environmental contamination. However, no assurances can be given that:

•  

a prior owner, operator or occupant of the properties we own or the properties we intend to acquire did not create a material environmental condition not known to us, which might have been revealed by more in-depth study of the properties; and

•  

future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations) will not result in the imposition of environmental liability upon us.

In addition to laws and regulations relating to the protection of the environment, many other laws and governmental regulations are applicable to our properties, and changes in the laws and regulations, or in their interpretation by agencies and the courts, occur frequently. Under the Americans with Disabilities Act of 1990 (the “ADA”), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. In addition, the Fair Housing Amendments Act of 1988 (the “FHAA”) requires apartment communities first occupied after March 13, 1990, to be accessible to the handicapped. Non-compliance with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants. We believe that those of our properties to which the ADA and/or FHAA apply are substantially in compliance with present ADA and FHAA requirements.

Competition

Investing in and operating real estate is a very competitive business. We compete with other owners and developers of multi-family and commercial properties to attract tenants to our properties. Ownership of competing properties is diversified among other REITs, financial institutions, individuals and public and private companies who are actively engaged in this business. Our multi-family properties compete directly with other rental apartments, as well as with condominiums and single-family homes that are available for rent or purchase in the areas in which our properties are located. Our commercial properties compete with other commercial properties for tenants. Additionally, we compete with other real estate investors, including other REITs, pension and investment funds, partnerships and investment companies, to acquire properties. This competition affects our ability to acquire properties we want to add to our portfolio and the price we pay in acquisiti ons. During the past year, the demand for quality real estate of all types has continued to increase. This demand caused continued high prices for all types of real estate. As a result, we were unable to purchase properties that will generate rates of return similar to those generated by properties we acquired in previous years.acquisitions. We do not believe we have a dominant position in any of the geographic markets in which we operate, but some of our competitors are dominant in selected markets. Many of our competitors have greater financial and management resources than we have. We believe, however, that the geographic diversity of our investments, the experience and abilities of our management, the quality of our assets and the financial strength of many of our commercial tenants affords us some competitive advantages that have in

2009 Annual Report 9
Index

the past and will in the future allow us to operate our business successfully despite the competitive nature of our business.

Corporate Governance

The Company’s Board of Trustees has adopted various policies and initiatives to strengthen the Company’s corporate governance and increase the transparency of financial reporting.  Each of the committees of the Company’s Board of Trustees operates under written charters, and the Company’s independent trustees meet regularly in executive sessions at which only the independent trustees are present.  The Board of Trustees has also adopted a Code of Conduct applicable to trustees, officers and employees, and a Code of Ethics for Senior Financial Officers, and has established processes for shareholder communications with the Board of Trustees.

Additionally, the Company’s Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by Company employees of concerns regarding accounting or auditing matters.

2007 Annual Report 10

The Audit Committee also maintains a policy requiring Audit Committee approval of all audit and non-audit services provided to the Company by the Company’s independent registered public accounting firm.

The Company will disclose any amendment to its Code of Ethics for Senior Financial officers on its website. In the event the Company waives compliance by any of its trustees or officers subject to the Code of Ethics or Code of Conduct, the Company will disclose such waiver in a Form 8-K filed within four business days.

Website and Available Information

Our internet address is www.iret.com. We make available, free of charge, through the “SEC filings” tab under the Investor RelationsInvestors/Financial Reporting section of our internet website, our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such forms are filed with or furnished to the SEC. Current copies of our Code of Conduct, Code of Ethics for Senior Financial Officers, and Charters for the Audit, Compensation, Executive and Nominating Committees of our Board of Trustees are also available on our website under the heading “Corporate Governance” in the Investor RelationsInvestors/Corporate Profile section of our website. Copies of these documents are also available to shareholders upon request addressed to the Secretary at Investors Real Estate Trust, P.O. Box 1988, Minot, North Dakota 5870 1.58702-1988. Information on our internet website does not constitute part of this Annual Report on Form 10-K.

Item 1A.  Risk Factors

Risks Related to Our Properties and Business

Our performance and share value are subject to risks associated with the real estate industry.  Our results of operations and financial condition, the value of our real estate assets, and the value of an investment in us are subject to the risks normally associated with the ownership and operation of real estate properties.  These risks include, but are not limited to, the following factors which, among others, may adversely affect the income generated by our properties:

•  

downturns in national, regional and local economic conditions (particularly increases in unemployment);

•   

competition from other commercial and multi-family residential properties;

•  

local real estate market conditions, such as oversupply or reduction in demand for commercial and multi-family residential space;

•  

changes in interest rates and availability of attractive financing;

•  

declines in the economic health and financial condition of our tenants and our ability to collect rents from our tenants;

•  

vacancies, changes in market rental rates and the need periodically to repair, renovate and re-lease space;

•   


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increased operating costs, including real estate taxes, state and local taxes, insurance expense, utilities, and security costs;

•  

significant expenditures associated with each investment, such as debt service payments, real estate taxes and insurance and maintenance costs, which are generally not reduced when circumstances cause a reduction in revenues from a property;

•  

weather conditions, civil disturbances, natural disasters, or terrorist acts or acts of war which may result in uninsured or underinsured losses;  and

•   

decreases in the underlying value of our real estate.

Adverse global market and economic conditions may continue to adversely affect us and could cause us to recognize additional impairment charges or otherwise harm our performance.  Recent market and economic conditions have been challenging with tighter credit conditions through the end of 2008 and continuing in 2009.  Continued concerns about the availability and cost of credit, the U.S. mortgage market, inflation, unemployment levels, geopolitical issues and declining equity and real estate markets have contributed to increased market volatility and diminished expectations for the U.S. economy.  The commercial real estate sector in particular has been negatively affected by these recent market and economic conditions.  These conditions may result in our tenants delaying lease commencements, requesting rent reductions, declining to extend or renew leases upon expiration and/or renewing at lower rates. These conditions also have forced some weaker tenants, in some cases, to declare bankruptcy and/or vacate leased premises. We may be unable to re-lease vacated space at attractive rents or at all.  We are unable to predict whether, or to what extent or for how long, these adverse market and economic conditions will persist.  The continuation and/or intensification of these conditions may impede our ability to generate sufficient operating cash flow to pay expenses, maintain properties, pay distributions and repay debt.
The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. Government, may adversely affect our business.  We depend on the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) for financing for the majority of our multi-family residential properties.  Fannie Mae and Freddie Mac are U.S. Government-sponsored entities, or GSEs, but their guarantees are not backed by the full faith and credit of the United States.  Since 2007, Annual Report 11
Fannie Mae and Freddie Mac have reported substantial losses and a need for substantial amounts of additional capital. In response to the deteriorating financial condition of Fannie Mae and Freddie Mac and the recent credit market disruptions, Congress and the U.S. Treasury have undertaken a series of actions to stabilize these GSEs and the financial markets generally.  In September 2008 Fannie Mae and Freddie Mac were placed in federal conservatorship.  The problems faced by Fannie Mae and Freddie Mac resulting in their being placed into federal conservatorship have stirred debate among some federal policy makers regarding the continued role of the U.S. Government in providing liquidity for the residential mortgage market.   It is possible that each of Fannie Mae and Freddie Mac could be dissolved and the U.S. Government could decide to stop providing liquidity support of any kind to the multi-family residential mortgage market.  The effect of the actions taken by the U.S. Government remains uncertain, and the scope and nature of the actions that the U.S. Government will ultimately undertake are unknown and will continue to evolve. Future legislation could further change the relationship between Fannie Mae and Freddie Mac and the U.S. Government, and could also nationalize or eliminate such GSEs entirely. Any law affecting these GSEs may create market uncertainty and have the effect of reducing the credit available for financing multi-family residential properties.  The loss or reduction of this important source of credit would be likely to result in higher loan costs for us, and could result in inability to borrow or refinance maturing debt, all of which could materially adversely affect our business, operations and financial condition.

Our property acquisition activities subject us to various risks which could adversely affect our operating results. We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including large portfolios that could increase our size and result in alterations to our capital structure. Our acquisition activities and their success are subject to numerous risks, including, but not limited to:

• 

even if we enter into an acquisition agreement for a property, it is subject to customary closing conditions, including completion of due diligence investigations, and we may be unable to complete that acquisition after making a non-refundable deposit and incurring other acquisition-related costs;

• 


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we may be unable to obtain financing for acquisitions on favorable terms or at all;

• 

acquired properties may fail to perform as expected;

• 

the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates; and

• 

we may be unable quickly and efficiently to integrate new acquisitions into our existing operations.

These risks could have an adverse effect on our results of operations and financial condition.  

condition and the amount of cash available for payment of distributions.

Acquired properties may subject us to unknown liabilities which could adversely affect our operating results. We may acquire properties subject to liabilities and without any recourse, or with only limited recourse against prior owners or other third parties, with respect to unknown liabilities.  As a result, if liability were asserted against us based upon ownership of these properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flows.  Unknown liabilities with respect to acquired properties might include liabilities for clean-up of undisclosed environmental contamination; claims by tenants, vendors or other persons against the former owners of the properties; liabilities incurred in the ordinary course of business; and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

Our geographic concentration in Minnesota and North Dakota may result inlosses due to our significant exposure to the effects of economic and real estate conditions in those markets.  For the fiscal year ended April 30, 2007,2009, we received approximately 69.8%68.5% of our gross revenue from properties in Minnesota and North Dakota.  As a result of this concentration, we are subject to substantially greater risk than if our investments were more geographically dispersed. Specifically, we are more significantly exposed to the effects of economic and real estate conditions in those particular markets, such as building by competitors, local vacancy and rental rates and general levels of employment and economic activity.  To the extent that weak economic or real estate conditions affect Minnesota and/or North Dakota more severely than other areas of the country, our financial performance could be negatively impacted.

If we are not able to renew leases or enter into new leases on favorable terms or at all as our existing leases expire, our revenue, operating results and cash flows will be reduced.  We may be unable to renew leases with our existing tenants or enter into new leases with new tenants due to economic and other factors as our existing leases expire or are terminated prior to the expiration of their current terms.  As a result, we could lose a significant source of revenue while remaining responsible for the payment of our obligations.  In addition, even if we were able to renew existing leases or enter into new leases in a timely manner, the terms of those leases may be less favorable to us than the terms of expiring leases, because the rental rates of the renewal or new leases may be significantly lower than those of the expiring leases, or tenant installation costs, including the cost of required renovations or concessions to tenants, may be significant.  If we are unable to enter into lease renewals or new leases on favorable terms or in a timely manner for all or a substantial portion of space that is subject to expiring leases, our revenue, operating results and cash flows will be adversely affected. As a result, our ability to make distributions to the holders of our shares of beneficial interest may be adversely affected. As of April 30, 2007,2009, approximately 722,0001.1 million square feet, or 7.2%9.0% of our total commercial property square footage, was vacant. Approximately 741688 of our 9,3979,645 apartment units, or 7.9%7.1%, were vacant. As of April 30, 2007,2009, leases covering approximately 10.5%7.8% of our total commercial segments net rentable square footage will expire in fiscal year 2008, 9.1% in fiscal year 2009, 14.0% in fiscal year 2010, 14.4%18.1% in fiscal year 2011, and 14.2%11.7% in fiscal year 2012. 

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2012, 7.3% in fiscal year 2013, and 6.9% in fiscal year 2014.

We face potential adverse effects from commercial tenant bankruptcies or insolvencies.  The bankruptcy or insolvency of our commercial tenants may adversely affect the income produced by our properties.  If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord.  If a tenant files for bankruptcy, we cannot evict the tenant solely because of such bankruptcy.  A court, however, may authorize the tenant to reject and terminate its lease with us.  In such a case, our claim against the tenant for unpaid future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and it is unlikely that a bankrupt tenant would pay in full amounts it owes us under a lease.  This shortfall could adversely affect our cash flow and results of operations.  If a tenant experiences a downturn in its business or other t ypestypes of financial distress, it may be unable to make timely rental payments.  Under some circumstances, we may agree to partially or wholly terminate the lease in advance of the termination date in consideration for a lease

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termination fee that is less than the agreed rental amount.  Additionally, without regard to the manner in which a lease termination occurs, we are likely to incur additional costs in the form of tenant improvements and leasing commissions in our efforts to lease the space to a new tenant, as well as possibly lower rental rates reflective of declines in market rents.

Because real estate investments are generally illiquid, and various factors limit our ability to dispose of assets, we may not be able to sell properties when appropriate.  Real estate investments are relatively illiquid and, therefore, we have limited ability to vary our portfolio quickly in response to changes in economic or other conditions.  In addition, the prohibitions under the federal income tax laws on REITs holding property for sale and related regulations may affect our ability to sell properties.  Our ability to dispose of assets may also be limited by constraints on our ability to utilize disposition proceeds to make acquisitions on financially attractive terms, and the requirement that we take additional impairment charges on certain assets.  More specifically, we are required to distribute or pay tax on all capital gains generated from the sale of assets, and, in addition, a significant number of our properties were acquired using limited partnership units of IRET Properties, our operating partnership, and are subject to certain agreements which restrict our ability to sell such properties in transactions that would create current taxable income to the former owners.  As a result, we are motivated to structure the sale of these assets as tax-free exchanges.  To accomplish this we must identify attractive re-investment opportunities.  Recently, while capital market conditions have been favorable for dispositions, investment yields on acquisitions have been less attractive due to the abundant capital inflows into the real estate sector.  These considerations impact our decisions on whether or not to dispose of certain of our assets.

Inability to manage our rapid growth effectively may adversely affect ouroperating results. We have experienced significant growth at various times in recent years, increasingthe past; for example, we increased our total assets from approximately $1,151.2 million$1.4 billion at April 30, 2005,2007, to $1,435.4 million$1.6 billion at April 30, 2007,2009, principally through the acquisition of additional real estate properties. Subject to our continued ability to raise equity capital and issue limited partnership units of IRET Properties and identify suitable investment properties, we intend to continue our acquisition of real estate properties. Effective management of this level ofrapid growth presents challenges, including:

•  

the need to expand our management team and staff;

•  

the need to enhance internal operating systems and controls;

•  

increased reliance on outside advisors and property managers; and

•  

the ability to consistently achieve targeted returns on individual properties.

We may not be able to maintain similar rates of growth in the future, or manage our growth effectively.  Our failure to do so may have a material adverse effect on our financial condition and results of operations and ability to make distributions to the holders of our shares of beneficial interest.

Competition may negatively impact our earnings. We compete with many kinds of institutions, including other REITs, private partnerships, individuals, pension funds and banks, for tenants and investment opportunities. Many of these institutions are active in the markets in which we invest and have greater financial and other resources that may be used to compete against us. With respect to tenants, this competition may affect our ability to lease our properties, the price at which we are able to lease our properties and the cost of required renovations or tenant improvements. With respect to acquisition and development investment opportunities, this competition may cause us

2007 Annual Report 13

to pay higher prices for new properties than we otherwise would have paid, or may prevent us from purchasing a desired property at all.

An inability to make accretive property acquisitions may adverselyaffect our ability to increase our operatingnet income. From our fiscal year ended April 30, 2005,2006, to our fiscal year ended April 30, 2007,2009, our operatingnet income increaseddecreased from $9.9$11.6 million to $11.6$8.5 million.  The acquisition of additional real estate properties is critical to our ability to increase our operatingnet income.  If we are unable to continue to make real estate acquisitions on terms that meet our financial and strategic objectives, whether due to market conditions, a changed competitive environment or unavailability of capital, our ability to increase our operatingnet income may be materially and adversely affected.

High leverage on our overall portfolio may result in losses. As of April 30, 2007,2009, our ratio of total indebtedness to total Net Assets (as that term is used in our Bylaws, which usage is not in accordance with GAAP, “Net Assets” means our total assets at cost before deducting depreciation or other non-cash reserves, less total liabilities) was approximately 149.6%141.8%. As of April 30, 20062008 and 2005,2007, our percentage of total indebtedness to total Net Assets was approximately 138.0%143.8% and 133.9%149.6%, respectively. Under our Bylaws we may increase our total indebtedness up to

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300.0% of our Net Assets, or by an additional approximately $956 million.$1.2 billion. There is no limitation on the increase that may be permitted if approved by a majority of the independent members of our board of trustees and disclosed to the holders of our shares of beneficial interestsecurities in the next quarterly report, along with justification for any excess.

This amount of leverage may expose us to cash flow problems if rental income decreases. Under those circumstances, in order to pay our debt obligations we might be required to sell properties at a loss or be unable to make distributions to the holders of our shares of beneficial interest. A failure to pay amounts due may result in a default on our obligations and the loss of the property through foreclosure.  Additionally, our degree of leverage could adversely affect our ability to obtain additional financing and may have an adverse effect on the market price of our common shares.

Our inability to renew, repay or refinance our debt may result in losses. We incur a significant amount of debt in the ordinary course of our business and in connection with acquisitions of real properties. In addition, because we are unablehave a limited ability to retain earnings as a result of the REIT distribution requirements, we will generally be required to refinance debt that matures with additional debt or equity.  We are subject to the normal risks associated with debt financing, including the risk that:

•  

our cash flow will be insufficient to meet required payments of principal and interest;

•   

we will not be able to renew, refinance or repay our indebtedness when due; and

•  

the terms of any renewal or refinancing will be less favorable than the terms of our current indebtedness.

These risks increase when credit markets are tight, as they are now; in general, when the credit markets are constrained, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to be less favorable to us than the terms of our current indebtedness.
We anticipate that only a small portion of the principal of our debt will be repaid prior to maturity.  Therefore, we are likely to need to refinance at least a significant portion of our outstanding debt as it matures.  We cannot guarantee that any refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us.  If we cannot refinance, extend or pay principal payments due at maturity with the proceeds of other capital transactions, such as new equity capital, our cash flows may not be sufficient in all years to repay debt as it matures.  Additionally, if we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more of our properties on disadvantageous terms, which may result in losses to us. These losses could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of our revenues and asset value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Internal Revenue Code.

As of April 30, 2009, approximately 13.1% of our mortgage debt is due for repayment in fiscal year 2010.  As of April 30, 2009, we had approximately $140.5 million of principal payments and approximately $63.9 million of interest payments due in fiscal year 2010 on fixed and variable-rate mortgages secured by our real estate.
The cost of our indebtedness may increase. We have incurred, and we expect to continue to incur, indebtedness that bears interest at a variable rate. As of April 30, 2007, $21.7 million, or approximately 2.3%, of the principal amountPortions of our total mortgage indebtedness was subject to variable interest rate agreements.  If short-term interest rates rise, our debt service payments on adjustable rate debt would increase, which would lower our net income and could decrease our distributions to the holders of our shares of beneficial interest.  In addition, portions of our fixed-rate

2007 Annual Report 14

indebtedness incurred for past property acquisitions come due on a periodic basis.  Rising interest rates could limit our ability to refinance this existing debt when it matures, and would increase our interest costs, which could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt.  

In addition, we have incurred, and we expect to continue to incur, indebtedness that bears interest at a variable rate. As of April 30, 2009, $9.6 million, or approximately 0.9%, of the principal amount of our total mortgage indebtedness was subject to variable interest rate agreements.  If short-term interest rates rise, our debt service payments on adjustable rate debt would increase, which would lower our net income and could decrease our distributions to the holders of our shares of beneficial interest.  We depend on distributions and other payments from our subsidiaries that they may be prohibited from making to us, which could impair our ability to make distributions to holders of our shares of beneficial interest.  Substantially all of our assets are held through IRET Properties, our operating partnership, and other of our subsidiaries. As a


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result, we depend on distributions and other payments from our subsidiaries in order to satisfy our financial obligations and make distributions to the holders of our shares of beneficial interest.  The ability of our subsidiaries to make such distributions and other payments depends on their earnings, and may be subject to statutory or contractual limitations.  As an equity investor in our subsidiaries, our right to receive assets upon their liquidation or reorganization effectively will be subordinated to the claims of their creditors.  To the extent that we are recognized as a creditor o fof such subsidiaries, our claims may still be subordinate to any security interest in or other lien on their assets and to any of their debt or other obligations that are senior to our claims.

Our current or future insurance may not protect us against possible losses. We carry comprehensive liability, fire, extended coverage and rental loss insurance with respect to our properties at levels that we believe to be adequate and comparable to coverage customarily obtained by owners of similar properties. However, the coverage limits of our current or future policies may be insufficient to cover the full cost of repair or replacement of all potential losses. Moreover, this level of coverage may not continue to be available in the future or, if available, may be available only at unacceptable cost or with unacceptable terms.  Additionally, there may be certain extraordinary losses, such as those resulting from civil unrest, terrorism or environmental contamination, that are not generally, or fully, insured against because they are either uninsurable or not economically insurable. For example, we do not currently carry insurance against loss eslosses as a result of environmental contamination. Should an uninsured or underinsured loss occur to a property, we could be required to use our own funds for restoration or lose all or part of our investment in, and anticipated revenues from, the property. In any event, we would continue to be obligated on any mortgage indebtedness on the property. Any loss could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt.  In addition, in most cases we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases.  Any material increase in insurance rates or decrease in available coverage in the future could adversely affect our business and financial condition and results of operations, which could cause a decline in the market value of our securities.&n bsp;

We have significant investments in medical properties and adverse trends inhealthcare provider operations may negatively affect our lease revenues fromthese properties. We have acquired a significant number of specialty medical properties (including senior housing/assisted living facilities)housing) and may acquire more in the future. As of April 30, 2007,2009, our real estate portfolio consisted of 3449 medical properties, with a total real estate investment amount, net of accumulated depreciation, of $250.0$345.9 million, or approximately 19.1%23.6% of the total real estate investment amount, net of accumulated depreciation, of our entire real estate portfolio.  The healthcare industry is currently experiencing changes in the demand for, and methods of delivery of, healthcare services; changes in third-party reimbursement policies; significant unused capacity in certain areas, which has created substantial competition for patients among healthcare provi dersproviders in those areas; continuing pressure by private and governmental payors to reduce payments to providers of services; and increased scrutiny of billing, referral and other practices by federal and state authorities. Sources of revenue for our medical property tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants.  These factors may adversely affect the economic performance of some or all of our medical services tenants and, in turn, our lease revenues.  The American Reinvestment and Recovery Act of 2009, which was signed into law on February 17, 2009, provides $87 billion in additional federal Medicaid funding for states’ Medicaid expenditures between October 1, 2008 and December 31, 2010. Under this Act, states meeting certain eligibility requirements will temporarily receive additional money in the form of an increase in the federal medical assistance percentage (FMAP). Thus, for a limited period of time, the share of Medicaid costs that are paid for by the federal government will go up, and each state’s share will go down. We cannot predict whether states are, or will remain, eligible to receive the additional federal Medicaid funding, or whether the states will have sufficient funds for their Medicaid programs. We also cannot predict the impact that this broad-based, far-reaching legislation will have on the U.S. economy or our business. In addition, if we or our tenants terminate the leases for these properties, or our tenants lose their regulatory authority to operate such properties, we may not be able to locate suitable replacement tenants to lease the properties for their specialized uses. Altern atively,Alternatively, we may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues and/or additional capital expenditures occurring as a result could hinder our ability to make distributions to the holders of our shares of beneficial interest. 

Adverse changes in applicable laws may affect our potential liabilitiesrelating to our properties and operations. Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to all tenants in

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the form of higher rents. As a result, any increase may adversely affect our cash available for distribution, our ability


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to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. Similarly, changes in laws that increase the potential liability for environmental conditions existing on properties, that increase the restrictions on discharges or other conditions or that affect development, construction and safety requirements may result in significant unanticipated expenditures that could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In addition, future enactment of rent control or rent stabilization laws or other laws regulating multi-family residential properties may reduce rental revenues or increase operating costs.

Complying with laws benefiting disabled persons or other safety regulations and requirements may affect our costs andinvestment strategies. Federal, state and local laws and regulations designed to improve disabled persons’ access to and use of buildings, including the Americans with Disabilities Act of 1990, may require modifications to, or restrict renovations of, existing buildings. Additionally, these laws and regulations may require that structural features be added to buildings under construction.  Legislation or regulations that may be adopted in the future may impose further burdens or restrictions on us with respect to improved access to, and use of these buildings by, disabled persons. Noncompliance could result in the imposition of fines by government authorities or the award of damages to private litigants.  The costs of complying with these laws and regulations may be substantial, and limits or restrictions on con struction,construction, or the completion of required renovations, may limit the implementation of our investment strategy or reduce overall returns on our investments. This could have an adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt.  Our properties are also subject to various other federal, state and local regulatory requirements, such as state and local fire and life safety requirements.  If we fail to comply with these requirements, we could incur fines or private damage awards.  Additionally, in the event that existing requirements change, compliance with future requirements may require significant unanticipated expenditures that may adversely affect our cash flow and results of operations.

We may be responsible for potential liabilities under environmental laws. Under various federal, state and local laws, ordinances and regulations, we, as a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, hazardous or toxic substances in, on, around or under that property. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. The presence of these substances, or the failure to properly remediate any property containing these substances, may adversely affect our ability to sell or rent the affected property or to borrow funds using the property as collateral. In arranging for the disposal or treatment of hazardous or toxic substances, we may also be liable for the costs of removal of, or remediation of, these substances at that disposal or treatment facility, whether or not we own or operate the facility. In connection with our current or former ownership (direct or indirect), operation, management, development and/or control of real properties, we may be potentially liable for removal or remediation costs with respect to hazardous or toxic substances at those properties, as well as certain other costs, including governmental fines and claims for injuries to persons and property. A finding of liability for an environmental condition as to any one or more properties could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt.

Environmental laws also govern the presence, maintenance and removal of asbestos, and require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos; notify and train those who may come into contact with asbestos; and undertake special precautions if asbestos would be disturbed during renovation or demolition of a building.  Indoor air quality issues may also necessitate special investigation and remediation.  These air quality issues can result from inadequate ventilation, chemical contaminants from indoor or outdoor sources, or biological contaminants such as molds, pollen, viruses and bacteria.  Such asbestos or air quality remediation programs could be costly, necessitate the temporary relocation of some or all of the property’s tenants or require rehabilitation of an affected property.

It is generally our policy to obtain a Phase I environmental study on each property that we seek to acquire.  A Phase I environmental study generally includes a visual inspection of the property and the surrounding areas, an examination of current and historical uses of the property and the surrounding areas and a review of relevant state and federal documents, but does not involve invasive techniques such as soil and ground water sampling. If the Phase I indicates any possible environmental problems, our policy is to order a Phase II study, which involves testing the soil and ground water for actual hazardous substances. However, Phase I and Phase II environmental

2007 Annual Report 16

studies, or any other environmental studies undertaken with respect to any of our current or future properties, may


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not reveal the full extent of potential environmental liabilities. We currently do not carry insurance for environmental liabilities.

We may be unable to retain or attract qualified management. We are dependent upon our senior officers for essentially all aspects of our business operations. Our senior officers have experience in the specialized business segments in which we operate, and the loss of them would likely have a material adverse effect on our operations, and could adversely impact our relationships with lenders, industry personnel and potential tenants.  We do not have employment contracts with any of our senior officers. As a result, any senior officer may terminate his or her relationship with us at any time, without providing advance notice.  If we fail to manage effectively a transition to new personnel, or if we fail to attract and retain qualified and experienced personnel on acceptable terms, our business and prospects could be harmed.  The location of our company headquarters in Minot, North Dakota, may make it more difficult and expensive to attra ct,attract, relocate and retain current and future officers and employees.

Failure to comply with changing regulation of corporate governance and public disclosure could have a material adverse effect on our business, operating results and stock price, and continuing compliance will result in additional expenses.  The Sarbanes-Oxley Act of 2002, as well as new rules and standards subsequently implemented by the Securities and Exchange Commission and NASDAQ, have required changes in some of our corporate governance and accounting practices, and are creating uncertainty for us and many other public companies, due to varying interpretations of the rules and their evolving application in practice.  We expect these laws, rules and regulations to increase our legal and financial compliance costs, and to subject us to additional risks.  In particular, if we fail to maintain the adequacy of our internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, as such standards may be modified, suppl ementedsupplemented or amended from time to time, a material misstatement could go undetected, and we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting.  Failure to maintain an effective internal control environment could have a material adverse effect on our business, operating results, and stock price.  Additionally, our efforts to comply with Section 404 of the Sarbanes-Oxley Act and the related regulations have required, and we believe will continue to require, the commitment of significant financial and managerial resources.

Risks Related to Our Structure and Organization

We may incur tax liabilities as a consequence of failing to qualify as a REIT. Although our management believes that we are organized and have operated and are operating in such a manner to qualify as a “real estate investment trust,” as that term is defined under the Internal Revenue Code, we may not in fact have operated, or may not be able to continue to operate, in a manner to qualify or remain so qualified. Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations.  Even a technical or inadvertent mistake could endanger our REIT status.  The determination that we qualify as a REIT requires an ongoing analysis of various factual matters and circumstances, some of which may not be within our control. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must com ecome from qualifyingcertain passive sources that are itemized in the REIT tax laws, and we are prohibited from owning specified amounts of debt or equity securities of some issuers.  Thus, to the extent revenues from non-qualifying sources, such as income from third-party management services, represent more than five percent of our gross income in any taxable year, we will not satisfy the 95% income test and may fail to qualify as a REIT, unless certain relief provisions contained in the Internal Revenue Code apply. Even if relief provisions apply, however, a tax would be imposed with respect to excess net income. We are also required to make distributions to the holders of our shares of beneficial interestsecurities of at least 90% of our REIT taxable income, excluding net capital gains.  The fact that we hold substantially all of our assets (except for qualified REIT subsidiaries) through IRET Properties, our operating partnership, and its subsidiaries, and our ongoing reliance on factual determinations, such as determinati onsdeterminations related to the valuation of our assets, further complicates the application of the REIT requirements for us.  Additionally, if IRET Properties, our operating partnership, or one or more of our subsidiaries is determined to be taxable as a corporation, we may fail to qualify as a REIT. Either our failure to qualify as a REIT, for any reason, or the imposition of taxes on excess net income from non-qualifying sources, could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. Furthermore, new legislation, regulations, administrative interpretations or court decisions could change the tax laws with respect to our qualification as a REIT or the federal income tax consequences of our qualification.

2007 Annual Report 17

If we failed to qualify as a REIT, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates, which would likely have a material adverse effect on

2009 Annual Report17
Index

us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In addition, we could be subject to increased state and local taxes, and, unless entitled to relief under applicable statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification. This treatment would reduce funds available for investment or distributions to the holders of our shares of beneficial interestsecurities because of the additional tax liability to us for the year or years involved. In addition, we would no longer be able to deduct, and would not be required to make, distributions to holders of our common shares.securities. To the extent that distributions to the holders of our shares of beneficial interestsecurities had been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain investments to pay the applicable tax.

Failure of our operating partnership to qualify as a partnership would have a material adverse effect on us.  We believe that IRET Properties, our operating partnership, qualifies as a partnership for federal income tax purposes.  No assurance can be given, however, that the Internal Revenue Service will not challenge its status as a partnership for federal income tax purposes, or that a court would not sustain such a challenge.  If the Internal Revenue Service were to be successful in treating IRET Properties as an entity that is taxable as a corporation (such as a publicly-traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in IRET Properties would exceed 5% of our assets, and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation.  Also, the imposition of a corporate tax on IRET Properties would reduce significantly the amount of cash available for distribution by it.

Certain provisions of our Articles of Amendment and Third Restated Declaration of Trust may limit achange in control and deter a takeover. In order to maintain our qualification as a REIT, our Third Restated Declaration of Trust provides that any transaction, other than a transaction entered into through the NASDAQ National Market, (recently renamed(renamed the NASDAQ Global Market), or other similar exchange, that would result in our disqualification as a REIT under Section 856 of the Internal Revenue Code, including any transaction that would result in (i) a person owning in excess of the ownership limit of 9.8%, in number or value, of our outstanding shares of beneficial interest,securities, (ii) less than 100 people owning our shares of beneficial interest,securities, (iii) our being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code, or (iv) 50% or more of the fair market value of our shares of beneficial interestsecurities being held by persons other than “United States persons,” as defined in Section 7701(a)(30) of the Internal Revenue Code, will be void ab initio. If the transaction is not void ab initio, then the shares of beneficial interestsecurities in excess of the ownership limit, that would cause us to be closely held, that would result in 50% or more of the fair market value of our shares of beneficial interestsecurities to be held by persons other than United States persons or that otherwise would result in our disqualification as a REIT, will automatically be exchanged for an equal number of excess shares, and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable beneficiaries named by our board of trustees. These limitations may have the effect of preventing a change in control or takeover of us by a third party, even if the change in control or takeover would be in the best interests of the holders of our shares of beneficial interest. 

securities.

In order to maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions.  In order to maintain our REIT status, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements, even if the then-prevailing market conditions are not favorable for these borrowings.  To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our net taxable income each year, excluding net capital gains.  In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions made by us with respect to the calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income for that year, and any undistributed taxable income from prior periods.  We intend to make distributions to our shareholders to comply with the 90% distribution requirement and to avoid the nondeductible excise t axtax and will rely for this purpose on distributions from our operating partnership.  However, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.  The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.

2007
Complying with REIT requirements may force us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.  To qualify and maintain our status as a REIT, we must satisfy certain requirements with respect to the character of our assets.  If we fail to comply with these requirements at the end of any quarter, we must correct such failure within 30 days after the end of the quarter (by, possibly, selling asses not withstanding

2009 Annual Report18

Index

their prospects as an investment) to avoid losing our REIT status.  If we fail to comply with these requirements at the end of any quarter, and the failure exceeds a minimum threshold, we may be able to preserve our REIT status if (a) the failure was due to reasonable cause and not to willful neglect, (b) we dispose of the assets causing the failure within six months after the last day of the quarter in which we identified the failure, (c) we file a schedule with the IRS describing each asset that caused the failure, and (d) we pay an additional tax of the greater of $50,000 or the product of the highest applicable tax rate multiplied by the net income generated on those assets.  As a result, compliance with the REIT requirements may require us to liquidate or forego otherwise attractive investments.  These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.  Even if we qualify for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted a a result of a foreclosure, and state or local income, property and transfer taxes, such as mortgage recording taxes.  Any of these taxes would decrease cash available for distribution to our shareholders.  In addition, in order to meet the REIT qualification requirements, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may in the future hold some of our assets through a taxable REIT subsidiary.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares.  At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended.  Any of those new laws or interpretations may take effect retroactively and could adversely affect us or the market price of our common shares of beneficial interest.
The U.S. federal income tax laws governing REITs are complex.  We intend to operate in a manner that will qualify us as a REIT under the U.S. federal income tax laws.  The REIT qualification requirements are extremely complex, however, and interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that we will be successful in operating so we can continue to qualify as a REIT.  At any time, new laws, interpretations, or court decisions may change the federal tax laws or the U.S. federal income tax consequences of our qualification as a REIT.
Our board of trustees may make changes to our major policies without approval of the holders of our shares of beneficial interest. Our operating and financial policies, including policies relating to development and acquisition of real estate, financing, growth, operations, indebtedness, capitalization and distributions, are exclusively determined by our board of trustees. Our board of trustees may amend or revoke those policies, and other policies, without advance notice to, or the approval of, the holders of our shares of beneficial interest.  Accordingly, our shareholders do not control these policies, and policy changes could adversely affect our financial condition and results of operations.

Risks Related to the Purchase of our Shares of Beneficial Interest

Our future growth depends, in part, on our ability to raise additionalequity capital, which will have the effect of diluting the interests of theholders of our common shares. Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of IRET Properties. The issuance of additional common shares, and of limited partnership units for which we subsequently issue common shares upon the redemption of the limited partnership units, will dilute the interests of the current holders of our common shares.  Additionally, sales of substantial amounts of our common shares or preferred shares in the public market, or issuances of our common shares upon redemption of limited partnership units in our operating partnership, or the perception that such sales or issuances might occur, could adversely affect the market price of our common shares.

We may issue additional classes or series of our shares of beneficialinterest with rights and preferences that are superior to the rights andpreferences of our common shares. Without the approval of the holders of our common shares, our board of trustees may establish additional classes or series of our shares of beneficial interest, and such classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights and preferences that are superior to the rights of the holders of our common shares.

Payment of distributions on our shares of beneficial interest is notguaranteed. Our board of trustees must approve our payment of distributions and may elect at any time, or from time to time, and for an indefinite duration, to

2009 Annual Report19
Index

reduce the distributions payable on our shares of beneficial interest or to not pay distributions on our shares of beneficial interest. Our board of trustees may reduce distributions for a variety of reasons, including, but not limited to, the following:

•   

operating and financial results below expectations that cannot support the current distribution payment;

•   

unanticipated costs or cash requirements; or

•    

a conclusion that the payment of distributions would cause us to breach the terms of certain agreements or contracts, such as financial ratio covenants.

covenants in our debt financing documents.

Our distributions are not eligible for the lower tax rate on dividends except in limited situations.  The tax rate applicable to qualifying corporate dividends received by individualsshareholders taxed at individual rates prior to 20092010 has been reduced to a maximum rate of 15%.  This special tax rate is generally not applicable to distributions paid by a REIT, unless such distributions represent earnings on which the REIT itself had been taxed. As a result, distributions (other than capital gain distributions) paid by us to shareholders taxed at individual investorsrates will generally be subject to the tax rates that are otherwise applicable to ordinary income which, currently, are as high as 35%.  ThisAlthough the earnings of a REIT that are distributed to its shareholders are still generally subject to less federal income taxation than earnings of a non-REIT C corporation that are distributed to its shareholders net of corporate-level income tax, this law change may make an investment in our common sharessecurities comparatively less attractive relative to an investment in the shares of other entities which pay dividends but are not formed as REITs.

Changes in market conditions could adversely affect the price of ourshares of beneficial interest securities. As is the case with any publicly-traded securities, certain factors outside of our control could influence the value of our common shares, Series A preferred shares and any other classes or series of preferred shares of beneficial interestsecurities to be issued in the future. These conditions include, but are not limited to:

2007 Annual Report 19

•   

market perception of REITs in general;

•   

market perception of REITs relative to other investment opportunities;

•   

market perception of our financial condition, performance, distributions and growth potential;

•   

prevailing interest rates;

•   

general economic and business conditions;

•    

government action or regulation, including changes in the tax laws; and

•   

relatively low trading volumes in securities of REITS.

Higher market interest rates may adversely affect the market price of our common shares,securities, and low trading volume on the NASDAQ Global Select Market may prevent the timelyresale of our common sharessecurities. One of the factors that investors may consider important in deciding whether to buy or sell shares of a REIT is the distribution with respect to such REIT’s shares as a percentage of the price of those shares, relative to market interest rates.  If market interest rates go up,rise, prospective purchasers of REIT shares may expect a higher distribution rate in order to maintain their investment.  Higher market interest rates would likely increase our borrowing costs and might decrease funds available for distribution.  Thus, higher market interest rates could cause the market price of our common shares to decline.  In addition, although our common shares of beneficial interest are listed on the NASDAQ Global Select Market, the d ailydaily trading volume of our shares may be lower than the trading volume for other companies and industries.companies.  The average daily trading volume for the period of May 1, 2006,2008, through April 30, 2007,2009, was 93,365243,304 shares and the average monthly trading volume for the period of May 1, 20062008 through April 30, 20072009 was 2,111,0265,105,451 shares.  As a result of this trading volume, an owner of our common shares may encounter difficulty in selling our shares in a timely manner and may incur a substantial loss.

Item 1B.  Unresolved Staff Comments

None.


2009 Annual Report20
Index

Item 2. Properties

IRET is organized as a REIT under Section 856-858 of the Code, and is in the business of owning, leasing, developing and acquiring real estate properties. Except for certain commercial properties managed by our Minneapolis, Omaha and Minot offices, theseThese real estate investments are generally managed by our own employees and by third-party professional real estate management companies on our behalf.

Certain financial information from fiscal 20062008 and 20052007 was adjusted to reflect the effects of discontinued operations. See the Property Dispositions section in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the discussion in Note 12 to our Consolidated Financial Statements.

Total Real Estate Rental Revenue

As of April 30, 2007,2009, our real estate portfolio consisted of 6977 multi-family residential properties and 148167 commercial properties, consisting of office, medical, industrial and retail properties, comprising 30.6%29.1%, 37.6%34.0%, 19.1%23.6%, 5.1%6.5%, and 7.6%6.8%, respectively, of our total real estate portfolio, based on the dollar amount of our original investment plus capital improvements, net of accumulated depreciation, through April 30, 2007.2009. Gross annual rental revenue and percentages of total annual real estate rental revenue by property type for each of the three most recent fiscal years ended April 30, are as follows:

2007 Annual Report 20

Fiscal Year Ended April 30,
(in thousands)

 

Multi-Family Residential
Gross Revenue

 

%

Commercial Office Gross Revenue

 

%

Commercial Medical Gross Revenue

 

%

Commercial Industrial Gross Revenue

 

%

Commercial Retail Gross Revenue

 

%

 

Total Revenue

2007

$

67,214

 

34.0%

$

73,640

 

37.2%

$

34,783

 

17.6%

$

8,091

 

4.1%

$

14,089

 

7.1%

$

197,817

2006

$

61,906

 

36.3%

$

57,523

 

33.8%

$

31,670

 

18.6%

$

6,372

 

3.7%

$

12,977

 

7.6%

$

170,448

2005

$

58,702

 

38.4%

$

48,604

 

31.8%

$

25,424

 

16.6%

$

6,459

 

4.2%

$

13,748

 

9.0%

$

152,937

Fiscal Year Ended April 30,
(in thousands)
 
Multi-Family Residential
Gross Revenue
  %  Commercial Office Gross Revenue  %  Commercial Medical Gross Revenue  %  Commercial Industrial Gross Revenue  %  Commercial Retail Gross Revenue  %  Total Revenue 
2009 $76,716   31.9% $83,446   34.8% $52,564   21.9% $12,711   5.3% $14,568   6.1% $240,005 
2008 $72,827   32.9% $84,042   38.0% $38,412   17.4% $11,691   5.3% $14,198   6.4% $221,170 
2007 $66,972   33.9% $73,603   37.3% $34,783   17.6% $8,091   4.1% $14,089   7.1% $197,538 
Economic Occupancy Rates

Economic occupancy rateslevels on a stabilized property and all-property basis are shown below for each property type in each of the three most recent fiscal years ended April 30. Economic occupancy represents actual rental revenues recognized for the period indicated as a percentage of scheduled rental revenues for the period.  Percentage rents, tenant concessions, straightline adjustments and expense reimbursements are not considered in computing either actual revenues or scheduled rent revenues.  Scheduled rent revenue is determined by valuing occupied units or square footage at contract rates and vacant units or square footage at market rates. Stabilized properties are those properties owned for the entirety of both periods being compared.  While results presented on a stabilized property basis are not determined in accordance with GAAP, management believes that measuring performance on a stabilized property basis is useful to investors and to management because it enables evaluation of how the Company’s properties are performing year over year. In the case of multi-family residential properties, lease arrangements with individual tenants vary from month-to-month to one-year leases. Leases on commercial properties generally vary from month-to-month to 20 years.

 

Fiscal Year Ended April 30,

 

2007

2006

2005

Multi-Family Residential

93.2%

91.6%

89.9%

Commercial - Office

91.9%

92.6%

90.8%

Commercial - Medical

96.7%

96.1%

92.6%

Commercial - Industrial

95.1%

87.2%

86.8%

Commercial - Retail

89.6%

89.2%

90.3%

 

Segments Stabilized Properties  All Properties 
  Fiscal Year Ended April 30,  Fiscal Year Ended April 30, 
  2009  2008  2007  2009  2008  2007 
Multi - Family Residential  93.9%  93.4%  93.2%  93.5%  92.7%  93.2%
Commercial - Office  88.9%  92.1%  90.8%  89.1%  92.1%  91.9%
Commercial - Medical  96.0%  95.6%  96.7%  95.7%  95.8%  96.7%
Commercial - Industrial  97.3%  96.8%  94.8%  97.8%  96.3%  95.1%
Commercial - Retail  87.1%  87.4%  89.3%  87.1%  87.4%  89.6%
Certain Lending Requirements

In certain instances, in connection with the acquisition of investment properties, the lender financing such properties may require, as a condition of the loan, that the properties be owned by a “single asset entity.” Accordingly, we have organized a number of wholly-owned subsidiary corporations, and IRET Properties has organized several limited partnerships, for the purpose of holding title in an entity that complies with such lending conditions. All financial statements of these subsidiaries are consolidated into our financial statements.


2009 Annual Report21
Index

Management and Leasing of Our Real Estate Assets

We conduct our operations from offices in Minot, North Dakota and Minneapolis, Minnesota.  We also have property management offices in Omaha, Nebraska; Kansas City, Kansas; St. Louis, Missouri and  Jamestown, North Dakota. The day-to-day management of our commercial properties is carried out by our own employees and by third-party property management companies. The management and leasing of our real estate assets has, with the exception of certainmulti-family residential properties managed by our Minneapolis, Omaha and Minot offices,are generally been handled by locally-based, third-party professional real estate management companies.  Day-to-day
In markets where the amount of rentable square footage we own does not justify self-management, when properties acquired have effective pre-existing property management activities include the negotiation of leases, the preparation of proposed operating budgets, and the supervision of routine maintenance and capital improvements that have been authorized by us.  Allin place, or when for other reasons particular properties are in our judgment not attractive candidates for self-management, we utilize third-party professional management companies for day-to-day management.  However, all decisions relating to purchase, sale, insurance coverage, capital improvements, approval of commercial leases, annual operating budgets and major renovations are made exclusively by our employees and then implemented by the third-party management companies.  

In adopting this model of third-party management of our real estate assets, we considered that under most circumstances the use of locally-based management companies would allow us to benefit from local knowledge of the applicable real estate market, while avoiding the cost and difficulty associated with maintaining management personnel in every city in which we own properties.  However, following our September 2006 acquisition from Magnum Resources, Inc. of a portfolio of office properties, we opened an office in Omaha, Nebraska, and property management offices in St. Louis and Kansas City, and hired property management personnel previously with Magnum Resources to continue managing these properties for us, as our employees.  During fiscal year 2007, we have added additional property management personnel in our Minneapolis office, and have brought in-house the management of certain of our properties that we considered suitable for internal management.  As of April 30, 2007,2009, we have under internal management 74103 commercial properties.  Our remaining 64 commercial properties are managed by third parties.  We also internally manage two of our multi-family residential properties.  We believe that in certain of the locations in which we own properties, economies of scale and our own knowledge of the applicable market may make internal management more efficient and cost effective than retaining third-party management companies, and accordingly we plan

2007 Annual Report 21

to continue evaluating our portfolio to identify other commercial properties and multi-family properties that may be candidates for management by our own employees.

As of April 30, 2007,2009, we had property management contracts and/or leasing agreements with the following companies:

Residential Management

Commercial Management and Leasing

•           Builder’s Management & Investment Co., Inc.

•    A & L Management Services, LLC

•           ConAm Management Corporation

•    AJB, Inc. dba Points West Realty Management

•           Investors Management & Marketing, Inc.

•    Balke Brown Associates, Inc.

•           Illies Nohava Heinen Property Management, Inc.
•    Bayport Properties US, Inc.

•           Kahler Property Management
•    BTO Development Corporation
•           Paramark Corp.
•    CB Richard Ellis, Inc.
•    Cushman & Wakefield of Minnesota, Inc.
•    Dakota Commercial and Development Co.
•    Davis Real Estate Services Group
•    DESCO Commercial, LLC., dba NAI Desco
•    Duemelands Commercial LLLP
•    Frauenshuh Companies
•    Ferguson Property Management Services, L.C.
•    Illies Nohava Heinen Property Management, Inc.

•   CB Richard Ellis

•  Kahler Property Management

•   Colliers Turley Martin Tucker Company

•  Paramark Corp.

•   Dakota Commercial and Development Co.

•   Frauenshuh Companies

•   Ferguson Property Management Services, L.C.

•   Illies Nohava Heinen Property Management, Inc.

•    Inland Companies, Inc.

•   Mega Corporation, dba CB Richard Ellis/Mega

•   Nath Management, Inc.

•    Northco Real Estate Services, LLC

•    NorthMarq Real Estate Brokerage LLC

•    Pacific Realty Commercial LLC dba Grubb & Ellis/Pacific Realty
•    Paramount Real Estate Corporation

•    Results Unlimited, Inc.

Red Brokerage LLC

•   The Remada Company

•    Thornton Oliver Keller, Commercial, LLC

    •    Turley Martin Tucker Company, Inc. dba Colliers Turley Martin Tucker Company

•    United Properties, LLC

•    Vector Property Services, LLC

•    Welsh Companies, LLC
•    Winbury Realty of K.C.

Generally, our management contracts provide for compensation ranging from 2.5%1.5% to 5.0% of gross rent collections and, typically, we may terminate these contracts in 60 days or less or upon the property manager’s failure to meet certain specified financial performance goals.

With respect to multi-tenant commercial properties, we rely almost exclusively on third-party brokers to locate potential tenants. As compensation, brokers may receive a commission that is generally calculated as a percentage of the net rent to be paid over the term of the lease. We believe that the broker commissions paid by us conform to market and industry standards, and accordingly are commercially reasonable.


2009 Annual Report22
Index

Summary of Real Estate Investment Portfolio

As of April 30, (in thousands)

2007

%

2006

%

2005

%

Real Estate Investments

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate Owned

$

1,489,287

 

 

$

1,269,423

 

 

$

1,179,856

 

 

Less Accumulated Depreciation

 

(180,544)

 

 

 

(148,607)

 

 

 

(118,512)

 

 

 

$

1,308,743

 

99.4%

$

1,120,816

 

99.5%

$

1,061,344

 

99.4%

Unimproved Land

 

7,392

 

0.6%

 

5,175

 

0.5%

 

5,382

 

0.5%

Mortgage Loans Receivable

 

399

 

0.0%

 

409

 

0.0%

 

619

 

0.1%

Total Real Estate Investments

$

1,316,534

 

100.0%

$

1,126,400

 

100.0%

$

1,067,345

 

100.0%

As of April 30, (in thousands)
 2009  %  2008  %  2007  % 
Real estate investments                  
Property owned $1,729,585     $1,648,259     $1,489,287    
Less accumulated depreciation  (262,871)     (219,379)     (180,544)   
  $1,466,714   99.6% $1,428,880   98.1% $1,308,743   99.4%
Development in progress  0   0.0%  22,856   1.6%  3,498   0.3%
Unimproved land  5,701   0.4%  3,901   0.3%  3,894   0.3%
Mortgage loans receivable  160   0.0%  541   0.0%  399   0.0%
Total real estate investments $1,472,575   100.0% $1,456,178   100.0% $1,316,534   100.0%

Summary of Individual Properties Owned as of April 30, 2007

2009

The following table presents information regarding our 217244 properties owned as of April 30, 2007.2009. We own the following interests in real estate either through our wholly-owned subsidiaries or by ownership of a controlling interest in an entity owning the real estate. We account for these interests on a consolidated basis. Occupancy rates given are the average economic occupancy rates for the fiscal year ended April 30, 2007:

2007 Annual Report 22
2009:

(

* = Real estate not owned in fee; all or a portion is leased under a ground lease)

(** = Primarily Parking Lot Rental)

Property Name and Location

Units

(in thousands) Investment (initial cost plus improvements)

Fiscal 2007 Economic Occupancy

 

 

 

 

 

 

MULTI-FAMILY RESIDENTIAL

 

 

 

 

 

17 South Main Apartments - Minot, ND

4

$

216

 

94.8%

405 Grant Avenue (Lonetree) - Harvey, ND

12

 

273

 

90.2%

408 1st Street SE - Minot, ND

**

 

48

 

100.0%

Applewood On The Green - Omaha, NE

234

 

12,584

 

90.0%

Arbors Apartments - S. Sioux City, NE

192

 

7,316

 

92.5%

Boulder Court  - Eagan, MN

115

 

7,175

 

93.3%

Brookfield Village Apartments - Topeka, KS

160

 

7,804

 

95.0%

Candlelight Apartments - Fargo, ND

66

 

1,796

 

95.4%

Canyon Lake Apartments - Rapid City, SD

109

 

4,371

 

87.1%

Castle Rock - Billings, MT

165

 

6,579

 

82.1%

Chateau Apartments - Minot, ND

64

 

3,117

 

99.3%

Colonial Villa - Burnsville, MN

240

 

15,456

 

85.1%

Colton Heights Properties - Minot, ND

18

 

1,042

 

100.0%

Cottonwood Lake I - Bismarck, ND

67

 

4,652

 

98.3%

Cottonwood Lake II - Bismarck, ND

67

 

4,407

 

98.4%

Cottonwood Lake III - Bismarck, ND

67

 

4,841

 

98.9%

Country Meadows I - Billings, MT

67

 

4,360

 

91.1%

Country Meadows II - Billings, MT

67

 

4,502

 

92.5%

Crestview Apartments - Bismarck, ND

152

 

5,174

 

98.9%

Crown Colony Apartments - Topeka, KS

220

 

11,546

 

93.5%

Dakota Hill At Valley Ranch - Irving, TX

504

 

39,261

 

92.3%

East Park Apartments - Sioux Falls, SD

84

 

2,804

 

97.5%

Forest Park Estates - Grand Forks, ND

270

 

9,248

 

91.9%

Heritage Manor - Rochester, MN

182

 

8,352

 

97.3%

Indian Hills Apartments - Sioux City, IA

120

 

3,232

 

92.6%

Jenner Properties - Grand Forks, ND

90

 

2,161

 

92.3%

Kirkwood Manor - Bismarck, ND

108

 

4,118

 

98.2%

Lancaster Place - St. Cloud, MN

84

 

3,724

 

87.3%

Legacy Buildings I & II - Grand Forks, ND

116

 

7,521

 

92.8%

Legacy Building III - Grand Forks, ND

67

 

4,001

 

95.9%

Legacy Building IV- Grand Forks, ND

67

 

6,879

 

94.2%

Legacy Building V - Grand Forks, ND

36

 

2,878

 

92.0%

Legacy Building VI - Grand Forks, ND

36

 

3,020

 

90.6%

Legacy Building VII - Grand Forks, ND

36

 

2,897

 

90.0%

Magic City Apartments - Minot, ND

200

 

5,597

 

97.7%

Meadows Phase I - Jamestown, ND

27

 

1,875

 

99.3%

Meadows Phase II - Jamestown, ND

27

 

1,957

 

100.0%

Meadows Phase III - Jamestown, ND

27

 

2,216

 

99.7%

Miramont Apartments - Fort Collins , CO

210

 

15,245

 

97.4%

Monticello Apartments - Monticello, MN

60

 

4,425

 

95.2%

Neighborhood Apartments - Colorado Springs, CO

192

 

12,993

 

91.3%

North Pointe - Bismarck, ND

49

 

2,492

 

99.3%

Oakmont Apartments - Sioux Falls, SD

80

 

5,373

 

94.4%

Oakwood - Sioux Falls, SD

160

 

6,412

 

91.9%

Olympic Village - Billings, MT

274

 

12,802

 

98.3%

Olympik Village Apartments - Rochester, MN

140

 

7,426

 

93.4%

Oxbow - Sioux Falls, SD

120

 

5,471

 

94.5%

Park Meadows I - Waite Park, MN

120

 

4,645

 

90.0%

Park Meadows II & III - Waite Park, MN

240

 

9,184

 

89.6%

or air rights lease.
2007
Property Name and Location Units  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
          
MULTI-FAMILY RESIDENTIAL         
17 South Main Apartments - Minot, ND  4  $222   99.5%
401 South Main Apartments - Minot, ND  10   1,283   60.6%
Arbors Apartments - S Sioux City, NE  192   7,552   90.9%
Boulder Court - Eagan, MN  115   7,946   95.8%
Brookfield Village Apartments - Topeka, KS  160   7,981   95.4%
Candlelight Apartments - Fargo, ND  66   1,863   93.7%
Canyon Lake Apartments - Rapid City, SD  109   4,584   91.6%
Castle Rock - Billings, MT  165   6,828   93.9%
Chateau Apartments - Minot, ND  64   3,438   99.5%
Cimarron Hills - Omaha, NE  234   13,214   85.4%
Colonial Villa - Burnsville, MN  240   16,059   88.1%
Colton Heights Properties - Minot, ND  18   999   99.0%
Cottonwood Community - Bismarck, ND  268   20,614   93.5%
Country Meadows Community - Billings, MT  134   9,022   95.3%
Crestview Apartments - Bismarck, ND  152   5,331   97.9%
Crown Colony Apartments - Topeka, KS  220   12,028   92.6%
Dakota Hill At Valley Ranch - Irving, TX  504   39,707   91.7%
East Park Apartments - Sioux Falls, SD  84   3,047   90.7%
Evergreen Apartments - Isanti, MN  36   3,150   93.8%
Forest Park Estates - Grand Forks, ND  270   10,107   89.6%
Greenfield Apartments - Omaha, NE  96   4,931   97.5%
Heritage Manor - Rochester, MN  182   8,823   98.4%
Indian Hills Apartments - Sioux City, IA  120   5,639   80.5%
IRET Corporate Plaza Apartments - Minot, ND  71   16,955   54.2%
Jenner Properties - Grand Forks, ND  90   2,468   93.3%
Kirkwood Manor - Bismarck, ND  108   4,406   95.7%
Lancaster Place - St. Cloud, MN  84   3,909   78.8%
Legacy Community - Grand Forks, ND  358   27,671   97.1%
Magic City Apartments - Minot, ND  200   5,748   98.8%
Meadows Community - Jamestown, ND  81   6,084   99.7%


2009 Annual Report23

Property Name and Location

Units

(in thousands) Investment (initial cost plus improvements)

Fiscal 2007 Economic Occupancy

 

 

 

 

 

 

MULTI-FAMILY RESIDENTIAL - continue

 

 

 

 

 

Pebble Springs - Bismarck, ND

16

$

821

 

99.5%

Pinecone Apartments - Fort Collins , CO

195

 

14,183

 

95.8%

Pinehurst Apartments - Billings, MT

21

 

812

 

98.1%

Pointe West - Rapid City, SD

90

 

4,723

 

91.8%

Prairie Winds Apartments - Sioux Falls, SD

48

 

2,232

 

93.7%

Prairiewood Meadows - Fargo, ND

85

 

3,498

 

96.6%

Quarry Ridge Apartments - Rochester, MN

154

 

14,688

 

96.2%

Ridge Oaks - Sioux City, IA

132

 

5,122

 

87.9%

Rimrock Apartments - Billings, MT

78

 

4,136

 

97.4%

Rocky Meadows - Billings, MT

98

 

7,001

 

97.2%

Rum River Apartments - Isanti, MN

72

 

5,666

 

100.0%

St. Cloud Student Housing - St. Cloud, MN

389

 

7,859

 

87.9%

Sherwood Apartments - Topeka, KS

300

 

17,206

 

93.9%

Southbrook & Mariposa - Topeka, KS

54

 

5,640

 

94.3%

South Pointe - Minot, ND

195

 

10,879

 

99.6%

Southview Apartments - Minot, ND

24

 

844

 

96.9%

Southwind Apartments - Grand Forks, ND

164

 

6,818

 

95.0%

Sunset Trail Phase I - Rochester, MN

73

 

7,166

 

89.0%

Sunset Trail Phase II - Rochester, MN

73

 

7,650

 

90.8%

Sweetwater Properties - Devils Lake & Grafton, ND

90

 

1,884

 

79.4%

Sycamore Village Apartments - Sioux Falls, SD

48

 

1,634

 

91.8%

Terrace On The Green - Moorhead, MN

116

 

3,003

 

87.3%

Thomasbrook Apartments - Lincoln, NE

264

 

11,254

 

90.6%

Valley Park Manor - Grand Forks, ND

168

 

5,910

 

94.0%

Village Green - Rochester, MN

36

 

2,608

 

94.1%

West Stonehill - Waite Park, MN

313

 

13,993

 

92.4%

Westwood Park - Bismarck, ND

64

 

2,672

 

97.9%

Winchester - Rochester, MN

115

 

6,938

 

93.3%

Woodridge Apartments - Rochester, MN

110

 

7,336

 

89.8%

TOTAL MULTI-FAMILY RESIDENTIAL

9,397

$

489,644

 

93.2%

Property Name and Location

Approximate Net Rentable Square Footage

(in thousands) Investment (initial cost plus improvements)

Fiscal 2007 Economic Occupancy

 

 

 

 

 

 

 

OFFICE

 

 

 

 

 

 

1st Avenue Building - Minot, ND

 

15,443

$

690

 

84.4%

401 South Main - Minot, ND

 

8,443

 

643

 

41.0%

2030 Cliff Road - Eagan, MN

 

13,374

 

982

 

100.0%

7800 W Brown Deer Road - Milwaukee, WI

 

175,610

 

11,042

 

100.0%

American Corporate Center - Mendota Heights, MN

 

137,180

 

20,264

 

93.3%

Ameritrade - Omaha, NE

 

73,742

 

8,348

 

100.0%

Benton Business Park - Sauk Rapids, MN

 

30,464

 

1,479

 

100.0%

Bloomington Business Plaza - Bloomington, MN

 

121,064

 

8,041

 

77.5%

Brenwood - Minnetonka, MN

 

176,587

 

16,104

 

55.2%

Brook Valley I - La Vista, NE

 

30,000

 

2,045

 

100.0%

Burnsville Bluffs II - Burnsville, MN

 

45,158

 

3,213

 

75.5%

Cold Spring Center - St. Cloud, MN

 

75,745

 

8,861

 

93.4%

Corporate Center West - Omaha, NE

 

141,724

 

21,389

 

100.0%

Crosstown Centre - Eden Prairie , MN

 

185,000

 

17,933

 

100.0%

Dewey Hill Business Center - Edina, MN

 

73,338

 

5,335

 

61.8%

Farnam Executive Center - Omaha, NE

 

94,832

 

13,592

 

100.0%

2007 Annual Report 24

Property Name and Location

Approximate Net Rentable Square Footage

(in thousands) Investment (initial cost plus improvements)

Fiscal 2007 Economic Occupancy

 

 

 

 

 

 

 

OFFICE - continue

 

 

 

 

 

 

Flagship - Eden Prairie , MN

 

138,825

$

23,571

 

94.8%

Gateway Corporate Center - Woodbury, MN

 

59,827

 

9,419

 

100.0%

Golden Hills Office Center - Golden Valley, MN

 

190,758

 

23,482

 

89.9%

Great Plains - Fargo, ND

 

122,040

 

15,375

 

100.0%

Highlands Ranch I - Highlands Ranch, CO

 

71,430

 

10,629

 

100.0%

Highlands Ranch II - Highlands Ranch, CO

 

81,173

 

11,520

 

100.0%

Interlachen Corporate Center - Eagan, MN

 

105,084

 

16,726

 

96.3%

Mendota Office Center I - Mendota Heights, MN

 

59,852

 

7,203

 

77.4%

Mendota Office Center II - Mendota Heights, MN

 

88,398

 

11,738

 

90.8%

Mendota Office Center III - Mendota Heights, MN

 

60,776

 

6,788

 

97.9%

Mendota Office Center IV - Mendota Heights, MN

 

72,231

 

8,705

 

100.0%

Minnesota National Bank - Duluth, MN

 

16,937

 

1,745

 

62.3%

Minnetonka Office Building - Minnetonka, MN

 

4,000

 

411

 

70.7%

Miracle Hills One - Omaha, NE

 

84,475

 

12,347

 

86.2%

Nicollett VII - Burnsville, MN

 

120,752

 

7,387

 

93.2%

Northgate I - Maple Grove, MN

 

79,297

 

7,789

 

100.0%

Northgate II - Maple Grove, MN

 

26,000

 

2,445

 

100.0%

Northpark Corporate Center - Arden Hills, MN

 

146,087

 

17,352

 

95.4%

Pacific Hills - Omaha, NE

 

143,061

 

16,276

 

97.0%

Pillsbury Business Center - Bloomington, MN

 

42,220

 

1,904

 

94.5%

Plaza VII - Boise, ID

 

28,994

 

3,536

 

76.9%

Plymouth I - Plymouth, MN

 

26,186

 

1,672

 

100.0%

Plymouth II - Plymouth, MN

 

26,186

 

1,643

 

65.6%

Plymouth III - Plymouth, MN

 

26,186

 

2,012

 

100.0%

Plymouth IV - Plymouth, MN

 

53,298

 

6,386

 

100.0%

Plymouth V - Plymouth, MN

 

73,632

 

8,503

 

94.5%

Prairie Oak Business Center - Eden Prairie, MN

 

36,481

 

5,756

 

72.3%

Rapid City, SD - 900 Concourse Drive - Rapid City, SD

 

75,815

 

7,088

 

100.0%

Riverport - Maryland Heights, MO

 

122,567

 

20,873

 

100.0%

Southeast Tech Center - Eagan, MN

 

58,300

 

6,338

 

100.0%

Spring Valley IV - Omaha, NE

 

15,700

 

1,138

 

100.0%

Spring Valley V - Omaha, NE

 

24,171

 

1,364

 

61.6%

Spring Valley X - Omaha, NE

 

24,000

 

1,228

 

91.0%

Spring Valley XI - Omaha, NE

 

24,000

 

1,265

 

100.0%

Superior Office Building - Duluth, MN

 

20,000

 

2,539

 

95.5%

TCA Building - Eagan , MN

 

103,640

 

9,903

 

85.9%

Three Paramount Plaza - Bloomington, MN

 

75,526

 

8,044

 

92.4%

Thresher Square - Minneapolis, MN

 

117,144

 

12,074

 

57.8%

Timberlands – Leawood, KS

 

90,315

 

14,676

 

98.6%

UHC Office - International Falls, MN

 

30,000

 

2,505

 

100.0%

US Bank Financial Center - Bloomington, MN

 

153,947

 

16,689

 

96.4%

Viromed - Eden Prairie , MN

 

48,700

 

4,864

 

100.0%

Wayroad Corporate - Minnetonka, MN

 

62,383

 

5,631

 

61.1%

Wells Fargo Center - St Cloud, MN

 

86,428

 

9,791

 

96.6%

West River Business Park - Waite Park, MN

 

24,000

 

1,476

 

69.2%

Westgate - Boise, ID

 

103,342

 

12,231

 

100.0%

Wirth Corporate Center - Golden Valley, MN

 

74,568

 

8,991

 

97.5%

Woodlands Plaza IV - Maryland Heights, MO

 

60,942

 

5,442

 

83.4%

TOTAL OFFICE

 

4,777,378

$

536,431

 

91.9%

2007
Index


Property Name and Location Units  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
          
MULTI-FAMILY RESIDENTIAL - continued
         
Minot 4th Street Apartments - Minot, ND  4  $89   100.0%
Minot 11th Street Apartments - Minot, ND  3   65   100.0%
Minot Fairmont Apartments - Minot, ND  12   367   100.0%
Minot Westridge Apartments - Minot, ND  33   1,971   99.4%
Miramont Apartments - Fort Collins, CO  210   15,442   95.4%
Monticello Apartments - Monticello, MN  60   4,533   94.1%
Neighborhood Apartments - Colorado Springs, CO  192   13,716   91.6%
North Pointe - Bismarck, ND  49   2,542   99.7%
Oakmont Apartments - Sioux Falls, SD  80   5,446   97.4%
Oakwood - Sioux Falls, SD  160   6,637   93.8%
Olympic Village - Billings, MT  274   13,149   97.9%
Olympik Village Apartments - Rochester, MN  140   7,571   95.2%
Oxbow - Sioux Falls, SD  120   5,682   96.5%
Park Meadows Community - Waite Park, MN  360   14,444   88.3%
Pebble Springs - Bismarck, ND  16   834   98.1%
Pinecone Apartments - Fort Collins, CO  195   14,376   94.2%
Pinehurst Apartments - Billings, MT  21   850   97.4%
Pointe West - Rapid City, SD  90   4,885   96.9%
Prairie Winds Apartments - Sioux Falls, SD  48   2,299   89.5%
Prairiewood Meadows - Fargo, ND  85   3,621   88.0%
Quarry Ridge Apartments - Rochester, MN  154   14,828   96.6%
Ridge Oaks - Sioux City, IA  132   5,752   91.1%
Rimrock Apartments - Billings, MT  78   4,262   98.1%
Rocky Meadows - Billings, MT  98   7,097   95.8%
Rum River Apartments - Isanti, MN  72   5,676   96.5%
SCSH Campus Center Apartments - St. Cloud, MN  90   2,677   90.7%
SCSH Campus Heights Apartments - St. Cloud, MN  49   753   62.6%
SCSH Campus Knoll I Apartments - St. Cloud, MN  71   1,811   86.0%
SCSH Campus Plaza Apartments - St. Cloud, MN  24   371   72.0%
SCSH Campus Side Apartments - St. Cloud, MN  48   744   86.2%
SCSH Campus View Apartments - St. Cloud, MN  48   735   87.3%
SCSH Cornerstone Apartments - St. Cloud, MN  24   377   90.3%
SCSH University Park Place Apartments - St. Cloud, MN  35   540   89.5%
Sherwood Apartments - Topeka, KS  300   17,744   98.4%
Southbrook & Mariposa - Topeka, KS  54   5,735   96.0%
South Pointe - Minot, ND  195   11,804   99.7%
Southview Apartments - Minot, ND  24   911   99.0%
Southwind Apartments - Grand Forks, ND  164   7,298   94.8%
Sunset Trail - Rochester, MN  146   14,991   97.1%
Sweetwater Properties - Grafton, ND  42   952   63.8%
Sycamore Village Apartments - Sioux Falls, SD  48   1,777   86.3%
Terrace On The Green - Moorhead, MN  116   3,287   92.7%
Thomasbrook Apartments - Lincoln, NE  240   10,611   89.1%
Valley Park Manor - Grand Forks, ND  168   6,242   91.3%
Village Green - Rochester, MN  36   2,883   95.6%
West Stonehill - Waite Park, MN  313   14,687   94.4%
Westwood Park - Bismarck, ND  64   2,817   96.8%
Winchester - Rochester, MN  115   7,328   95.3%
Woodridge Apartments - Rochester, MN  110   7,729   97.1%
TOTAL MULTI-FAMILY RESIDENTIAL  9,645  $542,547   93.5%


2009 Annual Report 2524

Property Name and Location

Approximate Net Rentable Square Footage

(in thousands) Investment (initial cost plus improvements)

Fiscal 2007 Economic Occupancy

 

 

 

 

 

 

MEDICAL

 

 

 

 

 

 

2800 Medical Building - Minneapolis, MN

 

54,490

$

8,751

 

81.6%

6517 Drew Avenue South - Edina, MN

 

12,140

 

1,515

 

75.0%

Abbott Northwest - Sartell, MN*

 

60,095

 

12,653

 

96.8%

Airport Medical - Bloomington, MN*

 

24,218

 

4,678

 

100.0%

Denfeld Clinic - Duluth, MN

 

20,512

 

3,099

 

100.0%

Edgewood Vista - Bismarck, ND

 

74,112

 

9,704

 

100.0%

Edgewood Vista - Brainerd, MN

 

82,535

 

9,586

 

100.0%

Edgewood Vista - Duluth, MN

 

119,349

 

11,709

 

100.0%

Edgewood Vista - Fremont, NE

 

6,042

 

552

 

100.0%

Edgewood Vista - Hastings, NE

 

6,042

 

572

 

100.0%

Edgewood Vista - Hermantown, MN

 

160,485

 

11,235

 

100.0%

Edgewood Vista - Kalispell, MT

 

5,895

 

589

 

100.0%

Edgewood Vista - Missoula, MT

 

10,150

 

962

 

100.0%

Edgewood Vista - Omaha, NE

 

6,042

 

641

 

100.0%

Edgewood Vista - Spearfish, SD

 

60,161

 

6,121

 

100.0%

Edgewood Vista - Virginia, MN

 

70,313

 

7,070

 

100.0%

Edgewood Vista Phase II - Virginia, MN

 

76,870

 

5,111

 

100.0%

Fresenius - Duluth, MN

 

9,052

 

1,572

 

100.0%

Fox River Cottages - Grand Chute, WI

 

26,336

 

3,712

 

100.0%

Garden View - St. Paul, MN *

 

43,404

 

7,588

 

100.0%

Gateway Clinic - Sandstone, MN*

 

12,444

 

1,765

 

100.0%

Health East St John & Woodwinds - Maplewood & Woodbury, MN

 

114,316

 

21,601

 

100.0%

High Pointe Health Campus - Lake Elmo, MN

 

60,294

 

12,038

 

100.0%

Mariner Clinic - Superior, WI *

 

28,928

 

3,788

 

100.0%

Nebraska Orthopaedic Hospital - Omaha, NE*

 

61,758

 

20,512

 

100.0%

Park Dental - Brooklyn Center, MN

 

9,998

 

2,952

 

100.0%

Pavilion I - Duluth, MN*

 

45,081

 

10,144

 

100.0%

Pavilion II - Duluth, MN

 

73,000

 

19,325

 

100.0%

Ritchie Medical Plaza - St Paul, MN

 

50,409

 

9,547

 

91.8%

St. Michael Clinic - St. Michael, MN

 

10,796

 

2,587

 

100.0%

Southdale FM - Edina, MN

 

67,409

 

13,999

 

92.2%

Southdale SMB - Edina, MN*

 

195,983

 

34,131

 

86.6%

Stevens Point - Stevens Point, WI

 

47,950

 

12,309

 

100.0%

Wells Clinic - Hibbing, MN

 

18,810

 

2,661

 

100.0%

TOTAL MEDICAL

 

1,725,419

$

274,779

 

96.7%

 

 

 

 

 

 

 

INDUSTRIAL

 

 

 

 

 

 

API Building - Duluth, MN

 

35,000

$

1,723

 

100.0%

Bloomington 2000 - Bloomington, MN

 

100,850

 

6,229

 

100.0%

Bodycote Industrial Building - Eden Prairie, MN

 

41,880

 

2,152

 

100.0%

Dixon Avenue Industrial Park - Des Moines, IA

 

657,142

 

13,143

 

93.3%

Lexington Commerce Center - Eagan, MN

 

90,260

 

6,175

 

90.7%

Lighthouse - Duluth, MN

 

59,145

 

1,884

 

19.6%

Metal Improvement Company - New Brighton, MN

 

49,620

 

2,507

 

100.0%

Roseville 2929 - Roseville, MN

 

172,057

 

9,237

 

100.0%

Stone Container - Fargo, ND

 

195,075

 

7,141

 

100.0%

Stone Container - Roseville, MN

 

229,072

 

8,250

 

100.0%

Waconia Industrial Building - Waconia, MN

 

29,440

 

2,004

 

100.0%

Wilson’s Leather - Brooklyn Park, MN

 

353,049

 

13,805

 

100.0%

Winsted Industrial Building - Winsted, MN

 

41,685

 

1,007

 

100.0%

TOTAL INDUSTRIAL

 

2,054,275

$

75,257

 

95.1%

Index


2007
Property Name and Location Approximate Net Rentable Square Footage  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
          
OFFICE BUILDINGS         
1st Avenue Building - Minot, ND  15,446  $694   35.5%
12 South Main - Minot, ND  10,126   393   0.0%
610 Business Center IV - Brooklyn Park, MN  78,190   9,403   100.0%
2030 Cliff Road - Eagan, MN  13,374   983   100.0%
7800 West Brown Deer Road - Milwaukee, WI  175,610   11,477   100.0%
American Corporate Center - Mendota Heights, MN  138,959   20,870   92.1%
Ameritrade - Omaha, NE  73,742   8,349   100.0%
Benton Business Park - Sauk Rapids, MN  30,464   1,527   100.0%
Bismarck 715 East Broadway - Minot, ND  22,500   1,672   100.0%
Bloomington Business Plaza - Bloomington, MN  121,064   8,050   63.4%
Brenwood - Minnetonka, MN  176,789   16,793   78.4%
Brook Valley I - La Vista, NE  30,000   2,055   68.2%
Burnsville Bluffs II - Burnsville, MN  45,158   3,352   83.8%
Cold Spring Center - St. Cloud, MN  77,634   9,146   91.2%
Corporate Center West - Omaha, NE  141,724   21,405   100.0%
Crosstown Centre - Eden Prairie, MN  185,000   17,933   100.0%
Dewey Hill Business Center - Edina, MN  73,338   5,341   29.6%
Farnam Executive Center - Omaha, NE  94,832   13,592   100.0%
Flagship - Eden Prairie, MN  138,825   24,127   100.0%
Gateway Corporate Center - Woodbury, MN  59,827   9,489   100.0%
Golden Hills Office Center - Golden Valley, MN  190,758   24,202   97.6%
Great Plains - Fargo, ND  122,040   15,375   100.0%
Highlands Ranch - Highlands Ranch, CO  81,173   11,912   95.2%
Highlands Ranch I - Highlands Ranch, CO  71,430   10,630   100.0%
Interlachen Corporate Center - Edina, MN  105,084   16,819   10.7%
Intertech Building - Fenton, MO  64,607   6,099   90.9%
IRET Corporate Plaza - Minot, ND  50,360   6,317   0.0%
Mendota Office Center I - Mendota Heights, MN  59,852   7,337   89.0%
Mendota Office Center II - Mendota Heights, MN  88,398   12,472   72.8%
Mendota Office Center III - Mendota Heights, MN  60,776   6,813   90.2%
Mendota Office Center IV - Mendota Heights, MN  72,231   9,283   100.0%
Minnesota National Bank - Duluth, MN  17,108   1,745   100.0%
Miracle Hills One - Omaha, NE  83,448   12,665   95.9%
Nicollett VII - Burnsville, MN  118,125   7,444   79.6%
Northgate I - Maple Grove, MN  79,297   8,242   100.0%
Northgate II - Maple Grove, MN  26,000   2,445   100.0%
Northpark Corporate Center - Arden Hills, MN  146,087   17,551   83.8%
Pacific Hills - Omaha, NE  143,075   16,952   93.6%
Pillsbury Business Center - Bloomington, MN  42,220   1,906   49.2%
Plaza VII - Boise, ID  28,994   3,769   79.7%
Plymouth 5095 Nathan Lane - Plymouth, MN  20,528   1,897   100.0%
Plymouth I - Plymouth, MN  26,186   1,690   92.8%
Plymouth II - Plymouth, MN  26,186   1,671   100.0%
Plymouth III - Plymouth, MN  26,186   2,352   54.4%
Plymouth IV & V - Plymouth, MN  126,930   15,292   95.2%
Prairie Oak Business Center - Eden Prairie, MN  36,421   5,896   100.0%
Rapid City 900 Concourse Drive - Rapid City, SD  75,815   7,088   100.0%
Riverport - Maryland Heights, MO  122,567   20,885   100.0%
Southeast Tech Center - Eagan, MN  58,300   6,358   100.0%
Spring Valley IV - Omaha, NE  15,700   1,154   100.0%
Spring Valley V - Omaha, NE  24,171   1,558   62.5%
 
2009 Annual Report 25
 
 
 
Index

 
Property Name and Location Approximate Net Rentable Square Footage  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
             
OFFICE BUILDINGS - continued
            
Spring Valley X - Omaha, NE  24,000  $1,232   75.3%
Spring Valley XI - Omaha, NE  24,000   1,265   100.0%
Superior Office Building - Duluth, MN  20,000   2,539   100.0%
TCA Building - Eagan, MN  103,640   9,928   86.3%
Three Paramount Plaza - Bloomington, MN  75,526   8,450   83.8%
Thresher Square - Minneapolis, MN  117,144   12,659   44.8%
Timberlands - Leawood, KS  90,388   14,859   78.2%
UHC Office - International Falls, MN  30,000   2,505   100.0%
US Bank Financial Center - Bloomington, MN  153,947   16,809   95.7%
Viromed - Eden Prairie, MN  48,700   4,864   100.0%
Wells Fargo Center - St Cloud, MN  86,192   10,052   94.8%
West River Business Park - Waite Park, MN  24,075   1,476   74.1%
Westgate - Boise, ID  103,342   12,237   100.0%
Whitewater Plaza - Minnetonka, MN  61,138   5,664   48.4%
Wirth Corporate Center - Golden Valley, MN  74,568   9,054   96.4%
Woodlands Plaza IV  61,820   5,502   79.9%
TOTAL OFFICE BUILDINGS  5,011,135  $571,565   89.1%

Property Name and Location Approximate Net Rentable Square Footage  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
          
MEDICAL         
2800 Medical Building - Minneapolis, MN  54,490  $8,676   92.3%
2828 Chicago Avenue - Minneapolis, MN  56,239   16,506   71.9%
Abbott Northwest - Sartell, MN*  59,760   12,653   95.7%
Airport Medical - Bloomington, MN*  24,218   4,678   100.0%
Barry Pointe Office Park - Kansas City, MO  18,502   2,845   87.8%
Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN  53,466   8,609   100.0%
Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN  36,199   5,850   100.0%
Denfeld Clinic - Duluth, MN  20,512   3,099   100.0%
Eagan 1440 Duckwood Medical - Eagan, MN  17,640   2,587   100.0%
Edgewood Vista - Belgrade, MT  5,192   814   100.0%
Edgewood Vista - Billings, MT  11,800   1,882   100.0%
Edgewood Vista - Bismarck, ND  74,112   9,740   100.0%
Edgewood Vista - Brainerd, MN  82,535   9,620   100.0%
Edgewood Vista - Columbus, NE  5,194   867   100.0%
Edgewood Vista - East Grand Forks, MN  18,488   1,642   100.0%
Edgewood Vista - Fargo, ND  168,801   21,843   100.0%
Edgewood Vista - Fremont, NE  6,042   588   100.0%
Edgewood Vista - Grand Island, NE  5,185   807   100.0%
Edgewood Vista - Hastings, NE  6,042   606   100.0%
Edgewood Vista - Hermantown I, MN  119,349   11,660   100.0%
Edgewood Vista - Hermantown II, MN  160,485   11,269   100.0%
Edgewood Vista - Kalispell, MT  5,895   624   100.0%
Edgewood Vista - Missoula, MT  10,150   999   100.0%
Edgewood Vista - Norfolk, NE  5,135   764   100.0%
Edgewood Vista - Omaha, NE  6,042   676   100.0%
Edgewood Vista - Sioux Falls, SD  11,800   1,289   100.0%
Edgewood Vista - Spearfish, SD  60,161   6,156   100.0%
Edgewood Vista - Virginia, MN  147,183   12,146   100.0%

2009 Annual Report26

Property Name and Location

Approximate Net Rentable Square Footage

(in thousands) Investment (initial cost plus improvements)

Fiscal 2007 Economic Occupancy

 

 

 

 

 

 

 

RETAIL

 

 

 

 

 

 

17 South Main - Minot, ND

 

2,454

$

279

 

86.1%

Anoka Strip Center - Anoka, MN

 

10,625

 

733

 

63.9%

Burnsville 1 Strip Center - Burnsville, MN

 

8,526

 

1,001

 

90.8%

Burnsville 2 Strip Center - Burnsville, MN

 

8,400

 

804

 

85.9%

Champlin South Pond - Champlin, MN

 

26,315

 

3,635

 

76.8%

Chan West Village - Chanhassen, MN

 

137,572

 

20,899

 

97.9%

Dakota West Plaza - Minot, ND

 

16,921

 

602

 

91.1%

Duluth Denfeld Retail - Duluth, MN

 

36,546

 

4,985

 

94.2%

Duluth NAPA - Duluth, MN

 

15,597

 

1,933

 

86.6%

Eagan 1 Retail Center - Eagan, MN

 

5,400

 

518

 

100.0%

Eagan 2 Retail Center - Eagan, MN

 

13,901

 

1,371

 

100.0%

Eagan 3 C Store - Eagan, MN

 

3,886

 

784

 

100.0%

East Grand Station - East Grand Forks, MN

 

16,103

 

1,392

 

100.0%

Fargo Express Center - Fargo, ND

 

30,227

 

1,441

 

100.0%

Fargo Express SC Pad 1 - Fargo, ND

 

4,000

 

368

 

100.0%

Forest Lake Auto - Forest Lake, MN

 

6,836

 

501

 

100.0%

Forest Lake Westlake Center - Forest Lake, MN

 

100,570

 

8,187

 

100.0%

Grand Forks Carmike - Grand Forks, ND

 

28,528

 

2,546

 

100.0%

Grand Forks Medpark Mall - Grand Forks, ND

 

59,117

 

5,697

 

99.8%

Jamestown Buffalo Mall - Jamestown, ND

 

212,671

 

5,009

 

84.6%

Jamestown Business Center - Jamestown, ND

 

100,864

 

1,935

 

89.2%

Kalispell Retail Center - Kalispell, MT

 

52,000

 

3,470

 

100.0%

Kentwood Thomasville Furniture - Kentwood, MI

 

16,080

 

2,122

 

100.0%

Ladysmith Pamida - Ladysmith, WI

 

41,000

 

1,501

 

100.0%

Lakeville Strip Center - Lakeville, MN

 

9,488

 

1,971

 

75.1%

Livingston Pamida - Livingston, MT

 

41,200

 

1,800

 

100.0%

Minot Arrowhead SC - Minot, ND

 

76,133

 

6,086

 

94.4%

Minot Plaza - Minot, ND

 

10,843

 

595

 

100.0%

Monticello C Store - Monticello, MN

 

3,575

 

889

 

76.7%

Omaha Barnes & Noble - Omaha, NE

 

27,500

 

3,699

 

100.0%

Pine City C Store - Pine City, MN

 

4,800

 

442

 

100.0%

Pine City Evergreen Square - Pine City, MN

 

63,225

 

3,028

 

100.0%

Rochester Maplewood Square - Rochester, MN

 

118,398

 

11,976

 

62.6%

St. Cloud Westgate SC - St. Cloud, MN

 

104,928

 

6,841

 

64.8%

Weston Retail - Weston, WI

 

25,644

 

1,681

 

100.0%

Weston Walgreens - Weston, WI

 

14,820

 

2,455

 

100.0%

TOTAL RETAIL

 

1,454,693

$

113,176

 

89.6%

SUBTOTAL

 

 

$

1,489,287

 

 

2007
Index

Property Name and Location Approximate Net Rentable Square Footage  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
          
MEDICAL - continued
         
Edina 6363 France Medical - Edina, MN*  70,934  $12,695   82.0%
Edina 6405 France Medical - Edina, MN*  55,478   12,201   100.0%
Edina 6517 Drew Avenue - Edina, MN  12,140   1,537   100.0%
Edina 6525 France SMC II - Edina, MN  67,409   14,633   96.8%
Edina 6545 France SMC I - Edina, MN*  227,626   44,324   84.4%
Fox River Cottages - Grand Chute, WI  26,336   3,808   100.0%
Fresenius - Duluth, MN  9,052   1,572   100.0%
Garden View - St. Paul, MN*  43,404   7,870   100.0%
Gateway Clinic - Sandstone, MN*  12,444   1,765   100.0%
Health East St John & Woodwinds - Maplewood & Woodbury, MN  114,316   21,602   100.0%
High Pointe Health Campus - Lake Elmo, MN  60,294   12,180   94.3%
Mariner Clinic - Superior, WI*  28,928   3,788   100.0%
Minneapolis 701 25th Avenue Medical (Riverside) - Minneapolis, MN*  57,212   7,873   98.3%
Nebraska Orthopaedic Hospital - Omaha, NE*  61,758   20,512   100.0%
Park Dental - Brooklyn Center, MN  9,998   2,952   100.0%
Pavilion I - Duluth, MN*  45,081   10,174   100.0%
Pavilion II - Duluth, MN  73,000   19,325   100.0%
Ritchie Medical Plaza - St Paul, MN  52,328   9,576   67.1%
St Michael Clinic - St Michael, MN  10,796   2,851   100.0%
Stevens Point - Stevens Point, WI  47,950   14,825   100.0%
Wells Clinic - Hibbing, MN  18,810   2,661   100.0%
TOTAL MEDICAL  2,355,911  $388,219   95.7%

Property Name and Location Approximate Net Rentable Square Footage  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
          
INDUSTRIAL         
API Building - Duluth, MN  35,000  $1,723   100.0%
Bloomington 2000 West 94th Street - Bloomington, MN  100,850   6,229   100.0%
Bodycote Industrial Building - Eden Prairie, MN  41,880   2,152   100.0%
Cedar Lake Business Center - St. Louis Park, MN  50,400   3,711   97.4%
Dixon Avenue Industrial Park - Des Moines, IA  604,886   13,181   91.6%
Eagan 2785 & 2795 Highway 55 - Eagan, MN  198,600   5,628   100.0%
Lexington Commerce Center - Eagan, MN  90,260   6,480   100.0%
Lighthouse - Duluth, MN  59,292   1,885   81.6%
Metal Improvement Company - New Brighton, MN  49,620   2,507   100.0%
Minnetonka 13600 County Road 62 - Minnetonka, MN  69,984   3,702   100.0%
Roseville 2929 Long Lake Road - Roseville, MN  172,057   10,712   100.0%
Stone Container - Fargo, ND  195,075   7,141   100.0%
Stone Container - Roseville, MN  229,072   8,250   100.0%
Urbandale 3900 106th Street - Urbandale, IA  528,353   14,124   100.0%
Waconia Industrial Building - Waconia, MN  29,440   2,040   100.0%
Wilson's Leather - Brooklyn Park, MN  353,049   13,875   100.0%
Winsted Industrial Building - Winsted, MN  41,685   1,007   46.7%
Woodbury 1865 Woodland - Woodbury, MN  69,600   3,756   100.0%
TOTAL INDUSTRIAL  2,919,103  $108,103   97.8%


2009 Annual Report27

Property Name and Location

 

(in thousands) Investment (initial cost plus improvements)

 

 

 

 

 

 

 

UNIMPROVED LAND

 

 

 

 

 

 

2828 Chicago Avenue - Minneapolis, MN

 

 

$

254

 

 

Cottonwood Lake IV - Bismarck, ND

 

 

 

1,366

 

 

Eagan Unimproved Land - Eagan, MN

 

 

 

423

 

 

Kalispell Unimproved Land - Kalispell, MT

 

 

 

1,424

 

 

Minot Unimproved Land - Minot, ND

 

 

 

1,767

 

 

Monticello Unimproved Land - Monticello, MN

 

 

 

89

 

 

Quarry Ridge Unimproved Land - Rochester, MN

 

 

 

942

 

 

River Falls Unimproved Land - River Falls, WI

 

 

 

205

 

 

St. Michael Unimproved Property - St. Michael, MN

 

 

 

111

 

 

Weston Unimproved Land - Weston, WI

 

 

 

811

 

 

TOTAL UNIMPROVED LAND

 

 

$

7,392

 

 

 

 

 

 

 

 

 

TOTAL UNITS – RESIDENTIAL SEGMENT

 

9,397

 

 

 

 

TOTAL SQUARE FOOTAGE – COMMERCIAL SEGMENTS

 

10,011,765

 

 

 

 

TOTAL INVESTMENTS

 

 

$

1,496,679

 

 

Index


Property Name and Location Approximate Net Rentable Square Footage  
(in thousands) Investment (initial cost plus improvements)
  Fiscal 2009 Economic Occupancy 
          
RETAIL         
17 South Main - Minot, ND  2,454  $287   100.0%
Anoka Strip Center - Anoka, MN  10,625   744   50.0%
Burnsville 1 Strip Center - Burnsville, MN  8,526   1,181   100.0%
Burnsville 2 Strip Center - Burnsville, MN  8,400   962   84.2%
Champlin South Pond - Champlin, MN  26,020   3,593   85.2%
Chan West Village – Chanhassen, MN  137,572   21,423   99.0%
Dakota West Plaza - Minot , ND  16,921   611   90.3%
Duluth Denfeld Retail - Duluth, MN  37,617   4,990   94.5%
Duluth NAPA - Duluth, MN  15,582   1,933   97.7%
Eagan Community - Eagan, MN  23,187   3,143   90.0%
East Grand Station - East Grand Forks, MN  16,103   1,694   100.0%
Fargo Express Community - Fargo, ND  34,226   1,813   81.2%
Forest Lake Auto - Forest Lake, MN  6,836   509   100.0%
Forest Lake Westlake Center - Forest Lake, MN  100,570   8,205   100.0%
Grand Forks Carmike - Grand Forks, ND  28,528   2,546   100.0%
Grand Forks Medpark Mall - Grand Forks, ND  59,117   5,721   99.2%
Jamestown Buffalo Mall - Jamestown, ND  213,271   6,183   81.0%
Jamestown Business Center - Jamestown, ND  100,249   2,492   92.1%
Kalispell Retail Center - Kalispell, MT  52,000   3,473   100.0%
Kentwood Thomasville Furniture - Kentwood, MI  16,080   2,123   100.0%
Ladysmith Pamida - Ladysmith, WI  41,000   1,500   100.0%
Lakeville Strip Center - Lakeville, MN  9,488   1,971   97.2%
Livingston Pamida - Livingston, MT  41,200   1,800   100.0%
Minot Arrowhead - Minot, ND  77,912   8,268   99.2%
Minot Plaza - Minot, ND  10,843   608   100.0%
Monticello C Store - Monticello, MN  3,575   893   100.0%
Omaha Barnes & Noble - Omaha, NE  26,985   3,699   100.0%
Pine City C Store - Pine City, MN  4,800   442   100.0%
Pine City Evergreen Square - Pine City, MN  63,225   3,356   67.5%
Rochester Maplewood Square - Rochester, MN  118,398   12,011   51.8%
St. Cloud Westgate - St. Cloud, MN  104,928   6,841   60.2%
Weston Retail - Weston, WI  25,644   1,681   75.0%
Weston Walgreens - Weston, WI  14,820   2,455   100.0%
TOTAL RETAIL  1,456,702  $119,151   87.1%
SUBTOTAL     $1,729,585     


2009 Annual Report25
Index


Property Name and Location  
(in thousands) Investment (initial cost plus improvements)
    
UNIMPROVED LAND   
Bismarck 2130 South 12th Street - Bismarck, ND  $587
Bismarck 700 East Main - Bismarck, ND   827
Eagan Unimproved Land - Eagan, MN   423
IRET Corporate Plaza Out-lot - Minot, ND   323
Kalispell Unimproved Land - Kalispell, MT   1,424
Monticello Unimproved Land - Monticello, MN   97
Quarry Ridge Unimproved Land - Rochester, MN   942
River Falls Unimproved Land - River Falls, WI   205
Thomasbrook 24 Units - Lincoln, NE   56
Urbandale Unimproved Land - Urbandale, IA   5
Weston Unimproved Land - Weston, WI   812
TOTAL UNIMPROVED LAND  $5,701
     
TOTAL UNITS – RESIDENTIAL SEGMENT9,645   
TOTAL SQUARE FOOTAGE – COMMERCIAL SEGMENTS11,742,851   
TOTAL INVESTMENTS  $1,735,286

Mortgages Payable

As of April 30, 2007,2009, individual first mortgage loans on the above properties totaled $951.1 million.$1.1 billion. Of the $951.1 million$1.1 billion of mortgage indebtedness on April 30, 2007, $21.72009, $9.6 million or 0.9% is represented by variable rate mortgages on which the future interest rate will vary based on changes in the interest rate index for each respective loan. The balance of fixed rate mortgages totaled $929.4 million. Principal payments due on our mortgage indebtedness are as follows:

Year Ended April 30,

Mortgage Principal
(in thousands)

2008

$

30,831

2009

 

47,701

2010

 

127,747

2011

 

101,282

2012

 

85,713

Later Years

 

557,865

Total

$

951,139

Year Ended April 30, 
Mortgage Principal
(in thousands)
 
2010 $140,456 
2011  104,089 
2012  113,381 
2013  48,682 
2014  57,537 
Thereafter  606,013 
Total $1,070,158 
Future Minimum Lease Payments

Receipts

The future minimum lease paymentsreceipts to be received under leases for commercial properties in place as of April 30, 2007,2009, assuming that no options to renew or buy out the leases are exercised, are as follows:

Year Ended April 30,

 

Lease Payments
(in thousands)

2008

$

91,368

2009

 

82,328

2010

 

74,402

2011

 

61,703

2012

 

47,268

Later Years

 

241,836

Total

$

598,905

2007
Year Ended April 30, 
Lease Payments
(in thousands)
 
2010 $111,786 
2011  99,833 
2012  84,440 
2013  72,039 
2014  61,911 
Thereafter  267,961 
Total $697,970 


2009 Annual Report 2829

Index

Capital Expenditures

Each year we review the physical condition of each property we own. In order for our properties to remain competitive, attract new tenants, and retain existing tenants, we plan for a reasonable amount of capital improvements. For the year ended April 30, 2007,2009, we spent approximately $30.9$28.0 million on capital improvements.

Contracts or Options to Sell

Purchase

We have granted options to purchase certain of our properties to tenants in these properties, under lease agreements with the tenant. In general, these options grant the tenant the right to purchase the property at the greater of such property’s appraised value or an annual compounded increase of 2.0% to 2.5%a specified percentage of the initial cost to us. As of April 30, 2007,2009, our properties subject to purchase options, the cost, plus improvements, of each such property and its gross rental revenue are as follows:

 

(in thousands)

Property

Property Cost

Gross Rental Revenue

2007

2006

2005

Edgewood Vista - Bismarck, ND

 

10,868

 

980

 

653

 

0

Edgewood Vista - Brainerd, MN

 

10,634

 

968

 

645

 

0

Edgewood Vista - Duluth, MN

 

11,709

 

1,472

 

1,472

 

1,406

Edgewood Vista - Fremont, NE

 

552

 

68

 

62

 

59

Edgewood Vista - Hastings, NE

 

572

 

68

 

63

 

61

Edgewood Vista - Hermantown, MN

 

12,325

 

1,124

 

749

 

0

Edgewood Vista - Kalispell, MT

 

588

 

72

 

62

 

62

Edgewood Vista - Missoula, MT

 

962

 

132

 

120

 

120

Edgewood Vista - Omaha, NE

 

641

 

76

 

70

 

67

Edgewood Vista - Spearfish, SD

 

6,757

 

608

 

406

 

0

Edgewood Vista - Virginia, MN

 

12,182

 

1,320

 

1,320

 

1,320

Fox River Cottage - Grand Chute, WI

 

3,860

 

260

 

0

 

0

Great Plains Software - Fargo, ND

 

15,375

 

1,876

 

1,876

 

1,876

Healtheast - Woodbury & Maplewood, MN

 

21,601

 

2,032

 

2,032

 

2,032

Minnesota National Bank - Duluth, MN

 

2,104

 

135

 

100

 

189

St. Michael Clinic - St. Michael, MN

 

2,587

 

35

 

0

 

0

Stevens Point - Stevens Point, WI

 

12,504

 

630

 

102

 

0

Total

$

125,821

$

11,856

$

9,732

$

7,192

 

  (in thousands) 
     Gross Rental Revenue 
Property Investment Cost  2009  2008  2007 
Abbott Northwest-Sartell, MN $12,653  $1,292  $1,292  $1,252 
Edgewood Vista-Belgrade, MT  2,135   196   31   0 
Edgewood Vista-Billings, MT  4,274   396   66   0 
Edgewood Vista-Bismarck, ND  10,903   1,008   985   980 
Edgewood Vista-Brainerd, MN  10,667   988   971   968 
Edgewood Vista-Columbus, NE  1,481   136   21   0 
Edgewood Vista-East Grand Forks, MN  5,012   464   78   0 
Edgewood Vista-Fargo, ND  26,322   2,065   310   0 
Edgewood Vista-Fremont, NE  588   72   69   68 
Edgewood Vista-Grand Island, NE  1,431   132   20   0 
Edgewood Vista-Hastings, NE  606   76   69   68 
Edgewood Vista-Hermantown I, MN  21,510   2,040   1,557   1,472 
Edgewood Vista-Hermantown II, MN  12,359   1,144   1,127   1,124 
Edgewood Vista-Kalispell, MT  624   76   72   72 
Edgewood Vista-Missoula, MT  999   96   132   132 
Edgewood Vista-Norfolk, NE  1,332   124   19   0 
Edgewood Vista-Omaha, NE  676   80   77   76 
Edgewood Vista-Sioux Falls, SD  3,357   312   52   0 
Edgewood Vista-Spearfish, SD  6,792   628   612   608 
Edgewood Vista-Virginia, MN  17,132   1,736   1,381   1,320 
Fox River Cottages - Grand Chute, WI  3,956   388   387   260 
Healtheast St John & Woodwinds- Maplewood & Woodbury, MN  21,601   2,052   2,032   2,032 
Great Plains - Fargo, ND  15,375   1,876   1,876   1,876 
Minnesota National Bank - Duluth, MN  2,104   211   205   135 
St. Michael Clinic - St. Michael, MN  2,851   240   229   35 
Stevens Point - Stevens Point, WI  15,020   1,356   1,279   630 
Total $201,760  $19,184  $14,949  $13,108 
Properties by State

The following table presents, as of April 30, 2007, an analysis2009, the total real estate investment amount, net of accumulated depreciation, by state of each of the five major segments of properties owned by us - multi-family residential, office, medical, industrial and retail:

 

(in thousands)

 

State

Multi-Family
 Residential

Commercial
 Office

Commercial
 Medical

Commercial
 Industrial

Commercial
 Retail

Total

% of Total

Minnesota

$

137,294

$

343,694

$

215,317

$

54,973

$

71,890

$

823,168

 

55.3%

North Dakota

 

115,752

 

16,708

 

9,704

 

7,141

 

24,558

 

173,863

 

11.7%

Nebraska

 

31,154

 

78,992

 

22,277

 

0

 

3,699

 

136,122

 

9.1%

Colorado

 

42,421

 

22,149

 

0

 

0

 

0

 

64,570

 

4.3%

Kansas

 

42,196

 

14,676

 

0

 

0

 

0

 

56,872

 

3.8%

Montana

 

40,192

 

0

 

1,551

 

0

 

5,270

 

47,013

 

3.2%

South Dakota

 

33,020

 

7,088

 

6,121

 

0

 

0

 

46,229

 

3.1%

Texas

 

39,261

 

0

 

0

 

0

 

0

 

39,261

 

2.6%

Wisconsin

 

0

 

11,042

 

19,809

 

0

 

5,637

 

36,488

 

2.5%

All Other States

 

8,354

 

42,082

 

0

 

13,143

 

2,122

 

65,701

 

4.4%

Total

$

489,644

$

536,431

$

274,779

$

75,257

$

113,176

$

1,489,287

 

100.0%

2007

2009 Annual Report 2930

Index


  (in thousands)    
State 
Multi-Family
 Residential
  
Commercial
 Office
  
Commercial
 Medical
  
Commercial
 Industrial
  
Commercial
 Retail
  Total  % of Total 
Minnesota $118,503  $310,178  $259,500  $65,319  $64,374  $817,874   55.8%
North Dakota  114,440   20,203   30,155   5,204   22,023   192,025   13.1%
Nebraska  30,309   74,017   21,886   0   2,653   128,865   8.8%
Colorado  30,598   20,702   0   0   0   51,300   3.5%
Kansas  35,123   13,914   0   0   0   49,037   3.3%
Montana  31,539   0   3,869   0   4,583   39,991   2.7%
South Dakota  25,067   5,595   6,888   0   0   37,550   2.6%
Wisconsin  0   9,639   20,852   0   4,996   35,487   2.4%
Iowa  9,895   0   0   24,733   0   34,628   2.4%
Missouri  0   30,740   2,724   0   0   33,464   2.3%
Texas  31,344   0   0   0   0   31,344   2.1%
All Other States*  0   13,617   0   0   1,532   15,149   1.0%
Total $426,818  $498,605  $345,874  $95,256  $100,161  $1,466,714   100.0%
*Idaho and Michigan
Item 3. Legal Proceedings

In the ordinary course of our operations, we become involved in litigation. At this time, we know of no material pending or threatened legal proceedings, or other proceedings contemplated by governmental authorities, that would have a material impact upon us.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to our shareholders during the fourth quarter of the fiscal year ended April 30, 2007. 

2009.

PART II

Item 5. Market for Registrant’s Common Equity, Related StockholderMatters and Issuer Purchases of Equity Securities

Quarterly Share and Distribution Data

Our common shares of beneficial interest trade on the NASDAQ Global Select Market under the symbol IRETS.IRET (formerly IRETS; we changed our symbol to IRET on July 1, 2008). On June 29, 2007,30, 2009, the last reported sales price per share of our common shares on the NASDAQ National Market was $10.33.$8.89. The following table sets forth the quarterly high and low closing sales prices per share of our common shares as reported on the NASDAQ Global Select Market, and the distributions per common share and limited partnership unit declared with respect to each period.

Quarter Ended

High

Low

Distributions Declared
(per share and unit)

Fiscal Year 2007

 

 

 

 

 

 

April 30, 2007

$

11.00

$

9.66

$

0.1660

January 31, 2007

 

10.68

 

9.65

 

0.1655

October 31, 2006

 

10.15

 

9.22

 

0.1650

July 31, 2006

 

9.50

 

8.85

 

0.1645

 

Quarter Ended

High

Low

Distributions Declared
(per share and unit)

Fiscal Year 2006

 

 

 

 

 

 

April 30, 2006

$

9.67

$

9.11

$

0.1640

January 31, 2006

 

9.79

 

9.20

 

0.1635

October 31, 2005

 

10.16

 

8.85

 

0.1630

July 31, 2005

 

10.24

 

9.04

 

0.1625

 

Quarter Ended High  Low  
Distributions Declared
(per share and unit)
 
Fiscal Year 2009         
April 30, 2009 $10.43  $8.60  $0.1700 
January 31, 2009  10.71   7.43   0.1695 
October 31, 2008  11.19   7.66   0.1690 
July 31, 2008  10.68   9.54   0.1685 

Quarter Ended High  Low  
Distributions Declared
(per share and unit)
 
Fiscal Year 2008         
April 30, 2008 $10.47  $8.95  $0.1680 
January 31, 2008  10.55   8.84   0.1675 
October 31, 2007  11.59   9.35   0.1670 
July 31, 2007  10.86   9.40   0.1665 


2009 Annual Report31
Index

It is IRET’s policy to pay quarterly distributions to our common shareholders and unitholders, at the discretion of our Board of Trustees, based on our funds from operations, financial condition and capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board of Trustees deems relevant. Since July 1, 1971, IRET has paid quarterly cash distributions in the months of January, April, July and October.

Shareholders

As of June 29, 2007,30, 2009, the Company had approximately 4,1963,908 common shareholders of record, and 48,581,30663,460,743 common shares of beneficial interest (plus 20,388,75420,836,972 limited partnership units potentially convertible into 20,388,75420,836,972 common shares) were outstanding.

Unregistered Sales of Shares

Sales of Unregistered Securities. During the fiscal years ended April 30, 2007, 20062009, 2008 and 2005,2007, respectively, we issued an aggregate of 219,587, 342,242338,286, and 595,810389,670 and 219,587 unregistered common shares to holders of limited partnership units of IRET Properties upon redemption and conversion of an aggregate of 219,587, 342,242338,286, and 595,810389,670 and 219,587 limited partnership units of IRET Properties on a one-for-one basis. All such issuances of our common shares were exempt from registration as private placements under Section 4(2) of the Securities Act, including Regulation D promulgated thereunder. We have registered the re-sale of such common shares under the Securities Act.

2007 Annual Report 30

Issuer Purchases of Equity Securities. The Company did not repurchase any of its equity securities during fiscal year 2007,2009, except for repurchases of nominal amounts of fractional shares, at shareholder request.

Comparative Stock Performance


The information contained in this Comparative Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.


Set forth below is a graph that compares, for the five fiscal years commencing May 1, 2002,2004, and ending April 30, 2007,2009, the cumulative total returns for the Company’s common shares with the comparable cumulative total return of two indexes, the Standard & Poor’s 500 Index (“S&P 500”), and the FTSE NAREIT Equity REITs Index, which is an index prepared by the FTSE Group for the National Association of Real Estate Investment Trusts, which includes all tax-qualified equity REITs listed on the New York Stock Exchange, the American Stock Exchange and the NASDAQ Market.


The performance graph assumes that at the close of trading on April 30, 2002,2004, the last trading day of fiscal year 2002,2004, $100 was invested in the Company’s common shares and in each of the indexes.  The comparison assumes the reinvestment of all distributions.  Cumulative total shareholder returns for the Company’s common shares, the S&P 500 and the FTSE NAREIT Equity REITs Index are based on the Company’s fiscal year ending April 30.

FY02

FY03

FY04

FY05

FY06

FY07

Investors Real Estate Trust

100.00

103.92

108.41

109.07

120.14

143.08

NAREIT Equity

100.00

99.94

124.78

167.97

212.62

268.88

S&P 500

100.00

86.69

106.52

113.28

130.74

150.66



2009 Annual Report32
Index


  FY04  FY05  FY06  FY07  FY08  FY09 
Investors Real Estate Trust  100.00   100.61   112.75   134.28   138.55   134.27 
S&P 500  100.00   106.34   122.73   141.43   134.82   87.21 
FTSE NAREIT Equity REITs  100.00   134.62   170.40   215.49   188.52   97.63 

Source:  Research Data Group, Inc.

2007 Annual Report 31


Item 6. Selected Financial Data

Set forth below is selected financial data on a historical basis for the Company for the five most recent fiscal years ended April 30. This information should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this Annual Report on Form 10-K.

 

(in thousands, except per share data)

 

2007

2006

2005

2004

2003

Consolidated Income Statement Data

 

 

 

 

 

 

 

 

 

 

Revenue

$

197,817

$

170,448

$

152,937

$

130,458

$

109,780

Income before minority interest and discontinued operations and gain on sale of other investments

$

14,300

$

11,138

$

9,920

$

10,190

$

13,655

Gain on sale of real estate, land, and other investments

$

4,602

$

3,293

$

8,605

$

662

$

1,595

Minority interest portion of operating partnership income

$

(3,229)

$

(1,896)

$

(1,738)

$

(2,173)

$

(3,190)

Income from continuing operations

$

11,059

$

8,781

$

7,806

$

7,418

$

9,841

Income from discontinued operations

$

3,051

$

2,786

$

7,270

$

2,022

$

2,407

Net income

$

14,110

$

11,567

$

15,076

$

9,440

$

12,248

Consolidated Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

Total real estate investments

$

1,316,534

$

1,126,400

$

1,067,345

$

991,923

$

845,325

Total assets

$

1,435,389

$

1,207,315

$

1,151,158

$

1,076,317

$

885,681

Mortgages payable

$

951,139

$

765,890

$

708,558

$

633,124

$

539,397

Shareholders’ equity

$

284,969

$

289,560

$

295,172

$

278,629

$

214,761

 

 

 

 

 

 

 

 

 

 

 

Consolidated Per Common Share Data
(basic and diluted)

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

.18

$

.14

$

.13

$

.19

$

.31

Income from discontinued operations

$

.06

$

.06

$

.17

$

.05

$

.07

Net income

$

.24

$

.20

$

.30

$

.24

$

.38

Distributions

$

.66

$

.65

$

.65

$

.64

$

.63

  (in thousands, except per share data) 
  2009  2008  2007  2006  2005 
Consolidated Income Statement Data               
Revenue $240,005  $221,170  $197,538  $170,171  $152,759 
Income before minority interest and discontinued operations and gain on sale of other investments $10,659  $15,021  $14,255  $11,119  $9,871 
Gain on sale of real estate, land, and other investments $54  $556  $4,602  $3,293  $8,605 
Minority interest portion of operating partnership income $(2,227) $(3,524) $(3,217) $(1,892) $(1,727)
Income from continuing operations $8,526  $11,675  $11,026  $8,766  $7,768 
Income from discontinued operations $0  $413  $3,084  $2,801  $7,308 
Net income $8,526  $12,088  $14,110  $11,567  $15,076 
Consolidated Balance Sheet Data                    
Total real estate investments $1,472,575  $1,456,178  $1,316,534  $1,126,400  $1,067,345 
Total assets $1,605,091  $1,618,026  $1,435,389  $1,207,315  $1,151,158 
Mortgages payable $1,070,158  $1,063,858  $951,139  $765,890  $708,558 
Shareholders’ equity $333,935  $345,006  $284,969  $289,560  $295,172 
                     
Consolidated Per Common Share Data
(basic and diluted)
                    
Income from continuing operations $.11  $.17  $.18  $.14  $.13 
Income from discontinued operations $.00  $.01  $.06  $.06  $.17 
Net income $.11  $.18  $.24  $.20  $.30 
Distributions $.68  $.67  $.66  $.65  $.65 

2009 Annual Report33
Index

CALENDAR YEAR

2006

2005

2004

2003

2002

Tax status of distributions

 

 

 

 

 

Capital gain

1.22%

16.05%

0.00%

3.88%

0.00%

Ordinary income

42.01%

41.48%

44.65%

58.45%

68.29%

Return of capital

56.77%

42.47%

55.35%

37.67%

31.71%

 

CALENDAR YEAR 2008  2007  2006  2005  2004 
Tax status of distributions               
Capital gain  0.00%  1.49%  1.22%  16.05%  0.00%
Ordinary income  53.43%  51.69%  42.01%  41.48%  44.65%
Return of capital  46.57%  46.82%  56.77%  42.47%  55.35%
Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations

The following information is provided in connection with, and should be read in conjunction with, the consolidated financial statements included in this Annual Report on Form 10-K. We operate on a fiscal year ending on April 30. The following discussion and analysis is for the fiscal year ended April 30, 2007.

2009.

Overview

We are a self-advised equity real estate investment trust engaged in owning and operating income-producing real properties. Our investments include multi-family residential properties and commercial properties located primarily in the upper Midwest states of Minnesota and North Dakota. Our properties are diversified in property type and location. As of April 30, 2007,2009, our real estate portfolio consisted of 6977 multi-family residential properties containing 9,3979,645 apartment units and having a total real estate investment amount net of accumulated depreciation of $400.1$426.8 million, and 148167 commercial properties containing approximately 10.011.7 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $908.6 million.$1.0 billion. Our commercial properties consist of:

•    64

67 office properties containing approximately 4.85.0 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $492.2$498.6 million;

2007 Annual Report 32

•    34

49 medical properties (including senior housing/assisted living facilities)housing) containing approximately 1.72.3 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $250.0$345.9 million;

•    13

18 industrial properties (including miscellaneous commercial properties) containing approximately 2.02.9 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $67.0$95.2 million; and

•    37

33 retail properties containing approximately 1.5 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $99.4$100.2 million.

Our primary source of income and cash is rents associated with multi-family residential and commercial leases.  Our business objective is to increase shareholder value by employing a disciplined investment strategy.  This strategy is focused on growing assets in desired geographical markets, achieving diversification by property type and location, and adhering to targeted returns in acquiring properties.

During fiscal year 2007, IRET continued to operate in a challenging acquisition environment.  Liquidity levels in the Company’s markets remained high, and much of the abundant investment capital available continued to seek commercial real estate.  Accordingly, identifying potential acquisition properties that met IRET’s investment criteria remained difficult during fiscal year 2007, although deal flow continued to be robust.  Despite these challenges, during fiscal year 2007

In April 2009, the Company closed oncommenced the largest acquisitionsale of up to $50 million of Common Shares pursuant to a continuous offering program. Through April 30, 2009, the Company sold 632,712 common shares as part of this program. The net proceeds (before offering expenses but after underwriting discounts and commissions) from the offering of $6.0 million through April 30, 2009 were used for general corporate purposes. Through April 30, 2009, the Company paid Robert W. Baird & Co. Incorporated, its agent under this program, $122,000 in its history, when it purchased from subsidiaries of Omaha-based Magnum Resources, Inc. a portfolio of nine office complexes, consisting of 15 buildings totaling approximately 936,568 rentable square feet, for aggregate consideration of approximately $140.8 million (the “Magnum Portfolio). As of the closing date of the acquisition, the Magnum Portfolio was approximately 94% leased to multiple tenants.  The acquisition increased t he leasable space of IRET’s office portfolio by approximately 25%. 

In additionfees with respect to the Magnum Portfolio, the Company during fiscal year 2007 added five apartment properties, one office property, two medical properties (excluding the acquisition of the remaining ownership interest in a medical office building previously partially owned by the Company), two industrial properties, two retail properties (including the construction of a retail drug store property to replace an existing older retail property owned by the Company) and six parcels of unimproved land to its investment portfolio, for an aggregate purchase price and construction cost  (including the Magnum properties) of approximately $220.7 million.  During fiscal year 2007, the Company disposed of two apartment complexes, one office property, one medical (assisted living) property, 11 small retail properties and two parcels of unimproved land, for sale prices totaling approximately $22.5 million. 

common shares sold through this program.

Total revenues of IRET Properties, our operating partnership, increased by $27.4$18.8 million to $197.8$240.0 million in fiscal year 2007,2009, compared to $170.4$221.2 million in fiscal year 2006.2008.  This increase was primarily attributable to the addition of new real estate properties.  Operating income increased in fiscal year 2007, to $11.6 million from $9.9 million in fiscal year 2006.  We estimate that rent concessions offered to tenants during the twelve months ended April 30, 20072009 lowered our operating revenues by approximately $5.0$3.4 million, compared to $5.2$3.0 million for fiscal year 2006.2008.  Expenses increased during fiscal year 20072009 as well, with real estate taxes, maintenance, utilities and property management expense all increasing from year-earlier levels.  While some of this increase was due to existing real estate, the majority was due to the addition of new real estate properties to our portfolio.

Economic


2009 Annual Report 34
Index

On an all-property basis, economic occupancy levels in our total commercial property segments increased slightlydecreased to 93.2%91.8% in fiscal year 20072009 from 92.8%93.0% in fiscal year 2006.2008.  Economic occupancy rates in our commercial medical, industrial and retail segmentssegment increased; the economic occupancy raterates in our commercial office, segmentmedical and retail segments decreased.  Economic occupancy in our multi-family residential segment increased to 93.2%93.5% in fiscal year 2007,2009 on an all-property basis, from 91.6%92.7% in fiscal year 2006. 

2008.

We have written off or recorded as past due a total of approximately $570,000 at IRET’s Fox River project (Grand Chute, WI) and approximately $874,000 at the Stevens Point project (Stevens Point, WI) as of April 30, 2009.  The Fox River project was acquired by IRET in fiscal year 2006 as a partially-completed eight-unit senior housing project with adjoining vacant land, and IRET subsequently funded the completion of the eight senior living villas and the construction of ten new senior living patio homes, which were completed in September 2007.  The Stevens Point project was acquired by IRET in fiscal year 2006, and at acquisition consisted of an existing senior housing complex and an adjoining vacant parcel of land.  IRET subsequently funded the construction of an expansion to the existing facility on the adjoining parcel, which was completed in June 2007.  The tenants in these two properties, affiliates of Sunwest Management, Inc., have filed for bankruptcy under Chapter 11 of the Bankruptcy Code, and have been unable to finance their portion of the construction cost for the ten new Fox River patio homes and have been unable to fund the shortfall between the Stevens Point project’s cash flow and the lease payments due to IRET.  IRET’s investment in the Fox River and Stevens Point properties leased to Sunwest is approximately $3.8 million and $14.8 million, respectively, or approximately 0.2% and 0.9% of IRET’s property owned as of April 30, 2009.
IRET is currently receiving all of the cash flow generated by the Stevens Point project (approximately $85,000 per month, or approximately 58.3% of the Scheduled Rent and other obligations due under the lease). IRET is currently receiving no payments from the Fox River project, and its exercise of its rights under the lease to remove Sunwest as the tenant and manager at the project and to pursue collection of amounts owed under guarantees provided in conjunction with the lease agreement has been suspended following the tenant’s bankruptcy filing. IRET is evaluating its options in respect of this project; at this time IRET considers that, subject to its analysis of market values in Appleton, Wisconsin, IRET would proceed to market the patio homes and senior living villas and the balance of the vacant parcel (approximately 12 acres) in an attempt to recover its investment and provide some return on investment.
Additional information and more detailed discussions of our fiscal year 20072009 operating results are found in the following sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

2007 Annual Report 33

Critical Accounting Policies

Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements included in this Annual Report on Form 10-K.

Real Estate. Real estate is carried at cost, net of accumulated depreciation, less an adjustment for impairment, if any. Depreciation requires an estimate by management of the useful life of each property as well as an allocation of the costs associated with a property to its various components. As described further below, the process of allocating property costs to its components involves a considerable amount of subjective judgments to be made by Company management. If the Company does not allocate these costs appropriately or incorrectly estimates the useful lives of its real estate, depreciation expense may be misstated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The Company uses a 20-40 year estimated life for buildings and improvements and a 5-12 year estimated life for furniture, fixtures and equipment. Maintenance and repairs are charged to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life, generally five to ten years.

Upon acquisitions of real estate, the Company assesses the fair value of acquired tangible assets (including land, buildings and personal property), which is determined by valuing the property as if it were vacant, and considers whether there were significant intangible assets acquired (for example, above-and below-market leases, the value of acquired in-place leases, and tenant relationships, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141)relationships) and acquired liabilities, and allocates the purchase price based on these assessments. The as-if-vacant value is allocated to land, buildings, and personal property based on management’s determination of the relative fair value of these assets. The estimated fair value of the property is the amount that would be recoverable upon the disposition of the property. Techniques used to estimate fair value include discounted cash flow analysis independent appraisals, and refer encereference to recent sales of comparable properties. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and

2009 Annual Report 35
Index

market/economic conditions that may affect the property. Land value is assigned based on the purchase price if land is acquired separately, or based on estimated market value if acquired in a merger or in a portfolio acquisition.

Above-market and below-market in-place lease values for acquired properties are estimated based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company performs this analysis on a lease-by-lease basis. The capitalized above-market or below-market intangible is amortized to rental income over the remaining non-cancelable terms of the respective leases.

Other intangible assets acquired include amounts for in-place lease values that are based upon the Company’s evaluation of the specific characteristics of the leases. Factors considered in these analyses include an estimate of carrying costs during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. The Company also considers information about each property obtained during its pre-acquisition due diligence and marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

Property sales or dispositions are recorded when title transfers and sufficient consideration is received by the Company and the Company has no significant continuing involvement with the property sold. The Company’s properties are reviewed for impairment if events or circumstances change indicating that the carrying amount of the assets may not be recoverable. This review requires management to exercise judgment, including making estimates about the future performance of the properties being reviewed. If the Company incorrectly estimates the values at acquisition or the undiscounted cash flows, initial allocations of purchase price and future impairment charges may be different. The impact of the Company’s estimates in connection with acquisitions and future impairment analysis could be material to the Company’s financial statements.

Allowance for Doubtful Accounts. The Company periodically evaluates the collectibility of amounts due from tenants and maintains an allowance for doubtful accounts ($238,000(approximately $286,000 as of April 30, 2007)2009) for estimated losses resulting from the inability of tenants to make required payments under their respective lease agreements. The Company also maintains an allowance for receivables arising from the straight-lining of rents ($660,000(approximately $842,000 as of April 30, 2007)2009) and from mortgage loans ($12,500(approximately $3,000 as of April 30, 2007)2009). The straight-lining of rents receivable arises from earnings recognized in excess of amounts currently due under lease agreements. Management exercises

2007 Annual Report 34

judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. If estimates differ from actual results this would impact reported results.

Revenue Recognition - The Company has the following revenue sources and revenue recognition policies:

•   

Base Rents - income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis, which includes the effects of rent increases and abated rent under the leases.  Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease. Rental revenue is recorded for the full term of each lease on a straight-line basis. Accordingly, the Company records a receivable from tenants for rents that it expects to collect over the remaining lease term as deferred rents receivable. When the Company acquires a property, the term of the existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Revenue recognition is considered to be critical because the evaluation of the reliability of such deferred ren tsrents receivable involves management's assumptions relating to such tenant's viability.

•  

Percentage Rents - income arising from retail tenant leases which are contingent upon the sales of the tenant exceeding a defined threshold. These rents are recognized in accordance with SEC Staff Accounting Bulletin 104: Revenue Recognition, which states that this income is to be recognized only after the contingency has been removed (i.e., sales thresholds have been achieved).

•   

Expense Reimbursement Income – revenue arising from tenant leases, which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the expenses are incurred.

Income Taxes. The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a distribution to its shareholders each year and which meets

2009 Annual Report 36
Index

certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. The Company intends to distribute to its shareholders 100% of its taxable income. Therefore, no provision for Federal income taxes is required. If the Company fails to distribute the required amount of income to its shareholders, it would fail to qualify as a REIT and substantial adverse tax consequences may result.

The Company’s taxable income is affected by a number of factors, including, but not limited to, the following:  that the Company’s tenants perform their obligations under their leases with the Company; that the Company’s tax and accounting positions do not change; and that the number of issued and outstanding shares of the Company’s common stock remain relatively unchanged.  These factors, which impact the Company’s taxable income, are subject to change, and many are outside the control of the Company.  If actual results vary, the Company’s taxable income may change.

Recent Accounting Pronouncements

For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 to our Consolidated Financial Statements.

RESULTS OF OPERATIONS

Revenues

Total revenues for fiscal year 20072009 were $197.8$240.0 million, compared to $170.4$221.2 million in fiscal year 20062008 and $152.9$197.5 million in fiscal year 2005.2007. Revenues during fiscal year 20072009 were $27.4$18.8 million greater than revenues in fiscal year 20062008 and revenues during fiscal year 20062008 were $17.5$23.7 million greater than in fiscal year 2005. 

2007 Annual Report 35
2007.

For fiscal 2007,2009, the increase in revenue of $27.4$18.8 million resulted from:

 

(in thousands)

Rent from 15 properties acquired in fiscal year 2006 in excess of that received in 2006

from the same 15 properties

$

5,443

Rent from 21 properties acquired in fiscal year 2007

 

16,948

Increase in rental income on existing properties

 

5,609

Decrease in lease termination fees

 

(631)

 

$

27,369

 

  (in thousands) 
Rent from 24 properties acquired in fiscal year 2008 in excess of that received
in 2008 from the same 24 properties
 $15,431 
Rent from 8 properties acquired in fiscal year 2009  2,093 
Increase in rental income on existing properties  1,311 
  $18,835 
For fiscal 2006,2008, the increase in revenue of $17.5$23.7 million resulted from:

 

(in thousands)

Rent from 16 properties acquired in fiscal year 2005 in excess of that received in 2005

from the same 16 properties

$

9,816

Rent from 15 properties acquired in fiscal year 2006

 

6,704

Increase in rental income on existing properties

 

860

An increase in straight-line rents

 

203

A decrease in rent from properties sold in fiscal year 2007

 

(72)

 

$

17,511

 

  (in thousands) 
Rent from 29 properties acquired in fiscal year 2007 in excess of that received
in 2007 from the same 29 properties
 $14,345 
Rent from 24 properties acquired in fiscal year 2008  5,759 
Increase in rental income on existing properties  3,528 
  $23,632 
As illustrated above, the substantial majority (81.8%(93.0% in fiscal year 20072009 and 94.3%85.1% in fiscal year 2006)2008) of the increase in our gross revenue for fiscal years 20072009 and 20062008 resulted from the addition of new real estate properties to the IRET Properties’ portfolio, with 20.5%7.0%  and 1.2%14.9%, respectively, resulting from rental increases on existing properties..properties. For the next 12 months, we expect acquisitions to continue to be the most significant factor in any increases in our revenues and ultimately our net income. While acceptable real estate assets are still available for purchase, continued widespread demand for real estate from traditionalHowever, domestic financial markets continue to experience unusual volatility and non-traditional investorsuncertainty. Although this occurred initially most visibly within the single-family mortgage lending sector of the credit market, liquidity has resultedsince tightened in a reductionoverall domestic financial markets, including the equity capital markets. Consequently, there is greater uncertainty regarding our ability to access the credit markets in the investment returns from all types of real estate. This reduction in rates of return willorder to attract financing on reasonable terms, and our ability to make acquisitions could be further exacerbated to the extent that rises in interest rates increase borrowing costs. While we were able to take advantage of lower borrowing costs for most of our recent acquisition s, our borrowing costs are rising. The majority of our debt is fixed and not prepayable without significant prepayment costs and fees. 

adversely affected. 

Gain on Sale of Real Estate

The Company realized a gain on sale of real estate, land and other investments for fiscal year 20072009 of $4.6 million.approximately $54,000. This compares to $3.3 millionapproximately $556,000 of gain on sale of real estate recognized in fiscal 20062008 and $8.6 $4.6

2009 Annual Report 37
Index

million recognized in fiscal 2005.2007. A list of the properties sold during fiscal year 2007,2008, showing sales price, depreciated cost plus sales costs and net gain is included in this Item 7 under the caption “Property Dispositions.”

Net Operating Income


The following tables report segment financial information.  We measure the performance of our segments based on net operating income (“NOI”), which we define as total real estate revenues less property operatingreal estate expenses and real estate taxes.  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing and general and administrative expense.  NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance.


The following tables show revenues, operating expenses and NOI by reportable operating segment for fiscal years 2007, 20062009, 2008 and 2005.2007.  For a reconciliation of net operating income of reportable segments to operating income as reported, see Note 11 of the Notes to Consolidated Financial Statements in this report.


The tables also show net operating income by reportable operating segment on a stabilized property and non-stabilized property basis.  Stabilized properties are properties owned and in operation for the entirety of the periods being compared (including properties that were redeveloped or expanded during the periods being compared, with properties purchased or sold during the periods being compared excluded from the stabilized property category).  This comparison allows the Company to evaluate the performance of existing properties and their contribution to net income.  Management believes that measuring performance on a stabilized property basis is useful to investors because it enables evaluation of how the Company’s properties are performing year over year.  Management uses

2007 Annual Report 36

this measure to assess whether or not it has been successful in increasing net operating income, renewing the leases of existing tenants, controlling operating costs and appropriately handling capital improvements.

 

(in thousands)

 Year Ended April 30, 2007

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

$

67,214

$

73,640

$

34,783

$

8,091

$

14,089

$

197,817

Real estate expenses

 

 

 

 

 

 

 

 

 

 

 

 

Utilities

 

6,711

 

6,290

 

1,771

 

57

 

377

 

15,206

Maintenance

 

8,640

 

9,245

 

2,611

 

218

 

1,000

 

21,714

Real estate taxes

 

7,322

 

10,844

 

2,322

 

755

 

2,079

 

23,322

Insurance

 

1,094

 

773

 

274

 

75

 

166

 

2,382

Property management

 

7,808

 

3,348

 

1,697

 

148

 

853

 

13,854

Total expenses

$

31,575

$

30,500

$

8,675

$

1,253

$

4,475

$

76,478

Net operating income

$

35,639

$

43,140

$

26,108

$

6,838

$

9,614

$

121,339

 

 

 

 

 

 

 

 

 

 

 

 

 

Stabilized net operating income

 

34,245

 

32,428

 

19,795

 

6,317

 

9,229

 

102,014

Non-stabilized net operating income

 

1,394

 

10,712

 

6,313

 

521

 

385

 

19,325

Total net operating income

$

35,639

$

43,140

$

26,108

$

6,838

$

9,614

$

121,339

 

(in thousands)

 Year Ended April 30, 2006

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

$

61,906

$

57,523

$

31,670

$

6,372

$

12,977

$

170,448

Real estate expenses

 

 

 

 

 

 

 

 

 

 

 

 

Utilities

 

6,587

 

4,805

 

1,600

 

91

 

390

 

13,473

Maintenance

 

7,872

 

7,582

 

2,471

 

201

 

1,107

 

19,233

Real estate taxes

 

6,982

 

8,022

 

2,283

 

771

 

1,727

 

19,785

Insurance

 

1,399

 

705

 

298

 

81

 

179

 

2,662

Property management

 

7,010

 

2,488

 

1,662

 

108

 

541

 

11,809

Total expenses

$

29,850

$

23,602

$

8,314

$

1,252

$

3,944

$

66,962

Net operating income

$

32,056

$

33,921

$

23,356

$

5,120

$

9,033

$

103,486

 

 

 

 

 

 

 

 

 

 

 

 

 

Stabilized net operating income

 

31,948

 

33,451

 

19,101

 

5,120

 

9,033

 

98,653

Non-stabilized net operating income

 

108

 

470

 

4,255

 

0

 

0

 

4,833

Total net operating income

$

32,056

$

33,921

$

23,356

$

5,120

$

9,033

$

103,486


 

(in thousands)

 Year Ended April 30, 2005

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

$

58,702

$

48,604

$

25,424

$

6,459

$

13,748

$

152,937

Real estate expenses

 

 

 

 

 

 

 

 

 

 

 

 

Utilities

 

5,663

 

3,386

 

1,142

 

60

 

372

 

10,623

Maintenance

 

6,755

 

6,312

 

1,870

 

185

 

953

 

16,075

Real estate taxes

 

6,903

 

7,147

 

1,616

 

797

 

1,728

 

18,191

Insurance

 

1,490

 

536

 

277

 

78

 

182

 

2,563

Property management

 

6,638

 

2,100

 

1,273

 

104

 

286

 

10,401

Total expenses

$

27,449

$

19,481

$

6,178

$

1,224

$

3,521

$

57,853

Net operating income

$

31,253

$

29,123

$

19,246

$

5,235

$

10,227

$

95,084

 

 

 

 

 

 

 

 

 

 

 

 

 

Stabilized net operating income

 

30,948

 

25,845

 

15,427

 

5,235

 

10,227

 

87,682

Non-stabilized net operating income

 

305

 

3,278

 

3,819

 

0

 

0

 

7,402

Total net operating income

$

31,253

$

29,123

$

19,246

$

5,235

$

10,227

$

95,084

2007
  (in thousands) 
Year Ended April 30, 2009 Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Real estate revenue $76,716  $83,446  $52,564  $12,711  $14,568  $240,005 
Real estate expenses                        
Utilities  7,724   7,851   2,859   93   448   18,975 
Maintenance  10,240   11,287   4,046   582   1,448   27,603 
Real estate taxes  7,972   13,850   4,515   1,926   2,180   30,443 
Insurance  1,272   1,003   419   175   182   3,051 
Property management  8,954   3,653   4,207   446   819   18,079 
Total real estate expenses $36,162  $37,644  $16,046  $3,222  $5,077  $98,151 
Net operating income $40,554  $45,802  $36,518  $9,489  $9,491  $141,854 
                         
Stabilized net operating income $38,644  $43,969  $26,732  $6,882  $9,491  $125,718 
Non-stabilized net operating income  1,910   1,833   9,786   2,607   0   16,136 
Total net operating income $40,554  $45,802  $36,518  $9,489  $9,491  $141,854 


2009 Annual Report 37 38

Index


  (in thousands) 
Year Ended April 30, 2008 Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Real estate revenue $72,827  $84,042  $38,412  $11,691  $14,198  $221,170 
Real estate expenses                        
Utilities  7,388   7,743   2,111   131   420   17,793 
Maintenance  9,637   10,522   2,757   558   1,108   24,582 
Real estate taxes  7,528   13,140   2,977   1,346   2,142   27,133 
Insurance  1,162   901   257   135   169   2,624 
Property management  8,922   3,900   1,654   359   438   15,273 
Total real estate expenses $34,637  $36,206  $9,756  $2,529  $4,277  $87,405 
Net operating income $38,190  $47,836  $28,656  $9,162  $9,921  $133,765 
                         
Stabilized net operating income $37,332  $47,536  $26,909  $7,576  $9,921  $129,274 
Non-stabilized net operating income  858   300   1,747   1,586   0   4,491 
Total net operating income $38,190  $47,836  $28,656  $9,162  $9,921  $133,765 

  (in thousands) 
Year Ended April 30, 2007 Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Real estate revenue $66,972  $73,603  $34,783  $8,091  $14,089  $197,538 
Real estate expenses                        
Utilities  6,666   6,286   1,771   57   377   15,157 
Maintenance  8,619   9,243   2,611   218   1,000   21,691 
Real estate taxes  7,294   10,831   2,322   755   2,079   23,281 
Insurance  1,090   772   274   75   166   2,377 
Property management  7,785   3,343   1,697   148   853   13,826 
Total real estate expenses $31,454  $30,475  $8,675  $1,253  $4,475  $76,332 
Net operating income $35,518  $43,128  $26,108  $6,838  $9,614  $121,206 
                         
Stabilized net operating income $34,318  $34,675  $25,823  $6,317  $9,229  $110,362 
Non-stabilized net operating income  1,200   8,453   285   521   385   10,844 
Total net operating income $35,518  $43,128  $26,108  $6,838  $9,614  $121,206 

Changes in Expenses and Net Income

Operating income for fiscal year 2007 increased to $11.6 million from $9.9 million in fiscal year 2006, and from $8.9 million in fiscal year 2005. Our net

Net income available to common shareholders for fiscal year 20072009 was $11.7$6.2 million, compared to $9.2$9.7 million in fiscal year 20062008 and $12.7$11.7 million in fiscal year 2005.2007. On a per common share basis, net income was $.24$.11 per common share in fiscal year 2007,2009, compared to $.20$.18 per common share in fiscal year 20062008 and $.30$.24 in fiscal year 2005. 

2007.


2009 Annual Report 39
Index

These changes in operating income and net income result from the changes in revenues and expenses detailed below:

Changes in net income available to common shareholders for fiscal year 20072009 resulted from:

 

(in thousands)

An increase in net operating income primarily due to new acquisitions

$

17,853

An increase in interest income

 

1,128

An increase in non-operating income

 

297

An increase in income from discontinued operations, net

 

265

A decrease in minority interest of other partnership’s income

 

510

 

 

 

These increases were offset by:

 

 

An increase in depreciation/amortization expense related to real estate investments

 

(7,528)

An increase in interest expense primarily due to debt placed on new acquisitions

 

(7,723)

An increase in minority interest of operating partnership income

 

(1,333)

An increase in operating expenses, administrative, advisory & trustee services

 

(528)

An increase in amortization related to non-real estate investments

 

(337)

A decrease in gain on sale of other investments

 

(61)

Total increase in fiscal 2007 net income available to common shareholders

$

2,543

 

  (in thousands) 
An increase in net operating income primarily due to new acquisitions $8,089 
A decrease in minority interest of operating partnership income  1,297 
A decrease in other expenses, administrative, advisory & trustee services  225 
An increase in gain on sale of other investments  12 
     
These increases were offset by:
    
An increase in interest expense primarily due to debt placed on new acquisitions  (5,304)
An increase in depreciation/amortization expense related to real estate investments  (4,604)
A decrease in interest income  (1,487)
An increase in amortization related to non-real estate investments  (592)
A decrease in income from discontinued operations, net  (413)
A decrease in other income  (351)
An increase in impairment of real estate investment  (338)
A decrease in minority interest of other partnership’s loss  (96)
Total decrease in fiscal 2009 net income available to common shareholders $(3,562)

Changes in net income available to common shareholders for fiscal year 20062008 resulted from:

 

(in thousands)

An increase in net operating income primarily due to new acquisitions

$

8,402

An increase in interest income

 

238

An increase in gain on sale of other investments

 

20

An increase in non-operating income

 

16

A decrease in operating expenses, administrative, advisory & trustee services

 

191

 

 

 

These increases were offset by:

 

 

An increase in depreciation/amortization expense related to real estate investments

 

(3,980)

An increase in interest expense primarily due to debt placed on new acquisitions

 

(3,334)

An increase in amortization related to non-real estate investments

 

(315)

An increase in minority interest of operating partnership income

 

(158)

An increase in minority interest of other partnership’s income

 

(105)

A decrease in income from discontinued operations, net

 

(4,484)

Total decrease in fiscal 2006 net income available to common shareholders

$

(3,509)

 

  (in thousands) 
An increase in net operating income primarily due to new acquisitions $12,559 
An increase in interest income  151 
An increase in minority interest of other partnership’s loss  110 
An increase in gain on sale of other investments  80 
     
These increases were offset by:
    
An increase in depreciation/amortization expense related to real estate investments  (5,623)
An increase in interest expense primarily due to debt placed on new acquisitions  (5,015)
A decrease in income from discontinued operations, net  (2,671)
An increase in other expenses, administrative, advisory & trustee services  (856)
An increase in amortization related to non-real estate investments  (394)
An increase in minority interest of operating partnership income  (307)
A decrease in other income  (56)
Total decrease in fiscal 2008 net income available to common shareholders $(2,022)
Factors Impacting Net Income During Fiscal Year 20072009 as Compared to Fiscal Year 2006

Our results during the fiscal year ended April 30, 2007, compared to the fiscal year ended April 30, 2006, show continued overall improvement in occupancy levels and rental revenues.  2008

Economic occupancy rates in fourthree of our five segments increased slightly compared to the year-earlier period, and real estate revenue increased in four of our five segments in fiscal year 20072009 compared to fiscal year 2006 in all of our reportable segments.2008.  Net income available to common shareholders increaseddecreased to $11.7$6.2 million in fiscal year 2007,2009, compared to $9.2$9.7 million in fiscal year 2006.2008.  Revenue increases during fiscal year 20072009 were offset somewhat by increases in maintenance, utilities, mortgage interest due to increased borrowing, real estate taxes, property management, insurance and amortization expense.  Insurance expense decreased in fiscal year 2007.

2007 Annual Report 38

•   


Economic Occupancy.  During fiscal year 2007,2009, economic occupancy levels at our properties improvedincreased slightly over year-earlier levels in eachthree of our five reportable segments other than(multi-family, medical and industrial), and declined in our commercial office.office and retail segments.  Economic occupancy represents actual rental revenues recognized for the period indicated as a percentage of scheduled rental revenues for the period. Percentage rents, tenant concessions, straightline adjustments and expense reimbursements are not considered in computing either actual revenues or scheduled rent revenues.   Economic occupancy rates on a stabilized property basis for the fiscal year ended April 30, 20072009 compared to the fiscal year ended April 30, 20062008 are shown below:

 

Fiscal Year Ended April 30,

 

2007

2006

% Change

Multi-Family Residential

93.2%

91.7%

1.5%

Commercial Office

90.5%

92.6%

(2.1%)

Commercial Medical

96.8%

95.3%

1.5%

Commercial Industrial

94.8%

87.2%

7.6%

Commercial Retail

89.3%

89.2%

0.1%

During fiscal year 2007, results continued to improve at our multi-family residential properties.  While we had limited success in increasing scheduled rental rates at our apartment communities, the construction of competing apartment units, single-family homes and condominium units has abated in most of our markets.  Combined with positive absorption of previously-constructed housing, this reduction in construction of competing product has allowed us to reduce vacancy and tenant concessions in our multi-family residential segment.  We also saw during fiscal year 2007 an accelerating demand for industrial space, although as in past periods rental rates in this segment continue to remain at levels lower than in prior fiscal years.  We did not see



2009 Annual Report 40
Index



  Fiscal Year Ended April 30, 
  2009  2008 
Multi-Family Residential  93.9%  93.4%
Commercial Office  88.9%  92.1%
Commercial Medical  96.0%  95.6%
Commercial Industrial  97.3%  96.8%
Commercial Retail  87.1%  87.4%

•
Concessions.  Our overall level of tenant concessions increased for the fiscal year ended April 30, 2009 compared to the year-earlier period. To maintain or increase physical occupancy levels at our properties, we may offer tenant incentives, generally in the form of lower or abated rents, which results in decreased revenues and income from operations at our properties.  Rent concessions offered during the fiscal year ended April 30, 2009 lowered our operating revenues by approximately $3.4 million, as compared to an approximately $3.0 million reduction in operating revenues attributable to rent concessions offered in fiscal year 2008.
The following table shows the approximate reduction in our operating revenues due to rent concessions, by segment, for the fiscal years ended April 30, 2009 and 2008:

  (in thousands) 
  Fiscal Year Ended April 30, 
  2009  2008  Change 
Multi-Family Residential $2,083  $2,254  $(171)
Commercial Office  1,036   692   344 
Commercial Medical  34   34   0 
Commercial Industrial  220   0   220 
Commercial Retail  44   31   13 
Total $3,417  $3,011  $406 

•
Increased Maintenance Expense.  Maintenance expenses totaled $27.6 million in fiscal year 2009, compared to $24.6 million in fiscal year 2008.  Maintenance expenses at properties newly acquired in fiscal years 2009 and 2008 added $1.4 million to the maintenance expense category during fiscal year 2009 (with our commercial medical segment accounting for $1.2 million), while maintenance expenses at existing properties increased by approximately $1.6 million, primarily for snow removal at our multi-family residential and commercial retail segments and building maintenance costs at our commercial office, medical and industrial segments, resulting in a net increase of $3.0 million or 12.3% in maintenance expenses in fiscal year 2009 compared to fiscal year 2008.  Under the terms of most of our commercial leases, the full cost of maintenance is paid by the tenant as additional rent. For our noncommercial real estate properties, any increase in our maintenance costs must be collected from tenants in the form of general rent increases.
Maintenance expenses by reportable segment for the fiscal years ended April 30, 2009 and 2008 are as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2009 $10,240  $11,287  $4,046  $582  $1,448  $27,603 
2008 $9,637  $10,522  $2,757  $558  $1,108  $24,582 
% change (2009 vs. 2008)
  6.3%  7.3%  46.8%  4.3%  30.7%  12.3%

Increased Utility Expense.  Utility expense totaled $19.0 million in fiscal year 2007 any consistent sustained demand for commercial office space or for existing smaller retail developments, which comprise a majority of IRET’s retail portf olio.  However, our expectation is that demand in IRET’s markets for our multi-family, medical, office and industrial locations will strengthen2009, compared to $17.8 million in fiscal year 2008.

•   Concessions.  Our overall level of tenant concessions declined slightly for the fiscal year ended April 30, 2007 compared to the year-earlier period.  To maintain or increase physical occupancy levels at our properties, we may offer tenant incentives, generally in the form of lower or abated rents, which results in decreased revenues and income from operations at our properties.  Rent concessions offered during the fiscal year ended April 30, 2007 lowered our operating revenues by approximately $5.0 million, as compared to an approximately $5.2 million reduction in operating revenues attributable to rent concessions offered in fiscal year 2006.  

The following table shows the approximate reduction in our operating revenues due to rent concessions, by segment, for the fiscal years ended April 30, 2007 and 2006: 

 

(in thousands)

 

Fiscal Year Ended April 30,

 

 

2007

 

2006

%Change

Multi-Family Residential

$

3,147

$

3,848

(18.2%)

Commercial Office

$

1,769

$

1,213

45.8%

Commercial Medical

$

70

$

74

(5.4%)

Commercial Industrial

$

14

$

53

(73.6%)

Commercial Retail

$

22

$

23

(4.3%)

Total

$

5,022

$

5,211

(3.6%)

 

•   Increased Maintenance Expense.  Maintenance expenses totaled $21.7 million in fiscal year 2007, compared to $19.2 million in fiscal year 2006.  Maintenance expenses at properties newly acquired in fiscal years 2007 and 2006 added $2.5 million to the maintenance expense category during fiscal year 2007, while maintenance expenses at existing properties decreased by $31,000, resulting in a net increase of $2.5 million or 13.0% in maintenance expenses in fiscal year 2007 compared to fiscal year 2006.  Under the terms of most of our commercial leases, the full cost of maintenance is paid by the tenant as additional rent.  For our noncommercial real estate properties, any increase in our maintenance costs must be collected from tenants in the form of general rent increases. 

2007 Annual Report 39

Maintenance expenses by reportable segment for the fiscal years ended April 30, 2007 and 2006 are as follows:  

 

(in thousands)

 

Multi-Family Residential

Commercial Office

Commercial Medical

Commercial Industrial

Commercial Retail

 

2007

$

8,640

$

9,245

$

2,611

$

218

$

1,000

2006

$

7,872

$

7,582

$

2,471

$

201

$

1,107

% change (2007 vs. 2006)

 

9.8%

 

21.9%

 

5.7%

 

8.5%

 

(9.7%)

 

•   Increased Utility Expense.  Utility expense totaled $15.2 million in fiscal year 2007, compared to $13.5 million in fiscal year 2006.  Utility expenses at properties newly acquired in fiscal years 20072009 and 20062008 added $1.6 million$787,000 to the utility expense category during fiscal year 2007,2009 (with our commercial medical segment accounting for $646,000), while utility expenses at existing properties increased by $88,000, for$395,000, primarily due to increased heating costs due to unseasonably cold temperatures and, to a total increase of $1.7 million or 12.6% in utility expenses in fiscal year 2007 compared to fiscal year 2006. 

Utility expenses by reportable segment for the fiscal years ended April 30, 2007 and 2006 are as follows:  

 

(in thousands)

 

Multi-Family Residential

Commercial Office

Commercial Medical

Commercial Industrial

Commercial Retail

 

2007

$

6,711

$

6,290

$

1,771

$

57

$

377

2006

$

6,587

$

4,805

$

1,600

$

91

$

390

% change (2007 vs. 2006)

 

1.9%

 

30.9%

 

10.7%

 

(37.4%)

 

(3.3%)

 

•   Increased Mortgage Interest Expense.  Our mortgage interest expenselesser degree, increased approximately $7.1 million, or 14.3%, to approximately $56.6 million during fiscal year 2007, compared to $49.5 million in fiscal year 2006. Mortgage interest expense for properties newly acquired in fiscal years 2007 and 2006 added $7.7 million to our total mortgage interest expense in fiscal year 2007, while mortgage interest expense on existing properties decreased $627,000.  Our overall weighted average interest rate on all outstanding mortgage debt was 6.43% as of April 30, 2007, compared to 6.63% as of April 30, 2006.  Our mortgage debt increased approximately $185.2 million, or 24.2%, to approximately $951.1 million as of April 30, 2007, compared to $765.9 million on April 30, 2006. 

Mortgage interest expense by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as follows:

 

(in thousands)

 

Multi-Family Residential

Commercial Office

Commercial Medical

Commercial Industrial

Commercial Retail

 

2007

$

18,745

$

20,157

$

11,291

$

2,325

$

4,070

2006

$

17,969

$

14,774

$

10,534

$

2,240

$

4,029

% change (2007 vs. 2006)

 

4.3%

 

36.4%

 

7.2%

 

3.8%

 

1.0%

 

•     rates from



2009 Annual Report 41
Index

higher fuel costs, (notably in our multi-family residential segment with an increase of $224,000), for a total increase of $1.2 million or 6.6% in utility expenses in fiscal year 2009 compared to fiscal year 2008.
Utility expenses by reportable segment for the fiscal years ended April 30, 2009 and 2008 are as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2009 $7,724  $7,851  $2,859  $93  $448  $18,975 
2008 $7,388  $7,743  $2,111  $131  $420  $17,793 
% change (2009 vs. 2008)
  4.5%  1.4%  35.4%  (29.0%)  6.7%  6.6%

•
Increased Mortgage Interest Expense.  Our mortgage interest expense increased approximately $5.3 million, or 8.4%, to approximately $68.0 million during fiscal year 2009, compared to $62.7 million in fiscal year 2008. Mortgage interest expense for properties newly acquired in fiscal years 2009 and 2008 added $5.2 million to our total mortgage interest expense in fiscal year 2009, while mortgage interest expense on existing properties increased $107,000.  Our overall weighted average interest rate on all outstanding mortgage debt was 6.30% as of April 30, 2009, compared to 6.37% as of April 30, 2008.  Our mortgage debt increased approximately $6.3 million, or 0.6%, to approximately $1.1 billion as of April 30, 2009, compared to April 30, 2008.
Mortgage interest expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2009 $19,696  $23,658  $16,870  $3,803  $3,939  $67,966 
2008 $19,602  $23,131  $12,351  $3,481  $4,137  $62,702 
% change (2009 vs. 2008)
  0.5%  2.3%  36.6%  9.3%  (4.8%)  8.4%

Increased Amortization Expense. In accordance with SFAS No. 141, Business Combinations, which establishes standards for valuing in-place leases in purchase transactions, the Company allocates a portion of the purchase price paid for properties to in-place lease intangible assets.  The amortization period of these intangible assets is the term of the lease, rather than the estimated life of the buildings and improvements.  The Company accordingly initially records additional amortization expense due to this shorter amortization period, which has the effect in the short term of decreasing the Company’s net income available to common shareholders, as computed in accordance with GAAP.  Amortization expense related to in-places leases totaled $9.2$10.2 million in fiscal year 2007,2009, compared to $6.7$10.0 million in fiscal year 2006.2008. The increase in amortization expense in f iscalfiscal year 20072009 compared to fiscal year 20062008 was primarily due to a significant acquisitionproperty acquisitions completed by the Company in fiscal year 2009.

•
Increased Real Estate Tax Expense.  Real estate taxes on properties newly acquired in fiscal years 2009 and 2008 added $2.3 million to real estate tax expense (with our commercial medical segment accounting for $1.3 million), while real estate taxes on existing properties increased by approximately $1.0 million, for a total increase of $3.3 million or 12.2% in real estate tax expense in fiscal year 2009 compared to fiscal year 2008, from $27.1 million to $30.4 million.  The increase in real estate taxes was primarily due to higher value assessments or increased tax levies on our stabilized properties.
Real estate tax expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2009 $7,972  $13,850  $4,515  $1,926  $2,180  $30,443 
2008 $7,528  $13,140  $2,977  $1,346  $2,142  $27,133 
% change (2009 vs. 2008)
  5.9%  5.4%  51.7%  43.1%  1.8%  12.2%

2009 Annual Report 42
Index

•
Increased Insurance Expense.  Insurance expense increased in fiscal year 2009 compared to fiscal year 2008, from $2.6 million to $3.1 million, an increase of approximately 16.3%.  Insurance expense at properties newly-acquired in fiscal years 2009 and 2008 added approximately $179,000 to insurance expense, while insurance expense at existing properties increased by approximately $248,000, for an increase of approximately $427,000 in insurance expense in fiscal year 2009 compared to fiscal year 2008.  The increase in insurance expense at stabilized properties is due to an increase in premiums.
Insurance expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2009 $1,272  $1,003  $419  $175  $182  $3,051 
2008 $1,162  $901  $257  $135  $169  $2,624 
% change (2009 vs. 2008)
  9.5%  11.3%  63.0%  29.6%  7.7%  16.3%

•
Increased Property Management Expense.  Property management expense increased in fiscal year 2009 compared to fiscal year 2008, from $15.3 million to $18.1 million, an increase of $2.8 million or approximately 18.4%.  Of this increase, approximately $1.6 million is attributable to existing properties, while $1.2 million is due to properties acquired in fiscal years 2009 and 2008 (with our commercial medical segment accounting for $826,000).  The increase at existing properties is primarily due to the increase in bad debt write-offs at our Fox River and Stevens Point projects in our commercial medical segment of $1.4 million and in our commercial retail segment of $279,000, offset by recoveries and decreased write-offs in our multi-family residential and commercial office segments compared to fiscal year 2008.
Property management expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows:
 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2009 $8,954  $3,653  $4,207  $446  $819  $18,079 
2008 $8,922  $3,900  $1,654  $359  $438  $15,273 
% change (2009 vs. 2008)
  0.4%  (6.3%)  154.4%  24.2%  87.0%  18.4%
Factors Impacting Net Income During Fiscal Year 2008 as Compared to Fiscal Year 2007
Economic occupancy rates in three of our five segments increased slightly compared to the second quarter ofyear-earlier period, and real estate revenue increased in fiscal year 2008 compared to fiscal year 2007 in all of our reportable segments.  Net income available to common shareholders decreased to $9.7 million in fiscal year 2008, compared to $11.7 million in fiscal year 2007.  Revenue increases during fiscal year 2008 were offset somewhat by increases in maintenance, utilities, mortgage interest due to increased borrowing, real estate taxes, property management, insurance and amortization expense.

Economic Occupancy.  During fiscal year 2008, economic occupancy levels at our properties increased slightly over year-earlier levels in three of our five reportable segments, and declined in our commercial medical and retail segments.  Economic occupancy represents actual rental revenues recognized for the period indicated as a portfoliopercentage of properties from Magnum Resources, Inc.

scheduled rental revenues for the period. Percentage rents, tenant concessions, straightline adjustments and expense reimbursements are not considered in computing either actual revenues or scheduled rent revenues.   Economic occupancy rates on a stabilized property basis for the fiscal year ended April 30, 2008 compared to the fiscal year ended April 30, 2007 are shown below:
2007


2009 Annual Report 40 43

•  

Index



  Fiscal Year Ended April 30, 
  2008  2007 
Multi-Family Residential  93.3%  93.2%
Commercial Office  91.0%  90.8%
Commercial Medical  95.5%  96.7%
Commercial Industrial  96.2%  94.8%
Commercial Retail  87.1%  89.3%

•
Concessions.  Our overall level of tenant concessions declined for the fiscal year ended April 30, 2008 compared to the year-earlier period. To maintain or increase physical occupancy levels at our properties, we may offer tenant incentives, generally in the form of lower or abated rents, which results in decreased revenues and income from operations at our properties.  Rent concessions offered during the fiscal year ended April 30, 2008 lowered our operating revenues by approximately $3.0 million, as compared to an approximately $5.0 million reduction in operating revenues attributable to rent concessions offered in fiscal year 2007.
The following table shows the approximate reduction in our operating revenues due to rent concessions, by segment, for the fiscal years ended April 30, 2008 and 2007:

  (in thousands) 
  Fiscal Year Ended April 30, 
  2008  2007  Change 
Multi-Family Residential $2,254  $3,147   (893)
Commercial Office  692   1,769   (1,077)
Commercial Medical  34   70   (36)
Commercial Industrial  0   14   (14)
Commercial Retail  31   22   9 
Total $3,011  $5,022   (2,011)

•
Increased Maintenance Expense.  Maintenance expenses totaled $24.6 million in fiscal year 2008, compared to $21.7 million in fiscal year 2007.  Maintenance expenses at properties newly acquired in fiscal years 2008 and 2007 added $2.3 million to the maintenance expense category during fiscal year 2008, while maintenance expenses at existing properties increased by approximately $568,000 primarily for snow removal and janitorial contract services, resulting in a net increase of $2.9 million or 13.3% in maintenance expenses in fiscal year 2008 compared to fiscal year 2007.  Under the terms of most of our commercial leases, the full cost of maintenance is paid by the tenant as additional rent. For our noncommercial real estate properties, any increase in our maintenance costs must be collected from tenants in the form of general rent increases.
Maintenance expenses by reportable segment for the fiscal years ended April 30, 2008 and 2007 were as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2008 $9,637  $10,522  $2,757  $558  $1,108  $24,582 
2007 $8,619  $9,243  $2,611  $218  $1,000  $21,691 
% change (2008 vs. 2007)
  11.8%  13.8%  5.6%  156.0%  10.8%  13.3%

Increased Real Estate Tax Expense.  Real estate taxes onUtility Expense.  Utility expense totaled $17.8 million in fiscal year 2008, compared to $15.2 million in fiscal year 2007.  Utility expenses at properties newly acquired in fiscal years 2008 and 2007 and 2006 added $2.9$1.5 million to real estate taxthe utility expense category during fiscal year 2008, while real estate taxes onutility expenses at existing properties increased by $638,000,$1.1 million, primarily due to unusually warm weather in certain of IRET’s markets, resulting in increased cooling costs, for a total increase of $3.5$2.6 million or 17.7%17.4% in real estate taxutility expenses in fiscal year 2008 compared to fiscal year 2007.


2009 Annual Report 44
Index

Utility expenses by reportable segment for the fiscal years ended April 30, 2008 and 2007 were as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2008 $7,388  $7,743  $2,111  $131  $420  $17,793 
2007 $6,666  $6,286  $1,771  $57  $377  $15,157 
% change (2008 vs. 2007)
  10.8%  23.2%  19.2%  129.8%  11.4%  17.4%

•
Increased Mortgage Interest Expense.  Our mortgage interest expense increased approximately $6.1 million, or 10.8%, to approximately $62.7 million during fiscal year 2008, compared to $56.6 million in fiscal year 2007. Mortgage interest expense for properties newly acquired in fiscal years 2008 and 2007 added $6.1 million to our total mortgage interest expense in fiscal year 2008, while mortgage interest expense on existing properties increased $24,000.  Our overall weighted average interest rate on all outstanding mortgage debt was 6.37% as of April 30, 2008, compared to 6.43% as of April 30, 2007.  Our mortgage debt increased approximately $112.8 million, or 11.9%, to approximately $1.1 billion as of April 30, 2008, compared to $951.1 million on April 30, 2007.
Mortgage interest expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 were as follows:
 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2008 $19,602  $23,131  $12,351  $3,481  $4,137  $62,702 
2007 $18,723  $20,157  $11,291  $2,325  $4,070  $56,566 
% change (2008 vs. 2007)
  4.7%  14.8%  9.4%  49.7%  1.6%  10.8%

Increased Amortization Expense. In accordance with SFAS No. 141, Business Combinations, which establishes standards for valuing in-place leases in purchase transactions, the Company allocates a portion of the purchase price paid for properties to in-place lease intangible assets.  The amortization period of these intangible assets is the term of the lease, rather than the estimated life of the buildings and improvements.  The Company accordingly initially records additional amortization expense due to this shorter amortization period, which has the effect in the short term of decreasing the Company’s net income available to common shareholders, as computed in accordance with GAAP.  Amortization expense related to in-place leases totaled $10.0 million in fiscal year 2008, compared to $9.2 million in fiscal year 2007. The increase in amortization expense in fiscal year 20072008 compared to fiscal year 2006, from $19.8 million2007 was primarily due to $23.3 million.   

Real estate tax expenseproperty acquisitions completed by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as follows:

 

(in thousands)

 

Multi-Family Residential

Commercial Office

Commercial Medical

Commercial Industrial

Commercial Retail

 

2007

$

7,322

$

10,844

$

2,322

$

755

$

2,079

2006

$

6,982

$

8,022

$

2,283

$

771

$

1,727

% change (2007 vs. 2006)

 

4.9%

 

35.2%

 

1.7%

 

(2.1%)

 

20.4%

 

•   Decreased Insurance Expense.  Insurance expense decreasedCompany in fiscal year 2008.


•
Increased Real Estate Tax Expense.  Real estate taxes on properties newly acquired in fiscal years 2008 and 2007 added $3.1 million to real estate tax expense, while real estate taxes on existing properties increased by approximately $738,000, for a total increase of $3.8 million or 16.5% in real estate tax expense in fiscal year 2008 compared to fiscal year 2007, from $23.3  million to $27.1 million.
Real estate tax expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 was as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2008 $7,528  $13,140  $2,977  $1,346  $2,142  $27,133 
2007 $7,294  $10,831  $2,322  $755  $2,079  $23,281 
% change (2008 vs. 2007)
  3.2%  21.3%  28.2%  78.2%  3.0%  16.5%

Increased Insurance Expense.  Insurance expense increased in fiscal year 2008 compared to fiscal year 2006,2007, from $2.7$2.4 million to $2.4$2.6 million, a decreasean increase of approximately 11.1%10.4%.  Insurance expense at properties newly-acquired in fiscal years 2008 and 2007 and 2006 totaled $208,000, whileadded approximately $240,000 to insurance expense, at existing properties decreased $488,000, for a net decrease of $280,000 in insurance expense in fiscal year 2007 compared to fiscal year 2006. 

Insurance expense by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as follows:  

 

(in thousands)

 

Multi-Family Residential

Commercial Office

Commercial Medical

Commercial Industrial

Commercial Retail

 

2007

$

1,094

$

773

$

274

$

75

$

166

2006

$

1,399

$

705

$

298

$

81

$

179

% change (2007 vs. 2006)

 

(21.8%)

 

9.6%

 

(8.1%)

 

(7.4%)

 

(7.3%)

 

•   Increased Property Management Expense.  Property management expense increased in fiscal year 2007 compared to fiscal year 2006, from $11.8 million to $13.9 million, an increase of $2.1 million or approximately 17.8%.  Of this increase, $1.3 million is attributable to existing properties, while $829,000 is due to properties acquired in fiscal years 2007 and 2006.  The increase at existing properties is primarily due to an increase in property revenue resulting in higher management fees payable (management fees are generally a percentage of rents received).

Property management expense by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as follows:  

 

(in thousands)

 

Multi-Family Residential

Commercial Office

Commercial Medical

Commercial Industrial

Commercial Retail

 

2007

$

7,808

$

3,348

$

1,697

$

148

$

853

2006

$

7,010

$

2,488

$

1,662

$

108

$

541

% change (2007 vs. 2006)

 

11.4%

 

34.6%

 

2.1%

 

37.0%

 

57.7%

 

Factors Impacting Net Income During Fiscal Year 2006 as Compared to Fiscal Year 2005

A discussion of the factors having the greatest impact on our operational results in fiscal year 2006 compared to fiscal year 2005 is set forth below. 

•   Increased concessions and limited ability to raise rents.  During fiscal year 2006, economic occupancy levels at our multi-family residential and commercial properties improved.  However, our level of tenant concessions continued to rise, and, despite some positive developments in the general economy, a majority of the markets in which we operated continued to experience lower-than-expected levels of job creation and demand for multi-family residential and commercial space.  Accordingly, we were unable to raise rents



2007
2009 Annual Report 41 45

significantly at the majority of our properties.  Economic occupancy levels at our stabilized multi-family residential properties increased throughout our entire portfolio during fiscal year 2006, to 92.0% compared to 90.1% at the end of fiscal year 2005. “Stabilized properties” are those properties that we have owned for the entirety of the periods being compared, and include properties that were redeveloped or expanded during the periods being compared.  

      Economic occupancy levels at our stabilized total commercial segment properties increased to 91.1% during fiscal year 2006, from 89.9% at the end of fiscal year 2005. On an individual commercial segment basis, economic occupancy levels at our stabilized commercial office, medical and industrial properties increased to 91.5%, 94.1% and 87.2%, respectively, during fiscal year 2006, from 90.2%, 90.9% and 86.8%, respectively, during fiscal year 2005.  Economic vacancy levels at our stabilized commercial retail properties decreased to 89.3% during fiscal year 2006, compared to 89.8% during fiscal year 2005. 

      To maintain physical occupancy levels at our multi-family residential properties, we may offer tenant incentives, generally in the form of lower rents, which results in decreased revenues and income from operations at our stabilized properties.  We estimate that rent concessions offered during fiscal year 2006 lowered our operating revenues by approximately $5.2 million, compared to an estimated approximately $4.4 million reduction in operating revenues attributable to rent concessions offered in fiscal year 2005. 

•   Increased real estate taxes.  Real estate taxes on properties newly acquired in fiscal years 2005 and 2006 added $2.0 million to the real estate taxes category, while real estate taxes on existing properties decreased by $406,000, resulting in a net increase in real estate tax expense of $1.6 million, or 8.1%, for fiscal year 2006, as compared to fiscal year 2005. 

•   Increased maintenance expense.  Maintenance expenses at our properties increased by $3.2 million, or 19.7% for the fiscal year ended April 30, 2006, as compared to fiscal year 2005.  Of the increased maintenance costs for the fiscal year ended April 30, 2006, $2.4 million, or 74.5%, was attributable to the addition of new real estate acquired in fiscal 2006 and 2005, while $774,000, or 25.5%, was due to increased costs for maintenance on existing real estate assets.  Under the terms of most of our commercial leases, the full cost of maintenance is paid by the tenant as additional rent.  For our non-commercial real estate properties, any increase in our maintenance costs must be collected from tenants in the form of a general rent increase.  

•   Increased utility expense.  The utility expense category increased by $2.9 million, or 26.4%, for the fiscal year ended April 30, 2006, compared to fiscal year 2005.  Of the increased utility costs, $1.6 million, or 56.5%, was attributable to the addition of new real estate acquired in fiscal years 2006 and 2005, while $1.2 million, or 43.5%, was due to increased costs for utilities on existing real estate assets.  Under the terms of most of our commercial leases, the full cost of utilities is paid by the tenant as additional rent.  For our other non-commercial real estate properties, any increase in our utility costs must be collected from tenants in the form of a general rent increase.  Additionally, since our real estate portfolio is primarily located in Minnesota and North Dakota, the severity of winters has a large impact on our utility costs. 

•   Increased mortgage interest expense.  Our mortgage debt increased $57.3 million, or 8.1%, for the fiscal year ended April 30, 2006 compared to fiscal year 2005, to approximately $765.9 million from approximately $708.6 million.  Mortgage interest expense at properties newly acquired in fiscal years 2005 and 2006 added $4.6 million to the mortgage interest expense category, while mortgage interest expense at existing properties decreased by $549,000, resulting in a net increase of $4.0 million or 8.8% in mortgage interest expense in fiscal year 2006 compared to fiscal year 2005.

2007 Annual Report 42

Index

insurance expense at existing properties increased by approximately $7,000, for a net increase of approximately $247,000 in insurance expense in fiscal year 2008 compared to fiscal year 2007.
Insurance expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 was as follows:
 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2008 $1,162  $901  $257  $135  $169  $2,624 
2007 $1,090  $772  $274  $75  $166  $2,377 
% change (2008 vs. 2007)
  6.6%  16.7%  (6.2%)  80.0%  1.8%  10.4%

•
Increased Property Management Expense.  Property management expense increased in fiscal year 2008 compared to fiscal year 2007, from $13.8 million to $15.3 million, an increase of $1.4 million or approximately 10.5%.  Of this increase, approximately $240,000 million was attributable to existing properties, while $1.2 million was due to properties acquired in fiscal years 2008 and 2007.  The increase at existing properties was primarily due to an increase in property revenue resulting in higher management fees payable (management fees are generally a percentage of rents received).
Property management expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 was as follows:

 (in thousands) 
 Multi-Family Residential Commercial Office Commercial Medical Commercial Industrial Commercial Retail Total 
 
2008 $8,922  $3,900  $1,654  $359  $438  $15,273 
2007 $7,785  $3,343  $1,697  $148  $853  $13,826 
% change (2008 vs. 2007)
  14.6%  16.7%  (2.5%)  142.6%  (48.7%)  10.5%
Comparison of Results from Commercial and Residential Properties

The following table presents an analysis of the relative investment in (corresponding to “Property owned” on the balance sheet, i.e., cost), and net operating income of, our commercial and multi-family residential properties over the past three fiscal years:

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

Fiscal Years Ended April 30

2007

%

2006

%

2005

%

Real Estate Investments – (cost)

 

 

 

 

 

 

 

 

 

 

 

 

Multi-Family Residential

$

489,644

 

32.9%

$

452,251

 

35.6%

$

442,109

 

37.5%

Commercial Office

 

536,431

 

36.0%

 

383,280

 

30.2%

 

353,536

 

30.0%

Commercial Medical

 

274,779

 

18.4%

 

263,300

 

20.7%

 

205,333

 

17.4%

Commercial Industrial

 

75,257

 

5.1%

 

59,583

 

4.7%

 

58,233

 

4.9%

Commercial Retail

 

113,176

 

7.6%

 

111,009

 

8.8%

 

120,645

 

10.2%

Total

$

1,489,287

 

100.0%

$

1,269,423

 

100.0%

$

1,179,856

 

100.0%

Net Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

Multi-Family Residential

$

35,639

 

29.4%

$

32,056

 

31.0%

$

31,253

 

32.9%

Commercial Office

 

43,140

 

35.6%

 

33,921

 

32.8%

 

29,123

 

30.6%

Commercial Medical

 

26,108

 

21.5%

 

23,356

 

22.6%

 

19,246

 

20.2%

Commercial Industrial

 

6,838

 

5.6%

 

5,120

 

4.9%

 

5,235

 

5.5%

Commercial Retail

 

9,614

 

7.9%

 

9,033

 

8.7%

 

10,227

 

10.8%

Total

$

121,339

 

100.0%

$

103,486

 

100.0%

$

95,084

 

100.0%

 

  (in thousands) 
Fiscal Years Ended April 30 2009  %  2008  %  2007  % 
Real Estate Investments – (cost)                  
Multi-Family Residential $542,547   31.4% $510,697   31.0% $489,644   32.9%
Commercial Office  571,565   33.0%  556,712   33.8%  536,431   36.0%
Commercial Medical  388,219   22.4%  359,986   21.8%  274,779   18.4%
Commercial Industrial  108,103   6.3%  104,060   6.3%  75,257   5.1%
Commercial Retail  119,151   6.9%  116,804   7.1%  113,176   7.6%
Total $1,729,585   100% $1,648,259   100% $1,489,287   100.0%
Net Operating Income                        
Multi-Family Residential $40,554   28.6% $38,190   28.6% $35,518   29.4%
Commercial Office  45,802   32.3%  47,836   35.8%  43,128   35.6%
Commercial Medical  36,518   25.7%  28,656   21.4%  26,108   21.5%
Commercial Industrial  9,489   6.7%  9,162   6.8%  6,838   5.6%
Commercial Retail  9,491   6.7%  9,921   7.4%  9,614   7.9%
Total $141,854   100.0% $133,765   100.0% $121,206   100.0%


2009 Annual Report 46
Index

Analysis of Lease Expirations and Credit Risk

The following table shows the annual lease expiration percentages and base rent of expiring leases for the total commercial segments properties owned by us as of April 30, 2007,2009, for fiscal years 20082010 through 2017,2019, and the leases that will expire during fiscal year 20182019 and beyond. Our multi-family residential properties are excluded from this table, since residential leases are generally for a one-year term.

Fiscal Year of Lease Expiration

Square Footage of  Expiring Leases

 

Percentage of Total Commercial Segments Leased Square Footage

Annualized Base
Rent of Expiring
Leases at Expiration

 

Percentage of Total Commercial Segments Annualized Base Rent

2008(1)

1,144,829

 

12.3%

$

10,288,847

 

10.5%

2009

981,320

 

10.6%

 

8,905,984

 

9.1%

2010

1,263,332

 

13.6%

 

13,797,728

 

14.0%

2011

1,271,698

 

13.7%

 

14,147,317

 

14.4%

2012

1,354,986

 

14.6%

 

13,905,217

 

14.2%

2013

663,706

 

7.1%

 

6,450,824

 

6.6%

2014

351,009

 

3.8%

 

4,378,351

 

4.5%

2015

172,080

 

1.9%

 

2,682,858

 

2.7%

2016

330,083

 

3.5%

 

2,809,501

 

2.8%

2017

221,267

 

2.4%

 

4,039,499

 

4.1%

2018 and beyond

1,535,816

 

16.5%

 

16,757,407

 

17.1%

Totals

9,290,126

 

100.0%

$

98,163,533

 

100.0%

 

(1)  Includes month-to-month leases for approximately 189,900 square feet, with annualized base rent totaling approximately $1,102,662.

2007 Annual Report 43

Fiscal Year of Lease Expiration Square Footage of Expiring Leases  Percentage of Total Commercial Segments Leased Square Footage  
Annualized Base
Rent of Expiring
Leases at Expiration
  Percentage of Total Commercial Segments Annualized Base Rent 
2010  915,355   9.1% $7,724,008   6.8%
2011  2,125,056   21.2%  16,808,994   14.8%
2012  1,368,366   13.6%  15,339,409   13.5%
2013  858,447   8.6%  9,202,739   8.1%
2014  808,845   8.1%  11,355,964   10.0%
2015  507,268   5.1%  5,561,416   4.9%
2016  755,725   7.5%  6,347,956   5.6%
2017  631,238   6.3%  8,981,845   7.9%
2018  270,955   2.7%  5,806,846   5.1%
2019  434,156   4.3%  5,439,379   4.8%
Thereafter  1,353,412   13.5%  20,968,934   18.5%
Totals  10,028,823   100.0% $113,537,490   100.0%
The following table lists our top ten commercial tenants on April 30, 2007,2009, for the total commercial segments properties owned by us as of April 30, 2007,2009, based upon minimum rents in place as of April 30, 2007:

2009:

(in thousands)

Lessee

% of Total Commercial Segments Minimum Rents as of April 30, 2007

2009

Affiliates of Edgewood Vista Senior Living, Inc.

6.4%

9.9%

St. Lukes Hospital of Duluth, Inc.

4.0%

3.5%

Applied Underwriters

Fairview Health

2.5%

2.4%

Applied Underwriters

2.2%
Best Buy Co., Inc. (NYSE: BBY)

2.4%

2.0%

UGS Corp.

1.9%

HealthEast Care System

1.9%

1.7%

UGS Corp.

1.6%
Microsoft (Nasdaq: MSFT)

1.7%

1.5%

Smurfit - Stone Container (Nasdaq: SSCC)

(1)

1.7%

1.5%

Allina Health System

Arcadis Corporate Services (Nasdaq: ARCAF)

1.7%

1.4%

Nebraska Orthopaedic Hospital

All Others

1.6%

72.3%

All Others

74.2%

Total Monthly Rent as of April 30, 2007

2009

100.0%

100.0%

(1)  Smurfit-Stone Container has filed bankruptcy under Chapter 11 of the Bankruptcy Code. As of April 30, 2009, Smurfit was current on all base rent payment under its leases with us. We have not yet been notified of the debtor’s intentions with respect to these leases.

2009 Annual Report 47
Index

Property Acquisitions

IRET Properties paid approximately $220.7$33.8 million for real estate properties addedto its portfolio during fiscal year 2007,2009, compared to $93.4$154.7 million in fiscal year 2006.2008. The fiscal year 20072009 and 20062008 additions are detailed below.

Fiscal 2007 2009 (May 1, 20062008 to April 30, 20072009)

Fiscal 2007 Acquisitions

(in thousands)

 

Acquisition Cost

Multi-Family Residential

 

 

192-unit Arbors Apartments – Sioux City, NE

$

7,000

154-unit Quarry Ridge Apartments – Rochester, MN

 

14,570

389-unit St. Cloud Apartments—St. Cloud, MN

 

7,800

120-unit Indian Hills Apartments—Sioux City, IA

 

3,120

72-unit Rum River Apartments—Isanti, MN

 

5,650

 

 

38,140

Commercial Property – Office

 

 

143,061 sq. ft. Pacific Hills – Omaha, NE

 

16,502

141,724 sq. ft. Corporate Center West – Omaha, NE

 

21,497

94,832 sq. ft. Farnam Executive Center – Omaha, NE

 

12,853

84,475 sq. ft. Miracle Hills One – Omaha, NE

 

11,950

60,942 sq. ft. Woodlands Plaza IV – Maryland Heights, MO

 

5,840

122,567 sq. ft. Riverport – Maryland Heights, MO

 

21,906

90,315 sq. ft. Timberlands – Leawood, KS

 

14,546

138,825 sq. ft. Flagship – Eden Prairie , MN

 

26,094

59,827 sq. ft. Gateway Corporate Center – Woodbury, MN

 

9,612

71,430 sq. ft. Highlands Ranch I – Highlands Ranch, CO

 

12,250

 

 

153,050

Commercial Property – Medical (including senior housing/assisted living)

 

 

26,336 sq. ft. Fox River Cottages – Grand Chute, WI

 

3,200

10,796 sq. ft. St. Michael Clinic – St. Michael, MN*

 

2,587

 

 

5,787

Commercial Property – Industrial

 

 

100,850 sq. ft. Bloomington 2000 – Bloomington, MN

 

6,750

172,057 sq. ft. Roseville 2929 – Roseville, MN

 

10,300

 

 

17,050

Commercial Property – Retail

 

 

16,921 sq. ft. Dakota West Plaza – Minot, ND

 

625

14,820 sq. ft. Weston Walgreens – Weston, WI**

 

2,144

 

 

2,769

2007 Annual Report 44

Unimproved Land

 

 

Monticello Unimproved Parcel (City) – Monticello, MN

 

5

St. Michaels Unimproved – St. Michael, MN

 

320

Monticello Unimproved Parcel (Other) – Monticello, MN

 

75

Weston Unimproved – Weston, WI

 

800

Quarry Ridge Unimproved – Rochester MN

 

930

Minot Prairie Green—Minot, ND

 

1,750

 

 

3,880

Total Fiscal 2007 Property Acquisitions

$

220,676


* Development property placed in service March 1, 2007.

**

  (in thousands) 
Acquisitions and Development Projects Placed in Service Land  Building  Intangible Assets  Acquisition Cost 
             
Multi-Family Residential            
33-unit Minot Westridge Apartments – Minot, ND $67  $1,887  $0  $1,954 
12-unit Minot Fairmont Apartments – Minot, ND  28   337   0   365 
4-unit Minot 4th Street Apartments – Minot, ND
  15   74   0   89 
3-unit Minot 11th Street Apartments – Minot, ND
  11   53   0   64 
36-unit Evergreen Apartments – Isanti, MN  380   2,720   0   3,100 
10-unit 401 S. Main Apartments – Minot, ND1
  0   905   0   905 
71-unit IRET Corporate Plaza Apartments – Minot, ND2
  0   10,824   0   10,824 
   501   16,800   0   17,301 
Commercial Property - Office                
22,500 sq. ft. Bismarck 715 E. Bdwy – Bismarck, ND  389   1,267   255   1,911 
50,360 sq. ft. IRET Corporate Plaza – Minot, ND2
  0   3,896   0   3,896 
   389   5,163   255   5,807 
Commercial Property - Medical                
56,239 sq. ft. 2828 Chicago Avenue – Minneapolis, MN3
  0   5,052   0   5,052 
31,643 sq. ft. Southdale Medical Expansion
(6545 France) –  Edina, MN4
  0   779   0   779 
   0   5,831   0   5,831 
Commercial Property - Industrial                
69,984 sq. ft. Minnetonka 13600 Cty Rd 62
– Minnetonka, MN
  809   2,881   310   4,000 
   809   2,881   310   4,000 
Unimproved Land                
Bismarck 2130 S. 12th Street – Bismarck, ND
  576   0   0   576 
Bismarck 700 E. Main – Bismarck, ND  314   0   0   314 
   890   0   0   890 
                 
Total Property Acquisitions $2,589  $30,675  $565  $33,829 

(1)  Development property placed in service November 10, 2008. Approximately $145,000 of this cost was incurred in the three months ended April 30, 2009.  Additional costs incurred in fiscal year 2008 totaled approximately $14,000 for a total project cost at April 30, 2009 of approximately $919,000.
(2)  Development property placed in service January 19, 2009.  Approximately $1.8 million of the residential cost and $563,000 of the commercial office cost was incurred in the three months ended April 30, 2009. Additional costs incurred in fiscal years 2008 and 2007 totaled $8.6 million for a total project cost at April 30, 2009 of $23.3 million.
(3)  Development property placed in service September 16, 2008. Approximately $800,000 of this cost was incurred in the three months ended January 31, 2009. Additional costs incurred in fiscal years 2008 and 2007 totaled $7.8 million for a total project cost at April 30, 2009 of $12.9 million.
(4)  Development property placed in service September 17, 2008. Approximately $364,000 of this cost was incurred in the three months ended January 31, 2009. Additional costs incurred in fiscal year 2008 totaled $5.4 million for a total project cost at April 30, 2009 of $6.2 million.


2009 Annual Report 48
Index

Fiscal 2008 (May 1, 2006.

In addition to the above property acquisitions, in the fourth quarter of fiscal year 2007 IRET Properties issued limited partnership units with a value at issuance of approximately $5.25 million to purchase an approximately 29% ownership interest in a limited liability company in which IRET already owned a 71% interest.  This entity owns the Southdale Medical Building in Edina, Minnesota, and with its acquisition of this remaining ownership interest, IRET now is the sole owner of this property.

Fiscal 2006 (May 1, 2005 to April 30, 20062008)

 

(in thousands)

Fiscal 2006 Acquisitions

Acquisition Cost

Multi-Family Residential

 

 

36-unit Legacy 7 - Grand Forks, ND

$

2,445

 

 

2,445

Commercial Property—Office

 

 

15,594 sq. ft. Spring Valley IV Office Building - Omaha, NE

 

1,250

23,913 sq. ft. Spring Valley V Office Building - Omaha, NE

 

1,375

24,000 sq. ft. Spring Valley X Office Building - Omaha, NE

 

1,275

24,000 sq. ft. Spring Valley XI Office Building - Omaha, NE

 

1,250

30,000 sq. ft. Brook Valley I Office Building - La Vista, NE

 

2,100

146,087 sq. ft. Northpark Corporate Center - Arden Hills, MN

 

18,597

 

 

25,847

Commercial Property—Medical (including assisted living)

 

 

74,112 sq. ft. Edgewood Vista - Bismarck, ND

 

10,750

60,161 sq. ft. Edgewood Vista - Spearfish, SD

 

6,687

82,535 sq. ft. Edgewood Vista - Brainerd, MN

 

10,625

160,485 sq. ft. Edgewood Vista - Hermantown, MN

 

12,315

50,409 sq. ft. Ritchie Medical Plaza - St. Paul, MN

 

10,750

54,971 sq. ft. 2800 Medical Building - Minneapolis, MN

 

9,000

47,950 sq. ft. Stevens Point - Stevens Point, WI

 

4,215

 

 

64,342

Unimproved Land

 

 

Stevens Point Unimproved - Stevens Point, WI

 

310

Eagan Unimproved Land - Eagan, MN

 

423

 

 

733

Total Fiscal 2006 Property Acquisitions

$

93,367


  (in thousands) 
Acquisitions and Development Projects Placed in Service Land  Building  Intangible Assets  Acquisition Cost 
             
Multi-Family Residential            
96 – unit Greenfield Apartments – Omaha, NE $578  $4,122  $0  $4,700 
67 – unit Cottonwood Lake IV – Bismarck, ND1
  267   5,924   0   6,191 
   845   10,046   0   10,891 
Commercial Property – Office                
20,528 sq. ft. Plymouth 5095 Nathan Lane Office Building – Plymouth, MN  604   1,236   160   2,000 
78,560 sq. ft. 610 Business Center IV – Brooklyn Park, MN  975   5,525   0   6,500 
64,607 sq. ft. Intertech Office Building – Fenton, MO  2,130   3,951   919   7,000 
   3,709   10,712   1,079   15,500 
Commercial Property—Medical (including Senior Housing)                
18,502 sq. ft. Barry Pointe Medical Building – Kansas City, MO  384   2,355   461   3,200 
11,800 sq. ft./28 beds Edgewood Vista – Billings, MT  115   1,743   2,392   4,250 
18,488 sq. ft./36 beds Edgewood Vista – East Grand Forks, MN  290   1,346   3,354   4,990 
11,800 sq. ft./28 beds Edgewood Vista – Sioux Falls, SD  314   971   2,065   3,350 
55,478 sq. ft. Edina 6405 France Medical – Edina, MN2
  0   12,179   1,436   13,615 
70,934 sq. ft. Edina 6363 France Medical – Edina, MN2
  0   12,651   709   13,360 
57,212 sq. ft. Minneapolis 701 25th Ave Medical (Riverside) – Minneapolis, MN2
  0   7,225   775   8,000 
53,466 sq. ft. Burnsville 303 Nicollet Medical (Ridgeview) – Burnsville, MN  1,071   6,842   887   8,800 
36,199 sq. ft. Burnsville 305 Nicollet Medical (Ridgeview South) – Burnsville, MN  189   5,127   584   5,900 
17,640 sq. ft. Eagan 1440 Duckwood Medical – Eagan, MN  521   1,547   257   2,325 
5,192 sq. ft./13 beds Edgewood Vista – Belgrade, MT  35   744   1,321   2,100 
5,194 sq. ft./13 beds Edgewood Vista – Columbus, NE  43   793   614   1,450 
168,801 sq. ft./185 beds Edgewood Vista – Fargo, ND  792   20,578   4,480   25,850 
5,185 sq. ft./13 beds Edgewood Vista – Grand Island, NE  34   742   624   1,400 
5,135 sq. ft./13 beds Edgewood Vista – Norfolk, NE  42   691   567   1,300 
   3,830   75,534   20,526   99,890 
Commercial Property – Industrial                
50,400 sq. ft. Cedar Lake Business Center – St. Louis Park, MN  896   2,802   342   4,040 
528,353 sq. ft. Urbandale Warehouse Building – Urbandale, IA  3,679   9,840   481   14,000 
69,600 sq. ft. Woodbury 1865 Woodlane – Woodbury, MN  1,108   2,613   279   4,000 
198,600 sq. ft. Eagan 2785 & 2795 Highway 55—Eagan, MN  3,058   2,557   785   6,400 
   8,741   17,812   1,887   28,440 
                 
Total Property Acquisitions $17,125  $114,104  $23,492  $154,721 

(1)  Development property placed in service January 2, 2008.
(2)  Acquisition of leasehold interests only (air rights lease and ground leases).

2009 Annual Report 49
Index

Property Dispositions

During fiscal year 2007, IRET Properties disposed of 142009, the Company had no material dispositions, compared to two properties and two parcelsbuildings of unimproved land for an aggregate sale price of $22.5 million, compared to 17 properties and two unimproved parcelsapartment community sold  for an aggregate sale price of $14.2$1.4 million in total during fiscal year 2006.2008. Real estate assets sold by IRET during fiscal years 2007 and 2006year 2008 were as follows:

2007 Annual Report 45

 

(in thousands)

Fiscal 2007 Dispositions

Sales Price

Book Value
and Sales Cost

Gain/Loss

Multi-Family Residential

 

 

 

 

 

 

60-unit Clearwater Apartments – Boise, ID

$

4,000

$

3,413

$

587

122-unit Park East Apartments—Fargo, ND

 

6,188

 

4,476

 

1,712

 

 

10,188

 

7,889

 

2,299

Commercial Property – Office

 

 

 

 

 

 

5,640 sq. ft. Greenwood Office – Greenwood, MN

 

1,500

 

961

 

539

 

 

1,500

 

961

 

539

Commercial Property – Medical (Assisted Living)

 

 

 

 

 

 

29,408 sq. ft. Wedgewood Sweetwater – Lithia Springs, GA

 

4,550

 

3,836

 

714

 

 

4,550

 

3,836

 

714

Commercial Property – Retail

 

 

 

 

 

 

4,560 sq. ft. Moundsview Bakery – Mounds View, MN

 

380

 

287

 

93

3,571 sq. ft. Howard Lake C-Store – Winsted, MN

 

550

 

374

 

176

6,225 sq. ft. Wilmar Sam Goody – Wilmar, MN

 

450

 

409

 

41

3,571 sq. ft. Winsted C-Store – Winsted, MN

 

190

 

214

 

(24)

7,700 sq. ft. Buffalo Strip Center – Buffalo, MN

 

800

 

667

 

133

4,800 sq. ft. Glencoe C-Store—Glencoe, MN

 

350

 

344

 

6

5,216 sq. ft. Long Prairie C-Store – Long Prairie, MN

 

302

 

304

 

(2)

5,600 sq. ft. Faribault Checkers Auto – Faribault, MN

 

525

 

337

 

188

4,800 sq. ft. Paynesville C-Store – Paynesville, MN

 

149

 

150

 

(1)

6,800 sq. ft. Prior Lake Strip Center I – Prior Lake, MN

 

1,105

 

993

 

112

4,200 sq. ft. Prior Lake Strip Center III – Prior Lake, MN

 

545

 

465

 

80

 

 

5,346

 

4,544

 

802

Unimproved Land

 

 

 

 

 

 

IGH Land – Inver Grove Heights, MN

 

900

 

613

 

287

Long Prairie Unimproved Land – Long Prairie, MN

 

59

 

60

 

(1)

 

 

959

 

673

 

286

Total Fiscal 2007 Property Dispositions

$

22,543

$

17,903

$

4,640

 

 

(in thousands)

Fiscal 2006 Dispositions

Sales Price

Book Value
and Sales Cost

Gain/Loss

Commercial - Office

 

 

 

 

 

 

1,600 sq. ft. Greenwood Chiropractic - Greenwood, MN

$

490

$

345

$

145

 

 

 

 

 

 

 

Commercial – Retail

 

 

 

 

 

 

3,000 sq. ft. Centerville Convenience Store - Centerville, MN

 

340

 

324

 

16

4,800 sq. ft. East Bethel C-Store - East Bethel, MN

 

660

 

498

 

162

6,325 sq. ft. Lino Lake Strip Center - Lino Lakes, MN

 

650

 

462

 

188

8,400 sq. ft. IGH Strip Center - Inver Grove Heights, MN

 

1,280

 

940

 

340

46,720 sq. ft. Sleep Inn - Brooklyn Park, MN

 

3,350

 

2,990

 

360

7,993 sq. ft. Excelsior Strip Center - Excelsior, MN

 

965

 

891

 

74

3,000 sq. ft. Andover C-Store - Andover, MN

 

383

 

308

 

75

6,266 sq. ft. Oakdale Strip Center - Oakdale, MN

 

1,050

 

745

 

305

6,225 sq. ft. Rochester Auto - Rochester, MN

 

465

 

431

 

34

3,650 sq. ft. Lakeland C-Store - Lakeland, MN

 

610

 

436

 

174

4,000 sq. ft. Lindstrom C-Store - Lindstrom, MN

 

450

 

345

 

105

3,571 sq. ft. Mora C-Store - Mora, MN

 

380

 

296

 

84

3,000 sq. ft. Shoreview C-Store - Shoreview, MN

 

400

 

326

 

74

8,750 sq. ft. Blaine Strip Center - Blaine, MN

 

990

 

599

 

391

3,444 sq. ft. St. Louis Park Retail - St. Louis Park, MN

 

845

 

365

 

480

3,864 sq. ft. Mound Strip Center - Mound, MN

 

550

 

358

 

192

2007 Annual Report 46

 

 

 

 

 

 

 

Unimproved Land

 

 

 

 

 

 

40,000 sq. ft. Centerville Unimproved Land - Centerville, MN

 

110

 

105

 

5

Andover Unimproved Land - Andover, MN

 

230

 

164

 

66

Total Fiscal 2006 Property Dispositions

$

14,198

$

10,928

$

3,270

 
  (in thousands) 
Fiscal 2008 Dispositions Sales Price  
Book Value
and Sales Cost
  Gain/Loss 
          
Multi-Family Residential         
405 Grant Ave (Lonetree) Apartments – Harvey, ND $185  $184  $1 
Sweetwater Apartments – Devils Lake, ND  940   430   510 
   1,125   614   511 
Commercial Property – Office            
Minnetonka Office Buildings – Minnetonka, MN  310   307   3 
   310   307   3 
Total Fiscal 2008 Property Dispositions $1,435  $921  $514 

Funds From Operations

IRET considers Funds from Operations (“FFO”) a useful measure of performance for an equity REIT. IRET uses the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) in 1991, as clarified in 1995, 1999 and 2002. NAREIT defines FFO to mean “net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.”  Because of limitations of the FFO definition adopted by NAREIT, IRET has made certain interpretations in applying the definition.  IRET believes all such interpretations not specifically provided for in the NAREIT definition are consistent with the defini tion. 

definition.

IRET management considers that FFO, by excluding depreciation costs, the gains or losses from the sale of operating real estate properties and extraordinary items as defined by GAAP, is useful to investors in providing an additional perspective on IRET’s operating results.   Historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation, that the value of real estate assets decreases predictably over time.  However, real estate asset values have historically risen or fallen with market conditions.  NAREIT’s definition of FFO, by excluding depreciation costs, reflects the fact that real estate, as an asset class, generally appreciates over time and that depreciation charges required by GAAP may not reflect underlying economic realities.  Additionally, the exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales of previously depreciated operating real esta teestate assets, allows IRET management and investors to better identify the operating results of the long-term assets that form the core of IRET’s investments, and assists in comparing those operating results between periods.  FFO is used by IRET’s management and investors to identify trends in occupancy rates, rental rates and operating costs.

While FFO is widely used by REITs as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies.

FFO should not be considered as an alternative to net income as determined in accordance with GAAP as a measure of IRET’s performance, but rather should be considered as an additional, supplemental measure, and should be viewed in conjunction with net income as presented in the consolidated financial statements included in this report. FFO does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of sufficient cash flow to fund all of IRET’s needs or its ability to service indebtedness or make distributions.

FFO applicable to common shares and limited partnership units for the fiscal year ended April 30, 20072009 increased to $57.0$64.6 million, compared to $46.7$64.2 million and $42.3$57.0 million for the fiscal years ended April 30, 20062008 and 2005,2007, respectively.

2007

2009 Annual Report 47 50

Index

Reconciliation of Net Income to Funds FromOperations

For the years ended April 30, 2007, 20062009, 2008 and 2005:

 

(in thousands, except per share amounts)

Fiscal Years Ended April 30,

2007

2006

2005

 

Amount

Weighted Avg
 Shares and
 Units (2)

Per
 Share
 and
 Unit (3)

Amount

Weighted Avg
 Shares and
 Units (2)

Per
 Share
 and
 Unit (3)

Amount

Weighted Avg
 Shares and
 Units (2)

Per
Share
and
Unit (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

14,110

 

 

$

 

$

11,567

 

 

$

 

$

15,076

 

 

$

 

Less dividends to preferred shareholders

 

(2,372)

 

 

 

 

 

(2,372)

 

 

 

 

 

(2,372)

 

 

 

 

Net income available to common shareholders

 

11,738

 

47,672

 

.25

 

9,195

 

45,717

 

.20

 

12,704

 

43,214

 

.30

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority interest in earnings of unitholders

 

4,299

 

17,017

 

 

 

2,705

 

13,329

 

 

 

3,873

 

12,621

 

 

Depreciation and Amortization(1)

 

45,568

 

 

 

 

 

38,104

 

 

 

 

 

34,342

 

 

 

 

Gains on depreciable property sales

 

(4,602)

 

 

 

 

 

(3,293)

 

 

 

 

 

(8,605)

 

 

 

 

Funds from operations applicable to common shares and Units(4)

$

57,003

 

64,689

$

.88

$

46,711

 

59,046

$

.79

$

42,314

 

55,835

$

.76

(1)   Real estate depreciation and amortization consists of the sum of depreciation/amortization related to real estate investments and amortization related to non-real estate investments from the Consolidated Statements of Operations, totaling $45,563, and depreciation/amortization from Discontinued Operations of $246, less corporate-related depreciation and amortization on office equipment and other assets of $241, for the fiscal year ended April 30, 2007.

(2)   UPREIT Units of the Operating Partnership are exchangeable for common shares of beneficial interest on a one-for-one basis.

(3)   Net income is calculated on a per share basis. FFO is calculated on a per share and unit basis.

(4)   In accordance with SEC and NAREIT guidance, IRET does not exclude impairment write-downs from FFO (that is, impairment charges are not added back to GAAP net income in calculating FFO). IRET recorded impairment charges of $640, $409 and $570 for the fiscal years ended April 30, 2007, 2006 and 2005, respectively. If these impairment charges are excluded from the Company's calculation of FFO, the Company's FFO per share and unit would be $.89, $.80 and $.77 for fiscal years 2007, 2006 and 2005, respectively

2007:

  (in thousands, except per share and unit amounts) 
Fiscal Years Ended April 30, 2009  2008  2007 
  Amount  
Weighted Avg
 Shares and
 Units(2)
  
Per
 Share
 and
 Unit(3)
  Amount  
Weighted Avg
 Shares and
 Units(2)
  
Per
 Share
 and
 Unit(3)
  Amount  
Weighted Avg
 Shares and
 Units(2)
  
Per
Share
and
Unit(3)
 
                            
Net income $8,526     $   $12,088     $   $14,110     $  
Less dividends to preferred shareholders  (2,372)         (2,372)         (2,372)       
Net income available to common shareholders  6,154   58,603   0.11   9,716   53,060   0.18   11,738   47,672   0.24 
Adjustments:                                    
Minority interest in earnings of unitholders  2,227   21,217       3,677   20,417       4,299   17,017     
Depreciation and amortization(1)  56,295           51,303           45,559         
Gains on depreciable property sales  (54)          (514)          (4,602)        
Funds from operations applicable to common shares and Units(4)
 $64,622   79,820  $0.81  $64,182   73,477  $0.87  $56,994   64,689  $0.88 
(1)Real estate depreciation and amortization consists of the sum of depreciation/amortization related to real estate investments and amortization related to non-real estate investments from the Consolidated Statements of Operations, totaling $56,714, $51,518 and $45,501 and depreciation/amortization from Discontinued Operations of $0, $47 and $ 299, less corporate-related depreciation and amortization on office equipment and other assets of $419, $262 and $241 for the fiscal year ended April 30, 2009, 2008 and 2007.
(2)UPREIT Units of the Operating Partnership are exchangeable for common shares of beneficial interest on a one-for-one basis.
(3)Net income is calculated on a per share basis. FFO is calculated on a per share and unit basis.
(4)In accordance with SEC and NAREIT guidance, IRET does not exclude impairment write-downs from FFO (that is, impairment charges are not added back to GAAP net income in calculating FFO). IRET recorded impairment charges of $338, $0 and $640 for the fiscal years ended April 30, 2009, 2008 and 2007, respectively. If these impairment charges are excluded from the Company's calculation of FFO, the Company's FFO per share and unit would be unchanged for fiscal year 2009 and 2008, and would increase by one cent per share and unit of fiscal year 2007, to $.89 per share and unit.
Cash Distributions

The following cash distributions were paid to our common shareholders and UPREIT unitholders during fiscal years 2007, 2006,2009, 2008 and 2005: 

 

Fiscal Years

Quarters

2007

2006

2005

First

$

.1645

$

.1625

$

.1605

Second

 

.1650

 

.1630

 

.1610

Third

 

.1655

 

.1635

 

.1615

Fourth

 

.1660

 

.1640

 

.1620

 

$

.6610

$

.6530

$

.6450

 

2007:

  Fiscal Years 
Quarters 2009  2008  2007 
First $.1685  $.1665  $.1645 
Second  .1690   .1670   .1650 
Third  .1695   .1675   .1655 
Fourth  .1700   .1680   .1660 
  $.6770  $.6690  $.6610 
The fiscal year 20072009 cash distributions increased 1%1.2% over the cash distributions paid during fiscal year 20062008, and fiscal year 2005,2008 cash distributions increased 1.2% over the cash distributions paid during fiscal year 2007, respectively.

Liquidity and Capital Resources

Overview

Management expects that the Company’s principal liquidity demands will continue to be distributions to holders of the Company’s preferred and common shares of beneficial interest and UPREIT Units, capital improvements and repairs and maintenance to the Company’s properties, acquisition of additional properties, property development, debt repayments and tenant improvements.

2007 Annual Report 48

The Company expects to meet its short-term liquidity requirements through net cash flows provided by its operating activities, and through draws from time to time on its unsecured lines of credit. Management considers the

2009 Annual Report 51
Index

Company’s ability to generate cash to be adequate to meet all operating requirements and to make distributions to its shareholders in accordance with the REIT provisions of the Internal Revenue Code. Budgeted expenditures for ongoing maintenance and capital improvements and renovations to our real estate portfolio are expected to be funded from cash flow generated from operations of current properties.

To the extent the Company does not satisfy its long-term liquidity requirements, which consist primarily of maturities under the Company’s long-term debt, construction and development activities and potential acquisition opportunities, through net cash flows provided by operating activities and its credit facilities, the Company intends to satisfy such requirements through a combination of funding sources which the Company believes will be available to it, including the issuance of UPREIT Units, additional common or preferred equity, proceeds from the sale of properties, and additional long-term secured or unsecured indebtedness.  

However, our ability to raise funds through the sale of equity securities, the sale of properties, and additional long-term secured or unsecured borrowings is dependent on, among other things, general economic conditions, general market conditions for REITs, our operating performance, and the current trading price of our common shares, and the capital and debt markets may not consistently be available on terms that we consider attractive. In particular, as a result of the current economic downturn and turmoil in the capital markets, the availability of secured and unsecured loans has been sharply curtailed, and long-term credit has become significantly more costly. We cannot predict how long these conditions will continue.

We believe that we will generate sufficient cash flow from operations and have access to the capital resources necessary to fund our requirements. However, as a result of general economic conditions in our markets, economic downturns affecting the ability to attract and retain tenants, unfavorable fluctuations in interest rates or our share price, unfavorable changes in the supply of competing properties, or our properties not performing as expected, we may not generate sufficient cash flow from operations or otherwise have access to capital on favorable terms, or at all. If we are unable to obtain capital from other sources, we may not be able to pay the distribution required to maintain our status as a REIT, make required principal and interest payments, make strategic acquisitions or make necessary routine capital improvements or undertake re-development opportunities with respect to our existing portfolio of operating assets. In addition, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the holder of the mortgage could foreclose on the property, resulting in loss of income and asset values.
Sources and Uses of Cash

As of April 30, 2007,2009, the Company had three unsecured lines of credit, in the amounts of $10.0 million, $12.0 million and $10.0$14.0 million, respectively, from (1) Bremer Bank, Minot, ND; (2) First Western Bank and Trust, Minot, ND; and (3) First International Bank and Trust, Watford City, ND. The Company had no outstanding borrowings on these lines asAs of April 30, 2007.2009, the Company had an outstanding balance of $4.0 million at First International Bank and Trust. Borrowings under the lines of credit bear interest based on the following, respectively: (1) Bremer Financial Corporation Reference Rate with a floor of 4.00%, (2) 175 basis points below the Prime Rate as published in the Wall Street Journal Prime Rate with a floor of 5.25% and a ceiling of 8.25%, and (3) 50 basis points above the Wall Street Journal prime rate.Prime Rate. Increases in interest rates will increase the Company’s interest expense on any borrowings under its lines of credit, and as a result will affect the Company’s results of operations and cash flows. The Company’s lines of credit with Bremer Bank, First Western Bank and First In ternationalInternational Bank and Trust expire in September 2007,2009, December 2011 and December 2007,2009, respectively.  The Company will seekexpects to renew these lines of credit prior to their expiration.  

In February 2004,addition to these three lines of credit, the Company also has a fully-drawn $5.0 million line of credit maturing in November 2009 with Dacotah Bank in Minot, North Dakota. Of this $5.0 million, the Company includes $3.5 million in mortgages payable on the Company’s balance sheet, as secured by six small apartment properties owned by the Company, with the remaining $1.5 million included in revolving lines of credit.

In September 2008, the Company filed a shelf registration statement on Form S-3 to offer for sale from time to time common shares and preferred shares. This registration statement was declared effective in April 2004.October 2008. We may sell any combination of common shares and preferred shares up to an aggregate initial offering price of $150$150.0 million during the period that the registration statement remains effective. This registration statement replaced the Company’s previous shelf registration statement on Form S-3, which would have expired in December 2008; the remaining securities available for issuance under the previous registration statement (in an aggregate amount of approximately $30.7 million) were transferred to the current registration statement. The Company did not issue any common or preferred shares under this registration statement in fiscal years 2007 and 2006. The Company issued 1,652,000 common shares under thisthe previous registration statement in fiscal year 2005,2007. The Company issued 6.9 million common shares under the previous registration statement in fiscal year 2008, for net proceeds of $15.8 $66.4

2009 Annual Report 52
Index

million. As of April 30, 2007,2009, the Company had available securities under thisthe current registration statement in the aggregate amount of approximately $101.5$143.9 million.

Continued uncertainty in the credit markets and declines and weakness in the general economy negatively impacted IRET during fiscal year 2009.  The credit markets have become considerably less favorable than in the recent past, and IRET accordingly has shifted its financing strategy to include more equity sales in order to address its financing needs.  Uncertainty about the pricing of commercial real estate and the curtailment of available financing to facilitate transactions has significantly reduced IRET’s ability to rely on cash-out refinancings and proceeds from the sale of real estate to provide funds for investment opportunities.  Additionally, current market conditions are not favorable for acquisitions and development, and consequently the potential for growth in net income from acquisitions and development is anticipated to be limited in fiscal year 2010.
Despite these market uncertainties, and a tightening in credit standards by lenders during the latter half of fiscal year 2009 in particular, IRET during fiscal year 2009 acquired or placed in service properties with an investment cost totaling $33.8 million. The Company had no material dispositions during fiscal year 2009.
The Company has a Distribution Reinvestment and Share Purchase Plan (“DRIP”). The DRIP provides shareholders of the Company an opportunity to invest their cash distributions in common shares of the Company at a discount (currently 5%) from the market price, and to purchase additional common shares of 5% fromthe Company with voluntary cash contributions, also at a discount to the market price. During fiscal year 2007,2009, approximately 1.21.3 million common shares were issued under this plan, with an additional 1.2 million common shares issued during fiscal year 2006,2008, and 1.11.2 million common shares issued during fiscal year 2005. 

2007.

The issuance of UPREIT Units for property acquisitions continues to be a source of capital for the Company.  Approximately 6.7 million362,000 units were issued in connection with property acquisitions during fiscal year 2007,2009, and approximately 1.12.3 million units and 2.06.7 million units, respectively, were issued in connection with property acquisitions during fiscal years 20062008 and 2005. 

2007.

Primarily as a result of the conversion of UPREIT units and the issuance of common shares pursuant to our shelf registration statement and distribution reinvestment plan, net of fractional shares repurchased, the Company’s equity capital increased during fiscal 20072009 by $15.1$22.4 million. Additionally, the equity capital of the Company was increased by $51.4$3.7 million as a result of contributions of real estate in exchange for UPREIT units, as summarized above, resulting in a total increase in equity capital for the Company during fiscal year 20072009 of $66.5$26.1 million. The Company’s equity capital increased by $26.2$108.6 million and $35.9$66.5 million in fiscal years 20062008 and 2005,2007, respectively.

Cash and cash equivalents on April 30, 20072009 totaled $44.5$33.2 million, compared to $17.5$53.5 million and $23.5$44.5 million on the same date in 20062008 and 2005,2007, respectively. Net cash provided by operating activities decreased to $60.1 million in fiscal year 2009 from $61.9 million in fiscal year 2008, due primarily to decreased net income as a result of higher maintenance costs. Net cash provided by operating activities increased to $58.4 million

2007 Annual Report 49

in fiscal year 2007 from $48.4$61.9 million in fiscal year 2006,2008 from $58.4 million in fiscal year 2007, due primarily to increased net income as a result of higher occupancy rates at Company properties. Netless cash provided from operating activities increasedconcessions given to $48.4 million in fiscal year 2006 from $48.3 million in fiscal year 2005, also due primarily to increased net income as a result of higher occupancy rates at Company properties. 

tenants.

Net cash used in investing activities increaseddecreased to $161.4$54.4 million in fiscal year 2007,2009, from $82.6$145.3 million in fiscal year 2006.2008. Net cash used in investing activities was $70.4$161.4 million in fiscal year 2005.2007. The increasedecrease in net cash used in investing activities in fiscal year 20072009 compared to fiscal year 20062008 was primarily a result of fewer proceeds from salesacquisitions of properties.property. Net cash provided fromused by financing activities also increased to $130.0 million during fiscal year 2007, from $28.22009 was $26.0 million, compared to $92.3 million provided by financing activities during fiscal year 2006,2008. The difference was due primarily to an increasea decrease in proceeds received from mortgage borrowings and refinancings. Net cash provided from financing activities increaseddecreased to $28.2$92.3 million during fiscal year 2006,2008, from $14.0$130.0 million during fiscal year 2005,2007, also due primarily to an increasea decrease in proceeds received from mortgage borrowings and refinancings.

Financial Condition

Mortgage Loan Indebtedness. Mortgage loan indebtedness increased towas $1.1 billion on April 30, 2009 and 2008, and $951.1 million on April 30, 2007, due to the acquisition of new investment properties, from $765.9 million on April 30, 2006 and $708.6 million on April 30, 2005.2007. Approximately 97.7%99.1% of such mortgage debt is at fixed rates of interest, with staggered maturities. This limits the Company’s exposure to changes in interest rates, which minimizes the effect of interest rate fluctuations on the Company’s results of operations and cash flows. As of April 30, 2007,2009, the weighted average rate of interest on the Company’s mortgage debt was 6.43%6.30%, compared to 6.63%6.37% on April 30, 20062008 and 6.75%6.43% on April 30, 2005. 

2007.


2009 Annual Report 53
Index

Revolving lines of credit. As of April 30, 2007,2009, the Company had an outstanding balance of $4.0 million under its unsecured credit line with First International Bank and Trust and no amounts outstanding under its unsecured credit lines withat Bremer Bank and First Western Bank and Trust, and First International Bank and Trust. AsIn addition to these three lines of April 30, 2006,credit, the Company hadalso has a fully-drawn $5.0 million line of credit with Dacotah Bank. Of this $5.0 million, the Company includes $3.5 million outstanding under its unsecured credit linein mortgages payable on the Company’s balance sheet, as secured by six small apartment properties owned by the Company, with First Western Bank and Trust.the remaining $1.5 million included in revolving lines of credit. The Company had no amounts outstanding under these credit lines as of April 30, 2005. 

2008 and 2007.

Mortgage Loans Receivable. Mortgage loans receivable net of allowance decreased to approximately $160,000 at April 30, 2009, from approximately $541,000 at April 30, 2008 and approximately $399,000 at April 30, 2007, from $409,0002007.
Property Owned. Property owned increased to $1.7 billion at April 30, 2006 and $619,0002009, from $1.6 billion at April 30, 2005. 

Real Estate Owned. Real estate owned increased to $1,489.3 million at April 30, 2007, from $1,269.4 million at April 30, 2006.2008. The increases resulted primarily from the acquisition of the additional investment properties net of dispositions as described in the “Property Acquisitions” and “Property Dispositions” subsections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cash and Cash Equivalents. Cash and cash equivalents on April 30, 2007,2009, totaled $44.5$33.2 million, compared to $17.5$53.5 million on April 30, 20062008 and $23.5$44.5 million on April 30, 2005.2007. The increasedecrease in cash on hand on April 30, 2007,2009, as compared to April 30, 2006,2008, was due primarily to proceeds from an increasea decrease in mortgage loan borrowings.

Marketable Securities. During fiscal year 2007, IRET decreased its2009, IRET’s investment in marketable securities classified as available-for-sale toremained at approximately $420,000 on April 30, 2009 and 2008, a decrease from $2.0 million on April 30, 2007, from $2.4 million on April 30, 2006 and $2.5 million on April 30, 2005.2007. Marketable securities are held available for sale and, from time to time, the Company invests excess funds in such securities or uses the funds so invested for operational purposes.

Operating Partnership Units. Outstanding limited partnership units in the Operating Partnership increaseddecreased to 20.8 million units on April 30, 2009, compared to 21.2 million units on April 30, 2008 and 20.0 million units on April 30, 2007, compared to 13.7 million units on April 30, 2006 and 13.1 million units on April 30, 2005.2007. The increasedecrease in units outstanding at April 30, 20072009 as compared to April 30, 2006 and 2005,2008, resulted primarily from the issuanceconversion of additional limited partnership units to acquire interests in real estate, net of units converted to shares.

Common and Preferred Shares of Beneficial Interest. Common shares of beneficial interest outstanding on April 30, 20072009 totaled 48.660.3 million compared to 46.957.7 million common shares outstanding on April 30, 20062008 and 45.248.6 million common shares outstanding on April 30, 2005.2007. This increase in common shares outstanding from April 30, 20062008 and 2005,2007, to April 30, 2007,2009, was primarily due to the issuance of common shares pursuant to our shelf registration statement and distribution reinvestment plan. Preferred shares of beneficial interest outstanding on April 30, 2009, 2008 and 2007 2006 and 2005 totaled 1.151.2 million.

2007 Annual Report 50

Contractual Obligations and Other Commitments

The primary contractual obligations of the Company relate to its borrowings under its threefour lines of credit and mortgage notes payable. The Company had no amounts$5.5 million outstanding under its lines of credit at April 30, 2007.2009. The principal and interest payments on the mortgage notes payable for the years subsequent to April 30, 2007,2009, are included in the table below as “Long-term debt.” Interest due on variable rate mortgage notes is calculated using rates in effect on April 30, 2009. The other debt“Other Debt” category consists of twoan unsecured promissory notesnote issued by the Company to the sellers of an office/warehouse property located in Minnesota.  The Company acquired this property for leasehold improvements at twoa purchase price of our properties, Southdale Medical Center$4.0 million, consisting of $3.0 million in Edina, Minnesota,cash and the Wells Fargo Building$1.0 million balance payable under a promissory note with a ten-year term.  If the tenant defaults in St. Cloud, Minnesota. 

The Company has sold investment certificatesthe initial term of the lease, the then-current balance of the promissory note is forfeited to the public, with interest rates varying from 6.5% to 9.0% per annum. The sales of these investment certificates has been discontinued and the outstanding certificates will be redeemed as they mature. Amounts due with respect to these investment certificates are reflected in the “Investment Certificates” category below.

Company.

As of April 30, 2007,2009, the Company is a tenant under operating ground or air rights leases on eighteleven of its properties. The Company pays a total of approximately $283,000$503,000 per year in rent under these ground leases, which have remaining terms ranging from 74 to 9092 years, and expiration dates ranging from July 2012 to April 2095. 

October 2100.

Purchase obligations of the Company represent those costs that the Company is contractually obligated to pay in the future. The Company’s significant contractualpurchase obligations as of April 30, 2007,2009, which the Company expects to finance through debt and operating cash, are summarized in the following table. The significant components in this purchase obligation category are costs for construction and expansion projects and capital improvements at the Company’s properties. ContractualPurchase obligations that are contingent upon the achievement of certain milestones are not included in the table below, nor are service orders or contracts for the provision of routine maintenance services at our

2009 Annual Report 54
Index

properties, such as landscaping and grounds maintenance, since these arrangements are generally based on current needs, are filled by our service providers within short time horizons, and may be cancelled without penalty. The expected timing of payment of the obligations discussed below i sis estimated based on current information.

 

(in thousands)

 

Total

Less Than
1 Year

1-3 Years

3-5 Years

More than
5 Years

Long-term debt (principal and interest)

$

1,364,206

$

91,016

$

284,893

$

268,557

$

719,740

Investment Certificates

$

11

$

0

$

11

$

0

$

0

Other Debt

$

146

$

72

$

74

$

0

$

0

Operating Lease Obligations

$

18,085

$

283

$

566

$

566

$

16,670

Purchase Obligations

$

25,697

$

25,697

$

0

$

0

$

0

 

  (in thousands) 
  Total  
Less Than
1 Year
  1-3 Years  3-5 Years  
More than
5 Years
 
Long-term debt (principal and interest) $1,445,283  $204,380  $319,759  $186,032  $735,112 
Other Debt (principal and interest) $1,516  $60  $170  $211  $1,075 
Operating Lease Obligations $26,080  $503  $1,006  $1,006  $23,565 
Purchase Obligations $7,138  $7,138  $0  $0  $0 

Off-Balance-Sheet Arrangements

As of April 30, 2007, we did not have any2009, the Company had no significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Recent Developments

Common and Preferred Share Distributions. On July 2, 2007,June 30, 2009, the Company paid a distribution of 51.56 cents per share on the Company’s Series A Cumulative Redeemable Preferred Shares, to preferred shareholders of record on June 15, 2007. Also on2009. On July 2, 2007,1, 2009, the Company paid a distribution of 16.6517.05 cents per share on the Company’s common shares of beneficial interest, to common shareholders and UPREIT unitholders of record on June 15, 2007.2009. This distribution represented an increase of .05 cents or .3% over the previous regular quarterly distribution of 16.6017.00 cents per common share/unit paid April 2, 2007. 

Closed1, 2009.

Pending Acquisition.  The Company currently has no material pending acquisitions. In the fourth quarter of fiscal year 2009, IRET signed a purchase agreement to acquire a portfolio of office and Pending Acquisitions; Pending Dispositions.retail properties located in the Minneapolis-St. Paul metropolitan area for a total of $29.7 million.  The Company subsequently terminated this purchase agreement. Subsequent to its April 30, 20072009 fiscal year end, in May 2007, the Company closed on its purchase of the two-story, approximately 18,500 square foot Barry Pointe medical office building in Kansas City, Missouri.  The Company paid approximately $3.2 million for this property, excluding closing costs.  In June 2007, the Company closed on the two-story, approximately 50,400 square foot Cedar Lake Business Center in St. Louis Park, Minnesota.  The Company paid approximately $4.04 million, excluding closing costs, for this office/warehouse property.  Also in June 2007, the Company completed its

2007 Annual Report 51

acquisition of a one-story office/warehouse property located in Urbandale, Iowa.  The Company paid approximately $14 million, excluding closing costs (approximately $4.25 million of which purchase price consisted of the issuance of UPREIT Units), for this approximately 519,813 square foot building.  

As of April 30, 2007, the Company had signed a purchase agreement for the acquisition ofto acquire an additional two office/approximately 42,180 square foot, single-tenant office showroom/warehouse properties,building located in Minnesota,Iowa for $350,000 in cash and the issuance of limited partnership units of IRET Properties valued at $3.0 million, for a total purchase price of approximately $6 million, excluding closing costs.  The buildings have, respectively, approximately 70,000 and 20,000 square feet of rentable space.  These$3.4 million.  This pending acquisitions are subject to various closing conditions and contingencies, and no assurance can be given that these transactions will be completed.  Subsequent to its April 30, 2007 fiscal year end, in June 2007, the Company signed a lease with an anchor tenant committing the Company to construct an approximately 26,000 square foot addition to the Company’s existing Southdale Medical Building located in Edina, Minnesota.  The estimated cost of this expansion projectacquisition is approximately $6.4 million, with an additional approximately $2 million in relocation, tenant improvement and leasing costs expected to be incurred to relocate tenants in the existing facility.  This proposed construction project is subject to various conditions and contingencies, and no assurance can be given that this project will be completed.   

During the third quarter of fiscal year 2007, the tenant in four of the Company’s Edgewood Vista assisted living facilities, located in, respectively, Fremont, Nebraska; Hastings, Nebraska; Omaha, Nebraska and Kalispell, Montana, exercised its options to purchase these properties. Under the terms of the options, the specified purchase price for each of these assisted living properties is the higher of the fair market value of the property as determined by an independent appraisal, or an annual compounded increase at 2.5% per year based on the purchase price paid by the Company for the property.  Also subsequent to its April 30, 2007 fiscal year end, the Company signed an agreement for the sale of an office building located in Minnetonka, Minnesota, for a sale price of approximately $345,000.  These pending dispositions are subject to various closing conditions and contingencies, and no assurances can be given that these transactionsthis transaction will be com pleted. 

Development Project.  Duringcompleted.

Common Share Offering.  Subsequent to its April 30, 2009 fiscal year 2007,end, in June 2009, the Company purchasedcompleted a public offering of 3,000,000 common shares of beneficial interest at $8.70 per share (before underwriting discounts and commissions).  Proceeds to the Company were $24,795,000 after deducting underwriting discounts and commissions but before deducting offering expenses.  The shares were sold pursuant to an unimproved parcel of land in Minot, North Dakota for approximately $1.75 million.  The Company is inUnderwriting Agreement with Robert W. Baird & Co., Incorporated, D.A. Davidson & Co. and J.J.B. Hilliard, W.L. Lyons, Inc., and were issued pursuant to IRET’s registration statement on Form S-3 filed with and declared effective by the preliminary stages of planning the construction of a mixed-use project for this site, to consist of apartmentsSecurities and office and retail space.  The Company currently expects that it will move its Minot, North Dakota offices to this location, occupying approximately half of the proposed office/retail space.   Current estimates are that the project would be completed in the second quarter of the Company’s fiscal year 2009.  No firm cost estimates have yet been developed for this project, and no assurances can be given that this project will be undertaken as currently proposed, or completed.

Exchange Commission.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is limited primarily to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations, and secondarily to our deposits with and investments in certain products issued by various financial institutions.

Variable interest rates. Because approximately 97.7%99.1% of our debt, as of April 30, 2007 (96.8%2009 (98.9% and 96.2%97.7% respectively, as of April 30, 20062008 and 2005)2007), is at fixed interest rates, we have little exposure to interest rate fluctuation risk on our existing debt, and accordingly interest rate increases during fiscal year 2007 did not have a material effect on the Company.debt. However, even though our goal is to maintain a fairly low exposure to interest rate risk, we are still vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt and on future debt. We primarily use long-term (more than nine years) and medium term (five to seven years) debt as a source of capital. We do not currently use derivative securities, interest-rate swaps or any other type of hedging activity to manage our interest rate risk. As of April 30, 2007,2009, we had the following amount of future principal and interest pa ymentspayments due on mortgages secured by our real estate.

 

Future Principal Payments (in thousands)

Long Term Debt

 

2008

 

2009

 

2010

 

2011

 

2012

 

Thereafter

 

Total

Fixed Rate

$

29,740

$

45,176

$

126,620

$

100,082

$

82,416

$

545,440

$

929,474

Variable Rate

 

1,091

 

2,525

 

1,127

 

1,200

 

3,297

 

12,425

 

21,665

 

 

 

 

 

 

 

 

 

 

 

 

 

$

951,139

Average Interest Rate (%)

 

(1)

 

(1)

 

(1)

 

(1)

 

(1)

 

(1)

 

(1)

2007

2009 Annual Report 52 55

 

Future Interest Payments (in thousands)

Long Term Debt

 

2008

 

2009

 

2010

 

2011

 

2012

 

Thereafter

 

Total

Fixed Rate

$

58,803

$

56,206

$

50,852

$

42,934

$

36,649

$

160,341

$

405,785

Variable Rate

 

1,382

 

1,239

 

1,148

 

1,076

 

903

 

1,534

 

7,282

 

 

 

 

 

 

 

 

 

 

 

 

 

$

413,067

Average Interest Rate (%)

 

(1)

 

(1)

 

(1)

 

(1)

 

(1)

 

(1)

 

(1)

 

(1) 

Index


 
Future Principal Payments (in thousands)
 
Long Term Debt 2010  2011  2012  2013  2014  Thereafter  Total  Fair Value 
Fixed Rate $133,105  $103,811  $113,087  $48,370  $56,853  $605,355  $1,060,581  $1,291,494 
Variable Rate  7,351   278   294   312   684   658   9,577   9,577 
   $1,070,158  $1,301,071 

 
Future Interest Payments (in thousands)
 
Long Term Debt 2010  2011  2012  2013  2014  Thereafter  Total 
Fixed Rate $63,680  $55,481  $46,586  $41,412  $38,257  $128,883  $374,299 
Variable Rate  244   119   103   84   60   216   826 
   $375,125 

The weighted average interest rate on all of our debt as of April 30, 2007,2009, was 6.43%6.30%. Any fluctuations in variable interest rates could increase or decrease our interest expenses. For example, an increase of one percent per annum on our $21.7$9.6 million of variable rate indebtedness would increase our annual interest expense by $217,000.

$96,000.

Marketable Securities. IRET’s investments in securities are classified as “available-for-sale.” The securities classified as “available-for-sale” represent investments in debt and equity securities which the Company intends to hold for an indefinite period of time. As of April 30, 20072009 and 2006,2008, IRET had approximately $2.0 million and $2.4 million, respectively,$420,000 of marketable securities classified as “available-for-sale,” consisting of securities of various issuers, primarily U.S. Government, U.S. agency and corporate bonds and bank certificates of deposit, held in IRET Properties’ security deposit account with Merrill Lynch.deposit. IRET had approximately $2.5$2.0 million of securities classified as “available-for-sale” as of April 30, 2005.2007. The values of these securities will fluctuate with changes in market interest rates. As of April 30, 2007, and 2006 the unrealized lossIRET recorded in other comp rehensivecomprehensive income an unrealized loss of $16,000 on these securities. During the fourth quarter of fiscal year 2008, IRET sold the securities was $16,000in its deposit account with Merrill Lynch for a gain of approximately $42,000, recorded in other comprehensive income and $48,000, respectively. 

in net income as of April 30, 2008.

Investments with Certain Financial Institutions. IRET has entered into a cash management arrangement with First Western Bank with respect to deposit accounts with First Western Bank that exceed FDIC Insurance coverage. On a daily basis, account balances are invested in U.S. Government securities sold to IRET by First Western Bank. IRET can require First Western Bank to repurchase such securities at any time, at a purchase price equal to what IRET paid for the securities, plus interest. First Western Bank automatically repurchases obligations when collected amounts on deposit in IRET’s deposit accounts fall below the maximum insurance amount, with the proceeds of such repurchases being transferred to IRET’s deposit accounts to bring the amount on deposit back up to the threshold amount. The amounts invested by IRET pursuant to the repurchase agreement are not insured by FDIC.

Deposits exceeding FDIC insurance. The Company is potentially exposed to off-balance-sheet risk in respect of cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Item 8. Financial Statements and Supplementary Data

Financial statements required by this item appear with an Index to Financial Statements and Schedules, starting on page F-1 of this report. 

Item 9. Changes inreport, and Disagreements with Accountants on Accounting andFinancial Disclosure

are incorporated herein by reference

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures:  As of April 30, 2007,2009, the end of the period covered by this Annual Report on Form 10-K, our management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange act of 1934, as amended).  Based upon that evaluation, the Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures arewere effective in timely alerting them to materialensure that information required to be includeddisclosed by IRET in our periodic SEC filings. 

the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the


2009 Annual Report 56
Index

commission’s rule and forms, and is accumulated and communicated to management, including the Company’s principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting:  There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fourth quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2007 Annual Report 53


MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Investors Real Estate Trust (together with its consolidated subsidiaries, the “Company’“Company”), is responsible for establishing and maintaining adequate internal control over financial reporting.  The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with United States generally accepted accounting principles.

As of April 30, 2007,2009, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting, based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on this assessment, management has determined that the Company’s internal control over financial reporting as of April 30, 2007, is2009, was effective.

The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and acquisitions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the trustees of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Company assets that could have a material effect on the Company’s financial statements.

Management’s assessment of the effectiveness of the

The Company’s internal control over financial reporting as of April 30, 2007,2009, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing below,on page F-2 hereof, which expresses an unqualified opinions on management’s assessment andopinion on the effectiveness of the Company’s internal control over financial reporting as of April 30, 2007.

2009.





(The remainder of this page has been intentionally left blank.)

2009 Annual Report 57
Index

Item 9B.  Other Information
During the fourth quarter of fiscal year 2009, the Compensation Committee of the Company’s Board of Trustees rescinded its previous decision to award 1,000 shares of IRET common shares of beneficial interest to each trustee for fiscal year 2009 under IRET’s 2008 Incentive Award Plan, and accordingly no shares were awarded or issued to the Company’s trustees for fiscal year 2009.
PART III
Item 10. Trustees, Executive Officers and Corporate Governance
Information regarding executive officers required by this Item is set forth in Part I, Item 1 of this pageAnnual Report on Form 10-K pursuant to Instruction 3 to Item 401(b) of Regulation S-K. Other information required by this Item will be included in our definitive Proxy Statement for our 2009 Annual Meeting of Shareholders and such information is incorporated herein by reference. IRET has adopted a Code of Ethics applicable to, among others, IRET’s principal executive officer and principal financial and accounting officer. This Code is available on our website at www.iret.com.
Item 11. Executive Compensation
The information required by this Item will be contained in our definitive Proxy Statement for our 2009 Annual Meeting of Shareholders and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be contained in our definitive Proxy Statement for our 2009 Annual Meeting of Shareholders and such information is incorporated herein by reference.
The following table provides information as of April 30, 2009 regarding compensation plans (including individual compensation arrangements) under which our common shares of beneficial interest are available for issuance:
Equity Compensation Plan Information 
Plan category 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
  
Weighted-average exercise price of outstanding options, warrants and rights
(b)
  
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
 
Equity compensation plans approved by security holders(1)
  0   0   2,000,000(2)
Equity compensation plans not approved by security holders  0   0   0 
Total  0   0   2,000,000 
(1)  The 2008 Incentive Award Plan of Investors Real Estate Trust and IRET Properties approved by shareholders on September 16, 2008.
(2)  All of the shares available for future issuance under the 2008 Incentive Award Plan approved by shareholders may be issued as restricted shares or performance shares.
Item 13. Certain Relationships and Related Transactions, and Trustee Independence
The information required by this Item will be contained in our definitive Proxy Statement for our 2009 Annual Meeting of Shareholders and such information is incorporated herein by reference.

2009 Annual Report 58
Index

Item 14. Principal Accountant Fees and Services
The information required by this Item will be contained in our definitive Proxy Statement for our 2009 Annual Meeting of Shareholders and such information is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)
The following documents are filed as part of this report:
1.Financial Statements
The response to this portion of Item 15 is submitted as a separate section of this report. See the table of contents to Financial Statements and Supplemental Data.
2. Financial Statement Schedules
The response to this portion of Item 15 is submitted as a separate section of this report. The following financial statement schedules should be read in conjunction with the financial statements referenced in Part II, Item 8 of this Annual Report on Form 10-K:
II Valuation and Qualifying Accounts
III Real Estate Owned and Accumulated Depreciation
IV Investments in Mortgage Loans on Real Estate
3. Exhibits
See the list of exhibits set forth in part (b) below.
(b)The following is a list of Exhibits to this Annual Report on Form 10-K. We will furnish a copy of any exhibit listed below to any security holder 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.
3.1
Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, dated September 23, 2003, and incorporated herein by reference to Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A for the 2003 Annual Meeting of Shareholders, filed with the SEC on August 13, 2003.
3.2
Third Restated Trustees’ Regulations (Bylaws), dated May 16, 2007, and incorporated herein by reference to the Company’s Current Report on Form 8-K , filed with the SEC on May 16, 2007.
3.3
Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership, dated January 31, 1997, filed as Exhibit 3(ii) to the Registration Statement on Form S-11, effective March 14, 1997 (SEC File No. 333-21945) filed for the Registrant on February 18, 1997 (File No. 0-14851), and incorporated herein by reference.
3.4
Articles Supplementary classifying and designating 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, filed as Exhibit 3.2 to the Company’s Form 8-A filed on April 22, 2004, and incorporated herein by reference.
10.1
Member Control and Operating Agreement dated September 30, 2002, filed as Exhibit 10 to the Company’s Form 8-K filed October 15, 2003, and incorporated herein by reference.
10.2
Letter Agreement dated January 31, 2003, filed as Exhibit 10(i) to the Company’s Form 8-K filed February 27, 2003, and incorporated herein by reference.

2009 Annual Report 59
Index

10.3
Option Agreement dated January 31, 2003, filed as Exhibit 10(ii) to the Company’s Form 8-K filed February 27, 2003, and incorporated herein by reference.
10.4
Financial Statements of T.F. James Company filed as Exhibit 10 to the Company’s Form 8-K filed January 31, 2003, and incorporated herein by reference.
10.5
Agreement for Purchase and Sale of Property dated February 13, 2004, by and between IRET Properties and the Sellers specified therein, filed as Exhibit 10.5 to the Company’s Form 10-K filed July 20, 2004, and incorporated herein by reference.
10.6*
Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed March 11, 2005, and incorporated herein by reference.
10.7*
Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed December 12, 2005, and incorporated herein by reference.
10.8
Contribution Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2006, and incorporated herein by reference.
10.9*
Description of Compensation of Trustees, filed as Exhibit 10 to the Company’s Form 10-Q filed September 11, 2006, and incorporated herein by reference.
10.10
Loan and Security Agreement, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 18, 2006, and incorporated herein by reference.
10.11*
Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed March 12, 2007, and incorporated herein by reference.
10.12*
Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed March 11, 2008, and incorporated herein by reference.
10.13*
Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed March 12, 2009, and incorporated herein by reference.
10.14*
Description of Compensation of Trustees, filed as Exhibit 10 to the Company’s Form 10-Q filed December 10, 2007, and incorporated herein by reference.
12.1
Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Share Dividends, filed herewith.
21.1
Subsidiaries of Investors Real Estate Trust, filed herewith.
23.1
Consent of Deloitte & Touche LLP, filed herewith.
31.1
Section 302 Certification of President and Chief Executive Officer, filed herewith.
31.2
Section 302 Certification of Senior Vice President and Chief Financial Officer, filed herewith.
32.1
Section 906 Certification of the President and Chief Executive Officer, filed herewith.
32.2
Section 906 Certification of the Senior Vice President and Chief Financial Officer, filed herewith.
________________________
*      Indicates management compensatory plan, contract or arrangement.

2009 Annual Report 60
Index

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.
Date: July 8, 2009Investors Real Estate Trust
By:/s/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr.
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been intentionally left blank.)

signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
2007
SignatureTitleDate
/s/ Jeffrey L. Miller
Jeffrey L. MillerTrustee & ChairmanJuly 8, 2009
/s/ Stephen L. Stenehjem
Stephen L. StenehjemTrustee & Vice ChairmanJuly 8, 2009
/s/ Thomas A. Wentz. Sr.
Thomas A. Wentz, Sr.
President & Chief Executive Officer
(Principal Executive Officer)
July 8, 2009
/s/ Timothy P. Mihalick
Timothy P. Mihalick
Trustee, Senior Vice President & Chief
Operating Officer
July 8, 2009
/s/ Thomas A. Wentz, Jr.
Thomas A. Wentz, Jr.Trustee & Senior Vice PresidentJuly 8, 2009
/s/ Diane K. Bryantt
Diane K. BryanttSenior Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)July 8, 2009
/s/ John D. Stewart
John D. StewartTrusteeJuly 8, 2009
/s/ Patrick G. Jones
Patrick G. JonesTrusteeJuly 8, 2009
/s/ C.W. “Chip” Morgan
C.W. “Chip” MorganTrusteeJuly 8, 2009
/s/ John T. Reed
John T. ReedTrusteeJuly 8, 2009
/s/ W. David Scott
W. David ScottTrusteeJuly 8, 2009


2009 Annual Report 54 61

Index





INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF April 30, 2009 AND 2008,
AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,
SHAREHOLDERS’ EQUITY AND CASH FLOWS FOR EACH OF
THE FISCAL YEARS IN THE PERIOD ENDED April 30, 2009.
ADDITIONAL INFORMATION
FOR THE YEAR ENDED
April 30, 2009
and
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PO Box 1988
3015 16th Street SW, Suite 100
Minot, ND 58702-1988
701-837-4738
fax: 701-838-7785
info@iret.com
www.iret.com


2009 Annual Report


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations
F-5
Consolidated Statements of Shareholders’ Equity
F-6
Consolidated Statements of Cash Flows
F-7 – F-8
Notes to Consolidated Financial Statements
F-9 – F-29
ADDITIONAL INFORMATION
Schedule II - Valuation and Qualifying Accounts
F-30
Schedule III - Real Estate and Accumulated Depreciation
F-31-40
Schedule IV - Investments in Mortgage Loans on Real Estate
F-41
Schedules other than those listed above are omitted since they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereon.


2009 Annual Report F-1
Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Trustees and Shareholders of
Investors Real Estate Trust
Minot, North Dakota


We have audited management's assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, thatconsolidated balance sheets of Investors Real Estate Trust and subsidiaries (the “Company”"Company") maintained effectiveas of April 30, 2009 and 2008, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended April 30, 2009.  Our audits also included the consolidated financial statement schedules listed in the Index at Item 15.  We also have audited the Company's internal control over financial reporting as of April 30, 2007,2009, based on criteria established in Internal Control—Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting.reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on management's assessmentthese financial statements and financial statement schedules and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. 

audits.

We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management's assessment,assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control andbased on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audit providesaudits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of trustees,directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of th ethe company are being made only in accordance with authorizations of management and trusteesdirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


2009 Annual Report F-2
Table of Contents

In our opinion, management's assessment that the Company maintained effective internal control overconsolidated financial reportingstatements referred to above present fairly, in all material respects, the financial position of Investors Real Estate Trust and subsidiaries as of April 30, 2007, is2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 2009, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.information set forth therein.  Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2007,2009, based on the criteria established in Internal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements  as of and for the year ended April 30, 2007, of the Company and our report dated July 13, 2007, expressed an unqualified opinion on those financial statements. 

/s/ DELOITTE & TOUCHE LLP 

Minneapolis, MN
July 13, 2007

2007 Annual Report 55

Item 9B.  Other Information

None. 

PART III

Item 10. Trustees and Executive Officers of the Registrant

Information regarding executive officers required by this Item is set forth in Part I, Item 1 of this Annual Report on Form 10-K pursuant to Instruction 3 to Item 401(b) of Regulation S-K. Other information required by this Item will be included in our definitive Proxy Statement for our 2007 Annual Meeting of Shareholders and such information is incorporated herein by reference. 

Item 11. Executive Compensation

The information required by this Item will be contained in our definitive Proxy Statement for our 2007 Annual Meeting of Shareholders and such information is incorporated herein by reference. 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will be contained in our definitive Proxy Statement for our 2007 Annual Meeting of Shareholders and such information is incorporated herein by reference. We do not have any equity compensation plans and, accordingly, are not required to include the disclosure required by Item 201(d) of Regulation S-K. 

Item 13. Certain Relationships and Related Transactions, and Trustee Independence

The information required by this Item will be contained in our definitive Proxy Statement for our 2007 Annual Meeting of Shareholders and such information is incorporated herein by reference. 

Item 14. Principal Accountant Fees and Services

The information required by this Item will be contained in our definitive Proxy Statement for our 2007 Annual Meeting of Shareholders and such information is incorporated herein by reference.

2007 Annual Report 56

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)       The following documents are filed as part of this report: 

1.  Financial Statements

The response to this portion of Item 15 is submitted as a separate section of this report. See the table of contents to Financial Statements and Supplemental Data. 

2. Financial Statement Schedules

The response to this portion of Item 15 is submitted as a separate section of this report. The following financial statement schedules should be read in conjunction with the financial statements referenced in Part II, Item 8 of this Annual Report on Form 10-K: 

III Real Estate Owned and Accumulated Depreciation 

IV Investments in Mortgage Loans on Real Estate 

3. Exhibits

See the list of exhibits set forth in part (b) below. 

(b)         The following is a list of Exhibits to this Annual Report on Form 10-K. We will furnish a copy of any exhibit listed below to any security holder 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.

3.1        Articles of Amendment and Third Restated Declaration of Trust ofInvestors Real Estate Trust, dated September 23, 2003, and incorporated herein by reference to Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A for the 2003 Annual Meeting of Shareholders, filed with the SEC on August 13, 2003. 

3.2        Third Restated Trustees’ Regulations (Bylaws), dated May 16, 2007, and incorporated herein by reference to the Company’s Current Report on Form 8-K , filed with the SEC on May 16, 2007. 

3.3        Agreement of Limited Partnership of IRET Properties, A North DakotaLimited Partnership, dated January 31, 1997, filed as Exhibit 3(ii) to the Registration Statement on Form S-11, effective March 14, 1997 (SEC File No. 333-21945) filed for the Registrant on February 18, 1997, (File No. 0-14851) and incorporated herein by reference. 

3.4        Articles Supplementary classifying and designating 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, filed as Exhibit 3.2 to the Company’s Form 8-A filed on April 22, 2004, and incorporated herein by reference. 

10.1      Member Control and Operating Agreement dated September 30, 2002, filed as Exhibit 10 to the Company’s Form 8-K filed October 15, 2003, and incorporated herein by reference. 

10.2      Letter Agreement dated January 31, 2003, filed as Exhibit 10(i) to the Company’s Form 8-K filed February 27, 2003, and incorporated herein by reference. 

10.3      Option Agreement dated January 31, 2003, filed as Exhibit 10(ii) to the Company’s Form 8-K filed February 27, 2003, and incorporated herein by reference.

2007 Annual Report 57

10.4      Financial Statements of T.F. James Company filed as Exhibit 10 to the Company’s Form 8-K filed January 31, 2003, and incorporated herein by reference. 

10.5      Agreement for Purchase and Sale of Property dated February 13, 2004, by and between IRET Properties and the Sellers specified therein, filed as Exhibit 10.5 to the Company’s Form 10-K filed July 20, 2004, and incorporated herein by reference. 

10.6      Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed March 11, 2005, and incorporated herein by reference. 

10.7      Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed December 12, 2005, and incorporated herein by reference. 

10.8      Contribution Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2006, and incorporated herein by reference. 

10.09    Description of Compensation of Trustees, filed as Exhibit 10 to the Company’s Form 10-Q filed September 11, 2006, and incorporated herein by reference. 

10.10    Loan and Security Agreement, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 18, 2006, and incorporated herein by reference.

10.11    Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q filed March 12, 2007, and incorporated herein by reference. 

21.1      Subsidiaries of Investors Real Estate Trust, filed herewith. 

23.1      Consent of Deloitte & Touche LLP, filed herewith. 

31.1      Section 302 Certification of President and Chief Executive Officer, filed herewith. 

31.2      Section 302 Certification of Senior Vice President and ChiefFinancial Officer, filed herewith. 

32.1      Section 906 Certification of the President and Chief ExecutiveOfficer, filed herewith. 

32.2      Section 906 Certification of the Senior Vice President and ChiefFinancial Officer, filed herewith.

2007 Annual Report 58

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. 

Date: July 11, 2007

Investors Real Estate Trust

By:

/s/ Thomas A. Wentz, Sr.

Thomas A. Wentz, Sr.

President & Chief Executive Officer

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/ Jeffrey L. Miller

Jeffrey L. Miller

Trustee & Chairman

July 11, 2007

Stephen L. Stenehjem

Trustee & Vice Chairman

/s/ Thomas A. Wentz. Sr.

Thomas A. Wentz, Sr.

President & Chief Executive Officer
(Principal Executive Officer)

July 11, 2007

/s/ Timothy P. Mihalick

Timothy P. Mihalick

Trustee, Senior Vice President & Chief
Operating Officer

July 11, 2007

/s/ Thomas A. Wentz, Jr.

Thomas A. Wentz, Jr.

Trustee & Senior Vice President

July 11, 2007

/s/ Diane K. Bryantt

Diane K. Bryantt

Senior Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)

July 11, 2007

/s/ John D. Stewart

John D. Stewart

Trustee

July 11, 2007

/s/ Patrick G. Jones

Patrick G. Jones

Trustee

July 11, 2007

/s/ C.W. “Chip” Morgan

C.W. “Chip” Morgan

Trustee

July 11, 2007

/s/ Edward T. Schafer

Edward T. Schafer

Trustee

July 11, 2007

/s/ W. David Scott

W. David Scott

Trustee

July 11, 2007

2007 Annual Report 59

(This page has been intentionally left blank.)

2007 Annual Report

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
April 30, 2007, 2006 and 2005

ADDITIONAL INFORMATION
FOR THE YEAR ENDED
April 30, 2007

and 

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 

PO Box 1988
12 Main Street South
Minot, ND 58702-1988
701-837-4738
fax: 701-838-7785
info@iret.com
www.iret.com

2007 Annual Report

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

TABLE OF CONTENTS

PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..............................................

F-2

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets..................................................................................................................................

F-3 – F-4

Consolidated Statements of Operations................................................................................................................

F-5

Consolidated Statements of Shareholders’ Equity..............................................................................................

F-6

Consolidated Statements of Cash Flows...............................................................................................................

F-7 – F-8

Notes to Consolidated Financial Statements........................................................................................................

F-9 – F-29

ADDITIONAL INFORMATION

Report of Independent Registered Public Accounting Firm on Financial Statement Schedules.................

F-30

Schedule II - Valuation and Qualifying Accounts...............................................................................................

F-31

Schedule III - Real Estate and Accumulated Depreciation...............................................................................

F-32-40

Schedule IV - Investments in Mortgage Loans on Real Estate.........................................................................

F-41

Schedules other than those listed above are omitted since they are not requiredor are not applicable, or the required information is shown in the consolidatedfinancial statements or notes thereon.

2007 Annual Report F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of
Investors Real Estate Trust
Minot, North Dakota 

We have audited the accompanying consolidated balance sheets of Investors Real Estate Trust and subsidiaries (the “Company”) as of April 30, 2007 and 2006, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three fiscal years in the period ended April 30, 2007.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion. 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Investors Real Estate Trust as of April 30, 2007 and 2006, and the results of its operations, and its cash flows for each of the three fiscal years in the period ended April 30, 2007, in conformity with accounting principles generally accepted in the United States of America. 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of April 30, 2007, based on the criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 13, 2007, expressed an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. 

/s/ .

DELOITTE & TOUCHE LLP

Minneapolis, MN
Minnesota
July 13, 2007

2009
2007

2009 Annual Report F-2F-3

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 20072009 and 2006

 

(in thousands)

 

2007

2006

ASSETS

 

 

 

 

Real estate investments

 

 

 

 

Property owned

$

1,489,287

$

1,269,423

Less accumulated depreciation

 

(180,544)

 

(148,607)

 

 

1,308,743

 

1,120,816

Unimproved land

 

7,392

 

5,175

Mortgage loan receivable, net of allowance

 

399

 

409

Total real estate investments

 

1,316,534

 

1,126,400

Other assets

 

 

 

 

Cash and cash equivalents

 

44,516

 

17,485

Marketable securities - available-for-sale

 

2,048

 

2,402

Receivable arising from straight-lining of rents, net of allowance

 

12,558

 

9,474

Accounts receivable, net of allowance

 

3,171

 

2,364

Real estate deposits

 

735

 

1,177

Prepaid and other assets

 

568

 

436

Intangible assets, net of accumulated amortization

 

33,240

 

26,449

Tax, insurance, and other escrow

 

7,222

 

8,893

Property and equipment, net

 

1,458

 

1,506

Goodwill

 

1,397

 

1,441

Deferred charges and leasing costs – net

 

11,942

 

9,288

TOTAL ASSETS

$

1,435,389

$

1,207,315

 

2008


  (in thousands) 
  April 30, 2009  April 30, 2008 
ASSETS      
Real estate investments      
Property owned $1,729,585  $1,648,259 
Less accumulated depreciation  (262,871)  (219,379)
   1,466,714   1,428,880 
Development in progress  0   22,856 
Unimproved land  5,701   3,901 
Mortgage loans receivable, net of allowance of $3 and $11, respectively
  160   541 
Total real estate investments  1,472,575   1,456,178 
Other assets        
Cash and cash equivalents  33,244   53,481 
Marketable securities – available-for-sale  420   420 
Receivable arising from straight-lining of rents, net of allowance of $842 and $992, respectively
  16,012   14,113 
Accounts receivable, net of allowance of $286 and $261, respectively
  2,738   4,163 
Real estate deposits  88   1,379 
Prepaid and other assets  1,051   349 
Intangible assets, net of accumulated amortization of $44,887 and $34,493, respectively
  52,173   61,649 
Tax, insurance, and other escrow  7,261   8,642 
Property and equipment, net of accumulated depreciation of $957 and $1,328, respectively
  1,015   1,467 
Goodwill  1,392   1,392 
Deferred charges and leasing costs, net of accumulated amortization of $11,010 and $7,265, respectively
  17,122   14,793 
TOTAL ASSETS $1,605,091  $1,618,026 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
LIABILITIES        
Accounts payable and accrued expenses $32,773  $33,757 
Revolving lines of credit  5,500   0 
Mortgages payable  1,070,158   1,063,858 
Other  1,516   978 
TOTAL LIABILITIES  1,109,947   1,098,593 
         
COMMITMENTS AND CONTINGENCIES (NOTE 15)        
MINORITY INTEREST IN PARTNERSHIPS  13,010   12,609 
MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP  148,199   161,818 
(20,838,197 units at April 30, 2009 and 21,238,342  units at April 30, 2008)    ��   
SHAREHOLDERS’ EQUITY        
Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 1,150,000 shares issued and outstanding at April 30, 2009 and April 30, 2008, aggregate liquidation preference of $28,750,000)
  27,317   27,317 
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 60,304,154 shares issued and outstanding at April 30, 2009, and 57,731,863 shares issued and outstanding at April 30, 2008)
  462,574   440,187 
Accumulated distributions in excess of net income  (155,956)  (122,498)
Total shareholders’ equity  333,935   345,006 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,605,091  $1,618,026 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2007

2009 Annual Report F-3F-4

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
April 30, 2007 and 2006

 

(in thousands)

 

2007

2006

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

LIABILITIES

 

 

 

 

Accounts payable and accrued expenses

$

28,995

$

24,223

Revolving lines of credit

 

0

 

3,500

Mortgages payable

 

951,139

 

765,890

Investment certificates issued

 

11

 

2,451

Other

 

885

 

1,075

TOTAL LIABILITIES

 

981,030

 

797,139

COMMITMENTS AND CONTINGENCIES (NOTE 15)

 

 

 

 

MINORITY INTEREST IN PARTNERSHIPS

 

12,925

 

16,403

MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP

 

156,465

 

104,213

(19,981,259 units at April 30, 2007 and 13,685,522 units at April 30, 2006)

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value,1,150,000  shares issued and outstanding at April 30, 2007 and 2006, aggregate liquidation preference of $28,750,000)

 

27,317

 

27,317

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 48,570,461 shares outstanding at April 30, 2007, and 46,915,352 shares outstanding at April 30, 2006)

 

354,495

 

339,384

Accumulated distributions in excess of net income

 

(96,827)

 

(77,093)

Accumulated other comprehensive loss

 

(16)

 

(48)

Total shareholders’ equity

 

284,969

 

289,560

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,435,389

$

1,207,315

 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2007 Annual Report F-4

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended April 30, 2007, 2006,2009, 2008, and 2005

 

(in thousands, except per share data)

 

2007

2006

2005

REVENUE

 

 

 

 

 

 

Real estate rentals

$

162,680

$

142,059

$

127,809

Tenant reimbursement

 

35,137

 

28,389

 

25,128

TOTAL REVENUE

 

197,817

 

170,448

 

152,937

OPERATING EXPENSE

 

 

 

 

 

 

Interest

 

58,450

 

50,727

 

47,393

Depreciation/amortization related to real estate investments

 

44,481

 

36,953

 

32,973

Utilities

 

15,206

 

13,473

 

10,623

Maintenance

 

21,714

 

19,233

 

16,075

Real estate taxes

 

23,322

 

19,785

 

18,191

Insurance

 

2,382

 

2,662

 

2,563

Property management expenses

 

13,854

 

11,809

 

10,401

Administrative expenses

 

4,162

 

3,673

 

3,844

Advisory and trustee services

 

289

 

221

 

103

Other operating expenses

 

1,240

 

1,269

 

1,407

Amortization related to non-real estate investments

 

1,082

 

745

 

430

TOTAL OPERATING EXPENSE

 

186,182

 

160,550

 

144,003

Operating income

 

11,635

 

9,898

 

8,934

Interest income

 

1,944

 

816

 

578

Other non-operating income

 

721

 

424

 

408

Income before minority interest and discontinued operations and (loss) gain on sale of other investments

 

14,300

 

11,138

 

9,920

(Loss) gain on sale of other investments

 

(38)

 

23

 

3

Minority interest portion of operating partnership income

 

(3,229)

 

(1,896)

 

(1,738)

Minority interest portion of other partnerships’ loss (income)

 

26

 

(484)

 

(379)

Income from continuing operations

 

11,059

 

8,781

 

7,806

Discontinued operations, net of minority interest

 

3,051

 

2,786

 

7,270

NET INCOME

 

14,110

 

11,567

 

15,076

Dividends to preferred shareholders

 

(2,372)

 

(2,372)

 

(2,372)

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

$

11,738

$

9,195

$

12,704

Earnings per common share from continuing operations

$

.18

$

.14

$

.13

Earnings per common share from discontinued operations

 

.06

 

.06

 

.17

NET INCOME PER COMMON SHARE – BASIC & DILUTED

$

.24

$

.20

$

.30

 

2007


  
(in thousands, except per share data)
 
  2009  2008  2007 
REVENUE         
Real estate rentals $194,758  $179,965  $162,410 
Tenant reimbursement  45,247   41,205   35,128 
TOTAL REVENUE  240,005   221,170   197,538 
EXPENSES            
Interest  68,743   63,439   58,424 
Depreciation/amortization related to real estate investments  54,646   50,042   44,419 
Utilities  18,975   17,793   15,157 
Maintenance  27,603   24,582   21,691 
Real estate taxes  30,443   27,133   23,281 
Insurance  3,051   2,624   2,377 
Property management expenses  18,079   15,273   13,826 
Administrative expenses  4,430   4,745   4,162 
Advisory and trustee services  452   458   289 
Other expenses  1,440   1,344   1,240 
Amortization related to non-real estate investments  2,068   1,476   1,082 
Impairment of real estate investment  338   0   0 
TOTAL EXPENSES  230,268   208,909   185,948 
Interest income  608   2,095   1,944 
Other income  314   665   721 
Income before gain (loss) on sale of other investments and minority interest and discontinued operations  10,659   15,021   14,255 
Gain (loss) on sale of other investments  54   42   (38)
Minority interest portion of operating partnership income  (2,227)  (3,524)  (3,217)
Minority interest portion of other partnerships’ loss  40   136   26 
Income from continuing operations  8,526   11,675   11,026 
Discontinued operations, net of minority interest  0   413   3,084 
NET INCOME  8,526   12,088   14,110 
Dividends to preferred shareholders  (2,372)  (2,372)  (2,372)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $6,154  $9,716  $11,738 
Earnings per common share from continuing operations $.11  $.17  $.18 
Earnings per common share from discontinued operations  .00   .01   .06 
NET INCOME PER COMMON SHARE – BASIC & DILUTED $.11  $.18  $.24 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2007

2009 Annual ReportF-5

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
for the years ended April 30, 2007, 2006,2009, 2008, and 2005

2007

 

(in thousands)

 

NUMBER OF PREFERRED SHARES

 

PREFERRED SHARES

 

NUMBER OF COMMON SHARES

 

COMMON SHARES

 

 

ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME

 

 

ACCUMULATED
OTHER
COMPRE- HENSIVE
(LOSS)

 

 

TOTAL
SHARE-
HOLDERS’
EQUITY

BALANCE APRIL 30, 2004

1,150

$

27,343

 

41,693

$

292,400

 

$

(41,083)

 

$

(31)

 

$

278,629

Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

15,076

 

 

 

 

 

15,076

Unrealized gain for the period on securities available- for-sale

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

9

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

15,085

Distributions - common shares

 

 

 

 

 

 

 

 

 

(27,892)

 

 

 

 

 

(27,892)

Distributions - preferred shares

 

 

 

 

 

 

 

 

 

(2,404)

 

 

 

 

 

(2,404)

Distribution reinvestment plan

 

 

 

 

1,146

 

10,738

 

 

 

 

 

 

 

 

10,738

Sale of shares

 

 

(26)

 

1,652

 

15,774

 

 

 

 

 

 

 

 

15,748

Redemption of units for common shares

 

 

 

 

701

 

5,306

 

 

 

 

 

 

 

 

5,306

Fractional shares repurchased

 

 

 

 

(4)

 

(38)

 

 

 

 

 

 

 

 

(38)

BALANCE APRIL 30, 2005

1,150

 

27,317

 

45,188

 

324,180

 

 

(56,303)

 

 

(22)

 

 

295,172

Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

11,567

 

 

 

 

 

11,567

Unrealized loss for the period on securities available- for-sale

 

 

 

 

 

 

 

 

 

 

 

 

(26)

 

 

(26)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

11,541

Distributions - common shares

 

 

 

 

 

 

 

 

 

(29,985)

 

 

 

 

 

(29,985)

Distributions - preferred shares

 

 

 

 

 

 

 

 

 

(2,372)

 

 

 

 

 

(2,372)

Distribution reinvestment plan

 

 

 

 

1,213

 

11,076

 

 

 

 

 

 

 

 

11,076

Sale of shares

 

 

 

 

15

 

139

 

 

 

 

 

 

 

 

139

Redemption of units for common shares

 

 

 

 

501

 

4,006

 

 

 

 

 

 

 

 

4,006

Fractional shares repurchased

 

 

 

 

(2)

 

(17)

 

 

 

 

 

 

 

 

(17)

BALANCE APRIL 30, 2006

1,150

 

27,317

 

46,915

 

339,384

 

 

(77,093)

 

 

(48)

 

 

289,560

Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

14,110

 

 

 

 

 

14,110

Unrealized gain for the period on securities available- for-sale

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

32

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

14,142

Distributions - common shares

 

 

 

 

 

 

 

 

 

(31,472)

 

 

 

 

 

(31,472)

Distributions - preferred shares

 

 

 

 

 

 

 

 

 

(2,372)

 

 

 

 

 

(2,372)

Distribution reinvestment plan

 

 

 

 

1,215

 

11,412

 

 

 

 

 

 

 

 

11,412

Sale of shares

 

 

 

 

32

 

303

 

 

 

 

 

 

 

 

303

Redemption of units for common shares

 

 

 

 

410

 

3,411

 

 

 

 

 

 

 

 

3,411

Fractional shares repurchased

 

 

 

 

(2)

 

(15)

 

 

 

 

 

 

 

 

(15)

BALANCE APRIL 30, 2007

1,150

$

27,317

 

48,570

$

354,495

 

$

(96,827)

 

$

(16)

 

$

284,969


  (in thousands) 
  NUMBER OF PREFERRED SHARES  PREFERRED SHARES  NUMBER OF COMMON SHARES  COMMON SHARES  
ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME
 
ACCUMULATED
OTHER
COMPRE-HENSIVE
(LOSS)
  
TOTAL
SHARE-
HOLDERS’
EQUITY
 
BALANCE APRIL 30, 2006  1,150  $27,317   46,915  $339,384  $(77,093) $(48) $289,560 
Comprehensive Income                            
Net income                  14,110       14,110 
Unrealized gain for the period on securities available-for-sale                      32   32 
Total comprehensive income                          14,142 
Distributions - common shares                  (31,472)      (31,472)
Distributions - preferred shares                  (2,372)      (2,372)
Distribution reinvestment plan          1,215   11,412           11,412 
Sale of shares          32   303           303 
Redemption of units for common shares          410   3,411           3,411 
Fractional shares repurchased          (2)  (15)          (15)
BALANCE APRIL 30, 2007  1,150  $27,317   48,570  $354,495  $(96,827) $(16) $284,969 
Comprehensive Income                            
Net income                  12,088       12,088 
Unrealized gain for the period on securities available-for-sale                      16   16 
Total comprehensive income                          12,104 
Distributions - common shares                  (35,387)      (35,387)
Distributions - preferred shares                  (2,372)      (2,372)
Distribution reinvestment plan          1,177   11,274           11,274 
Sale of shares          6,934   66,679           66,679 
Redemption of units for common shares          1,052   7,753           7,753 
Fractional shares repurchased          (1)  (14)          (14)
BALANCE APRIL 30, 2008  1,150  $27,317   57,732  $440,187  $(122,498) $0  $345,006 
Net income                  8,526       8,526 
Distributions - common shares                  (39,612)      (39,612)
Distributions - preferred shares                  (2,372)      (2,372)
Distribution reinvestment plan          1,186   11,385           11,385 
Sale of shares          641   5,978           5,978 
Redemption of units for common shares          746   5,034           5,034 
Fractional shares repurchased          (1)  (10)          (10)
BALANCE APRIL 30, 2009  1,150  $27,317   60,304  $462,574  $(155,956) $0  $333,935 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2007

2009 Annual ReportF-6

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended April 30, 2007, 2006,2009, 2008, and 2005

 

(in thousands)

 

2007

2006

2005

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net Income

$

14,110

$

11,567

$

15,076

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

46,695

 

39,219

 

35,803

Minority interest portion of income

 

4,273

 

3,189

 

4,252

Gain on sale of real estate, land and other investments

 

(4,602)

 

(3,293)

 

(8,605)

Interest reinvested in investment certificates

 

0

 

127

 

243

Loss on impairment of real estate investments

 

640

 

409

 

570

Bad debt expense

 

507

 

167

 

359

Changes in other assets and liabilities:

 

 

 

 

 

 

Increase in receivable arising from straight-lining of rents

 

(3,247)

 

(2,261)

 

(1,314)

(Increase) decrease in accounts receivable

 

(1,007)

 

(1,137)

 

457

(Increase) decrease in prepaid and other assets

 

(132)

 

724

 

1,517

Decrease in tax, insurance and other escrow

 

1,671

 

175

 

2,233

Increase in deferred charges and leasing costs

 

(4,801)

 

(2,914)

 

(2,921)

Increase in accounts payable, accrued expenses and other liabilities

 

4,334

 

2,428

 

611

Net cash provided by operating activities

 

58,441

 

48,400

 

48,281

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Proceeds from sale of marketable securities - available-for-sale

 

525

 

174

 

0

(Proceeds) payments of real estate deposits

 

442

 

1,365

 

(975)

Principal proceeds on mortgage loans receivable

 

23

 

210

 

4,274

Purchase of marketable securities - available-for-sale

 

(132)

 

(57)

 

(35)

Proceeds from sale of real estate and other investments

 

22,375

 

13,480

 

47,877

Payments for acquisitions and improvements of real estate investments

 

(184,613)

 

(97,810)

 

(121,544)

Net cash used by investing activities

 

(161,380)

 

(82,638)

 

(70,403)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from sale of common shares, net of issue costs

 

303

 

139

 

15,742

Proceeds from sale of preferred shares, net of issue costs

 

0

 

0

 

(26)

Proceeds from mortgages payable

 

257,664

 

80,276

 

115,460

Proceeds from minority partner

 

54

 

248

 

161

Proceeds from revolving lines of credit

 

20,500

 

3,500

 

13

Repurchase of fractional shares and minority interest units

 

(15)

 

(17)

 

(38)

Distributions paid to common shareholders, net of reinvestment

 

(20,865)

 

(19,649)

 

(17,923)

Distributions paid to preferred shareholders

 

(2,372)

 

(2,372)

 

(2,207)

Distributions paid to unitholders of operating partnership

 

(10,258)

 

(7,881)

 

(7,318)

Distributions paid to other minority partners

 

(170)

 

(189)

 

(1,064)

Redemption of investment certificates

 

(2,440)

 

(2,312)

 

(2,682)

Principal payments on mortgages payable

 

(88,345)

 

(23,482)

 

(61,097)

Principal payments on revolving lines of credit and other debt

 

(24,086)

 

(76)

 

(25,065)

Net cash provided by financing activities

 

129,970

 

28,185

 

13,956

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS

 

27,031

 

(6,053)

 

(8,166)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 

17,485

 

23,538

 

31,704

CASH AND CASH EQUIVALENTS AT END OF YEAR

$

44,516

$

17,485

$

23,538

 

2007


  (in thousands) 
  2009  2008  2007 
CASH FLOWS FROM OPERATING ACTIVITIES         
Net Income $8,526  $12,088  $14,110 
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization  57,832   52,423   46,695 
Minority interest portion of income  2,187   3,541   4,273 
Gain on sale of real estate, land and other investments  (54)  (556)  (4,602)
Impairment of real estate investments  338   0   640 
Bad debt expense  2,472   1,060   507 
Changes in other assets and liabilities:            
Increase in receivable arising from straight-lining of rents  (2,403)  (1,921)  (3,247)
Decrease (increase) in accounts receivable  (603)  (1,754)  (1,007)
(Increase) decrease in prepaid and other assets  (702)  219   (132)
Decrease (increase) in tax, insurance and other escrow  1,381   (1,420)  1,671 
Increase in deferred charges and leasing costs  (5,686)  (5,468)  (4,801)
(Decrease) increase in accounts payable, accrued expenses and other liabilities  (3,153)  3,667   4,334 
Net cash provided by operating activities  60,135   61,879   58,441 
CASH FLOWS FROM INVESTING ACTIVITIES            
Proceeds from sale of marketable securities - available-for-sale  0   1,740   525 
Net proceeds (payments) of real estate deposits  1,291   (644)  442 
Principal proceeds on mortgage loans receivable  389   25   23 
Investment in mortgage loans receivable  0   (167)  0 
Purchase of marketable securities - available-for-sale  0   (54)  (132)
Proceeds from sale of real estate and other investments  68   1,374   22,375 
Insurance proceeds received  2,962   837   0 
Payments for acquisitions and improvements of real estate investments  (59,077)  (148,364)  (184,613)
Net cash used by investing activities  (54,367)  (145,253)  (161,380)
CASH FLOWS FROM FINANCING ACTIVITIES            
Proceeds from sale of common shares, net of issue costs  5,978   66,679   303 
Proceeds from mortgages payable  73,530   111,684   257,664 
Proceeds from minority partner  717   0   54 
Proceeds from revolving lines of credit and other debt  20,500   0   20,500 
Repurchase of fractional shares and minority interest units  (10)  (14)  (15)
Distributions paid to common shareholders, net of reinvestment of $10,603, $10,518 and $10,607, respectively
  (29,009)  (24,869)  (20,865)
Distributions paid to preferred shareholders  (2,372)  (2,372)  (2,372)
Distributions paid to unitholders of operating partnership, net reinvestment of $782, $756 and $805, respectively
  (13,601)  (12,747)  (10,258)
Distributions paid to other minority partners  (277)  (179)  (170)
Redemption of partnership units  (158)  0   0 
Redemption of investment certificates  0   (11)  (2,440)
Principal payments on mortgages payable  (67,230)  (45,759)  (88,345)
Principal payments on revolving lines of credit and other debt  (14,073)  (73)  (24,086)
Net cash (used) provided by financing activities  (26,005)  92,339   129,970 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  (20,237)  8,965   27,031 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR  53,481   44,516   17,485 
CASH AND CASH EQUIVALENTS AT END OF YEAR $33,244  $53,481  $44,516 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2007

2009 Annual ReportF-7

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended April 30, 2007, 2006,2009, 2008, and 2005

 

(in thousands)

 

2007

2006

2005

SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Distribution reinvestment plan

$

10,607

$

10,336

$

9,969

Operating partnership distribution reinvestment plan

 

805

 

741

 

769

Preferred dividends payable

 

0

 

0

 

197

Property acquired through issue of shares

 

0

 

0

 

32

Real estate investment acquired through assumption of indebtedness and accrued costs

 

16,838

 

0

 

21,071

Other assets acquired in lieu of cash

 

6

 

129

 

134

Other debt reclassified to mortgage payable

 

0

 

539

 

0

Assets acquired through the issuance of minority interest units in the operating partnership

 

62,427

 

10,898

 

20,071

Operating partnership units converted to shares

 

3,411

 

4,006

 

5,306

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

Interest on mortgages

$

56,918

$

49,900

$

46,647

Interest on investment certificates

 

164

 

231

 

254

Interest on margin account and other

 

812

 

100

 

370

 

$

57,894

$

50,231

$

47,271

 

2007


  (in thousands) 
  2009  2008  2007 
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES         
Distribution reinvestment plan $10,603  $10,518  $10,607 
Operating partnership distribution reinvestment plan  782   756   805 
Real estate investment acquired through assumption of indebtedness and accrued costs  0   46,794   16,838 
Assets acquired through the issuance of minority interest units in the operating partnership  3,730   22,931   62,427 
Operating partnership units converted to shares  5,034   7,753   3,411 
             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION            
Cash paid during the year for:            
Interest on mortgages $67,947  $62,110  $56,918 
Interest on investment certificates  0   2   164 
Interest on margin account and other  421   98   812 
  $68,368  $62,210  $57,894 
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007, 2006,2009, 2008, and 2005

2007

NOTE 1 • ORGANIZATION

Investors Real Estate Trust (“IRET” or the “Company”) is a self-advised real estate investment trust engaged in acquiring, owning and leasing multi-family and commercial real estate. IRET has elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. REITs are subject to a number of organizational and operational requirements, including a requirement to distribute 90% of ordinary taxable income to shareholders, and, generally, are not subject to federal income tax on net income. IRET’s multi-family residential properties and commercial properties are located mainly in the states of North Dakota and Minnesota, but also in the states of Colorado, Idaho, Iowa, Kansas, Montana, Missouri, Nebraska, South Dakota, Texas, Michigan and Wisconsin. As of April 30, 2007,2009, IRET owned 6977 multi-family residential properties with approximately 9,3979,645 apartment units and 148167 commercial properties, consisting of office, medical, industrial and retail properties, totaling approximately 10.011.7 million net rentable square feet. IRET conducts a majority of its business activities through its consolidated operating partnership, IRET Properties, a North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other subsidiary entities.

All references to IRET or the Company refer to Investors Real Estate Trust and its consolidated subsidiaries.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of IRET and all subsidiaries in which it maintains a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation. The Company’s fiscal year ends April 30th.

The accompanying consolidated financial statements include the accounts of IRET and its general partnership interest in the Operating Partnership. The Company’s interest in the Operating Partnership was 70.9%74.3% and 77.4%73.1% as of April 30, 20072009 and 2006,2008, which includes 100% of the general partnership interest. The limited partners have a redemption option that they may exercise. Upon exercise of the redemption option by the limited partners, IRET has the option of redeeming the limited partners’ interests (“Units”) for IRET common shares of beneficial interest, on a one-for-one basis, or for cash payment to the unitholder. The redemption generally may be exercised by the limited partners at any time after the first anniversary of the date of the acquisition of the Units (provided, however, that not more than two redemptions by a limited partner may occur during each calendar year, and each limited partner may not exercise the redemption for less than 1,000 Units, or, , if such limited partner holds less than 1,000 Units, for all of the Units held by such limited partner). Some limited partners have contractually agreed to a holding period of greater than one year.

The consolidated financial statements also reflect the ownership by the Operating Partnership of certain joint venture entities in which the Operating Partnership has a general partner or controlling interest. These entities are consolidated into IRET’s other operations with minority interests reflecting the minority partners’ share of ownership and income and expenses.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007,May 2009, the Financial Accounting Standards Board (“FASB”) issued FAS No. 165, Subsequent Events (“FAS 165”). FAS 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. FAS 165 is effective for interim periods or fiscal years ending after June 15, 2009. The Company does not expect this Statement to have a material impact on the Company’s consolidated financial statements.
In June 2008, the FASB issued FASB Staff Position (“FSP”) on Emerging Issues Task Force Issue 03-6, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included

2009 Annual Report F-9
Table of Contents

NOTE 2 • continued
in the computation of earnings per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. Early application is not permitted. The Company currently has no unvested share-based payment awards outstanding, but expects that in the future some may be granted under its 2008 Incentive Award Plan approved by shareholders in September 2008.  The Company’s adoption of this staff position on May 1, 2009 did not impact the Company’s EPS calculations.
In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 removes the requirement under Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions and replaces it with a requirement that an entity consider its own historical experience in renewing similar arrangements, or a consideration of market participant assumptions in the absence of historical experience. FSP 142-3 also requires entities to disclose information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the arrangement. FSP 142-3 is effective for fiscal years beginning on or after December 15, 2008.  Earlier adoption is prohibited. The adoption of FSP 142-3 did not have a material impact on the Company’s financial position and results of operations.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51 (“SFAS 160”). SFAS 160 changes the accounting and reporting for minority interests. Minority interests are recharacterized as noncontrolling interests and are reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest are included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, is recorded at fair value with any gain or loss recognized in earnings. SFAS 160 was effective for the Company on May 1, 2009. The adoption of this statement did not have a material effect on the Company’s financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). This new standard significantly changes the accounting for and reporting of business combination transactions in consolidated financial statements. SFAS 141(R) requires an acquiring entity to recognize acquired assets and liabilities assumed in a transaction at fair value as of the acquisition date, changes the disclosure requirements for business combination transactions, and changes the accounting treatment for certain items, including contingent consideration agreements, which will be required to be recorded at acquisition date fair value, and acquisition costs which will be required to be expensed as incurred. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008, and accordingly we adopted the standard on May 1, 2009; the new standard impacted the accounting for acquisitions we made after our adoption. Upon adoption of this pronouncement, we wrote off to general and administrative expense approximately $32,000 of previously capitalized pre-acquisition costs.  The impact of this pronouncement on our financial statements is dependent on the volume of our acquisition activity in fiscal year 2010 and beyond. We currently expect the most significant impact of this statement to be the treatment of transaction costs, which are expensed as a period cost due to the adoption of this statement.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”).  SFAS 159 permits entities to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for many financial assets and liabilities and certain other items. Entities electing the fair value option are required to recognize changes in fair value in earningsitems including property and to expense upfront cost and fees associated with the item for which the fair value option is elected.casualty insurance contracts. SFAS 159 iswas effective for the Company on May 1, 2008.  We are currently assessing2008, and it did not elect the impactfair value option for any of adopting SFAS 159.

2007 Annual Report F-9
its eligible financial instruments.

NOTE 2 • continued

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for the Company on May 1, 2008. We are currently evaluating the impact of adopting SFAS 157.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  FIN 48 was effective for the Company on May 1, 2007.  We2008; however, FASB Staff Position No. 157-2 deferred the effective date for certain non-financial assets and liabilities not re-



NOTE 2 • continued
measured at fair value on a recurring basis to fiscal years beginning after November 15, 2008 (for the Company, May 1, 2009).  SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are currently evaluatingquoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the impactasset or liability, either directly or indirectly through market corroboration, for substantially the full term of adopting FIN 48. 

the financial instrument. Level 3 inputs are unobservable inputs based upon the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.  At April 30, 2009, the Company’s marketable securities are carried at fair value measured on a recurring basis. Fair values are determined through the use of unadjusted quoted prices in active markets, which are inputs that are classified as Level 1 in the valuation hierarchy. The adoption of this statement did not have a material effect on the Company’s consolidated financial statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

REAL ESTATE INVESTMENTS

Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any. Acquisitions of real estate investments are recorded based upon preliminary allocations of the purchase price which are subject to adjustment as additional information is obtained, but in no case more than one year after the date of acquisition. The Company allocates the purchase price to the fair value of the tangible and intangible assets of an acquired property (which includes the land, building, and personal property) which are determined by valuing the property as if it were vacant and to fair value of the intangible assets (which include in-place leases.) The as-if-vacant value is allocated to land, buildings, and personal property based on management’s determination of the relative fair values of these assets. The estimated fair value of the property is the amount that would be recoverable upon the disposition of the property. Techniques used to estimate fa irfair value include discounted cash flow analysis independent appraisals, and reference to recent sales of comparables. A land value is assigned based on the purchase price if land is acquired separately or based on estimated fair value if acquired in a merger or in a single or portfolio acquisition.

Above-market and below-market in-place lease valuesintangibles for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease.

Other intangible assets acquired include amounts for in-place lease values that are based upon the Company’s evaluation of the specific characteristics of the leases. Factors considered in these analyses include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. The Company also considers information about each property obtained during its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The Company uses a 20-40 year estimated life for buildings and improvements and a 5-12 year estimated life for furniture, fixtures and equipment.

2007 Annual Report F-10

NOTE 2 • continued

Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful life, generally five to ten years. Property sales or dispositions are recorded when title transfers and sufficient consideration has been received by the Company and the Company has no significant involvement with the property sold.



NOTE 2 • continued
In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, the Company periodically evaluates its long-lived assets, including its investments in real estate, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset and legal and environmental concerns. If indicators exist, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset.

If our anticipated holding period for properties, the estimated fair value of properties or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. An impairment loss of $640,000 was recorded in fiscal year 2007. No impairment losses were recorded in fiscal year 2008. An impairment loss of $338,000 was recorded in fiscal year 2009.

REAL ESTATE HELD FOR SALE

Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Depreciation is not recorded on assets classified as held for sale.

The application of current accounting principles that govern the classification of any of our properties as held-for-sale on the balance sheet requires management to make certain significant judgments. In evaluating whether a property meets the normal coursecriteria set forth in SFAS No. 144, Accounting for the Impairment and Disposal of business IRETLong-Lived Assets (“SFAS 144”), the Company makes a determination as to the point in time that it is probable that a sale will receive offers to purchase its properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before completion of the transaction.be consummated. It is not unusual for mattersreal estate sales contracts to arise that result inallow potential buyers a period of time to evaluate the withdrawal or rejectionproperty prior to formal acceptance of the offer during this process.contract. In addition, certain other matters critical to the final sale, such as financing arrangements, often remain pending even upon contract acceptance. As a result, real estateproperties under contract may not close within the expected time period, or may not close at all. Due to these uncertainties, it is not classifiedlikely that the Company can meet the criteria of SFAS 144 prior to the sale formally closing. Therefore, any properties categorized as “held-for-sale” until it isheld-for-sale represent only those properties that management has determined are probable to close within the requirements set forth in the opinion of management, that a property will be disposed of in the near term, even if sale negotiations for such property are currently under way. 

SFAS 144.

The Company reports, in discontinued operations, the results of operations of a property that has either been disposed of or is classified as held for sale and the related gains or losses, and as a result of discontinued operations, reclassifications of prior year revenues and expenses have been made.

IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES AND GOODWILL

Upon acquisition of real estate, the Company records the intangible assets and liabilities acquired (for example, if the leases in place for the real estate property acquired carry rents above the market rent, the difference is classified as an intangible asset) at their estimated fair value separate and apart from goodwill.  The Company amortizes identified intangible assets and liabilities that are determined to have finite lives based on the period over which the assets and liabilities are expected to contributeaffect, directly or indirectly, to the future cash flows of the real estate property acquired (generally the life of the lease).  In fiscal years 20072009 and 2006,2008, respectively, the Company added $15,976,000approximately $565,000 and $8,486,000$38.0 million of new intangible assets, respectively,net of intangible liabilities, all of which were classified as in-place leases. The weighted average lives of these intangibles are 3.81.8 years for fiscal 20072009 and 4.67.0 years for fiscal year 2006.2008. Amortization of intangibles related to above or below-market leases is recorded in real estate rentals in the consolidated statements of operations. Amortization of other intangibles is recorded in depreciation/amortization related to real estate investments in the consolidated statements of operations. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstan cescircumstances indicate that their carrying amount may not be recoverable.  An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.



NOTE 2 • continued
As of April 30, 20072009 and 2006,2008, respectively, the net carrying amounts of the Company’s identified intangible assets and liabilities were $33,240,000$51.7 million and $26,449,000$60.7 million (net of accumulated amortization of $24,149,000$42.8 million and $14,718,000)$32.8 million), respectively. The estimated annual amortization of the Company’s identified intangible assets for each of the five succeeding fiscal years is as follows:

Year Ended April 30,

(in thousands)

2008

$

8,831

2009

 

6,684

2010

 

5,558

2011

 

4,009

2012

 

2,203

2007 Annual Report F-11

Year Ended April 30, (in thousands) 
2010 $8,484 
2011  6,372 
2012  4,353 
2013  3,361 
2014  2,956 

NOTE 2 • continued

The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill.  The Company’s goodwill has an indeterminate life in accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets. Goodwill is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill book values as of April 30, 20072009 and 20062008 were $1,397,000 and $1,441,000.$1.4 million. The annual reviews for these same periods indicated no impairment. In fiscal 2007 the Company disposed of three properties that had goodwill assigned, and as a result, $44,000 of goodwill was derecognized.

PROPERTY AND EQUIPMENT

Property and equipment consists of the administrative office buildings and equipment contained at IRET’s headquarters in Minot, North Dakota, and other locations in Minneapolis, MinnesotaMinnesota; Omaha, Nebraska; Kansas City, Kansas; St. Louis, Missouri and Omaha, Nebraska.Jamestown, North Dakota. The balance sheet reflects these assets at cost, net of accumulated depreciation. As of April 30, 20072009 and 2006,2008, the cost was $1.5$2.0 million and $2.8 million, respectively. Accumulated depreciation was $1.1$1.0 million and $.9$1.3 million as of April 30, 20072009 and 2006,2008, respectively.

MORTGAGE LOANLOANS RECEIVABLE

The mortgage loanloans receivable is(which include contracts for deed) are stated at the outstanding principal balance, net of an allowance for uncollectibility. Interest income is accrued and reflected in the balance.balance sheet. Non-performing loans are recognized as impaired in conformity with SFAS No. 114, Accounting byCreditors for Impairment of a Loan. The Company evaluates the collectibility of both interest and principal of each of its loans, if circumstances warrant, to determine whether the loan is impaired. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. An allowance is recorded to reduce impaired loans to their estimated fair value. Interest on impaired loans is recognized on a cash basis.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three months or less. Cash and cash equivalents consist of the Company’s bank deposits and short-term investment certificates acquired subject to repurchase agreements, and the Company’s deposits in a money market mutual fund.

MARKETABLE SECURITIES

IRET’s investments in marketable securities are classified as “available-for-sale.” The securities classified as “available-for-sale” represent investments in debt and equity securities which the Company intends to hold for an indefinite period of time. These securities are valued at current fair value with the resulting unrealized gains and losses excluded from earnings and reported as a separate component of shareholders’ equity until realized. Gains or losses on these securities are computed based on the amortized cost of the specific securities when sold.

All securities with unrealized losses are subjected to the Company’s process for identifying other-than-temporary impairments. The Company records a charge to earnings to write down to fair value securities that it deems to be other-than-temporarily impaired in the period the securities are deemed to be other-than-temporarily impaired. The assessment of whether such impairment has occurred is based on management’s case-by-case evaluation of the


NOTE 2 • continued
underlying reasons for the decline in fair value. Management considers a wide range of factors in making this assessment. Those factors include, but are not limited to, the length and severity of the decline in value and changes in the credit quality of the issuer or underlying assets. The Company does not engage in trading activities.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Management evaluates the appropriate amount of the allowance for doubtful accounts by assessing the recoverability of individual real estate mortgage loans and rent receivables, through a comparison of their carrying amount with their estimated realizable value. Management considers tenant financial condition, credit history and current economic conditions in establishing these allowances. Receivable balances are written off when deemed

2007 Annual Report F-12

NOTE 2 • continued

uncollectible. Recoveries of receivables previously written off, if any, are recorded when received. A summary of the changes in the allowance for doubtful accounts for fiscal years ended April 30, 2007, 20062009, 2008 and 20052007 is as follows:

 

(in thousands)

 

2007

2006

2005

Balance at beginning of year

$

725

$

725

$

475

Provision

 

507

 

230

 

438

Write-off

 

(322)

 

(230)

 

(188)

Balance at close of year

$

910

$

725

$

725

 

  (in thousands) 
  2009  2008  2007 
Balance at beginning of year $1,264  $910  $725 
Provision  2,472   1,060   507 
Write-off  (2,605)  (706)  (322)
Balance at close of year $1,131  $1,264  $910 
TAX, INSURANCE, AND OTHER ESCROW

Tax, insurance, and other escrow includes funds deposited with a lender for payment of real estate tax and insurance, and reserves for funds to be used for replacement of structural elements and mechanical equipment of certain projects. The funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender.

REAL ESTATE DEPOSITS

Real estate deposits include funds held by escrow agents to be applied toward the purchase of real estate or the payment of loan costs associated with loan placement or refinancing.

DEFERRED LEASING AND LOAN ACQUISITION COSTS

Costs and commissions incurred in obtaining tenant leases are amortized on the straight-line method over the terms of the related leases. Costs incurred in obtaining long-term financing are amortized to interest expense over the life of the loan. 

loan using the straight-line method, which approximates the effective interest method.

MINORITY INTERESTS

Interests in the Operating Partnership held by limited partners are represented by Units. The Operating Partnership’s income is allocated to holders of Units based upon the ratio of their holdings to the total Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to minority interests in accordance with the terms of the Operating Partnership agreement.

IRET reflects minority interests in Mendota Properties LLC, IRET–BD LLC, IRET-Candlelight LLC, IRET-Golden Jack LLC, and IRET-1715 YDR LLC on the balance sheet for the portion of properties consolidated by IRET that are not wholly owned by IRET. The earnings or losses from these properties attributable to the minority interests are reflected as minority interest portion of other partnerships’ income in the consolidated statements of operations.

INCOME TAXES

IRET operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended.  Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to shareholders. The Company intends to


NOTE 2 • continued
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 accompanying consolidated financial statements.

IRET conducts its business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) through its Operating Partnership. UPREIT status allows IRET to accept the contribution of real estate in exchange for Units. Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated real estate.

2007 Annual Report F-13

On May 1, 2008, IRET adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). The adoption of FIN 48 did not have a material impact on the Company’s consolidated financial statements.

NOTE 2 • continued

REVENUE RECOGNITION

Residential rental properties are leased under operating leases with terms generally of one year or less. Commercial properties are leased under operating leases to tenants for various terms generally exceeding one year. Lease terms often include renewal options. Rental revenue is recognized on the straight-line basis, which averages minimum required rents over the terms of the leases. Rents recognized in advance of collection are reflected as receivable arising from straight-lining of rents, net of allowance for doubtful accounts.  Rent concessions, including free rent, are amortized on a straight-line basis over the terms of the related leases.

This treatment of rent concessions is supported in SFAS No. 13, Accounting for Leases, which provides that if rentals vary from a straight-line basis, the income shall be recognized on a straight-line basis.

Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenditures are incurred. IRET receives payments for these reimbursements from substantially all of its multi-tenant commercial tenants throughout the year.

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. These percentage rents are recorded once the required sales level is achieved.

Interest on mortgage loans receivable is recognized in income as it accrues during the period the loan is outstanding. In the case of non-performing loans, income is recognized as discussed in above in the Mortgage Loans Receivable section of this Note 2.

NET INCOME PER SHARE

Basic net income per share is computed as net income available to common shareholders divided by the weighted average number of common shares outstanding for the period. The Company has no potentially dilutive financial interests; the potential exchange of Units for common shares will have no effect on net income per share because Unitholders and common shareholders effectively share equally in the net income of the Operating Partnership.

NOTE 3 • CREDIT RISK

The Company is potentially exposed to credit risk for cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

IRET has entered into a cash management arrangement with First Western Bank with respect to deposit accounts that exceed FDIC Insurance coverage. On a daily basis, account balances are invested in United States government securities sold to IRET by First Western Bank. IRET can require First Western Bank to repurchase such securities at any time, at a purchase price equal to what IRET paid for the securities plus interest. First Western Bank automatically repurchases securities when collected amounts on deposit in IRET’s deposit accounts fall below the maximum insurance amount, with the proceeds of such repurchases being transferred to IRET’s deposit accounts to bring the amount on deposit back up to the threshold amount. The amounts invested by IRET pursuant to the repurchase agreement are not insured by FDIC.



NOTE 4 • PROPERTY OWNED

Property, consisting principally of real estate, is stated at cost less accumulated depreciation of $1,308.7 million and $1,120.8 milliontotaled $1.5 billion and $1.4 billion as of April 30, 2007,2009, and April 30, 2006,2008, respectively.

Construction period interest of $69,256, $21,058,approximately, $912,000, $505,000, and $137,591,$69,000, has been capitalized for the years ended April 30, 2009, 2008, and 2007, 2006, and 2005, respectively.

2007 Annual Report F-14

NOTE 4 • continued

The future minimum lease proceedsreceipts to be received under non-cancellable leases for commercial properties as of April 30, 2007,2009, assuming that no options to renew or buy out the lease are exercised, are as follows:

Year Ended April 30,

(in thousands)

2008

$

91,368

2009

 

82,328

2010

 

74,402

2011

 

61,703

2012

 

47,268

Thereafter

 

241,836

 

$

598,905

 

Year Ended April 30, (in thousands) 
2010 $111,786 
2011  99,833 
2012  84,440 
2013  72,039 
2014  61,911 
Thereafter  267,961 
  $697,970 
During fiscal 2009, the Company incurred a loss of approximately $338,000 due to impairment of the property formerly used as IRET’s Minot headquarters. During fiscal 2008, the Company incurred no losses due to impairment. For the year ended April 30, 2007, the Company incurred a loss of approximately $640,000 due to impairment of three properties and one parcel of unimproved land. For the year ended April 30, 2006, the Company incurred a loss of $409,000 due to impairment on one property.  For the year ended April 30, 2005, the Company incurred a loss of $570,000 due to impairment on one property.  The 2007 2006 and 2005 impairment losses were related to properties which were subsequently sold; accordingly such losses are included in discontinued operations (Note 12).

NOTE 5 • MORTGAGE LOANLOANS RECEIVABLE - NET

The mortgage loanloans receivable consists of one loancontract for deed that is collateralized by real estate. The interest rate on this loan is 6.0%7.0% and it matures in fiscal 2010.2013. Future principal payments due under this mortgage loan as of April 30, 2007,2009, are as follows:

Year Ended April 30,

(in thousands)

2008

$

24

2009

 

25

2010

 

362

 

 

 

Less allowance for doubtful accounts

 

(12)

 

$

399

 

Year Ended April 30, (in thousands) 
2010 $2 
2011  2 
2012  2 
2013  157 
   163 
Less allowance for doubtful accounts  (3)
  $160 
There were no non-performing mortgage loan receivablesloans receivable as of April 30, 2007,2009, and 2006. 

2008.

NOTE 6 • MARKETABLE SECURITIES

The amortized cost and fair value of marketable securities available-for-sale at April 30, 20072009 and 20062008 are as follows. These marketable securities are securities of various issuers, primarily U.S. government, U.S. agency and corporate bonds, held in IRET Properties’ security deposit account with Merrill Lynch: 

 

(in thousands)

2007

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair Value

 

 

 

 

 

 

 

 

 

US government & agency debt securities

$

369

$

1

$

0

$

370

Agency MBS

 

871

 

0

 

14

 

857

Corporate bonds

 

328

 

0

 

3

 

325

Bank certificates of deposit

 

422

 

0

 

0

 

422

Other

 

74

 

0

 

0

 

74

 

$

2,064

$

1

$

17

$

2,048

2007 Annual Report F-15

 (in thousands) 
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value 
             
Bank certificates of deposit $420  $0  $0  $420 
  $420  $0  $0  $420 

NOTE 6 • continued

 

(in thousands)

2006

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair Value

 

 

 

 

 

 

 

 

 

US government & agency debt securities

$

196

$

0

$

6

$

190

Agency MBS

 

779

 

0

 

30

 

749

Corporate bonds

 

553

 

0

 

12

 

541

Bank certificates of deposit

 

875

 

0

 

0

 

875

Other

 

47

 

0

 

0

 

47

 

$

2,450

$

0

$

48

$

2,402

 

As of April 30, 2007,2009, the investment in Marketable Securities, at cost,bank certificates of deposit will mature as follows: 

 

(in thousands)

 

Total

Less Than
1 Year

1-3 Years

3-5 Years

More than
5 Years

US government & agency debt securities

 

369

 

62

 

182

 

39

 

86

Agency MBS

 

871

 

0

 

179

 

0

 

692

Corporate bonds

 

328

 

92

 

176

 

60

 

0

Bank certificates of deposit

 

422

 

422

 

0

 

0

 

0

Other

 

74

 

74

 

0

 

0

 

0

Total

$

2,064

$

650

$

537

$

99

$

778

in less than one year.

There were no realized gains or losses on sales of securities available-for-sale for the fiscal yearsyear ended April 30, 2007, 2006 and 2005. None2009. There was a realized gain on sale of securities available-for-sale of $42,000 for the securities with an unrealized loss atfiscal year ended April 30, 2007 are considered to be other-than-temporarily impaired. 

2008. There were no realized gains or losses on sales of securities available-for-sale for the fiscal year ended April 30, 2007.



NOTE 7 • REVOLVING LINES OF CREDIT

IRET has lines of credit with threefour financial institutions as of April 30, 2007.2009. Interest payments on outstanding borrowings are due monthly. These credit facilities are summarized in the following table:

 

(in thousands)

Financial Institution

 

Amount Available

 

Amount Outstanding as of April 30, 2007

 

Amount Outstanding as of April 30, 2006

 

Applicable Interest Rate as of April 30, 2007

Maturity Date

 

Weighted Average Int. Rate on Borrowings during fiscal year 2007

 

 

 

 

 

 

 

 

 

 

 

 

Lines of Credit

 

 

 

 

 

 

 

 

 

 

 

(1) First Western Bank & Trust

$

12,000

$

0

$

3,500

 

6.50%

12/26/11

 

8.09%

(2) First Int’l Bank & Trust

 

10,000

 

0

 

0

 

8.25%

12/13/07

 

7.91%

(3) Bremer Bank

 

10,000

 

0

 

0

 

8.25%

9/13/07

 

8.00%

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

32,000

$

0

$

3,500

 

 

 

 

 

 

  (in thousands) 
Financial Institution Amount Available Amount Outstanding as of April 30, 2009 Amount Outstanding as of April 30, 2008  Applicable Interest Rate as of April 30, 2009 Maturity Date Weighted Average Int. Rate on Borrowings during fiscal year 2009 
                 
Lines of Credit                
(1) Bremer Bank $10,000  $0  $0   4.00%09/01/09  4.6%
(2) First Western Bank & Trust  12,000   0   0   5.25%12/10/11  4.5%
(3) First International Bank
& Trust
  14,000   4,000   0   3.75%12/19/09  4.8%
(4) Dacotah Bank  1,500   1,500   0   3.25%11/4/09  3.3%
                
Total $37,500  $5,500  $0    
Borrowings under the lines of credit bear interest based on the following: (1) Bremer Financial Corporation Reference Rate with a floor of 4.00%, (2) 175 basis points below the Prime Rate as published in the Wall Street Journal Prime Rate with a floor of 5.25% and a ceiling of 8.25%, (2) and (3) 50 basis points above the Wall Street Journal prime rate, and (3) Bremer Financial Corporation ReferencePrime Rate.

  In addition to these three lines of credit, the Company also has a fully-drawn $5.0 million line of credit maturing in November 2009 with Dacotah Bank in Minot, North Dakota. Of this $5.0 million, the Company includes $3.5 million in mortgages payable on the Company’s balance sheet, as secured by six small apartment properties owned by the Company, with the remaining $1.5 million included in revolving lines of credit. Borrowings under the Dacotah Bank line of credit bear interest based on the Wall Street Journal Prime Rate.

NOTE 8 • MORTGAGES PAYABLE

The Company’s mortgages payable are collateralized by substantially all of its properties owned. The majority of the Company’s mortgages payable are secured by individual properties or groups of properties, and are non-recourse to the Company, other than for standard carve-out obligations such as fraud, waste, failure to insure, environmental conditions and failure to pay real estate taxes. Interest rates on mortgages payable range from 4.67%2.75% to 8.25%9.75%, and the mortgages have varying maturity dates from June 8, 2007,August 1, 2009, through May 31, 2035.

2007 Annual Report F-16
April 1, 2040.

NOTE 8 • continued

Of the mortgages payable, the balancesbalance of fixed rate mortgages totaled $929.5 million$1.1 billion at April 30, 2009 and $741.6 million,2008, and the balances of variable rate mortgages totaled $21.7$9.6 million and $24.3$11.7 million as of April 30, 2007,2009, and 2006,2008, respectively. The Company does not utilize derivative financial instruments to mitigate its exposure to changes in market interest rates. Most of the fixed rate mortgages have substantial pre-payment penalties. As of April 30, 2007,2009, the weighted average rate of interest on the Company’s mortgage debt was 6.43%6.30%, compared to 6.63%6.37% on April 30, 2006.2008. The aggregate amount of required future principal payments on mortgages payable as of April 30, 2007,2009, is as follows:

Year Ended April 30,

(in thousands)

2008

$

30,831

2009

 

47,701

2010

 

127,747

2011

 

101,282

2012

 

85,713

Later Years

 

557,865

Total payments

$

951,139

Year Ended April 30, (in thousands) 
2010 $140,456 
2011  104,089 
2012  113,381 
2013  48,682 
2014  57,537 
Thereafter  606,013 
Total payments $1,070,158 



NOTE 9 • TRANSACTIONS WITH RELATED PARTIES

PROPERTY MANAGEMENT SERVICES

In fiscal years 2007, 2006 and 2005, Hoyt Properties, Inc. earned management fees from the Company in the amounts of $8,436, $641,046 and $682,286, respectively, a portion of which was reimbursed by tenants. Additionally, during those same periods, the Company paid leasing commissions to Hoyt Properties in the amounts of $14,450, $172,875 and $49,309, respectively.  Hoyt Properties, Inc. is owned by Steven B. Hoyt, a former member of the Company’s Board of Trustees.  Mr. Hoyt resigned from the Company’s Board of Trustees on September 21, 2004 at the expiration of his term of office. 

PROPERTY ACQUISITIONS

ACQUISITION

During fiscal year 2005,2008, the Company acquired four office/warehouse buildings from a limited liability companytwo-story office building consisting of approximately 65,000 rentable square feet, located in which Steven Hoyt wasFenton, Missouri, for a member.purchase price of $7.0 million.  The Company closed on its purchase of these buildings,purchased the Plymouth I, II and III office buildings in Plymouth, Minnesota, and the Northgate I office building in Maple Grove, Minnesota, on June 30, 2004.  At the time of the transaction, Mr. Hoyt wasproperty from entities controlled by W. David Scott, a trustee of the Company.  The buildings together contain approximately 157,935 square feet.  The Company paid approximately $14,000,000 for these properties, excluding closing costs.  Of the $14,000,000 purchase price, $13,900,000 was paid in cash, and the remainder was paid through the issuance to the sellers of 10,000 Units valued at $10 per Unit. Independent appraisals were obtained by the Company for this property acquisition, and the purchase price was based on the results of these appraisals.

PURCHASE OPTION

On February 1, 2003, the Company entered into a merger agreementIn accordance with the T. F. James Company. As part of the merger agreement, two affiliated entities of the T. F. James Company were granted the right to purchase certain real property acquired by the Company as a result of the merger. Charles Wm. James, a former executive officer of the Company and a former memberrequirements of the Company’s BoardDeclaration of Trustees, has an ownership interest in these entities.  UnderTrust, the termstransaction was approved by a majority of the agreement, onetrustees and by a majority of the entities hadindependent trustees not otherwise interested in the option, but not the obligation, to purchase a commercial strip mall located in Excelsior, Minnesota, for the price the Company paid to acquire the property, plus an annual Consumer Price Index increase.  This option was exercised during the fourth quarter of fiscal year 2006 at a purchase price of approximately $965,000, and Mr. James resigned from the Company’s Board of Trustees.

2007 Annual Report F-17
transaction.

NOTE 9 • continued

VEHICLE PURCHASES

During fiscal year 2005, the Company purchased four vehicles from Fisher Motors, Inc., an automobile dealership wholly-owned by John D. Stewart, a member of the Company’s Board of Trustees.  The Company paid approximately $100,000 for these four vehicles, which were purchased for the use of Company employees, including the Company’s Chief Operating Officer. The Company purchased no vehicles from Fisher Motors during fiscal years 2007 and 2006.

BANKING SERVICES

The Company maintains an unsecured line of credit with First International Bank and Trust, Watford City, North Dakota.  During fiscal year 2006, the amount available to be borrowed under this line of credit was increased to $10 million from $5 million.  Dakota (First International). During fiscal years 2007, 20062009, 2008 and 2005,2007, respectively, the Company’s interest charges were $71,128, $14,167,approximately $91,000, $0, and less than $500$71,000, for borrowings under the First International line of credit.  During fiscal year 2007, the Company entered into two mortgage loans with First International in the amounts of $450,000 and $2,400,000,$2.4 million, respectively, paying a total of $34,287approximately $34,000 in origination fees and loan closing costs for these two loans, and paying interest on the loans of $24,545approximately $26,000 and $69,328,$69,000, respectively, during fiscal year 2007.2007, and interest of approximately $34,000 and $174,000, respectively, on the loans in fiscal year 2008, and interest of approximately $33,000 and $171,000, respectively, during fiscal year 2009.  The Company also maintains a number of checking accounts with First International.  In each of fiscal years 2007, 20062009, 2008 and 2005,2007, respectively, IRET paid less than $500 in total in variou svarious wire transfer and other fees charged on these checking accounts.  StevenStephen L. Stenehjem, a member of the Company’s Board of Trustees and Audit Committee, is the President and Chief Executive Officer of First International, and the bank is owned by Mr. Stenehjem and members of his family.

NOTE 10 • ACQUISITIONS AND DISPOSITIONS IN FISCAL YEARS 20072009 AND 2006

2008

PROPERTY ACQUISITIONS

IRET Properties paid approximately $220.7$33.8 million for real estate properties added to its portfolio during fiscal 2007,year 2009, compared to $93.4$154.7 million in fiscal year 2008. Of the $33.8 million paid for real estate properties added to the Company’s portfolio in fiscal year 2009, approximately $3.7 million was paid in the form of limited partnership units of the Operating Partnership, with the remainder paid in cash.  Of the $154.7 million paid in fiscal 2006.year 2008, approximately $22.9 million consisted of the value of limited partnership units of the Operating Partnership and approximately $46.8 million consisted of the assumption of mortgage debt, with the remainder paid in cash. The fiscal 2007year 2009 and 20062008 additions are detailed below.



NOTE 10 • continued
Fiscal 2007 2009 (May 1, 20062008 to April 30, 2007)

2009)

Fiscal 2007 Acquisitions

(in thousands)

 

Acquisition Cost

Multi-Family Residential

 

 

192-unit Arbors Apartments – Sioux City, NE

$

7,000

154-unit Quarry Ridge Apartments – Rochester, MN

 

14,570

389-unit St. Cloud Apartments—St. Cloud, MN

 

7,800

120-unit Indian Hills Apartments—Sioux City, IA

 

3,120

72-unit Rum River Apartments—Isanti, MN

 

5,650

 

 

38,140

Commercial Property – Office

 

 

143,061 sq. ft. Pacific Hills – Omaha, NE

 

16,502

141,724 sq. ft. Corporate Center West – Omaha, NE

 

21,497

94,832 sq. ft. Farnam Executive Center – Omaha, NE

 

12,853

84,475 sq. ft. Miracle Hills One – Omaha, NE

 

11,950

60,942 sq. ft. Woodlands Plaza IV – Maryland Heights, MO

 

5,840

122,567 sq. ft. Riverport – Maryland Heights, MO

 

21,906

90,315 sq. ft. Timberlands – Leawood, KS

 

14,546

138,825 sq. ft. Flagship – Eden Prairie , MN

 

26,094

59,827 sq. ft. Gateway Corporate Center – Woodbury, MN

 

9,612

71,430 sq. ft. Highlands Ranch I – Highlands Ranch, CO

 

12,250

 

 

153,050

Commercial Property – Medical (including assisted living)

 

 

26,336 sq. ft. Fox River Cottages – Grand Chute, WI

 

3,200

10,796 sq. ft. St. Michael Clinic – St. Michael, MN*

 

2,587

 

 

5,787

2007 Annual Report F-18

Commercial Property – Industrial

 

 

100,850 sq. ft. Bloomington 2000 – Bloomington, MN

 

6,750

172,057 sq. ft. Roseville 2929 – Roseville, MN

 

10,300

 

 

17,050

Commercial Property – Retail

 

 

16,921 sq. ft. Dakota West Plaza – Minot, ND

 

625

14,820 sq. ft. Weston Walgreens – Weston, WI**

 

2,144

 

 

2,769

Unimproved Land

 

 

Monticello Unimproved Parcel (City) – Monticello, MN

 

5

St. Michaels Unimproved – St. Michael, MN

 

320

Monticello Unimproved Parcel (Other) – Monticello, MN

 

75

Weston Unimproved – Weston, WI

 

800

Quarry Ridge Unimproved – Rochester MN

 

930

Minot Prairie Green—Minot, ND

 

1,750

 

 

3,880

Total Fiscal 2007 Property Acquisitions

$

220,676


* Development property placed in service March 1, 2007.

**

  (in thousands) 
Acquisitions and Development Projects Placed in Service Land  Building  Intangible Assets  Acquisition Cost 
             
Multi-Family Residential            
33-unit Minot Westridge Apartments – Minot, ND $67  $1,887  $0  $1,954 
12-unit Minot Fairmont Apartments – Minot, ND  28   337   0   365 
4-unit Minot 4th Street Apartments – Minot, ND
  15   74   0   89 
3-unit Minot 11th Street Apartments – Minot, ND
  11   53   0   64 
36-unit Evergreen Apartments – Isanti, MN  380   2,720   0   3,100 
10-unit 401 S. Main Apartments – Minot, ND1
  0   905   0   905 
71-unit IRET Corporate Plaza Apartments – Minot, ND2
  0   10,824   0   10,824 
   501   16,800   0   17,301 
Commercial Property - Office                
22,500 sq. ft. Bismarck 715 E. Bdwy – Bismarck, ND  389   1,267   255   1,911 
50,360 sq. ft. IRET Corporate Plaza – Minot, ND2
  0   3,896   0   3,896 
   389   5,163   255   5,807 
Commercial Property - Medical                
56,239 sq. ft. 2828 Chicago Avenue – Minneapolis, MN3
  0   5,052   0   5,052 
31,643 sq. ft. Southdale Medical Expansion
(6545 France) –  Edina, MN4
  0   779   0   779 
   0   5,831   0   5,831 
Commercial Property - Industrial                
69,984 sq. ft. Minnetonka 13600 Cty Rd 62
– Minnetonka, MN
  809   2,881   310   4,000 
   809   2,881   310   4,000 
Unimproved Land                
Bismarck 2130 S. 12th Street – Bismarck, ND
  576   0   0   576 
Bismarck 700 E. Main – Bismarck, ND  314   0   0   314 
   890   0   0   890 
                 
Total Property Acquisitions $2,589  $30,675  $565  $33,829 

(1)  Development property placed in service November 10, 2008. Approximately $145,000 of this cost was incurred in the three months ended April 30, 2009.  Additional costs incurred in fiscal year 2008 totaled approximately $14,000 for a total project cost at April 30, 2009 of approximately $919,000.
(2)  Development property placed in service January 19, 2009.  Approximately $1.8 million of the residential cost and $563,000 of the commercial office cost was incurred in the three months ended April 30, 2009. Additional costs incurred in fiscal years 2008 and 2007 totaled $8.6 million for a total project cost at April 30, 2009 of $23.3 million.
(3)  Development property placed in service September 16, 2008. Approximately $800,000 of this cost was incurred in the three months ended January 31, 2009. Additional costs incurred in fiscal years 2008 and 2007 totaled $7.8 million for a total project cost at April 30, 2009 of $12.9 million.
(4)  Development property placed in service September 17, 2008. Approximately $364,000 of this cost was incurred in the three months ended January 31, 2009. Additional costs incurred in fiscal year 2008 totaled $5.4 million for a total project cost at April 30, 2009 of $6.2 million.



NOTE 10 • continued
Fiscal 2008 (May 1, 2006. 

In addition to the above property acquisitions, in the fourth quarter of fiscal year 2007 IRET Properties issued limited partnership units with a value at issuance of approximately $5.25 million to purchase an approximately 29% ownership interest in a limited liability company in which IRET already owned a 71% interest.  This entity owns the Southdale Medical Building in Edina, Minnesota, and with its acquisition of this remaining ownership interest, IRET now is the sole owner of this property.

Fiscal 2006 (May 1, 2005 to April 30, 20062008)

 

(in thousands)

Fiscal 2006 Acquisitions

Acquisition Cost

Multi-Family Residential

 

 

36-unit Legacy 7 - Grand Forks, ND

$

2,445

 

 

2,445

Commercial Property—Office

 

 

15,594 sq. ft. Spring Valley IV Office Building - Omaha, NE

 

1,250

23,913 sq. ft. Spring Valley V Office Building - Omaha, NE

 

1,375

24,000 sq. ft. Spring Valley X Office Building - Omaha, NE

 

1,275

24,000 sq. ft. Spring Valley XI Office Building - Omaha, NE

 

1,250

30,000 sq. ft. Brook Valley I Office Building - La Vista, NE

 

2,100

146,087 sq. ft. Northpark Corporate Center - Arden Hills, MN

 

18,597

 

 

25,847

Commercial Property—Medical (including assisted living)

 

 

74,112 sq. ft. Edgewood Vista - Bismarck, ND

 

10,750

60,161 sq. ft. Edgewood Vista - Spearfish, SD

 

6,687

82,535 sq. ft. Edgewood Vista - Brainerd, MN

 

10,625

160,485 sq. ft. Edgewood Vista - Hermantown, MN

 

12,315

50,409 sq. ft. Ritchie Medical Plaza - St. Paul, MN

 

10,750

54,971 sq. ft. 2800 Medical Building - Minneapolis, MN

 

9,000

47,950 sq. ft. Stevens Point - Stevens Point, WI

 

4,215

 

 

64,342

Unimproved Land

 

 

Stevens Point Unimproved - Stevens Point, WI

 

310

Eagan Unimproved Land - Eagan, MN

 

423

 

 

733

Total Fiscal 2006 Property Acquisitions

$

93,367


2007
  (in thousands) 
Acquisitions and Development Projects Placed in Service Land  Building  Intangible Assets  Acquisition Cost 
             
Multi-Family Residential            
96 – unit Greenfield Apartments – Omaha, NE $578  $4,122  $0  $4,700 
67 – unit Cottonwood Lake IV – Bismarck, ND1
  267   5,924   0   6,191 
   845   10,046   0   10,891 
Commercial Property – Office                
20,528 sq. ft. Plymouth 5095 Nathan Lane Office Building – Plymouth, MN  604   1,236   160   2,000 
78,560 sq. ft. 610 Business Center IV – Brooklyn Park, MN  975   5,525   0   6,500 
64,607 sq. ft. Intertech Office Building – Fenton, MO  2,130   3,951   919   7,000 
   3,709   10,712   1,079   15,500 
Commercial Property—Medical (including Senior Housing)                
18,502 sq. ft. Barry Pointe Medical Building – Kansas City, MO  384   2,355   461   3,200 
11,800 sq. ft./28 beds Edgewood Vista – Billings, MT  115   1,743   2,392   4,250 
18,488 sq. ft./36 beds Edgewood Vista – East Grand Forks, MN  290   1,346   3,354   4,990 
11,800 sq. ft./28 beds Edgewood Vista – Sioux Falls, SD  314   971   2,065   3,350 
55,478 sq. ft. Edina 6405 France Medical – Edina, MN2
  0   12,179   1,436   13,615 
70,934 sq. ft. Edina 6363 France Medical – Edina, MN2
  0   12,651   709   13,360 
57,212 sq. ft. Minneapolis 701 25th Ave Medical (Riverside) – Minneapolis, MN2
  0   7,225   775   8,000 
53,466 sq. ft. Burnsville 303 Nicollet Medical (Ridgeview) – Burnsville, MN  1,071   6,842   887   8,800 
36,199 sq. ft. Burnsville 305 Nicollet Medical (Ridgeview South) – Burnsville, MN  189   5,127   584   5,900 
17,640 sq. ft. Eagan 1440 Duckwood Medical – Eagan, MN  521   1,547   257   2,325 
5,192 sq. ft./13 beds Edgewood Vista – Belgrade, MT  35   744   1,321   2,100 
5,194 sq. ft./13 beds Edgewood Vista – Columbus, NE  43   793   614   1,450 
168,801 sq. ft./185 beds Edgewood Vista – Fargo, ND  792   20,578   4,480   25,850 
5,185 sq. ft./13 beds Edgewood Vista – Grand Island, NE  34   742   624   1,400 
5,135 sq. ft./13 beds Edgewood Vista – Norfolk, NE  42   691   567   1,300 
   3,830   75,534   20,526   99,890 
Commercial Property – Industrial                
50,400 sq. ft. Cedar Lake Business Center – St. Louis Park, MN  896   2,802   342   4,040 
528,353 sq. ft. Urbandale Warehouse Building – Urbandale, IA  3,679   9,840   481   14,000 
69,600 sq. ft. Woodbury 1865 Woodlane – Woodbury, MN  1,108   2,613   279   4,000 
198,600 sq. ft. Eagan 2785 & 2795 Highway 55—Eagan, MN  3,058   2,557   785   6,400 
   8,741   17,812   1,887   28,440 
                 
Total Property Acquisitions $17,125  $114,104  $23,492  $154,721 

(1)  Development property placed in service January 2, 2008.
(2)  Acquisition of leasehold interests only (air rights lease and ground leases).


NOTE 10 • continued

Property Dispositions

PROPERTY DISPOSITIONS
During fiscal year 2007, IRET Properties disposed of 142009, the Company had no material dispositions, compared to two properties and two parcelsbuildings of unimproved land for an aggregate sale price of $22.5 million, compared to 17 properties and two unimproved parcelsapartment community sold  for an aggregate sale price of $14.2$1.4 million in total during fiscal year 2006.2008. Real estate assets sold by IRET during fiscal years 2007 and 2006year 2008 were as follows:

 

(in thousands)

Fiscal 2007 Dispositions

Sales Price

Book Value
and Sales Cost

Gain/Loss

Multi-Family Residential

 

 

 

 

 

 

60-unit Clearwater Apartments – Boise, ID

$

4,000

$

3,413

$

587

122-unit Park East Apartments—Fargo, ND

 

6,188

 

4,476

 

1,712

 

 

10,188

 

7,889

 

2,299

Commercial Property – Office

 

 

 

 

 

 

5,640 sq. ft. Greenwood Office – Greenwood, MN

 

1,500

 

961

 

539

 

 

1,500

 

961

 

539

Commercial Property – Medical (Assisted Living)

 

 

 

 

 

 

29,408 sq. ft. Wedgewood Sweetwater – Lithia Springs, GA

 

4,550

 

3,836

 

714

 

 

4,550

 

3,836

 

714

Commercial Property – Retail

 

 

 

 

 

 

4,560 sq. ft. Moundsview Bakery – Mounds View, MN

 

380

 

287

 

93

3,571 sq. ft. Howard Lake C-Store – Winsted, MN

 

550

 

374

 

176

6,225 sq. ft. Wilmar Sam Goody – Wilmar, MN

 

450

 

409

 

41

3,571 sq. ft. Winsted C-Store – Winsted, MN

 

190

 

214

 

(24)

7,700 sq. ft. Buffalo Strip Center – Buffalo, MN

 

800

 

667

 

133

4,800 sq. ft. Glencoe C-Store—Glencoe, MN

 

350

 

344

 

6

5,216 sq. ft. Long Prairie C-Store – Long Prairie, MN

 

302

 

304

 

(2)

5,600 sq. ft. Faribault Checkers Auto – Faribault, MN

 

525

 

337

 

188

4,800 sq. ft. Paynesville C-Store – Paynesville, MN

 

149

 

150

 

(1)

6,800 sq. ft. Prior Lake Strip Center I – Prior Lake, MN

 

1,105

 

993

 

112

4,200 sq. ft. Prior Lake Strip Center III – Prior Lake, MN

 

545

 

465

 

80

 

 

5,346

 

4,544

 

802

Unimproved Land

 

 

 

 

 

 

IGH Land – Inver Grove Heights, MN

 

900

 

613

 

287

Long Prairie Unimproved Land – Long Prairie, MN

 

59

 

60

 

(1)

 

 

959

 

673

 

286

Total Fiscal 2007 Property Dispositions

$

22,543

$

17,903

$

4,640

 

 

(in thousands)

Fiscal 2006 Dispositions

Sales Price

Book Value
and Sales Cost

Gain/Loss

Commercial - Office

 

 

 

 

 

 

1,600 sq. ft. Greenwood Chiropractic - Greenwood, MN

$

490

$

345

$

145

 

 

 

 

 

 

 

Commercial – Retail

 

 

 

 

 

 

3,000 sq. ft. Centerville Convenience Store - Centerville, MN

 

340

 

324

 

16

4,800 sq. ft. East Bethel C-Store - East Bethel, MN

 

660

 

498

 

162

6,325 sq. ft. Lino Lake Strip Center - Lino Lakes, MN

 

650

 

462

 

188

8,400 sq. ft. IGH Strip Center - Inver Grove Heights, MN

 

1,280

 

940

 

340

46,720 sq. ft. Sleep Inn - Brooklyn Park, MN

 

3,350

 

2,990

 

360

7,993 sq. ft. Excelsior Strip Center - Excelsior, MN

 

965

 

891

 

74

3,000 sq. ft. Andover C-Store - Andover, MN

 

383

 

308

 

75

6,266 sq. ft. Oakdale Strip Center - Oakdale, MN

 

1,050

 

745

 

305

6,225 sq. ft. Rochester Auto - Rochester, MN

 

465

 

431

 

34

3,650 sq. ft. Lakeland C-Store - Lakeland, MN

 

610

 

436

 

174

2007 Annual Report F-20

Commercial – Retail - continue

 

 

 

 

 

 

4,000 sq. ft. Lindstrom C-Store - Lindstrom, MN

 

450

 

345

 

105

3,571 sq. ft. Mora C-Store - Mora, MN

 

380

 

296

 

84

3,000 sq. ft. Shoreview C-Store - Shoreview, MN

 

400

 

326

 

74

8,750 sq. ft. Blaine Strip Center - Blaine, MN

 

990

 

599

 

391

3,444 sq. ft. St. Louis Park Retail - St. Louis Park, MN

 

845

 

365

 

480

3,864 sq. ft. Mound Strip Center - Mound, MN

 

550

 

358

 

192

 

 

 

 

 

 

 

Unimproved Land

 

 

 

 

 

 

40,000 sq. ft. Centerville Unimproved Land - Centerville, MN

 

110

 

105

 

5

Andover Unimproved Land - Andover, MN

 

230

 

164

 

66

Total Fiscal 2006 Property Dispositions

$

14,198

$

10,928

$

3,270


  (in thousands) 
Fiscal 2008 Dispositions Sales Price  
Book Value
and Sales Cost
  Gain/Loss 
          
Multi-Family Residential         
405 Grant Ave (Lonetree) Apartments – Harvey, ND $185  $184  $1 
Sweetwater Apartments – Devils Lake, ND  940   430   510 
   1,125   614   511 
Commercial Property – Office            
Minnetonka Office Buildings – Minnetonka, MN  310   307   3 
   310   307   3 
Total Fiscal 2008 Property Dispositions $1,435  $921  $514 
NOTE 11 •OPERATING SEGMENTS

IRET reports its results in five reportable segments: multi-family residential properties, and commercial office, medical (including assisted living facilities)senior housing), industrial (including miscellaneous commercial properties) and retail properties.  Our reportable segments are aggregations of similar properties.  The accounting policies of each of these segments are the same as those described in Note 2. We disclose segment information in accordance with SFAS 131, Disclosures about Segments of an Enterprise and Related Disclosures (“SFAS 131”).  SFAS 131 requires that segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing segment performance.

IRET’s internal reporting system produces reports in which business activities are presented in a variety of ways.  Based on these reports, IRET management and our Board of Trustees evaluate the performance of our segments using a number of different metrics.  IRET has previously disclosed segment information using a measure we called “Segment Operating Profit,” which we defined as total revenues less property operating expenses and real estate taxes, with mortgage interest and depreciation/amortization related to real estate investments included in property operating expenses.  However, our management and Board also evaluate segment performance based upon operating income from the combined properties in each segment.  Net operating income is a key measurement of our segment profit and loss, and, beginning in the fourth quarter of fiscal year 2007, we now consider it our primary measurement of segment performance.  Ac cordingly, segment


Segment information in this report is presented based on net operating income, which we define as total revenues less property operating expenses and real estate taxes.  Prior year segment information has been revised for presentation based on net operating income. 

The following tables present revenues and net operating income for the fiscal years ended April 30, 2007, 20062009, 2008 and 20052007 from our five reportable segments, and reconcile net operating income of reportable segments to operating income before gain (loss) on sale of other investments and minority interest and discontinued operations as reported. Segment assets are also reconciled to Total Assets as reported in the consolidated financial statements.

 

(in thousands)

 Year Ended April 30, 2007

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

$

67,214

$

73,640

$

34,783

$

8,091

$

14,089

$

197,817

Real estate expenses

 

31,575

 

30,500

 

8,675

 

1,253

 

4,475

 

76,478

Net operating income

$

35,639

$

43,140

$

26,108

$

6,838

$

9,614

$

121,339

Interest

 

 

 

 

 

 

 

 

 

 

 

(58,450)

Depreciation/amortization

 

 

 

 

 

 

 

 

 

 

 

(45,563)

Administrative, advisory and trustee fees

 

 

 

 

 

 

 

 

 

(4,451)

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

(1,240)

Non-operating income

 

 

 

 

 

 

 

 

 

 

 

2,665

Income before minority interest and discontinued operations and gain on sale of other investments

$

14,300


2007
 (in thousands) 
Year Ended April 30, 2009Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Real estate revenue $76,716  $83,446  $52,564  $12,711  $14,568  $240,005 
Real estate expenses  36,162   37,644   16,046   3,222   5,077   98,151 
Net operating income $40,554  $45,802  $36,518  $9,489  $9,491   141,854 
Interest                      (68,743)
Depreciation/amortization                      (56,714)
Administrative, advisory and trustee fees                   (4,882)
Other expenses                      (1,440)
Impairment of real estate investment                   (338)
Other income                      922 
Income before gain (loss) on sale of other investments and minority interest and discontinued operations  $10,659 



NOTE 11 • continued

 

(in thousands)

 Year Ended April 30, 2006

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

$

61,906

$

57,523

$

31,670

$

6,372

$

12,977

$

170,448

Real estate expenses

 

29,850

 

23,602

 

8,314

 

1,252

 

3,944

 

66,962

Net operating income

$

32,056

$

33,921

$

23,356

$

5,120

$

9,033

$

103,486

Interest

 

 

 

 

 

 

 

 

 

 

 

(50,727)

Depreciation/amortization

 

 

 

 

 

 

 

 

 

 

 

(37,698)

Administrative, advisory and trustee fees

 

 

 

 

 

 

 

 

 

(3,894)

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

(1,269)

Non-operating income

 

 

 

 

 

 

 

 

 

 

 

1,240

Income before minority interest and discontinued operations and gain on sale of other investments

$

11,138

 

(in thousands)

 Year Ended April 30, 2005

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

$

58,702

$

48,604

$

25,424

$

6,459

$

13,748

$

152,937

Real estate expenses

 

27,449

 

19,481

 

6,178

 

1,224

 

3,521

 

57,853

Net operating income

$

31,253

$

29,123

$

19,246

$

5,235

$

10,227

$

95,084

Interest

 

 

 

 

 

 

 

 

 

 

 

(47,393)

Depreciation/amortization

 

 

 

 

 

 

 

 

 

 

 

(33,403)

Administrative, advisory and trustee fees

 

 

 

 

 

 

 

 

 

(3,947)

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

(1,407)

Non-operating income

 

 

 

 

 

 

 

 

 

 

 

986

Income before minority interest and discontinued operations and gain on sale of other investments

$

9,920

 (in thousands) 
Year Ended April 30, 2008Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Real estate revenue $72,827  $84,042  $38,412  $11,691  $14,198  $221,170 
Real estate expenses  34,637   36,206   9,756   2,529   4,277   87,405 
Net operating income $38,190  $47,836  $28,656  $9,162  $9,921   133,765 
Interest                      (63,439)
Depreciation/amortization                      (51,518)
Administrative, advisory and trustee fees                   (5,203)
Other expenses                      (1,344)
Other income                      2,760 
Income before gain (loss) on sale of other investments and minority interest and discontinued operations  $15,021 

 (in thousands) 
Year Ended April 30, 2007Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Real estate revenue $66,972  $73,603  $34,783  $8,091  $14,089  $197,538 
Real estate expenses  31,454   30,475   8,675   1,253   4,475   76,332 
Net operating income $35,518  $43,128  $26,108  $6,838  $9,614   121,206 
Interest                      (58,424)
Depreciation/amortization                      (45,501)
Administrative, advisory and trustee fees                   (4,451)
Other expenses                      (1,240)
Other income                      2,665 
Income before gain (loss) on sale of other investments and minority interest and discontinued operations  $14,255 
Segment Assets and Accumulated Depreciation

 

(in thousands)

As of April 30, 2007

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

 

 

 

 

 

 

 

 

 

 

 

Property owned

$

489,644

$

536,431

$

274,779

$

75,257

$

113,176

$

1,489,287

Less accumulated depreciation/amortization

 

(89,541)

 

(44,204)

 

(24,787)

 

(8,257)

 

(13,755)

 

(180,544)

Total property owned

$

400,103

$

492,227

$

249,992

$

67,000

$

99,421

$

1,308,743

Cash

 

 

 

 

 

 

 

 

 

 

 

44,516

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

2,048

Receivables and other assets

 

 

 

 

 

 

 

 

 

 

 

72,261

Unimproved land

 

 

 

 

 

 

 

 

 

 

 

7,392

Mortgage receivables

 

 

 

 

 

 

 

 

 

 

 

399

Total Assets

$

1,435,359

2007
 (in thousands) 
As of April 30, 2009Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Segment assets                  
Property owned $542,547  $571,565  $388,219  $108,103  $119,151  $1,729,585 
Less accumulated depreciation  (115,729)  (72,960)  (42,345)  (12,847)  (18,990)  (262,871)
Total property owned $426,818  $498,605  $345,874  $95,256  $100,161  $1,466,714 
Cash and cash equivalents                      33,244 
Marketable securities – available-for-sale                   420 
Receivables and other assets                      98,852 
Unimproved land                      5,701 
Mortgage receivables, net of allowance                      160 
Total Assets  $1,605,091 



NOTE 11 • continued

 

(in thousands)

As of April 30, 2006

Multi-Family Residential

Commercial-Office

Commercial-Medical

Commercial-Industrial

Commercial-Retail

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

 

 

 

 

 

 

 

 

 

 

 

Property owned

$

452,251

$

383,280

$

263,300

$

59,583

$

111,009

$

1,269,423

Less accumulated depreciation/amortization

 

(79,150)

 

(32,193)

 

(18,954)

 

(6,625)

 

(11,685)

 

(148,607)

Total property owned

$

373,101

$

351,087

$

244,346

$

52,958

$

99,324

$

1,120,816

Cash

 

 

 

 

 

 

 

 

 

 

 

17,485

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

2,402

Receivables and other assets

 

 

 

 

 

 

 

 

 

 

 

61,028

Unimproved land

 

 

 

 

 

 

 

 

 

 

 

5,175

Mortgage receivables

 

 

 

 

 

 

 

 

 

 

 

409

Total Assets

$

1,207,315

 

 (in thousands) 
As of April 30, 2008Multi-Family Residential  Commercial-Office  Commercial-Medical  Commercial-Industrial  Commercial-Retail  Total 
                   
Segment assets                  
Property owned $510,697  $556,712  $359,986  $104,060  $116,804  $1,648,259 
Less accumulated depreciation  (101,964)  (58,095)  (32,466)  (10,520)  (16,334)  (219,379)
Total property owned $408,733  $498,617  $327,520  $93,540  $100,470  $1,428,880 
Cash and cash equivalents                      53,481 
Marketable securities – available-for-sale                   420 
Receivables and other assets                      107,947 
Development in progress                      22,856 
Unimproved land                      3,901 
Mortgage receivables, net of allowance                      541 
Total Assets  $1,618,026 

NOTE 12 • DISCONTINUED OPERATIONS

SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, requires the Company to report in discontinued operations the results of operations of a property that has either been disposed of or is classified as held for sale. It also requires that any gains or losses from the sale of a property be reported in discontinued operations. There were no properties classified as held for sale as of April 30, 2007, 2006 or 2005.2009, 2008 and 2007. The following information shows the effect on net income, net of minority interest, and the gains or losses from the sale of properties classified as discontinued operations for the fiscal years ended April 30, 2007, 20062008 and 2005.

 

(in thousands)

 

2007

2006

2005

REVENUE

 

 

 

 

 

 

Real estate rentals

$

1,339

$

3,251

$

5,497

Tenant reimbursement

 

57

 

287

 

639

TOTAL REVENUE

 

1,396

 

3,538

 

6,136

OPERATING EXPENSE

 

 

 

 

 

 

Interest

 

389

 

900

 

1,535

Depreciation/amortization related to real estate investments

 

237

 

635

 

1,136

Utilities

 

156

 

218

 

433

Maintenance

 

191

 

336

 

518

Real estate taxes

 

161

 

417

 

633

Insurance

 

26

 

60

 

90

Property management expenses

 

104

 

213

 

382

Administrative expenses

 

2

 

1

 

1

Other operating expenses

 

9

 

25

 

28

Amortization related to non-real estate investments

 

0

 

0

 

8

Loss on impairment of real estate

 

640

 

409

 

570

TOTAL OPERATING EXPENSE

 

1,915

 

3,214

 

5,334

Operating (loss) income

 

(519)

 

324

 

802

Non-operating income

 

0

 

1

 

1

Income before minority interest and gain on sale

 

(519)

 

325

 

803

Minority interest

 

(1,070)

 

(809)

 

(2,135)

Gain on sale of discontinued operations

 

4,640

 

3,270

 

8,602

DISCONTINUED OPERATIONS, NET

$

3,051

$

2,786

$

7,270

Segment Data

 

 

 

 

 

 

Multi-Family Residential

$

1,745

$

57

$

3,122

Commercial - Office

 

397

 

55

 

(493)

Commercial - Medical

 

605

 

259

 

2,059

Commercial - Industrial

 

0

 

0

 

0

Commercial - Retail

 

170

 

2,383

 

2,601

Unimproved Land

 

134

 

32

 

(19)

Total

$

3,051

$

2,786

$

7,270

2007 Annual Report F-23

Property Sale Data

 

 

 

 

 

 

Sales price

$

22,543

$

14,198

$

48,906

Net book value and sales costs

 

17,903

 

10,928

 

40,304

Gain

$

4,640

$

3,270

$

8,602

2007. There were no sales of property classified as discontinued operations for the fiscal year ended April 30, 2009.

  (in thousands) 
  2008  2007 
REVENUE      
Real estate rentals $208  $1,609 
Tenant reimbursement  2   66 
TOTAL REVENUE  210   1,675 
EXPENSES        
Interest  0   415 
Depreciation/amortization related to real estate investments  47   299 
Utilities  35   205 
Maintenance  22   214 
Real estate taxes  28   202 
Insurance  4   31 
Property management expenses  22   132 
Administrative expenses  0   2 
Other expenses  0   9 
Impairment of real estate investment  0   640 
TOTAL EXPENSES  158   2,149 
Income before minority interest and gain on sale of discontinued operations  52   (474)
Minority interest portion of operating partnership income  (153)  (1,082)
Gain on sale of discontinued operations  514   4,640 
DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST $413  $3,084 
Segment Data        
Multi-Family Residential $415  $1,783 
Commercial - Office  (2)  392 
Commercial - Medical  0   605 
Commercial - Industrial  0   0 
Commercial - Retail  0   170 
Unimproved Land  0   134 
Total $413  $3,084 



NOTE 12 • continued
  (in thousands) 
  2008  2007 
Property Sale Data      
Sales price $1,435  $22,543 
Net book value and sales costs  921   17,903 
Gain on sale of discontinued operations $514  $4,640 
NOTE 13 • EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. The Company has no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings. While Units can be exchanged for shares on a one-for-one basis after a minimum holding period of one year, the exchange of Units for common shares has no effect on diluted earnings per share, as Unitholders and common shareholders effectively share equally in the net income of the Operating Partnership. The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the consolidated financial statements for the fiscal years ended April 30, 2007, 2006,2009, 2008 and 2005: 

 

For Years Ended April 30,

 

(in thousands, except per share data)

 

2007

2006

2005

NUMERATOR

 

 

 

 

 

 

Income from continuing operations

$

11,059

$

8,781

$

7,806

Discontinued operations

 

3,051

 

2,786

 

7,270

Net income

 

14,110

 

11,567

 

15,076

Dividends to preferred shareholders

 

(2,372)

 

(2,372)

 

(2,372)

Numerator for basic earnings per share – net income available to common shareholders

 

11,738

 

9,195

 

12,704

Minority interest portion of operating partnership income

 

4,299

 

2,705

 

3,873

Numerator for diluted earnings per share

$

16,037

$

11,900

$

16,577

DENOMINATOR

 

 

 

 

 

 

Denominator for basic earnings per share weighted average shares

 

47,672

 

45,717

 

43,214

Effect of dilutive securities convertible operating partnership units

 

17,017

 

13,329

 

12,621

Denominator for diluted earnings per share

 

64,689

 

59,046

 

55,835

Earnings per common share from continuing operations – basic and diluted

$

.18

$

.14

$

.13

Earnings per common share from discontinued operations – basic and diluted

 

.06

 

.06

 

.17

NET INCOME PER COMMON SHARE – BASIC & DILUTED

$

.24

$

.20

$

.30

 

2007:

  For Years Ended April 30, 
  (in thousands, except per share data) 
  2009  2008  2007 
NUMERATOR         
Income from continuing operations $8,526  $11,675  $11,026 
Discontinued operations  0   413   3,084 
Net income  8,526   12,088   14,110 
Dividends to preferred shareholders  (2,372)  (2,372)  (2,372)
Numerator for basic earnings per share – net income available to
common shareholders
  6,154   9,716   11,738 
Minority interest portion of operating partnership income  2,227   3,677   4,299 
Numerator for diluted earnings per share $8,381  $13,393  $16,037 
DENOMINATOR            
Denominator for basic earnings per share weighted average shares  58,603   53,060   47,672 
Effect of dilutive securities convertible operating partnership units  21,217   20,417   17,017 
Denominator for diluted earnings per share  79,820   73,477   64,689 
Earnings per common share from continuing operations – basic and diluted $.11  $.17  $.18 
Earnings per common share from discontinued operations –
basic and diluted
  .00   .01   .06 
NET INCOME PER COMMON SHARE – BASIC & DILUTED $.11  $.18  $.24 

NOTE 14 • RETIREMENT PLANS

IRET sponsors a defined contribution profit sharing retirement plan and a defined contribution 401(k) plan.  IRET’s defined contribution profit sharing retirement plan is available to employees over the age of 21 who have completed one year of service.  Participation in IRET’s defined contribution 401(k) plan is available to all employees over the age of 21 immediately upon their employment with the Company, and employees participating in the 401(k) plan may contribute up to maximum levels established by the IRS.  Employer contributions to the profit sharing and 401(k) plans are at the discretion of the Company’s management.  IRET currently contributes 4.5% of the salary of each employee participating in the profit sharing plan, and 3% of the salary of each employee participating in the 401(k) plan, for a total contribution of 7.5% of the salary of each of the employees participating in both plans. Contributions by IRET to these plans on behalf of employees totaled $257,783approximately $356,000 in fiscal year 2007, $217,5992009, $305,000 in fiscal year 20062008 and $204,141$258,000 in fiscal year 2005. 

2007.



NOTE 15 • COMMITMENTS AND CONTINGENCIES

Ground Leases. As of April 30, 2007,2009, the Company is a tenant under operating ground or air rights leases on eighteleven of its properties. The Company pays a total of approximately $283,000$503,000 per year in rent under these ground leases, which have remaining terms ranging from 74 to 9092 years, and expiration dates ranging from July 2012 to April 2095.October 2100. The Company has renewal options for threefive of the eighteleven ground leases, and rights of first offer or first refusal for the remainder.

2007 Annual Report F-24

NOTE 15 • continued

The expected timing of Ground Leaseground and air rights lease payments as of April 30, 20072009 is as follows:

Year Ended April 30, (in thousands)

 

Lease Payments

2008

$

283

2009

 

283

2010

 

283

2011

 

283

2012

 

283

Thereafter

 

16,670

Total

$

18,085

 

 (in thousands) 
Year Ended April 30,Lease Payments 
2010 $503 
2011  503 
2012  503 
2013  503 
2014  503 
Thereafter  23,565 
Total $26,080 
Legal Proceedings. IRET is involved in various lawsuits arising in the normal course of business. Management believes that such matters will not have a material effect on the Company’s financial statements.

Environmental Matters. It is generally IRET’s policy to obtain a Phase I environmental assessment of each property that the Company seeks to acquire.  Such assessments have not revealed, nor is the Company aware of, any environmental liabilities that IRET believes would have a material adverse effect on IRET’s financial position or results of operations. IRET owns properties that contain or potentially contain (based on the age of the property) asbestos or lead, or have underground fuel storage tanks. For certain of these properties, the Company estimated the fair value of the conditional asset retirement obligation in accordance with FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, or FIN 47, and chose not to book a liability, because the amounts involved were immaterial. With respect to certain other properties, the Company has not recorded any related asset retirement obligation, as the fair value of the liability c annotcannot be reasonably estimated, due to uncertainties in the timing and manner of settlement of these obligations.

Tenant Improvements.  In entering into leases with tenants, IRET may commit itself to fund improvements or build-outs of the rented space to suit tenant requirements.  These tenant improvements are typically funded at the beginning of the lease term, and IRET is accordingly exposed to some risk of loss if a tenant defaults prior to the expiration of the lease term, and the rental income that was expected to cover the cost of the tenant improvements is not received.  As of April 30, 2009, the Company is committed to fund approximately $7.1 million in tenant improvements, within approximately the next 12 months.
Purchase Options. The Company has granted options to purchase certain IRET properties to tenants in these properties, under lease agreements.  In general, the options grant the tenant the right to purchase the property at the greater of such property’s appraised value or an annual compounded increase of 2% to 2.5%a specified percentage of the initial cost of the property to IRET. The property cost and gross rental revenue of these properties are as follows:

 

(in thousands)

Property

Property Cost

Gross Rental Revenue

2007

2006

2005

Edgewood Vista - Bismarck, ND

$

10,868

$

980

$

653

$

0

Edgewood Vista - Brainerd, MN

 

10,634

 

968

 

645

 

0

Edgewood Vista - Duluth, MN

 

11,709

 

1,472

 

1,472

 

1,406

Edgewood Vista - Fremont, NE

 

552

 

68

 

62

 

59

Edgewood Vista - Hastings, NE

 

572

 

68

 

63

 

61

Edgewood Vista - Hermantown, MN

 

12,325

 

1,124

 

749

 

0

Edgewood Vista - Kalispell, MT

 

588

 

72

 

62

 

62

Edgewood Vista - Missoula, MT

 

962

 

132

 

120

 

120

Edgewood Vista - Omaha, NE

 

641

 

76

 

70

 

67

Edgewood Vista - Spearfish, SD

 

6,757

 

608

 

406

 

0

Edgewood Vista - Virginia, MN

 

12,182

 

1,320

 

1,320

 

1,320

Fox River Cottage - Grand Chute, WI

 

3,860

 

260

 

0

 

0

Great Plains Software - Fargo, ND

 

15,375

 

1,876

 

1,876

 

1,876

Healtheast - Woodbury & Maplewood, MN

 

21,601

 

2,032

 

2,032

 

2,032

Minnesota National Bank - Duluth, MN

 

2,104

 

135

 

100

 

189

St. Michael Clinic - St. Michael, MN

 

2,587

 

35

 

0

 

0

Stevens Point - Stevens Point, WI

 

12,504

 

630

 

102

 

0

Total

$

125,821

$

11,856

$

9,732

$

7,192



NOTE 15 • continued
  (in thousands) 
     Gross Rental Revenue 
Property Investment Cost  2009  2008  2007 
Abbott Northwest-Sartell, MN $12,653  $1,292  $1,292  $1,252 
Edgewood Vista-Belgrade, MT  2,135   196   31   0 
Edgewood Vista-Billings, MT  4,274   396   66   0 
Edgewood Vista-Bismarck, ND  10,903   1,008   985   980 
Edgewood Vista-Brainerd, MN  10,667   988   971   968 
Edgewood Vista-Columbus, NE  1,481   136   21   0 
Edgewood Vista-East Grand Forks, MN  5,012   464   78   0 
Edgewood Vista-Fargo, ND  26,322   2,065   310   0 
Edgewood Vista-Fremont, NE  588   72   69   68 
Edgewood Vista-Grand Island, NE  1,431   132   20   0 
Edgewood Vista-Hastings, NE  606   76   69   68 
Edgewood Vista-Hermantown I, MN  21,510   2,040   1,557   1,472 
Edgewood Vista-Hermantown II, MN  12,359   1,144   1,127   1,124 
Edgewood Vista-Kalispell, MT  624   76   72   72 
Edgewood Vista-Missoula, MT  999   96   132   132 
Edgewood Vista-Norfolk, NE  1,332   124   19   0 
Edgewood Vista-Omaha, NE  676   80   77   76 
Edgewood Vista-Sioux Falls, SD  3,357   312   52   0 
Edgewood Vista-Spearfish, SD  6,792   628   612   608 
Edgewood Vista-Virginia, MN  17,132   1,736   1,381   1,320 
Fox River Cottages - Grand Chute, WI  3,956   388   387   260 
Healtheast St John & Woodwinds- Maplewood & Woodbury, MN  21,601   2,052   2,032   2,032 
Great Plains - Fargo, ND  15,375   1,876   1,876   1,876 
Minnesota National Bank - Duluth, MN  2,104   211   205   135 
St. Michael Clinic - St. Michael, MN  2,851   240   229   35 
Stevens Point - Stevens Point, WI  15,020   1,356   1,279   630 
Total $201,760  $19,184  $14,949  $13,108 
Income Guarantees. In connection with its acquisition in April 2004 of a portfolio of properties located in and near Duluth, Minnesota, the Company received from the seller of the properties a guarantee, for five years from the closing date of the acquisition, of a specified minimum amount of annual net operating income, before debt service (principal and interest payments), from two of the properties included in the portfolio. As of April 30, 2007,2009, the Company has recorded a receivable for payment of $233,344approximately $215,000 under this guarantee.  Separately, in connection with

2007 Annual Report F-25

NOTE 15 • continued

its acquisition of Olympik Village Apartments, a multi-family residential property in Rochester, Minnesota, the Company received from the seller of the property a guarantee of 12.5% return on IRET’s equity or $150,000 per year whichever is greater, for a period of 24 months ending March 1, 2007. As of April 30, 2007, $192,131 was due under the Olympik Village income guarantee. 

Restrictions on Taxable Dispositions.  Approximately 129131 of ourthe Company’s properties, consisting of approximately 5.97.3 million square feet of our combined commercial segment’s properties and 4,0084,101 apartment units, are subject to restrictions on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties.  The real estate investment amount of these properties (net of accumulated depreciation) was approximately $765.5$862.3 million at April 30, 2007.2009.  The restrictions on taxable dispositions are effective for varying periods.  The terms of these agreements generally prevent us from selling the properties in taxable transactions.  We doThe Company does not believe that the agreements materially affect the conduct of ourits business or ourits decisions whether to dispose of restricted properties during the restriction period because wethe Company generally holdholds these and ourits other properties for investment purposes, rather than for sale.  Histori cally,Historically, however, where we havethe Company has deemed it to be in ourits shareholders’ best interests to dispose of restricted properties, we havethe Company has done so through transactions structured as tax-deferred transactions under Section 1031 of the Internal Revenue Code.

Redemption Value of UPREIT Units.  The limited partnership units (“UPREIT Units”) of the Company’s operating partnership, IRET Properties, are redeemable at the option of the holder for cash, or, at our option, for the Company’s common shares of beneficial interest on a one-for-one basis, after a minimum one-year holding period.  All UPREIT Units receive the same cash distributions as those paid on common shares.  UPREIT Units are redeemable for an amount of cash per Unit equal to the average of the daily market price of an IRET common share


NOTE 15 • continued
for the ten consecutive trading days immediately preceding the date of valuation of the Unit.  As of April 30, 2009 and 2008, the aggregate redemption value of the then-outstanding UPREIT Units of the operating partnership owned by limited partners was approximately $198.2 million and $218.3 million, respectively.
Joint Venture Buy/Sell Options.  Certain of our joint venture agreements contain buy/sell options in which each party under certain circumstances has the option to acquire the interest of the other party, but do not generally require that we buy our partners’ interests.  We have one joint venture which allows our unaffiliated partner, at its election, to require that we buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price.  In accordance with Statement of Accounting Standards No. 5, Accounting for Contingencies, we have not recorded a liability or the related asset that would result from the acquisition in connection with the above potential obligation because the probability of our unaffiliated partner requiring us to buy their interest is not currently determinable, and we are unable to estimate the amount of the payment required for that purpose.& nbsp;

Development Projects.  The Company has certain funding commitments under contracts for propertycompleted several development andor renovation projects. As of April 30, 2007, IRET’s funding commitments included the following: 

Stevens Point Assisted Living:  Duringprojects during fiscal year 2006,2009; these projects are included in the Acquisitions and Development Projects Placed in Service table in Note 10 above.  IRET purchased an existing senior housingcurrently is constructing a 24-unit apartment building in Lincoln, NE, to replace the building in its Thomasbrook apartment complex and adjoining vacant parcel of landdestroyed by fire in Stevens Point, Wisconsin.  IRET is committed to fundJuly 2008.  The construction of an expansion to the existing facility on the adjoining parcel of land, to be leased to the tenant of the existing senior housing complex.  The construction costs to be paid by IRET were capped at approximately $10.7 million.  Construction on this project began in May 2006 and was completed in June 2007.  As of April 30, 2007, IRET had funded approximately $7.7 million of the construction cost. 

Fox River Senior Living:  During fiscal year 2006, IRET purchased a partially-completed senior housing project and adjoining vacant land located in Grand Chute, Wisconsin.  IRET has committed to fund the completion of eight senior living villas and the construction of ten new senior living cottages.  The construction costs to be paid by IRET are capped at approximately $2.2 million.  Construction on this project began in August 2006 and is expected to be completed in the fall of 2007.  As of April 30, 2007, IRET had funded approximately $1.5 million of the construction cost. 

St. Michael Medical Clinic:  In July 2006, construction commenced on a medical clinic located on land owned by IRET in St. Michael, Minnesota.  IRET committed to fund approximately $2.8 million in project costs to construct this clinic.  The clinic was completed as scheduled in February 2007, with total costs to IRET of approximately $2.3 million.  IRET has also committed to construct an expansion to the clinic if requested to do so by the clinic’s tenant; the cost for the expansion project is capped at approximately $1.1 million. 

2828 Chicago Avenue Medical Building:  In fiscal year 2006, IRET purchased an approximately 55,000 square foot, five-story medical officeapartment building located in Minneapolis, Minnesota.  During fiscal year 2007, IRET committed to construct an approximately 56,000 square foot medical office building adjacent to the existing structure, and an adjoining parking ramp, with a planned project completion date of August 2008 and an

2007 Annual Report F-26

NOTE 15 • continued

estimated total project cost of $15.7 million.  Approximately 60% of this new medical office building has been pre-leased to an anchor tenant. 

Cottonwood Apartments:  During fiscal year 2007, the Company began construction of a multi-family residential property adjacent to three existing apartment buildings owned by the Company in Bismarck, North Dakota.  The 67-unit Cottonwood IV apartment complex is expected to cost approximately $6.1$2.2 million, of which $2.1 million will be covered by insurance.  The remaining cost not covered by insurance is due to construct, and is targeted for completionvarious property upgrades incorporated in the third quarterproject by IRET to modernize and enhance the marketability of fiscal year 2008.

the units being constructed.

Crosstown Circle Office Building, Eden Prairie, MN. The Company’s Crosstown Circle Office Building in Eden Prairie, Minnesota was acquired in October 2004 from Best Buy Company, which is leasing all but 7,500 square feet of the 185,000 square foot building under a master lease expiring September 30, 2010. Under the terms of the financing obtained by the Company for this building, the Company is obligated to fund a leasing reserve account in the event that a specified occupancy level is not met at the time the Best Buy master lease expires. The amount to be deposited in the leasing reserve account would be calculated by multiplying a specified amount per square foot by the difference between the specified occupancy level and the building’s actual occupied square feet. The maximum amount the Company would be required to deposit in such leasing reserve account is $4,625,000. Funds in the leasing reserve account would be released as leases for vacant space in the buildi ngbuilding are executed.

Pending Acquisitions and Dispositions. As of April 30, 2007, the Company has signed a purchase agreement for the acquisition of two office/warehouse properties, located in Minnesota, with, respectively, approximately 70,000 and 20,000 square feet of rentable space.  The Company has agreed to pay approximately $6 million for these properties, excluding closing costs.  These pending acquisitions are subject to various closing conditions and contingencies, and no assurance can be given that these transactions will be completed.Acquisition. Subsequent to its April 30, 2007 fiscal year end, in June 2007, the Company signed a lease with an anchor tenant committing the Company to construct an approximately 26,000 square foot addition to the Company’s existing Southdale Medical Building located in Edina, Minnesota.  The estimated cost of this expansion project is approximately $6.4 million, with an additional approximately $2 million in relocation, tenant improvement and leasing costs expected to be incurred to relocate tenants in the existing facility.  This proposed construction project is subject to various conditions and contingencies, and no assurance can be given that this project will be completed.  During the third quarter of fiscal year 2007, the tenant in four of the Company’s Edgewood Vista assisted living facilities, located in, respectively, Fremont, Nebraska; Hastings, Nebraska; Omaha, Nebraska and Kalispell, Montana, exercised its options to purchase these properties.  Under the terms of the options, the specified purchase price for each of these assisted living properties is the higher of the fair market value of the property as determined by an independent appraisal, or an annual compounded increase at 2.5% per year based on the purchase price paid by the Company for the property.  Also subsequent to its April 30, 20072009 fiscal year end, the Company signed a purchase agreement to acquire an agreement for the sale of anapproximately 42,180 square foot, single-tenant office showroom/warehouse building located in Minnetonka, Minneso ta,Iowa for $350,000 in cash and the issuance of limited partnership units of IRET Properties valued at $3.0 million, for a saletotal purchase price of approximately $345,000.  These$3.4 million.  This pending dispositions areacquisition is subject to various closing conditions and contingencies, and no assurances can be given that these transactionsthis transaction will be completed.

NOTE 16 • FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Mortgage LoanLoans Receivable. Fair values are based on the discounted value of future cash flows expected to be received for a loan using current rates at which similar loans would be made to borrowers with similar credit risk and the same remaining maturities. Terms are short term in nature and carrying value approximates the estimated fair value.

Cash and Cash Equivalents. The carrying amount approximates fair value because of the short maturity.

Marketable Securities. The fair values of these instruments are estimated based on quoted market prices for the security.

Notes Payable. The carrying amount approximates fair value because of the short maturity of such notes.

2007 Annual Report F-27

NOTE 16 • continued

Other Debt. The fair value of other debt is estimated based on the discounted cash flows of the loan using current market rates.

Mortgages Payable. For variable rate loans that re-price 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 at financial institutions with similar remaining maturities.



NOTE 16 • continued
The estimated fair values of the Company’s financial instruments as of April 30, 20072009 and 2006,2008, are as follows:

 

(in thousands)

 

2007

2006

 

Carrying Amount

Fair Value

Carrying Amount

Fair Value

FINANCIAL ASSETS

 

 

 

 

 

 

 

 

Mortgage loans receivable

$

399

$

399

$

409

$

409

Cash and cash equivalents

 

44,516

 

44,516

 

17,485

 

17,485

Marketable securities - available-for-sale

 

2,048

 

2,048

 

2,402

 

2,402

FINANCIAL LIABILITIES

 

 

 

 

 

 

 

 

Notes payable

$

0

$

0

$

3,500

$

3,500

Other debt

 

146

 

148

 

233

 

234

Mortgages payable

 

951,139

 

944,843

 

765,890

 

761,831

Investment certificates issued

 

11

 

11

 

2,451

 

2,444

 

  (in thousands) 
  2009  2008 
  Carrying Amount  Fair Value  Carrying Amount  Fair Value 
FINANCIAL ASSETS            
Mortgage loans receivable $160  $160  $541  $541 
Cash and cash equivalents  33,244   33,244   53,481   53,481 
Marketable securities - available-for-sale  420   420   420   420 
FINANCIAL LIABILITIES                
Other debt  1,000   1,129   73   74 
Mortgages payable  1,070,158   1,301,071   1,063,858   1,079,986 
NOTE 17 • COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST AND SHAREHOLDERS’EQUITY

Distribution Reinvestment and Share Purchase Plan.  During fiscal years 20072009 and 2006,2008, IRET issued 1.3 million and 1.2 million common shares, respectively, pursuant to its distribution reinvestment and share purchase plan, at a total value at issuance of $12.4 million and $11.4 million, respectively. The shares issued under the distribution reinvestment and $11.1share purchase plan during fiscal year 2009 consisted of 1.2 million respectively.shares valued at issuance at $11.4 million that were issued for reinvested distributions and approximately 108,000 shares valued at $1.0 million at issuance that were sold for  voluntary cash contributions. All the shares issued under the distribution reinvestment plan during fiscal year 2008 were issued for reinvested distributions. IRET’s distribution reinvestment plan is available to common shareholders of IRET and all limited partners of IRET Properties. Under the distribution reinvestment plan, shareholders or limited partners may elect to have all or a portion of their distributions used to purchase additional IRET common shares. 

shares, and may elect to make voluntary cash contributions for the  purchase of IRET common shares, at a discount (currently 5%) from the market price.

Conversion of Units to Common Shares.  During fiscal years 20072009 and 2006,2008, respectively, 0.4 millionapproximately 746,000 and 0.51.1 million Units were converted to common shares, with a total value of $3.4$5.0 million and $4.0$7.8 million included in shareholders’ equity.

Issuance of Common Shares.  During fiscal year 2005, in May 2004,In April 2009, the Company concludedcommenced the sale of up to $50 million of common shares pursuant to a “best efforts”continuous offering program. Through April 30, 2009, the Company sold 632,712 common shares as part of this program. The net proceeds (before offering expenses but after underwriting discounts and commissions) from the offering of $6.0 million through April 30, 2009 will be used for general corporate purposes. Through April 30, 2009, the Company paid Robert W. Baird & Co. Incorporated, its agent under which approximately .2this program, $122,000 in fees with respect to the common shares sold through this program. In October 2007, the Company sold 6.9 million common shares were sold, at $10.10$10.20 per share in an underwritten public offering, for grossnet proceeds to the Company of approximately $2.6$66.4 million, beforeafter payment of commissions of six percent per share to the broker-dealers selling the shares, and before payment of other expenses of the offering.

The Company conducted no public offerings of common shares in fiscal year 2007, other than sales of common shares under its Distribution Reinvestment Plan.

Series A Cumulative Redeemable Preferred Shares of Beneficial Interest.  During fiscal year 2004, the Company issued 1,150,000 shares of 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest for total proceeds of $27.3 million, net of selling costs. Holders of the Company’s Series A Cumulative Redeemable Preferred Shares of Beneficial Interest are entitled to receive dividends at an annual rate of 8.25% of the liquidation preference of $25 per share, or $2.0625 per share per annum. These dividends are cumulative and payable quarterly in arrears. The shares are not convertible into or exchangeable for any other property or any other securities of the Company at the election of the holders. However, on or after April 26, 2009 (or sooner, under limited circumstances), the Company, at its option, may redeem the shares at a redemption price of $25.00 per share, plus any accrued and unpaid distributions through the date of redemption. The shares have no maturity date and will remain outstanding indefinitely unless redeemed by the Company.



NOTE 18 • QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)

 

(in thousands, except per share data)

QUARTER ENDED

July 31, 2006

October 31, 2006

January 31, 2007

April 30, 2007

Revenues

$

44,785

$

48,962

$

51,372

$

52,698

Operating Income

$

2,659

$

2,111

$

3,340

$

3,525

Net Income available to common shareholders

$

2,520

$

2,915

$

2,861

$

3,442

Net Income per common share - basic & diluted

$

.05

$

.06

$

.06

$

.07

 

 

(in thousands, except per share data)

QUARTER ENDED

July 31, 2005

October 31, 2005

January 31, 2006

April 30, 2006

Revenues

$

41,177

$

43,153

$

42,772

$

43,346

Operating Income

$

1,819

$

2,908

$

2,445

$

2,726

Net Income available to common shareholders

$

1,079

$

1,980

$

1,728

$

4,408

Net Income per common share - basic & diluted

$

.02

$

.04

$

.04

$

.10

 

  (in thousands, except per share data) 
QUARTER ENDED July 31, 2008  October 31, 2008  January 31, 2009  April 30, 2009 
Revenues $58,846  $59,573  $60,934  $60,652 
Net Income available to common shareholders $1,765  $1,930  $785  $1,674 
Net Income per common share - basic & diluted $.03  $.03  $.02  $.03 

  (in thousands, except per share data) 
QUARTER ENDED July 31, 2007  October 31, 2007  January 31, 2008  April 30, 2008 
Revenues $53,573  $54,211  $54,424  $58,962 
Net Income available to common shareholders $2,388  $2,243  $2,390  $2,695 
Net Income per common share - basic & diluted $.05  $.04  $.04  $.05 
The above financial information is unaudited. In the opinion of management, alladjustments (which are of a normal recurring nature) have been included for afair presentation.

NOTE 19 • SUBSEQUENT EVENTS

Common and Preferred Share Distributions. On July 2, 2007,June 30, 2009, the Company paid a distribution of 51.56 cents per share on the Company’s Series A Cumulative Redeemable Preferred Shares to preferred shareholders of record on June 15, 2007, and2009. On July 1, 2009, the Company paid a distribution of 16.6517.05 cents per share on the Company’s common shares and units, to common shareholders and Unitholders of record on June 15, 2007.2009. This common share/unit distribution represented an increase of .05 cents or 0.3% over the previous regular quarterly distribution of 16.6017.00 cents per common share/unit paid April 2, 2007. 

Closed Acquisitions1, 2009.

Common Share Offering.  Subsequent to the fourth quarter of fiscal year 2009, IRET completed a public offering of 3,000,000 common shares of beneficial interest at $8.70 per share (before underwriting discounts and commissions).  Proceeds to the Company were $24,795,000 after deducting underwriting discounts and commissions but before deducting offering expenses.  The shares were sold pursuant to an Underwriting Agreement with Robert W. Baird & Co., Incorporated, D.A. Davidson & Co. and J.J.B. Hilliard, W.L. Lyons, Inc., and were issued pursuant to IRET’s registration statement on Form S-3 filed with and declared effective by the Securities and Exchange Commission.
Pending Acquisition.  The Company currently has no material pending acquisitions. In the fourth quarter of fiscal year 2009, IRET signed a purchase agreement to acquire a portfolio of office and retail properties located in the Minneapolis-St. Paul metropolitan area for a total of $29.7 million.  The Company subsequently terminated this purchase agreement.  Subsequent to its April 30, 20072009 fiscal year end, in May 2007, the Company closed on itssigned a purchase of the two-story,agreement to acquire an approximately 18,50042,180 square foot, Barry Pointe medicalsingle-tenant office building in Kansas City, Missouri.  The Company paid approximately $3.2 million for this property, excluding closing costs.  In June 2007, the Company closed on its acquisition of the two-story, approximately 50,400 square foot Cedar Lake Business Center in St. Louis Park, Minnesota.  The Company paid approximately $4.04 million, excluding closing costs, for this office/showroom/warehouse property.  Also in June 2007, the Company completed its acquisition of a one-story office/warehouse propertybuilding located in Urbandale, Iowa. The Company paid approximately $14 million excluding closing costs (approximately $4.25 million of which purchase price consisted ofIowa for $350,000 in cash and the issuance of UPREIT Units),limited partnership units of IRET Properties valued at $3.0 million, for a total purchase price of $3.4 million.  This pending acquisition is subject to various closing conditions and contingencies, and no assurances can be given that this approximately 519,813 square foot building. 

transaction will be completed.

2007
2009 Annual ReportF-29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the BoardTable of Trustees and Shareholders ofContents


Investors Real Estate Trust
Minot, North Dakota 

We have audited the consolidated financial statements of Investors Real Estate Trust and subsidiaries (the “Company”) as of April 30, 2007 and 2006, and for each of the three fiscal years in the period ended April 30, 2007, management's assessment of the effectiveness of the Company's internal control over financial reporting as of April 30, 2007, and the effectiveness of the Company's internal control over financial reporting as of April 30, 2007, and have issued our reports thereon dated July 13, 2007; such reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedules of the Company listed in the table of contents to the consolidated financial statements. These consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. 

/s/ DELOITTE & TOUCHE LLP 

Minneapolis, Minnesota
July 13, 2007

2007 Annual Report F-30

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2007

2009

Schedule II

VALUATION AND QUALIFYING ACCOUNTS

 

(in thousands)

 

Column A

 

Column B

 

Column C

 

Column E

Description

 

Balance at Beginning of Year

 

Additions Charged Against Operations

 

Uncollectible Accounts Written-off

 

Balance at End of Year

Fiscal Year Ended April 30, 2007
Allowance for doubtful accounts

$

725

$

507

$

(322)

$

910

Fiscal Year Ended April 30, 2006
Allowance for doubtful accounts

$

725

$

230

$

(230)

$

725

Fiscal Year Ended April 30, 2005
Allowance for doubtful accounts

$

475

$

438

$

(188)

$

725

2007
  (in thousands) 
  Column A  Column B  Column C  Column E 
Description Balance at Beginning of Year  Additions Charged Against Operations  Uncollectible Accounts Written-off  Balance at End of Year 
Fiscal Year Ended April 30, 2009
Allowance for doubtful accounts
 $1,264  $2,472  $(2,605) $1,131 
Fiscal Year Ended April 30, 2008
Allowance for doubtful accounts
 $910  $1,060  $(706) $1,264 
Fiscal Year Ended April 30, 2007
Allowance for doubtful accounts
 $725  $507  $(322) $910 


2009 Annual Report F-31

F-30

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Multi-Family Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17 S Main Apartments - Minot, ND

$

0

$

0

$

0

$

216

$

0

$

216

$

216

$

(3)

 

2006

40 years

405 Grant Avenue (Lonetree) - Harvey, ND

 

0

 

14

 

156

 

103

 

20

 

253

 

273

 

(95)

 

1990

24-40 years

408 1st Street SE - Minot, ND

 

0

 

10

 

35

 

3

 

12

 

36

 

48

 

(36)

 

1986

40 years

Applewood On The Green - Omaha, NE

 

7,039

 

706

 

9,588

 

2,290

 

889

 

11,695

 

12,584

 

(1,754)

 

2001

40 years

Arbors Apts - S Sioux City, NE

 

4,386

 

350

 

6,625

 

341

 

360

 

6,956

 

7,316

 

(149)

 

2006

40 years

Boulder Court - Eagan, MN

 

4,434

 

1,067

 

5,498

 

610

 

1,227

 

5,948

 

7,175

 

(581)

 

2003

40 years

Brookfield Village Apartments - Topeka, KS

 

5,034

 

509

 

6,698

 

597

 

569

 

7,235

 

7,804

 

(661)

 

2003

40 years

Candlelight Apartments - Fargo, ND

 

1,459

 

80

 

758

 

958

 

210

 

1,586

 

1,796

 

(561)

 

1992

24-40 years

Canyon Lake Apartments - Rapid City, SD

 

2,797

 

305

 

3,958

 

108

 

324

 

4,047

 

4,371

 

(582)

 

2001

40 years

Castle Rock - Billings, MT

 

3,507

 

736

 

4,864

 

979

 

816

 

5,763

 

6,579

 

(1,256)

 

1998

40 years

Chateau Apartments - Minot, ND

 

1,864

 

122

 

2,224

 

771

 

167

 

2,950

 

3,117

 

(650)

 

1998

12-40 years

Colonial Villa - Burnsville, MN

 

8,867

 

2,401

 

11,515

 

1,540

 

2,603

 

12,853

 

15,456

 

(1,233)

 

2003

40 years

Colton Heights Properties - Minot, ND

 

588

 

80

 

734

 

228

 

108

 

934

 

1,042

 

(582)

 

1984

40 years

Cottonwood Lake I - Bismarck, ND

 

2,474

 

264

 

3,982

 

406

 

291

 

4,361

 

4,652

 

(1,014)

 

1997

40 years

Cottonwood Lake II - Bismarck, ND

 

2,601

 

264

 

3,341

 

802

 

313

 

4,094

 

4,407

 

(990)

 

1997

40 years

Cottonwood Lake III - Bismarck, ND

 

2,441

 

264

 

4,125

 

452

 

300

 

4,541

 

4,841

 

(781)

 

1997

40 years

Country Meadows I - Billings, MT

 

3,481

 

246

 

4,005

 

109

 

259

 

4,101

 

4,360

 

(964)

 

1995

33-40 years

Country Meadows II - Billings, MT

 

2,140

 

246

 

3,804

 

452

 

260

 

4,242

 

4,502

 

(771)

 

1995

40 years

Crestview Apartments - Bismarck, ND

 

4,343

 

235

 

4,290

 

649

 

435

 

4,739

 

5,174

 

(1,708)

 

1994

24-40 years

Crown Colony Apartments - Topeka, KS

 

6,708

 

620

 

9,956

 

970

 

708

 

10,838

 

11,546

 

(2,109)

 

1999

40 years

Dakota Hill At Valley Ranch - Irving, TX

 

23,528

 

3,650

 

33,810

 

1,801

 

3,844

 

35,417

 

39,261

 

(6,458)

 

2000

40 years

East Park Apartments - Sioux Falls, SD

 

1,646

 

115

 

2,405

 

284

 

152

 

2,652

 

2,804

 

(347)

 

2002

40 years

Forest Park Estates - Grand Forks, ND

 

6,550

 

810

 

5,579

 

2,859

 

1,054

 

8,194

 

9,248

 

(2,715)

 

1993

24-40 years

Heritage Manor - Rochester, MN

 

4,933

 

403

 

6,968

 

981

 

411

 

7,941

 

8,352

 

(1,820)

 

1998

40 years

Indian Hills Apartments - Sioux City, IA

 

0

 

294

 

2,921

 

17

 

294

 

2,938

 

3,232

 

(9)

 

2007

40 years

Jenner Properties - Grand Forks, ND

 

1,698

 

184

 

1,514

 

463

 

263

 

1,898

 

2,161

 

(491)

 

1997

40 years

Kirkwood Manor - Bismarck, ND

 

2,033

 

449

 

2,725

 

944

 

517

 

3,601

 

4,118

 

(953)

 

1997

12-40 years

Lancaster Place - St. Cloud, MN

 

1,338

 

289

 

2,899

 

536

 

383

 

3,341

 

3,724

 

(643)

 

2000

40 years

Legacy Buildings I & II - Grand Forks, ND

 

5,002

 

467

 

6,219

 

835

 

709

 

6,812

 

7,521

 

(1,842)

 

1995

24-40 years

Legacy Building III - Grand Forks, ND

 

2,660

 

233

 

3,263

 

505

 

311

 

3,690

 

4,001

 

(841)

 

1995

24-40 years

Legacy Building IV - Grand Forks, ND

 

4,374

 

252

 

5,102

 

1,525

 

427

 

6,452

 

6,879

 

(1,206)

 

1996

40 years

Legacy Building V - Grand Forks, ND

 

1,914

 

137

 

1,973

 

768

 

144

 

2,734

 

2,878

 

(177)

 

2004

40 years

Legacy Building VI - Grand Forks, ND

 

2,006

 

137

 

2,463

 

420

 

144

 

2,876

 

3,020

 

(163)

 

2005

40 years

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Multi-Family Residential                          
17 South Main Apartments - Minot, ND $198  $0  $0  $222  $0  $222  $222  $(16)200640 years
401 South Main Apartments - Minot, ND  693   158   334   791   164   1,119   1,283   (17)198724-40 years
Arbors Apartments - S Sioux City, NE  4,272   350   6,625   577   373   7,179   7,552   (556)200640 years
Boulder Court - Eagan, MN  4,075   1,067   5,498   1,381   1,272   6,674   7,946   (989)200340 years
Brookfield Village Apartments - Topeka, KS  5,667   509   6,698   774   579   7,402   7,981   (1,072)200340 years
Candlelight Apartments - Fargo, ND  1,392   80   758   1,025   216   1,647   1,863   (667)199224-40 years
Canyon Lake Apartments - Rapid City, SD  2,702   305   3,958   321   325   4,259   4,584   (808)200140 years
Castle Rock - Billings, MT  7,101   736   4,864   1,228   834   5,994   6,828   (1,623)199840 years
Chateau Apartments - Minot, ND  1,802   122   2,224   1,092   168   3,270   3,438   (847)199812-40 years
Cimarron Hills - Omaha, NE  0   706   9,588   2,920   997   12,217   13,214   (2,555)200140 years
Colonial Villa - Burnsville, MN  8,149   2,401   11,515   2,143   2,633   13,426   16,059   (2,035)200340 years
Colton Heights Properties - Minot, ND  548   80   672   247   111   888   999   (578)198440 years
Cottonwood Community - Bismarck, ND  16,460   1,056   17,372   2,186   1,255   19,359   20,614   (3,714)199740 years
Country Meadows Community - Billings, MT  5,345   491   7,809   722   518   8,504   9,022   (2,171)199533-40 years
Crestview Apartments - Bismarck, ND  4,240   235   4,290   806   449   4,882   5,331   (2,015)199424-40 years
Crown Colony Apartments - Topeka, KS  8,800   620   9,956   1,452   725   11,303   12,028   (2,720)199940 years
Dakota Hill At Valley Ranch - Irving, TX  22,730   3,650   33,810   2,247   4,139   35,568   39,707   (8,364)200040 years
East Park Apartments - Sioux Falls, SD  1,591   115   2,405   527   155   2,892   3,047   (530)200240 years
Evergreen Apartments - Isanti, MN  2,155   380   2,720   50   380   2,770   3,150   (43)200840 years
Forest Park Estates - Grand Forks, ND  6,178   810   5,579   3,718   1,081   9,026   10,107   (3,292)199324-40 years
Greenfield Apartments - Omaha, NE  3,650   578   4,122   231   616   4,315   4,931   (145)200740 years
Heritage Manor - Rochester, MN  4,714   403   6,968   1,452   442   8,381   8,823   (2,309)199840 years
Indian Hills Apartments - Sioux City, IA  0   294   2,921   2,424   314   5,325   5,639   (190)200740 years
IRET Corporate Plaza Apartments - Minot, ND  0   1,038   0   15,917   1,038   15,917   16,955   (108)200940 years
Jenner Properties - Grand Forks, ND  1,624   184   1,513   771   266   2,202   2,468   (631)199740 years
Kirkwood Manor - Bismarck, ND  1,925   449   2,725   1,232   537   3,869   4,406   (1,191)199712-40 years
Lancaster Place - St. Cloud, MN  1,172   289   2,899   721   432   3,477   3,909   (877)200040 years
Legacy Community - Grand Forks, ND  17,393   1,362   21,727   4,582   1,957   25,714   27,671   (5,732)1995-200424-40 years
Magic City Apartments - Minot, ND  2,706   370   3,875   1,503   511   5,237   5,748   (1,560)199712-40 years
Meadows Community - Jamestown, ND  2,809   590   4,519   975   629   5,455   6,084   (1,233)199840 years
Minot 4th Street Apartments - Minot, ND  99   15   74   0   15   74   89   (2)200840 years
Minot 11th Street Apartments - Minot, ND  99   11   53   1   11   54   65   (1)200840 years

2009 Annual Report F-32F-31

Table of Contents


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Multi-Family Residential - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Building VII - Grand Forks, ND

$

1,930

$

137

$

2,707

$

53

$

141

$

2,756

$

2,897

$

(134)

 

2005

40 years

Magic City Apartments - Minot, ND

 

2,904

 

370

 

3,875

 

1,352

 

504

 

5,093

 

5,597

 

(1,242)

 

1997

12-40 years

Meadows Phase I - Jamestown, ND

 

929

 

56

 

1,635

 

184

 

78

 

1,797

 

1,875

 

(347)

 

1998

40 years

Meadows Phase II - Jamestown, ND

 

929

 

56

 

1,429

 

472

 

61

 

1,896

 

1,957

 

(343)

 

1998

40 years

Meadows Phase III - Jamestown, ND

 

1,048

 

478

 

1,454

 

284

 

484

 

1,732

 

2,216

 

(261)

 

2000

40 years

Miramont Apartments - Fort Collins, CO

 

11,445

 

1,470

 

12,765

 

1,010

 

1,533

 

13,712

 

15,245

 

(3,633)

 

1996

40 years

Monticello Apartments - Monticello, MN

 

3,253

 

490

 

3,756

 

179

 

575

 

3,850

 

4,425

 

(317)

 

2004

40 years

Neighborhood Apartments - Colorado Springs, CO

 

10,314

 

1,034

 

9,812

 

2,147

 

1,136

 

11,857

 

12,993

 

(3,139)

 

1997

40 years

North Pointe - Bismarck, ND

 

2,158

 

144

 

2,244

 

104

 

155

 

2,337

 

2,492

 

(675)

 

1995

24-40 years

Oakmont Apartments - Sioux Falls, SD

 

3,852

 

423

 

4,838

 

112

 

429

 

4,944

 

5,373

 

(642)

 

2002

40 years

Oakwood - Sioux Falls, SD

 

3,609

 

543

 

2,784

 

3,085

 

744

 

5,668

 

6,412

 

(1,902)

 

1993

40 years

Olympic Village - Billings, MT

 

7,879

 

1,164

 

10,441

 

1,197

 

1,384

 

11,418

 

12,802

 

(2,013)

 

2000

40 years

Olympik Village Apartments - Rochester, MN

 

5,164

 

1,034

 

6,109

 

283

 

1,051

 

6,375

 

7,426

 

(351)

 

2005

40 years

Oxbow - Sioux Falls, SD

 

3,933

 

404

 

3,152

 

1,915

 

466

 

5,005

 

5,471

 

(1,542)

 

1994

24-40 years

Park Meadows I - Waite Park, MN

 

2,735

 

381

 

3,033

 

1,231

 

480

 

4,165

 

4,645

 

(1,590)

 

1997

40 years

Park Meadows II - Waite Park, MN

 

7,269

 

762

 

6,066

 

2,356

 

941

 

8,243

 

9,184

 

(2,172)

 

1997

40 years

Pebble Springs - Bismarck, ND

 

374

 

7

 

748

 

66

 

34

 

787

 

821

 

(159)

 

1999

40 years

Pinecone Apartments - Fort Collins, CO

 

10,112

 

905

 

12,105

 

1,173

 

1,001

 

13,182

 

14,183

 

(3,932)

 

1995

40 years

Pinehurst Apartments - Billings, MT

 

450

 

72

 

687

 

53

 

74

 

738

 

812

 

(98)

 

2002

40 years

Pointe West - Rapid City, SD

 

2,985

 

240

 

3,538

 

945

 

301

 

4,422

 

4,723

 

(1,479)

 

1994

24-40 years

Prairie Winds Apartments - Sioux Falls, SD

 

1,590

 

144

 

1,816

 

272

 

207

 

2,025

 

2,232

 

(733)

 

1993

24-40 years

Prairiewood Meadows - Fargo, ND

 

2,625

 

280

 

2,531

 

687

 

334

 

3,164

 

3,498

 

(548)

 

2000

40 years

Quarry Ridge Apartments - Rochester, MN

 

13,047

 

1,312

 

13,362

 

14

 

1,313

 

13,375

 

14,688

 

(209)

 

2006

40 years

Ridge Oaks - Sioux City, IA

 

2,703

 

178

 

4,073

 

871

 

243

 

4,879

 

5,122

 

(959)

 

2001

40 years

Rimrock Apartments - Billings, MT

 

2,305

 

330

 

3,489

 

317

 

337

 

3,799

 

4,136

 

(754)

 

1999

40 years

Rocky Meadows - Billings, MT

 

3,275

 

656

 

5,726

 

619

 

741

 

6,260

 

7,001

 

(1,698)

 

1995

40 years

Rum River Apartments - Isanti, MN

 

0

 

848

 

4,818

 

0

 

848

 

4,818

 

5,666

 

(5)

 

2007

40 years

St. Cloud Student Housing - St. Cloud, MN

 

2,748

 

1,170

 

6,688

 

1

 

1,170

 

6,689

 

7,859

 

(35)

 

2007

40 years

Sherwood Apartments - Topeka, KS

 

10,063

 

1,150

 

14,684

 

1,372

 

1,386

 

15,820

 

17,206

 

(3,083)

 

1999

40 years

Southbrook & Mariposa - Topeka, KS

 

3,286

 

399

 

5,110

 

131

 

415

 

5,225

 

5,640

 

(314)

 

2004

40 years

South Pointe - Minot, ND

 

9,755

 

550

 

9,548

 

781

 

686

 

10,193

 

10,879

 

(2,822)

 

1995

24-40 years

Southview Apartments - Minot, ND

 

782

 

185

 

469

 

190

 

215

 

629

 

844

 

(208)

 

1994

24-40 years

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Multi-Family Residential - continued
                          
Minot Fairmont Apartments - Minot, ND $396  $28  $337  $2  $28  $339  $367  $(8)200840 years
Minot Westridge Apartments - Minot, ND  1,981   68   1,887   16   70   1,901   1,971   (46)200840 years
Miramont Apartments - Fort Collins, CO  10,944   1,470   12,765   1,207   1,580   13,862   15,442   (4,368)199640 years
Monticello Apartments - Monticello, MN  3,145   490   3,756   287   592   3,941   4,533   (537)200440 years
Neighborhood Apartments - Colorado Springs, CO  9,871   1,034   9,812   2,870   1,148   12,568   13,716   (3,882)199740 years
North Pointe - Bismarck, ND  2,108   143   2,244   155   160   2,382   2,542   (816)199524-40 years
Oakmont Apartments - Sioux Falls, SD  3,737   423   4,838   185   430   5,016   5,446   (907)200240 years
Oakwood - Sioux Falls, SD  3,480   543   2,784   3,310   757   5,880   6,637   (2,278)199340 years
Olympic Village - Billings, MT  7,656   1,164   10,441   1,544   1,400   11,749   13,149   (2,698)200040 years
Olympik Village Apartments - Rochester, MN  4,999   1,034   6,109   428   1,091   6,480   7,571   (723)200540 years
Oxbow - Sioux Falls, SD  3,793   404   3,152   2,126   474   5,208   5,682   (1,849)199424-40 years
Park Meadows Community - Waite Park, MN  9,606   1,143   9,099   4,202   1,485   12,959   14,444   (4,687)199740 years
Pebble Springs - Bismarck, ND  340   7   748   79   36   798   834   (206)199940 years
Pinecone Apartments - Fort Collins, CO  9,804   905   12,105   1,366   1,034   13,342   14,376   (4,687)199540 years
Pinehurst Apartments - Billings, MT  402   72   687   91   74   776   850   (144)200240 years
Pointe West - Rapid City, SD  2,910   240   3,538   1,107   304   4,581   4,885   (1,742)199424-40 years
Prairie Winds Apartments - Sioux Falls, SD  1,553   144   1,816   339   208   2,091   2,299   (869)199324-40 years
Prairiewood Meadows - Fargo, ND  2,564   280   2,531   810   335   3,286   3,621   (754)200040 years
Quarry Ridge Apartments - Rochester, MN  12,618   1,312   13,362   154   1,320   13,508   14,828   (892)200640 years
Ridge Oaks - Sioux City, IA  2,619   178   4,073   1,501   252   5,500   5,752   (1,306)200140 years
Rimrock Apartments - Billings, MT  2,174   330   3,489   443   390   3,872   4,262   (971)199940 years
Rocky Meadows - Billings, MT  3,089   656   5,726   715   744   6,353   7,097   (2,061)199540 years
Rum River Apartments - Isanti, MN  3,913   843   4,823   10   843   4,833   5,676   (247)200740 years
SCSH Campus Center Apartments - St. Cloud, MN  1,539   395   2,244   38   395   2,282   2,677   (127)200740 years
SCSH Campus Heights Apartments - St. Cloud, MN  0   110   628   15   110   643   753   (36)200740 years
SCSH Campus Knoll I Apartments - St. Cloud, MN  1,026   265   1,512   34   266   1,545   1,811   (87)200740 years
SCSH Campus Plaza Apartments - St. Cloud, MN  0   54   311   6   54   317   371   (18)200740 years
SCSH Campus Side Apartments - St. Cloud, MN  0   107   615   22   108   636   744   (36)200740 years
SCSH Campus View Apartments - St. Cloud, MN  0   107   615   13   107   628   735   (35)200740 years
SCSH Cornerstone Apartments - St. Cloud, MN  0   54   311   12   54   323   377   (18)200740 years
SCSH University Park Place Apartments - St. Cloud, MN  0   78   451   11   78   462   540   (26)200740 years
Sherwood Apartments - Topeka, KS  13,200   1,150   14,684   1,910   1,487   16,257   17,744   (3,983)199940 years

2009 Annual Report F-33F-32

Table of Contents


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Multi-Family Residential - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southwind Apartments - Grand Forks, ND

$

6,227

$

400

$

5,034

$

1,384

$

639

$

6,179

$

6,818

$

(1,784)

 

1995

24-40 years

Sunset Trail Phase I - Rochester, MN

 

4,067

 

168

 

5,935

 

1,063

 

208

 

6,958

 

7,166

 

(1,159)

 

1999

40 years

Sunset Trail Phase II - Rochester, MN

 

3,968

 

168

 

6,879

 

603

 

215

 

7,435

 

7,650

 

(1,071)

 

1999

40 years

Sweetwater Properties - Devils Lake & Grafton, ND

 

0

 

72

 

998

 

814

 

161

 

1,723

 

1,884

 

(1,234)

 

1974

5-40 years

Sycamore Village Apartments - Sioux Falls, SD

 

926

 

101

 

1,317

 

216

 

141

 

1,493

 

1,634

 

(199)

 

2002

40 years

Terrace On The Green - Moorhead, MN

 

1,473

 

24

 

1,490

 

1,489

 

128

 

2,875

 

3,003

 

(2,009)

 

1970

33-40 years

Valley Park Manor - Grand Forks, ND

 

3,662

 

294

 

4,137

 

1,479

 

379

 

5,531

 

5,910

 

(1,181)

 

1999

40 years

Village Green - Rochester, MN

 

1,697

 

234

 

2,296

 

78

 

262

 

2,346

 

2,608

 

(228)

 

2003

40 years

West Stonehill - Waite Park, MN

 

9,568

 

939

 

10,167

 

2,887

 

1,143

 

12,850

 

13,993

 

(3,810)

 

1995

40 years

Westwood Park - Bismarck, ND

 

1,060

 

116

 

1,909

 

647

 

228

 

2,444

 

2,672

 

(601)

 

1998

40 years

Winchester - Rochester, MN

 

4,155

 

748

 

5,622

 

568

 

871

 

6,067

 

6,938

 

(583)

 

2003

40 years

Woodridge Apartments - Rochester, MN

 

2,961

 

370

 

6,028

 

938

 

409

 

6,927

 

7,336

 

(1,915)

 

1997

40 years

Total Multi-Family Residential

$

302,441

$

37,545

$

390,168

$

61,931

$

43,513

$

446,131

$

489,644

$

(89,541)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Office

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1st Avenue Building - Minot, ND

$

0

$

30

$

80

$

580

$

32

$

658

$

690

$

(360)

 

1981

33-40 years

401 South Main - Minot, ND

 

0

 

71

 

334

 

238

 

77

 

566

 

643

 

(257)

 

1987

24-40 years

2030 Cliff Road - Eagan, MN

 

543

 

146

 

835

 

1

 

146

 

836

 

982

 

(126)

 

2001

19-40 years

7800 W Brown Deer Road - Milwaukee, WI

 

6,016

 

1,455

 

9,267

 

320

 

1,475

 

9,567

 

11,042

 

(1,236)

 

2003

40 years

American Corporate Center - Mendota Heights, MN

 

10,217

 

893

 

16,768

 

2,603

 

893

 

19,371

 

20,264

 

(2,507)

 

2002

40 years

Ameritrade - Omaha, NE

 

4,666

 

327

 

7,957

 

64

 

327

 

8,021

 

8,348

 

(1,610)

 

1999

40 years

Benton Business Park - Sauk Rapids, MN

 

901

 

188

 

1,261

 

30

 

188

 

1,291

 

1,479

 

(127)

 

2003

40 years

Bloomington Business Plaza - Bloomington, MN

 

4,526

 

1,300

 

6,106

 

635

 

1,305

 

6,736

 

8,041

 

(1,042)

 

2001

40 years

Brenwood - Minnetonka, MN

 

8,048

 

1,762

 

12,138

 

2,204

 

1,771

 

14,333

 

16,104

 

(1,825)

 

2002

40 years

Brook Valley I - La Vista, NE

 

1,526

 

347

 

1,671

 

27

 

347

 

1,698

 

2,045

 

(69)

 

2005

45 years

Burnsville Bluffs II - Burnsville, MN

 

1,385

 

300

 

2,154

 

759

 

301

 

2,912

 

3,213

 

(486)

 

2001

40 years

Cold Spring Center - St. Cloud, MN

 

4,531

 

588

 

7,808

 

465

 

592

 

8,269

 

8,861

 

(1,261)

 

2001

40 years

Corporate Center West - Omaha, NE

 

17,315

 

3,880

 

17,509

 

0

 

3,880

 

17,509

 

21,389

 

(274)

 

2006

40 years

Crosstown Centre - Eden Prairie, MN

 

15,722

 

2,884

 

14,569

 

480

 

2,887

 

15,046

 

17,933

 

(970)

 

2004

40 years

Dewey Hill Business Center - Edina, MN

 

2,804

 

985

 

3,507

 

843

 

995

 

4,340

 

5,335

 

(776)

 

2000

40 years

Farnam Executive Center - Omaha, NE

 

12,160

 

2,188

 

11,404

 

0

 

2,188

 

11,404

 

13,592

 

(178)

 

2006

40 years

Flagship - Eden Prairie, MN

 

21,565

 

1,899

 

21,638

 

34

 

1,899

 

21,672

 

23,571

 

(340)

 

2006

40 years

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Multi-Family Residential - continued
                          
Southbrook & Mariposa - Topeka, KS $3,170  $399  $5,110  $226  $419  $5,316  $5,735  $(592)200440 years
South Pointe - Minot, ND  9,521   550   9,548   1,706   1,246   10,558   11,804   (3,470)199524-40 years
Southview Apartments - Minot, ND  738   185   469   257   219   692   911   (257)199424-40 years
Southwind Apartments - Grand Forks, ND  6,079   400   5,034   1,864   689   6,609   7,298   (2,193)199524-40 years
Sunset Trail - Rochester, MN  7,767   336   12,814   1,841   479   14,512   14,991   (2,992)199940 years
Sweetwater Properties - Grafton, ND  0   50   403   499   58   894   952   (570)19745-40 years
Sycamore Village Apartments - Sioux Falls, SD  895   101   1,317   359   146   1,631   1,777   (308)200240 years
Terrace On The Green - Moorhead, MN  1,416   24   1,490   1,773   130   3,157   3,287   (2,154)197033-40 years
Thomasbrook Apartments - Lincoln, NE  5,077   544   7,847   2,220   700   9,911   10,611   (2,742)199940 years
Valley Park Manor - Grand Forks, ND  3,547   293   4,137   1,812   407   5,835   6,242   (1,555)199940 years
Village Green - Rochester, MN  1,560   234   2,296   353   326   2,557   2,883   (375)200340 years
West Stonehill - Waite Park, MN  9,338   939   10,167   3,581   1,171   13,516   14,687   (4,766)199540 years
Westwood Park - Bismarck, ND  1,006   116   1,909   792   237   2,580   2,817   (780)199840 years
Winchester - Rochester, MN  3,819   748   5,622   958   966   6,362   7,328   (959)200340 years
Woodridge Apartments - Rochester, MN  2,518   370   6,028   1,331   432   7,297   7,729   (2,381)199740 years
Total Multi-Family Residential $316,207  $39,974  $403,755  $98,818  $48,181  $494,366  $542,547  $(115,729)  
                                   
Office                                  
1st Avenue Building - Minot, ND $0  $30  $80  $584  $33  $661  $694  $(339)198133-40 years
12 South Main - Minot, ND  0   29   0   364   29   364   393   (140)198724-40 years
610 Business Center IV - Brooklyn Park, MN  7,432   975   5,542   2,886   980   8,423   9,403   (319)200740 years
2030 Cliff Road - Eagan, MN  495   146   835   2   146   837   983   (168)200119-40 years
7800 West Brown Deer Road - Milwaukee, WI  11,360   1,455   9,267   755   1,475   10,002   11,477   (1,839)200340 years
American Corporate Center - Mendota Heights, MN  9,597   893   16,768   3,209   893   19,977   20,870   (4,240)200240 years
Ameritrade - Omaha, NE  4,140   327   7,957   65   327   8,022   8,349   (2,011)199940 years
Benton Business Park - Sauk Rapids, MN  800   188   1,261   78   188   1,339   1,527   (205)200340 years
Bismarck 715 East Broadway - Bismarck, ND  0   389   0   1,283   389   1,283   1,672   (22)200840 years
Bloomington Business Plaza - Bloomington, MN  4,297   1,300   6,106   644   1,305   6,745   8,050   (1,529)200140 years
Brenwood - Minnetonka, MN  7,640   1,762   12,138   2,893   1,770   15,023   16,793   (3,055)200240 years
Brook Valley I - La Vista, NE  1,459   347   1,671   37   347   1,708   2,055   (154)200545 years
Burnsville Bluffs II - Burnsville, MN  1,267   300   2,154   898   301   3,051   3,352   (751)200140 years
Cold Spring Center - St. Cloud, MN  4,212   588   7,808   750   592   8,554   9,146   (1,806)200140 years
2009 Annual Report F-34F-33


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Office - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gateway Corporate Center, Woodbury, MN

$

8,700

$

1,637

$

7,763

$

19

$

1,637

$

7,782

$

9,419

$

(121)

 

2006

40 years

Golden Hills Office Center - Golden Valley, MN

 

14,882

 

3,018

 

24,482

 

(4,018)

 

3,018

 

20,464

 

23,482

 

(2,092)

 

2003

40 years

Great Plains - Fargo, ND

 

7,176

 

126

 

15,240

 

9

 

126

 

15,249

 

15,375

 

(2,939)

 

1997

40 years

Highlands Ranch I- Highlands Ranch, CO

 

9,200

 

2,268

 

8,362

 

(1)

 

2,268

 

8,361

 

10,629

 

(96)

 

2006

40 years

Highlands Ranch II - Highlands Ranch, CO

 

9,385

 

1,437

 

9,549

 

534

 

1,437

 

10,083

 

11,520

 

(669)

 

2004

40 years

Interlachen Corporate Center - Edina, MN

 

10,419

 

1,650

 

14,983

 

93

 

1,652

 

15,074

 

16,726

 

(2,168)

 

2001

40 years

Mendota Office Center I - Mendota Heights, MN

 

4,052

 

835

 

6,169

 

199

 

835

 

6,368

 

7,203

 

(871)

 

2002

40 years

Mendota Office Center II - Mendota Heights, MN

 

6,488

 

1,121

 

10,085

 

532

 

1,121

 

10,617

 

11,738

 

(1,692)

 

2002

40 years

Mendota Office Center III - Mendota Heights, MN

 

3,728

 

970

 

5,734

 

84

 

970

 

5,818

 

6,788

 

(765)

 

2002

40 years

Mendota Office Center IV - Mendota Heights, MN

 

4,841

 

1,070

 

7,635

 

0

 

1,070

 

7,635

 

8,705

 

(979)

 

2002

40 years

Minnesota National Bank - Duluth, MN

 

1,145

 

287

 

1,454

 

4

 

288

 

1,457

 

1,745

 

(111)

 

2004

40 years

Minnetonka Office Building - Minnetonka, MN

 

0

 

40

 

361

 

10

 

40

 

371

 

411

 

(122)

 

2001

40 years

Miracle Hills One - Omaha, NE

 

8,895

 

1,974

 

10,117

 

256

 

1,974

 

10,373

 

12,347

 

(179)

 

2006

40 years

Nicollett VII - Burnsville, MN

 

4,306

 

429

 

6,931

 

27

 

436

 

6,951

 

7,387

 

(1,057)

 

2001

40 years

Northgate I - Maple Grove, MN

 

6,076

 

1,062

 

6,358

 

369

 

1,067

 

6,722

 

7,789

 

(461)

 

2004

40 years

Northgate II - Maple Grove, MN

 

1,387

 

359

 

1,944

 

142

 

403

 

2,042

 

2,445

 

(392)

 

1999

40 years

Northpark Corporate Center - Arden Hills, MN

 

14,279

 

2,034

 

14,584

 

734

 

2,034

 

15,318

 

17,352

 

(401)

 

2006

40 years

Pacific Hills - Omaha, NE

 

16,770

 

4,220

 

11,988

 

68

 

4,220

 

12,056

 

16,276

 

(195)

 

2006

40 years

Pillsbury Business Center - Bloomington, MN

 

1,052

 

284

 

1,556

 

64

 

284

 

1,620

 

1,904

 

(246)

 

2001

40 years

Plaza VII - Boise, ID

 

1,299

 

300

 

3,058

 

178

 

351

 

3,185

 

3,536

 

(351)

 

2003

40 years

Plymouth I - Plymouth, MN

 

1,362

 

530

 

1,133

 

9

 

530

 

1,142

 

1,672

 

(82)

 

2004

40 years

Plymouth II - Plymouth, MN

 

1,362

 

367

 

1,264

 

12

 

367

 

1,276

 

1,643

 

(92)

 

2004

40 years

Plymouth III - Plymouth, MN

 

1,676

 

507

 

1,495

 

10

 

507

 

1,505

 

2,012

 

(108)

 

2004

40 years

Plymouth IV - Plymouth, MN

 

3,433

 

641

 

5,251

 

494

 

641

 

5,745

 

6,386

 

(988)

 

2001

40 years

Plymouth V - Plymouth, MN

 

4,940

 

695

 

7,441

 

367

 

696

 

7,807

 

8,503

 

(1,223)

 

2001

40 years

Prairie Oak Business Center - Eden Prairie, MN

 

0

 

531

 

4,069

 

1,156

 

563

 

5,193

 

5,756

 

(569)

 

2003

40 years

Rapid City, SD - 900 Concourse Drive - Rapid City, SD

 

3,342

 

285

 

6,600

 

203

 

321

 

6,767

 

7,088

 

(1,151)

 

2000

40 years

Riverport - Maryland Heights, MO

 

19,690

 

1,891

 

18,982

 

0

 

1,891

 

18,982

 

20,873

 

(297)

 

2006

40 years

Southeast Tech Center - Eagan, MN

 

3,754

 

560

 

5,496

 

282

 

569

 

5,769

 

6,338

 

(1,136)

 

1999

40 years

Spring Valley IV - Omaha, NE

 

908

 

178

 

916

 

44

 

178

 

960

 

1,138

 

(40)

 

2005

41 years

Spring Valley V - Omaha, NE

 

999

 

212

 

1,123

 

29

 

212

 

1,152

 

1,364

 

(46)

 

2005

42 years

Spring Valley X - Omaha, NE

 

926

 

180

 

1,024

 

24

 

180

 

1,048

 

1,228

 

(42)

 

2005

43 years

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Office - continued
                          
Corporate Center West - Omaha, NE $17,315  $3,880  $17,509  $16  $3,880  $17,525  $21,405  $(1,150)200640 years
Crosstown Centre - Eden Prairie, MN  14,973   2,884   14,569   480   2,887   15,046   17,933   (1,741)200440 years
Dewey Hill Business Center - Edina, MN  2,663   985   3,507   849   995   4,346   5,341   (1,106)200040 years
Farnam Executive Center - Omaha, NE  12,160   2,188   11,404   0   2,188   11,404   13,592   (748)200640 years
Flagship - Eden Praire, MN  21,565   1,899   21,638   590   1,899   22,228   24,127   (1,548)200640 years
Gateway Corporate Center - Woodbury, MN  8,700   1,637   7,763   89   1,637   7,852   9,489   (524)200640 years
Golden Hills Office Center - Golden Valley, MN  14,537   3,018   24,482   (3,298)  3,018   21,184   24,202   (3,797)200340 years
Great Plains - Fargo, ND  5,295   126   15,240   9   126   15,249   15,375   (3,701)199740 years
Highlands Ranch - Highlands Ranch, CO  8,940   1,437   9,549   926   1,437   10,475   11,912   (1,326)200440 years
Highlands Ranch I - Highlands Ranch, CO  9,014   2,268   8,362   0   2,268   8,362   10,630   (514)200640 years
Interlachen Corporate Center - Edina, MN  9,886   1,650   14,983   186   1,652   15,167   16,819   (2,931)200140 years
Intertech Building - Fenton, MO  4,820   2,130   3,969   0   2,130   3,969   6,099   (136)200740 years
IRET Corporate Plaza - Minot, ND  0   389   5,217   711   389   5,928   6,317   (46)200940 years
Mendota Office Center I - Mendota Heights, MN  3,806   835   6,169   333   835   6,502   7,337   (1,269)200240 years
Mendota Office Center II - Mendota Heights, MN  6,094   1,121   10,085   1,266   1,121   11,351   12,472   (2,436)200240 years
Mendota Office Center III - Mendota Heights, MN  3,554   970   5,734   109   970   5,843   6,813   (1,101)200240 years
Mendota Office Center IV - Mendota Heights, MN  4,615   1,070   7,635   578   1,070   8,213   9,283   (1,437)200240 years
Minnesota National Bank - Duluth, MN  1,038   287   1,454   4   288   1,457   1,745   (184)200440 years
Miracle Hills One - Omaha, NE  8,895   1,974   10,117   574   1,974   10,691   12,665   (841)200640 years
Nicollett VII - Burnsville, MN  4,090   429   6,931   84   436   7,008   7,444   (1,418)200140 years
Northgate I - Maple Grove, MN  5,807   1,062   6,358   822   1,067   7,175   8,242   (816)200440 years
Northgate II - Maple Grove, MN  1,312   359   1,944   142   403   2,042   2,445   (521)199940 years
Northpark Corporate Center - Arden Hills, MN  13,704   2,034   14,584   933   2,034   15,517   17,551   (1,238)200640 years
Pacific Hills - Omaha, NE  16,770   4,220   11,988   744   4,220   12,732   16,952   (895)200640 years
Pillsbury Business Center - Bloomington, MN  959   284   1,556   66   284   1,622   1,906   (339)200140 years
Plaza VII - Boise, ID  1,209   300   3,058   411   351   3,418   3,769   (585)200340 years
Plymouth 5095 Nathan Lane - Plymouth, MN  1,327   604   1,253   40   604   1,293   1,897   (58)200740 years
Plymouth I - Plymouth, MN  1,302   530   1,133   27   530   1,160   1,690   (140)200440 years
Plymouth II - Plymouth, MN  1,302   367   1,264   40   367   1,304   1,671   (161)200440 years
Plymouth III - Plymouth, MN  1,602   507   1,495   350   507   1,845   2,352   (201)200440 years
Plymouth IV & V - Plymouth, MN  7,962   1,336   12,692   1,264   1,338   13,954   15,292   (2,949)200140 years
Prairie Oak Business Center - Eden Prairie, MN  3,609   531   4,069   1,296   563   5,333   5,896   (1,015)200340 years

2009 Annual Report F-35F-34

Table of Contents


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Office - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spring Valley XI - Omaha, NE

$

908

$

143

$

1,094

$

28

$

143

$

1,122

$

1,265

$

(45)

 

2005

44 years

Superior Office Building - Duluth, MN

 

1,723

 

336

 

2,200

 

3

 

336

 

2,203

 

2,539

 

(167)

 

2004

40 years

TCA Building - Eagan, MN

 

9,483

 

627

 

8,571

 

705

 

684

 

9,219

 

9,903

 

(925)

 

2003

40 years

Three Paramount Plaza - Bloomington, MN

 

4,400

 

1,261

 

6,149

 

634

 

1,298

 

6,746

 

8,044

 

(933)

 

2002

40 years

Thresher Square - Minneapolis, MN

 

0

 

1,094

 

10,026

 

954

 

1,104

 

10,970

 

12,074

 

(1,375)

 

2002

40 years

Timberlands - Leawood, KS

 

13,155

 

2,375

 

12,218

 

83

 

2,375

 

12,301

 

14,676

 

(213)

 

2006

40 years

UHC Office - International Falls, MN

 

1,460

 

119

 

2,366

 

20

 

119

 

2,386

 

2,505

 

(185)

 

2004

40 years

US Bank Financial Center - Bloomington, MN

 

15,023

 

3,117

 

13,350

 

222

 

3,119

 

13,570

 

16,689

 

(717)

 

2005

40 years

Viromed - Eden Prairie, MN

 

1,857

 

666

 

4,197

 

1

 

666

 

4,198

 

4,864

 

(861)

 

1999

40 years

Wayroad Corporate - Minnetonka, MN

 

4,008

 

530

 

4,860

 

241

 

577

 

5,054

 

5,631

 

(681)

 

2002

40 years

Wells Fargo Center - St Cloud, MN

 

7,401

 

869

 

8,373

 

549

 

869

 

8,922

 

9,791

 

(469)

 

2005

40 years

West River Business Park - Waite Park, MN

 

901

 

235

 

1,195

 

46

 

235

 

1,241

 

1,476

 

(117)

 

2003

40 years

Westgate - Boise, ID

 

7,138

 

1,000

 

10,618

 

613

 

1,000

 

11,231

 

12,231

 

(1,213)

 

2003

40 years

Wirth Corporate Center - Golden Valley, MN

 

4,680

 

970

 

7,659

 

362

 

971

 

8,020

 

8,991

 

(1,102)

 

2002

40 years

Woodlands Plaza IV-Maryland Heights, MO

 

4,360

 

771

 

4,609

 

62

 

771

 

4,671

 

5,442

 

(76)

 

2006

40 years

Total Office

$

364,894

$

65,054

$

455,638

$

15,739

$

65,456

$

470,975

$

536,431

$

(44,204)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2800 Medical Building - Minneapolis, MN

$

6,387

$

930

$

7,135

$

686

$

930

$

7,821

$

8,751

$

(364)

 

2005

40 years

6517 Drew Avenue South - Edina, MN

 

1,289

 

353

 

660

 

502

 

353

 

1,162

 

1,515

 

(106)

 

2002

40 years

Abbott Northwest - Sartell, MN

 

6,963

 

0

 

11,781

 

872

 

0

 

12,653

 

12,653

 

(1,542)

 

2002

40 years

Airport Medical - Bloomington, MN

 

2,522

 

0

 

4,678

 

0

 

0

 

4,678

 

4,678

 

(541)

 

2002

40 years

Denfeld Clinic - Duluth, MN

 

2,206

 

501

 

2,597

 

1

 

501

 

2,598

 

3,099

 

(198)

 

2004

40 years

Edgewood Vista - Bismarck, ND

 

7,111

 

511

 

9,193

 

0

 

511

 

9,193

 

9,704

 

(374)

 

2005

40 years

Edgewood Vista - Brainerd, MN

 

7,028

 

587

 

8,999

 

0

 

587

 

8,999

 

9,586

 

(366)

 

2005

40 years

Edgewood Vista - Duluth, MN

 

3,199

 

288

 

9,871

 

1,550

 

288

 

11,421

 

11,709

 

(1,598)

 

2000

40 years

Edgewood Vista - Fremont, NE

 

259

 

56

 

490

 

6

 

56

 

496

 

552

 

(79)

 

2000

40 years

Edgewood Vista - Hastings, NE

 

267

 

49

 

517

 

6

 

49

 

523

 

572

 

(84)

 

2000

40 years

Edgewood Vista - Hermantown, MN

 

8,144

 

719

 

10,517

 

(1)

 

719

 

10,516

 

11,235

 

(427)

 

2005

40 years

Edgewood Vista - Kalispell, MT

 

275

 

70

 

502

 

17

 

70

 

519

 

589

 

(80)

 

2001

40 years

Edgewood Vista - Missoula, MT

 

496

 

109

 

854

 

(1)

 

109

 

853

 

962

 

(224)

 

1996

40 years

Edgewood Vista - Omaha, NE

 

309

 

89

 

547

 

5

 

89

 

552

 

641

 

(84)

 

2001

40 years

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Office - continued
                          
Rapid City 900 Concourse Drive - Rapid City, SD $2,731  $285  $6,600  $203  $321  $6,767  $7,088  $(1,493)200040 years
Riverport - Maryland Heights, MO  19,690   1,891   18,982   12   1,903   18,982   20,885   (1,246)200640 years
Southeast Tech Center - Eagan, MN  3,549   560   5,496   302   569   5,789   6,358   (1,501)199940 years
Spring Valley IV - Omaha, NE  868   178   916   60   186   968   1,154   (98)200540 years
Spring Valley V - Omaha, NE  955   212   1,123   223   212   1,346   1,558   (112)200540 years
Spring Valley X - Omaha, NE  886   180   1,024   28   180   1,052   1,232   (98)200540 years
Spring Valley XI - Omaha, NE  868   143   1,094   28   143   1,122   1,265   (102)200540 years
Superior Office Building - Duluth, MN  1,561   336   2,200   3   336   2,203   2,539   (278)200440 years
TCA Building - Eagan, MN  8,766   627   8,571   730   684   9,244   9,928   (1,494)200340 years
Three Paramount Plaza - Bloomington, MN  3,969   1,261   6,149   1,040   1,298   7,152   8,450   (1,377)200240 years
Thresher Square - Minneapolis, MN  0   1,094   10,026   1,539   1,104   11,555   12,659   (2,057)200240 years
Timberlands - Leawood, KS  13,155   2,375   12,218   266   2,408   12,451   14,859   (945)200640 years
UHC Office - International Falls, MN  1,323   119   2,366   20   119   2,386   2,505   (308)200440 years
US Bank Financial Center - Bloomington, MN  14,547   3,117   13,350   342   3,119   13,690   16,809   (1,415)200540 years
Viromed - Eden Prairie, MN  1,415   666   4,197   1   666   4,198   4,864   (1,071)199940 years
Wells Fargo Center - St Cloud, MN  6,897   869   8,373   810   869   9,183   10,052   (956)200540 years
West River Business Park - Waite Park, MN  800   235   1,195   46   235   1,241   1,476   (187)200340 years
Westgate - Boise, ID  6,570   1,000   10,618   619   1,000   11,237   12,237   (1,803)200340 years
Whitewater Plaza - Minnetonka, MN  4,057   530   4,860   274   577   5,087   5,664   (990)200240 years
Wirth Corporate Center - Golden Valley, MN  4,258   970   7,659   425   971   8,083   9,054   (1,616)200240 years
Woodlands Plaza IV - Maryland Heights, MO  4,360   771   4,609   122   771   4,731   5,502   (363)200640 years
Total Office $372,749  $69,459  $470,924  $31,182  $69,914  $501,651  $571,565  $(72,960)  
                                   
Medical                                  
2800 Medical Building - Minneapolis, MN $6,091  $204  $7,135  $1,337  $229  $8,447  $8,676  $(876)200540 years
2828 Chicago Avenue - Minneapolis, MN  0   726   11,319   4,461   726   15,780   16,506   (309)200740 years
Abbott Northwest - Sartell, MN  5,910   0   11,781   872   0   12,653   12,653   (2,170)200240 years
Airport Medical - Bloomington, MN  2,116   0   4,678   0   0   4,678   4,678   (1,029)200240 years
Barry Pointe Office Park - Kansas City, MO  1,544   384   2,366   95   384   2,461   2,845   (121)200740 years
Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN  7,867   1,071   6,842   696   1,071   7,538   8,609   (212)200840 years
Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN  4,917   189   5,127   534   189   5,661   5,850   (165)200840 years

2009 Annual Report F-36F-35

Table of Contents


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Medical - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edgewood Vista - Spearfish, SD

$

4,427

$

315

$

5,807

$

(1)

$

315

$

5,806

$

6,121

$

(236)

 

2005

40 years

Edgewood Vista - Virginia, MN

 

4,438

 

246

 

6,712

 

112

 

246

 

6,824

 

7,070

 

(860)

 

2002

40 years

Edgewood Vista Phase II - Virginia, MN

 

3,214

 

0

 

5,111

 

0

 

0

 

5,111

 

5,111

 

(410)

 

2004

40 years

Fox River Cottages - Grand Chute, WI

 

2,382

 

305

 

2,746

 

661

 

305

 

3,407

 

3,712

 

(54)

 

2006

40 years

Fresenius - Duluth, MN

 

1,051

 

50

 

1,520

 

2

 

50

 

1,522

 

1,572

 

(116)

 

2004

40 years

Garden View - St. Paul, MN

 

3,766

 

0

 

7,408

 

180

 

0

 

7,588

 

7,588

 

(949)

 

2002

40 years

Gateway Clinic - Sandstone, MN

 

1,278

 

66

 

1,699

 

0

 

66

 

1,699

 

1,765

 

(129)

 

2004

40 years

Health East St John & Woodwinds - Maplewood & Woodbury, MN

 

16,227

 

3,239

 

18,362

 

0

 

3,239

 

18,362

 

21,601

 

(3,194)

 

2000

40 years

High Pointe Health Campus - Lake Elmo, MN

 

4,776

 

1,305

 

10,528

 

205

 

1,308

 

10,730

 

12,038

 

(748)

 

2004

40 years

Mariner Clinic - Superior, WI

 

2,794

 

0

 

3,781

 

7

 

6

 

3,782

 

3,788

 

(288)

 

2004

40 years

Nebraska Orthopaedic Hospital - Omaha, NE

 

14,135

 

0

 

20,272

 

240

 

0

 

20,512

 

20,512

 

(1,516)

 

2004

40 years

Park Dental - Brooklyn Center, MN

 

1,447

 

185

 

2,767

 

0

 

185

 

2,767

 

2,952

 

(320)

 

2002

40 years

Pavilion I - Duluth, MN

 

7,362

 

1,245

 

8,898

 

1

 

1,245

 

8,899

 

10,144

 

(640)

 

2004

40 years

Pavilion II - Duluth, MN

 

13,547

 

2,715

 

14,673

 

1,937

 

2,715

 

16,610

 

19,325

 

(1,594)

 

2004

40 years

Ritchie Medical Plaza - St Paul, MN

 

7,645

 

1,615

 

7,851

 

81

 

1,647

 

7,900

 

9,547

 

(370)

 

2005

40 years

St Michael Clinic - St Michael, MN

 

2,150

 

328

 

2,259

 

0

 

328

 

2,259

 

2,587

 

0

 

2007

40 years

Southdale FM - Edina, MN

 

9,939

 

755

 

8,054

 

5,190

 

755

 

13,244

 

13,999

 

(1,570)

 

2003

40 years

Southdale SMB - Edina, MN

 

22,587

 

3,480

 

26,432

 

4,219

 

3,480

 

30,651

 

34,131

 

(5,336)

 

2001

40 years

Stevens Point - Stevens Point, WI

 

2,701

 

442

 

3,888

 

7,979

 

442

 

11,867

 

12,309

 

(200)

 

2006

40 years

Wells Clinic - Hibbing, MN

 

1,948

 

162

 

2,497

 

2

 

162

 

2,499

 

2,661

 

(190)

 

2004

40 years

Total Medical

$

174,269

$

20,715

$

229,606

$

24,458

$

20,756

$

254,023

$

274,779

$

(24,787)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

API Building - Duluth, MN

$

1,168

$

115

$

1,605

$

3

$

115

$

1,608

$

1,723

$

(122)

 

2004

40 years

Bloomington 2000 W 94th ST - Bloomington, MN

 

4,243

 

2,133

 

4,097

 

(1)

 

2,133

 

4,096

 

6,229

 

(38)

 

2006

40 years

Bodycote Industrial Building - Eden Prairie, MN

 

1,426

 

198

 

1,154

 

800

 

198

 

1,954

 

2,152

 

(565)

 

1992

40 years

Dixon Avenue Industrial Park - Des Moines, IA

 

8,222

 

1,439

 

10,758

 

946

 

1,439

 

11,704

 

13,143

 

(1,400)

 

2002

40 years

Lexington Commerce Center - Eagan, MN

 

3,019

 

453

 

4,352

 

1,370

 

480

 

5,695

 

6,175

 

(1,094)

 

1999

40 years

Lighthouse - Duluth, MN

 

1,226

 

90

 

1,788

 

6

 

90

 

1,794

 

1,884

 

(137)

 

2004

40 years

Metal Improvement Company - New Brighton, MN

 

1,318

 

240

 

2,189

 

78

 

240

 

2,267

 

2,507

 

(281)

 

2002

40 years

Roseville 2929 Long Lake Road - Roseville, MN

 

6,240

 

1,966

 

7,272

 

(1)

 

1,966

 

7,271

 

9,237

 

(68)

 

2006

40 years

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Medical - continued
                          
Denfeld Clinic - Duluth, MN $2,041  $501  $2,597  $1  $501  $2,598  $3,099  $(328)200440 years
Eagan 1440 Duckwood Medical - Eagan, MN  1,967   521   1,547   519   521   2,066   2,587   (72)200840 years
Edgewood Vista - Belgrade, MT  0   35   779   0   35   779   814   (22)200840 years
Edgewood Vista - Billings, MT  976   115   1,782   (15)  115   1,767   1,882   (54)200840 years
Edgewood Vista - Bismarck, ND  6,520   511   9,193   36   511   9,229   9,740   (834)200540 years
Edgewood Vista - Brainerd, MN  6,444   587   8,999   34   587   9,033   9,620   (817)200540 years
Edgewood Vista - Columbus, NE  0   43   824   0   43   824   867   (23)200840 years
Edgewood Vista - East Grand Forks, MN  1,453   290   1,383   (31)  290   1,352   1,642   (41)200840 years
Edgewood Vista - Fargo, ND  14,497   792   21,050   1   792   21,051   21,843   (592)200840 years
Edgewood Vista - Fremont, NE  652   56   490   42   56   532   588   (104)200040 years
Edgewood Vista - Grand Island, NE  0   33   773   1   33   774   807   (22)200840 years
Edgewood Vista - Hastings, NE  672   49   517   40   49   557   606   (111)200040 years
Edgewood Vista - Hermantown I, MN  18,020   288   9,871   1,501   288   11,372   11,660   (2,169)200040 years
Edgewood Vista - Hermantown II, MN  7,467   719   10,517   33   719   10,550   11,269   (954)200540 years
Edgewood Vista - Kalispell, MT  674   70   502   52   70   554   624   (107)200140 years
Edgewood Vista - Missoula, MT  957   109   854   36   109   890   999   (268)199640 years
Edgewood Vista - Norfolk, NE  0   42   722   0   42   722   764   (20)200840 years
Edgewood Vista - Omaha, NE  426   89   547   40   89   587   676   (112)200140 years
Edgewood Vista - Sioux Falls, SD  975   314   1,001   (26)  314   975   1,289   (30)200840 years
Edgewood Vista - Spearfish, SD  4,059   315   5,807   34   315   5,841   6,156   (527)200540 years
Edgewood Vista - Virginia, MN  15,328   246   11,823   77   246   11,900   12,146   (1,867)200240 years
Edina 6363 France Medical - Edina, MN  8,159   0   12,675   20   0   12,695   12,695   (520)200840 years
Edina 6405 France Medical - Edina, MN  9,323   0   12,201   0   0   12,201   12,201   (366)200840 years
Edina 6517 Drew Avenue - Edina, MN  1,244   353   660   524   372   1,165   1,537   (223)200240 years
Edina 6525 France SMC II - Edina, MN  9,798   755   8,054   5,824   755   13,878   14,633   (2,669)200340 years
Edina 6545 France SMC I - Edina, MN  21,973   3,480   30,743   10,101   3,480   40,844   44,324   (7,672)200140 years
Fox River Cottages - Grand Chute, WI  2,308   305   2,746   757   305   3,503   3,808   (192)200640 years
Fresenius - Duluth, MN  952   50   1,520   2   50   1,522   1,572   (192)200440 years
Garden View - St. Paul, MN  3,079   0   7,408   462   0   7,870   7,870   (1,377)200240 years
Gateway Clinic - Sandstone, MN  1,182   66   1,699   0   66   1,699   1,765   (214)200440 years
Health East St John & Woodwinds - Maplewood & Woodbury, MN  14,705   3,239   18,363   0   3,239   18,363   21,602   (4,112)200040 years
High Pointe Health Campus - Lake Elmo, MN  3,605   1,305   10,528   347   1,308   10,872   12,180   (1,305)200440 years
Mariner Clinic - Superior, WI  2,586   0   3,781   7   6   3,782   3,788   (478)200440 years

2009 Annual Report F-38F-36

Table of Contents


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Industrial - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stone Container - Fargo, ND

$

3,813

$

440

$

6,597

$

104

$

440

$

6,701

$

7,141

$

(1,603)

 

1995

40 years

Stone Container - Roseville, MN

 

4,546

 

810

 

7,440

 

0

 

810

 

7,440

 

8,250

 

(1,000)

 

2001

40 years

Waconia Industrial Building - Waconia, MN

 

876

 

165

 

1,492

 

347

 

187

 

1,817

 

2,004

 

(308)

 

2000

40 years

Wilson's Leather - Brooklyn Park, MN

 

7,933

 

1,368

 

11,643

 

794

 

1,368

 

12,437

 

13,805

 

(1,480)

 

2002

40 years

Winsted Industrial Building - Winsted, MN

 

0

 

100

 

901

 

6

 

100

 

907

 

1,007

 

(161)

 

2001

40 years

Total Industrial

$

44,030

$

9,517

$

61,288

$

4,452

$

9,566

$

65,691

$

75,257

$

(8,257)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17 South Main - Minot, ND

$

0

$

15

$

75

$

189

$

15

$

264

$

279

$

(31)

 

2000

40 years

Anoka Strip Center - Anoka, MN

 

469

 

123

 

602

 

8

 

123

 

610

 

733

 

(64)

 

2003

40 years

Burnsville 1 Strip Center - Burnsville, MN

 

610

 

208

 

773

 

20

 

208

 

793

 

1,001

 

(88)

 

2003

40 years

Burnsville 2 Strip Center - Burnsville, MN

 

485

 

291

 

469

 

44

 

291

 

513

 

804

 

(69)

 

2003

40 years

Champlin South Pond - Champlin, MN

 

2,161

 

842

 

2,703

 

90

 

866

 

2,769

 

3,635

 

(214)

 

2004

40 years

Chan West Village - Chanhassen, MN

 

14,864

 

5,035

 

14,665

 

1,199

 

5,090

 

15,809

 

20,899

 

(1,677)

 

2003

40 years

Dakota West Plaza - Minot , ND

 

442

 

92

 

493

 

17

 

106

 

496

 

602

 

(12)

 

2006

40 years

Duluth Denfeld Retail - Duluth, MN

 

3,279

 

276

 

4,699

 

10

 

276

 

4,709

 

4,985

 

(361)

 

2004

40 years

Duluth NAPA - Duluth, MN

 

993

 

130

 

1,800

 

3

 

130

 

1,803

 

1,933

 

(137)

 

2004

40 years

Eagan 1 Retail Center - Eagan, MN

 

1,594

 

196

 

244

 

78

 

196

 

322

 

518

 

(33)

 

2003

40 years

Eagan 2 Retail Center - Eagan, MN

 

0

 

291

 

879

 

201

 

293

 

1,078

 

1,371

 

(111)

 

2003

40 years

Eagan 3 C Store - Eagan, MN

 

0

 

214

 

466

 

104

 

214

 

570

 

784

 

(59)

 

2003

40 years

East Grand Station - East Grand Forks, MN

 

498

 

150

 

1,235

 

7

 

150

 

1,242

 

1,392

 

(231)

 

1999

40 years

Fargo Express Center - Fargo, ND

 

1,212

 

305

 

1,120

 

16

 

316

 

1,125

 

1,441

 

(119)

 

2003

40 years

Fargo Express SC Pad 1 - Fargo, ND

 

0

 

69

 

300

 

(1)

 

69

 

299

 

368

 

(17)

 

2005

40 years

Forest Lake Auto - Forest Lake, MN

 

0

 

50

 

446

 

5

 

50

 

451

 

501

 

(44)

 

2003

40 years

Forest Lake Westlake Center - Forest Lake, MN

 

5,096

 

2,446

 

5,304

 

437

 

2,480

 

5,707

 

8,187

 

(598)

 

2003

40 years

Grand Forks Carmike - Grand Forks, ND

 

2,114

 

184

 

2,360

 

2

 

184

 

2,362

 

2,546

 

(738)

 

1994

40 years

Grand Forks Medpark Mall - Grand Forks, ND

 

3,056

 

681

 

4,808

 

208

 

699

 

4,998

 

5,697

 

(923)

 

2000

40 years

Jamestown Buffalo Mall - Jamestown, ND

 

2,075

 

566

 

3,209

 

1,234

 

695

 

4,314

 

5,009

 

(326)

 

2003

40 years

Jamestown Business Center - Jamestown, ND

 

796

 

297

 

1,023

 

615

 

326

 

1,609

 

1,935

 

(160)

 

2003

40 years

Kalispell Retail Center - Kalispell, MT

 

1,652

 

250

 

2,250

 

970

 

253

 

3,217

 

3,470

 

(288)

 

2003

40 years

Kentwood Thomasville Furniture - Kentwood, MI

 

839

 

225

 

1,889

 

8

 

225

 

1,897

 

2,122

 

(497)

 

1996

40 years

Ladysmith Pamida - Ladysmith, WI

 

1,146

 

89

 

1,411

 

1

 

89

 

1,412

 

1,501

 

(148)

 

2003

40 years

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Medical - continued
                          
Minneapolis 701 25th Avenue Medical (Riverside) - Minneapolis, MN $6,834  $0  $7,873  $0  $0  $7,873  $7,873  $(221)200840 years
Nebraska Orthopaedic Hospital - Omaha, NE  13,500   0   20,272   240   0   20,512   20,512   (2,542)200440 years
Park Dental - Brooklyn Center, MN  1,213   185   2,767   0   185   2,767   2,952   (458)200240 years
Pavilion I - Duluth, MN  6,813   1,245   8,898   31   1,245   8,929   10,174   (1,090)200440 years
Pavilion II - Duluth, MN  12,537   2,715   14,673   1,937   2,715   16,610   19,325   (2,642)200440 years
Ritchie Medical Plaza - St Paul, MN  7,290   1,615   7,851   110   1,647   7,929   9,576   (772)200540 years
St Michael Clinic - St Michael, MN  2,078   328   2,259   264   328   2,523   2,851   (131)200740 years
Stevens Point - Stevens Point, WI  11,306   442   3,888   10,495   442   14,383   14,825   (899)200640 years
Wells Clinic - Hibbing, MN  1,803   162   2,497   2   162   2,499   2,661   (314)200440 years
Total Medical
 $253,861  $24,544  $322,182  $41,493   24,629  $363,590  $388,219  $(42,345)  
                                   
Industrial                                  
API Building - Duluth, MN $1,058  $115  $1,605  $3  $115  $1,608  $1,723  $(203)200440 years
Bloomington 2000 West 94th Street
- Bloomington, MN
  4,076   2,133   4,096   0   2,133   4,096   6,229   (245)200640 years
Bodycote Industrial Building - Eden Prairie, MN  1,313   198   1,154   800   198   1,954   2,152   (662)199240 years
Cedar Lake Business Center - St. Louis Park, MN  2,487   895   2,810   6   895   2,816   3,711   (133)200740 years
Dixon Avenue Industrial Park - Des Moines, IA  7,786   1,439   10,758   984   1,439   11,742   13,181   (2,073)200240 years
Eagan 2785 & 2795 Highway 55 - Eagan, MN  3,776   3,058   2,570   0   3,058   2,570   5,628   (80)200840 years
Lexington Commerce Center - Eagan, MN  2,854   453   4,352   1,675   480   6,000   6,480   (1,558)199940 years
Lighthouse - Duluth, MN  1,111   90   1,788   7   90   1,795   1,885   (227)200440 years
Metal Improvement Company - New Brighton, MN  1,217   240   2,189   78   240   2,267   2,507   (404)200240 years
Minnetonka 13600 County Road 62 - Minnetonka, MN  2,499   809   434   2,459   809   2,893   3,702   (18)200940 years
Roseville 2929 Long Lake Road - Roseville, MN  5,995   1,966   7,272   1,474   1,980   8,732   10,712   (488)200640 years
Stone Container - Fargo, ND  3,124   440   6,597   104   440   6,701   7,141   (1,938)199540 years
Stone Container - Roseville, MN  4,173   810   7,440   0   810   7,440   8,250   (1,372)200140 years
Urbandale 3900 106th Street - Urbandale, IA  10,800   3,680   10,089   355   3,721   10,403   14,124   (498)200740 years
Waconia Industrial Building - Waconia, MN  1,122   165   1,492   383   187   1,853   2,040   (479)200040 years
Wilson's Leather - Brooklyn Park, MN  7,295   1,368   11,643   864   1,368   12,507   13,875   (2,140)200240 years
Winsted Industrial Building - Winsted, MN  0   100   901   6   100   907   1,007   (212)200140 years
Woodbury 1865 Woodland - Woodbury, MN  2,926   1,108   2,628   20   1,108   2,648   3,756   (117)200740 years
Total Industrial $63,612  $19,067  $79,818  $9,218  $19,171  $88,932  $108,103  $(12,847)  
Retail                                  
17 South Main - Minot, ND $0  $15  $75  $197  $17  $270  $287  $(103)200040 years
Anoka Strip Center - Anoka, MN  0   123   602   19   134   610   744   (95)200340 years

2009 Annual Report F-39F-37

Table of Contents


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 Initial Cost to Company

 

 Gross amount at which carried at
close of period

 

 

Life on which depreciation in latest income statement is computed

Description

Encumbrances

Land

Buildings & Improvements

Costs capitalized subsequent to acquisition

Land

Buildings & Improvements

Total

Accumulated Depreciation

Date of Construction or Acquisition

Retail - continued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lakeville Strip Center - Lakeville, MN

$

1,211

$

46

$

1,142

$

783

$

94

$

1,877

$

1,971

$

(216)

 

2003

40 years

Livingston Pamida - Livingston, MT

 

1,362

 

227

 

1,573

 

0

 

227

 

1,573

 

1,800

 

(165)

 

2003

40 years

Minot Arrowhead SC - Minot, ND

 

1,067

 

100

 

1,064

 

4,922

 

354

 

5,732

 

6,086

 

(2,572)

 

1973

15 1/2-40 years

Minot Plaza - Minot, ND

 

673

 

50

 

453

 

92

 

59

 

536

 

595

 

(182)

 

1993

40 years

Monticello C Store - Monticello, MN

 

0

 

86

 

770

 

33

 

118

 

771

 

889

 

(82)

 

2003

40 years

Omaha Barnes & Noble - Omaha, NE

 

3,141

 

600

 

3,099

 

0

 

600

 

3,099

 

3,699

 

(891)

 

1995

40 years

Pine City C Store - Pine City, MN

 

352

 

83

 

357

 

2

 

83

 

359

 

442

 

(38)

 

2003

40 years

Pine City Evergreen Square - Pine City, MN

 

2,163

 

154

 

2,646

 

228

 

206

 

2,822

 

3,028

 

(313)

 

2003

40 years

Rochester Maplewood Square - Rochester, MN

 

4,721

 

3,275

 

8,610

 

91

 

3,294

 

8,682

 

11,976

 

(1,690)

 

1999

40 years

St. Cloud Westgate SC - St. Cloud, MN

 

3,968

 

1,219

 

5,535

 

87

 

1,242

 

5,599

 

6,841

 

(437)

 

2004

40 years

Weston Retail - Weston, WI

 

0

 

79

 

1,575

 

27

 

80

 

1,601

 

1,681

 

(169)

 

2003

40 years

Weston Walgreens - Weston, WI

 

3,466

 

66

 

1,718

 

671

 

67

 

2,388

 

2,455

 

(55)

 

2006

40 years

Total Retail

$

65,505

$

19,010

$

81,765

$

12,401

 

19,768

$

93,408

$

113,176

$

(13,755)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2828 Chicago Avenue - Minneapolis, MN

$

0

$

0

$

0

$

254

 

0

$

254

$

254

$

0

 

2007

40 years

Cottonwood Lake IV - Bismarck, ND

 

0

 

264

 

0

 

1,102

 

286

 

1,080

 

1,366

 

0

 

1997

40 years

Eagan Unimproved Land - Eagan, MN

 

0

 

423

 

0

 

0

 

423

 

0

 

423

 

0

 

2006

40 years

Kalispell Unimproved Land - Kalispell, MT

 

0

 

1,400

 

0

 

24

 

1,411

 

13

 

1,424

 

0

 

2003

40 years

Minot Unimproved Land - Minot, ND

 

0

 

1,754

 

0

 

13

 

1,754

 

13

 

1,767

 

0

 

2007

40 years

Monticello Unimproved Land - Monticello, MN

 

0

 

89

 

0

 

0

 

89

 

0

 

89

 

0

 

2006

40 years

Quarry Ridge Unimproved Land - Rochester, MN

 

0

 

942

 

0

 

0

 

942

 

0

 

942

 

0

 

2006

40 years

River Falls Unimproved Land - River Falls, WI

 

0

 

200

 

0

 

5

 

203

 

2

 

205

 

0

 

2003

40 years

St. Michael Unimproved Property - St. Michael, MN

 

0

 

0

 

0

 

111

 

0

 

0

 

111

 

0

 

2007

40 years

Weston Unimproved Land - Weston, WI

 

0

 

811

 

0

 

0

 

811

 

0

 

811

 

0

 

2006

40 years

Total Unimproved Land

$

0

$

5,883

$

0

$

1,509

$

5,919

$

1,362

$

7,392

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

951,139

$

157,724

$

1,218,465

$

120,490

$

164,978

$

1,331,590

$

1,496,679

$

(180,544)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2007
     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Retail - continued
                          
Burnsville 1 Strip Center - Burnsville, MN $578  $207  $772  $202  $208  $973  $1,181  $(143)200340 years
Burnsville 2 Strip Center - Burnsville, MN  460   291   469   202   291   671   962   (106)200340 years
Champlin South Pond - Champlin, MN  1,957   842   2,703   48   866   2,727   3,593   (356)200440 years
Chan West Village - Chanhassen, MN  14,323   5,035   14,665   1,723   5,606   15,817   21,423   (2,533)200340 years
Dakota West Plaza - Minot , ND  421   92   493   26   106   505   611   (39)200640 years
Duluth Denfeld Retail - Duluth, MN  2,970   276   4,699   15   276   4,714   4,990   (601)200440 years
Duluth NAPA - Duluth, MN  899   130   1,800   3   130   1,803   1,933   (227)200440 years
Eagan Community - Eagan, MN  1,501   702   1,588   853   703   2,440   3,143   (315)200340 years
East Grand Station - East Grand Forks, MN  330   150   1,235   309   151   1,543   1,694   (301)199940 years
Fargo Express Community - Fargo, ND  1,132   374   1,420   19   385   1,428   1,813   (208) 2003-200540 years
Forest Lake Auto - Forest Lake, MN  0   50   446   13   50   459   509   (69)200340 years
Forest Lake Westlake Center - Forest Lake, MN  4,805   2,446   5,304   455   2,480   5,725   8,205   (891)200340 years
Grand Forks Carmike - Grand Forks, ND  1,943   184   2,360   2   184   2,362   2,546   (856)199440 years
Grand Forks Medpark Mall - Grand Forks, ND  2,907   680   4,808   233   720   5,001   5,721   (1,182)200040 years
Jamestown Buffalo Mall - Jamestown, ND  1,594   566   3,209   2,408   857   5,326   6,183   (594)200340 years
Jamestown Business Center - Jamestown, ND  699   297   1,023   1,172   326   2,166   2,492   (371)200340 years
Kalispell Retail Center - Kalispell, MT  1,543   250   2,250   973   253   3,220   3,473   (446)200340 years
Kentwood Thomasville Furniture - Kentwood, MI  529   225   1,889   9   225   1,898   2,123   (592)199640 years
Ladysmith Pamida - Ladysmith, WI  1,081   89   1,411   0   89   1,411   1,500   (219)200340 years
Lakeville Strip Center - Lakeville, MN  1,129   46   1,142   783   94   1,877   1,971   (351)200340 years
Livingston Pamida - Livingston, MT  1,284   227   1,573   0   227   1,573   1,800   (244)200340 years
Minot Arrowhead - Minot, ND  5,008   100   1,064   7,104   722   7,546   8,268   (2,934)197315 1/2-40 years
Minot Plaza - Minot, ND  634   50   453   105   72   536   608   (220)199340 years
Monticello C Store - Monticello, MN  0   86   769   38   118   775   893   (123)200340 years
Omaha Barnes & Noble - Omaha, NE  2,931   600   3,099   0   600   3,099   3,699   (1,046)199540 years
Pine City C Store - Pine City, MN  333   83   357   2   83   359   442   (56)200340 years
Pine City Evergreen Square - Pine City, MN  2,043   154   2,646   556   385   2,971   3,356   (495)200340 years
Rochester Maplewood Square - Rochester, MN  3,660   3,275   8,610   126   3,294   8,717   12,011   (2,131)199940 years
St. Cloud Westgate - St. Cloud, MN  3,691   1,219   5,535   87   1,242   5,599   6,841   (724)200440 years
Weston Retail - Weston, WI  0   79   1,575   27   80   1,601   1,681   (247)200340 years
Weston Walgreens - Weston, WI  3,344   66   1,718   671   66   2,389   2,455   (172)200640 years
Total Retail $63,729  $19,009  $81,762  $18,380  $21,040  $98,111  $119,151  $(18,990)  
                                   
Subtotal $1,070,158  $172,053  $1,358,441  $199,091  $182,935  $1,546,650  $1,729,585  $(262,871)  

2009 Annual Report F-39

F-38

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule III

- REAL ESTATE AND ACCUMULATED DEPRECIATION

(in thousands)

     Initial Cost to Company     
Gross amount at which carried at
close of period
      
Description Encumbrances  Land  Buildings & Improvements  Costs capitalized subsequent to acquisition  Land  Buildings & Improvements  Total  Accumulated Depreciation Date of Construction or AcquisitionLife on which depreciation in latest income statement is computed
Unimproved Land                          
Bismarck 2130 S 12th St - Bismarck, ND $0  $576  $0  $11  $587  $0  $587  $0 200840 years
Bismarck 700 E Main - Bismarck, ND  0   314   0   513   314   513   827   0 200840 years
Eagan Unimproved Land - Eagan, MN  0   423   0   0   423   0   423   0 200640 years
IRET Corporate Plaza Out-lot - Minot, ND  0   323   0   0   323   0   323   0 200940 years
Kalispell Unimproved Land - Kalispell, MT  0   1,400   0   24   1,411   13   1,424   0 200340 years
Monticello Unimproved Land - Monticello, MN  0   95   0   2   97   0   97   0 200640 years
Quarry Ridge Unimproved Land - Rochester, MN  0   942   0   0   942   0   942   0 200640 years
River Falls Unimproved Land - River Falls, WI  0   200   0   5   203   2   205   0 200340 years
Thomasbrook 24 Units - Lincoln, NE  0   56   0   0   56   0   56   0 200840 years
Urbandale Unimproved Land - Urbandale, IA  0   5   0   0   5   0   5   0 200940 years
Weston Unimproved Land - Weston, WI  0   812   0   0   812   0   812   0 200640 years
Total Unimproved Land $0  $5,146  $0  $555  $5,173  $528  $5,701  $0   
                                   
                                   
Total $1,070,158  $177,199  $1,358,441  $199,646  $188,108  $1,547,178  $1,735,286   (262,871)  
                                   



2009 Annual Report F-39
Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2009
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Reconciliations of total real estate carrying value for the three years ended April 30, 2007, 2006,2009, 2008, and 20052007 are as follows:

 

(in thousands)

 

2007

2006

2005

 

 

 

 

 

 

 

Balance at beginning of year

$

1,269,423

$

1,179,856

$

1,082,773

Additions during year

 

 

 

 

 

 

Residential Real Estate

 

38,562

 

2,445

 

12,643

Commercial Office Real Estate

 

147,302

 

25,034

 

67,532

Commercial Medical Real Estate

 

5,638

 

58,200

 

42,245

Commercial Industrial Real Estate

 

15,467

 

0

 

0

Commercial Retail Real Estate

 

2,382

 

0

 

3,120

Improvements and Other

 

30,865

 

14,771

 

17,688

 

 

1,509,639

 

1,280,306

 

1,226,001

Deductions during year

 

 

 

 

 

 

Cost of Real Estate Sold

 

(19,797)

 

(10,474)

 

(45,575)

Impairment charge

 

(555)

 

(409)

 

(570)

Balance at close of year(1)

$

1,489,287

$

1,269,423

$

1,179,856

  (in thousands) 
  2009  2008  2007 
          
Balance at beginning of year $1,648,259  $1,489,287  $1,269,423 
Additions during year            
Multi-Family Residential  23,215   11,159   38,562 
Commercial Office  8,573   14,473   147,302 
Commercial Medical  19,084   82,233   5,638 
Commercial Industrial  4,337   27,132   15,467 
Commercial Retail  0   0   2,382 
Improvements and Other  27,971   25,787   30,865 
   1,731,439   1,650,071   1,509,639 
Deductions during year            
Cost of real estate sold  (49)  (1,812)  (19,797)
Impairment charge  (338)  0   (555)
Other(1)
  (1,467)  0   0 
Balance at close of year(2)
 $1,729,585  $1,648,259  $1,489,287 
Reconciliations of accumulated depreciation/amortization for the three years ended April 30, 2007, 2006,2009, 2008, and 2005,2007, are as follows:

 

(in thousands)

 

2007

2006

2005

 

 

 

 

 

 

 

Balance at beginning of year

$

148,607

$

118,512

$

98,923

Additions during year

 

 

 

 

 

 

Provisions for depreciation

 

35,143

 

30,585

 

27,605

Deductions during year

 

 

 

 

 

 

Accumulated depreciation on real estate sold

 

(3,206)

 

(490)

 

(8,016)

Balance at close of year

$

180,544

$

148,607

$

118,512

(1)  

  (in thousands) 
  2009  2008  2007 
          
Balance at beginning of year $219,379  $180,544  $148,607 
Additions during year            
Provisions for depreciation  44,227   39,806   35,143 
Deductions during year            
Accumulated depreciation on real estate sold  (36)  (971)  (3,206)
Other(1)
  (699)  0   0 
Balance at close of year $262,871  $219,379  $180,544 
(1)Consists of miscellaneous disposed assets.
(2)The net basis of the Company’s real estate investments for Federal Income Tax purposes is approximately $1.2 billion.


2007 Annual Report F-40
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007

2009

Schedule IV

INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE

 

 

 

 

(in thousands)

 

Interest
Rate

Final
Maturity
Date

Payment
Terms

Prior
Liens

Face Amt. of
Mortgages

Carrying
Amt. of
Mortgages

Prin. Amt
of Loans
Subject to
Delinquent
Prin. or Int.

First Mortgage

 

 

 

 

 

 

 

 

 

Martin Property – Pioneer Seed

6.00%

05/01/09

Monthly/ Balloon

0

$

475

$

411

0

 

 

 

 

 

$

475

$

411

 

Less:

 

 

 

 

 

 

 

 

 

Allowance for Loan Losses

 

 

 

 

 

 

$

(12)

 

 

 

 

 

 

 

 

$

399

 

 

 

(in thousands)

 

2007

2006

2005

MORTGAGE LOANS RECEIVABLE, BEGINNING OF YEAR

$

409

$

619

$

4,893

 

 

 

 

619

 

4,893

Collections

 

(22)

 

(210)

 

(4,274)

Transferred to other assets

 

12

 

0

 

0

MORTGAGE LOANS RECEIVABLE, END OF YEAR

$

399

$

409

$

619

2007
      (in thousands) 
  
Interest
Rate
 
Final
Maturity
Date
Payment
Terms
Prior
Liens
 
Face Amt. of
Mortgages
  
Carrying
Amt. of
Mortgages
 
Prin. Amt
of Loans
Subject to
Delinquent
Prin. or Int.
 
First Mortgage                 
Liberty Holdings, LLC  7.00%11/01/12Monthly/ Balloon  0   167   163   0 
        $0  $167  $163  $0 
Less:                      
Allowance for Loan Losses               $(3)    
   $160     

  (in thousands) 
  2009  2008  2007 
MORTGAGE LOANS RECEIVABLE, BEGINNING OF YEAR $541  $399  $409 
New participations in and advances on mortgage loans  0   167   0 
  $541  $566  $409 
Collections  (381)  (25)  (22)
Transferred to other assets  0   0   12 
MORTGAGE LOANS RECEIVABLE, END OF YEAR $160  $541  $399 


2009 Annual ReportF-41

Table of Contents