-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+4JY8eXu6rqyaEu1CEG5oh1BiJV04Blx3oUpsps2D6rGdKP+lvLVNMgzWcENbko 0uyVR1Ug4GYMQRCZ6jtjZQ== 0000798359-02-000039.txt : 20020729 0000798359-02-000039.hdr.sgml : 20020729 20020729162517 ACCESSION NUMBER: 0000798359-02-000039 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020430 FILED AS OF DATE: 20020729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTORS REAL ESTATE TRUST CENTRAL INDEX KEY: 0000798359 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 450311232 STATE OF INCORPORATION: ND FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14851 FILM NUMBER: 02713324 BUSINESS ADDRESS: STREET 1: 12 S MAIN STREET STREET 2: SUITE 100 CITY: MINOT STATE: ND ZIP: 58701 BUSINESS PHONE: 701-837-4738 MAIL ADDRESS: STREET 1: PO BOX 1988 STREET 2: SUITE 100 CITY: MINOT STATE: ND ZIP: 58702-1988 10-K 1 k2002.htm INVESTORS REAL ESTATE TRUST - APRIL 30, 2002 Investors Real Estate Trust - Form 10-K405 - April 30, 2002
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

FORM 10-K
_________________________

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended April 30, 2002

Commission File Number  000-14851

INVESTORS REAL ESTATE TRUST
(Exact name of Registrant as specified in its charter)


North Dakota
(State or other jurisdiction of incorporation or organization)
45-0311232
(IRS Employer Identification No.)

12 South Main, 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:
None

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


Title of each class:
Shares of Beneficial Interest (no par value)
Name of each exchange on which registered:
The NASDAQ National Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   [X]  Yes  [   ]  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

The aggregate market value of the Registrant's outstanding capital shares of beneficial interest held by non-affiliates was $278,847,079 based on the last reported sale price on the Nasdaq National Market on July 15, 2002.

The number of shares of beneficial interest outstanding as of April 30, 2002, was 27,847,079.

Documents Incorporated by Reference: Portions of IRET's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders are incorporated by reference into Part III (Items 10, 11, 12 and 13) hereof.

INVESTORS REAL ESTATE TRUST
(Registrant)

INDEX

PART I
PAGE
      1.      Business........................................................................................................
1
      2.      Properties.....................................................................................................
18
      3.      Legal Proceedings.........................................................................................
30
      4.      Submission of Matters to a Vote of Security Holders......................................
30
 
  
PART II
  
5.      Market for Registrant's Common Stock and Related Security Holder
                  Matters......................................................................................................
31
      6.      Selected Financial Data.................................................................................
33
      7.      Management's Discussion and Analysis of Financial Condition and
                  Results of Operations.................................................................................
34
      7a.    Quantitative and Qualitative Disclosures about Market Risk............................
53
      8.      Financial Statements and Supplementary Data................................................
53
      9.      Changes in and Disagreements on Accounting and Financial Disclosure...........
53
 
  
PART III
  
      10.    Directors and Executive Officers of the Registrant..........................................
54
      11.    Executive Compensation................................................................................
54
      12.    Security Ownership of Certain Beneficial Owners and Management................
54
      13.    Certain Relationships and Related Transactions..............................................
54
 
  
PART IV
  
      14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.................
55
      Exhibit Index..........................................................................................................
55
      Signatures..............................................................................................................
57
      Report of Independent Certified Public Accountants................................................
F-1 - F-47

PART 1

Certain statements included in this discussion and the documents incorporated into this Form 10K405 by reference are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include statements about our intention to invest in properties that we believe will increase in income and value; our belief that the real estate markets in which we invest will continue to perform well; 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," "anticipate," "potential," "may," "will," "designed," "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 hold investments, specifically 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;
  • 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 shares;
  • financing risks, such as the inability to obtain debt or equity financing on favorable terms, or at all;
  • timely completion and lease-up of properties under construction;
  • competition;
  • compliance with applicable laws, including those concerning the environment and access by persons with disabilities; and
  • other risks identified in this Form 10-K and from time to time in the reports that we file with the Securities and Exchange Commission or otherwise publicly disseminate.
1
  • our inability to secure casualty insurance for losses caused by terrorist acts.
In light of these uncertainties, the events anticipated by our forward-looking statements might not occur. IRET undertakes no obligation to publicity 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 Form 10-K should not be construed as exhaustive.

Item 1.  Business

Overview
We are a self-administered, externally managed equity Real Estate Investment Trust or REIT and our business consists of owning and operating income-producing real properties. We are structured as an Umbrella Partnership Real Estate Investment Trust or UPREIT and we conduct our day-to-day business operations though our operating partnership, IRET Properties, a North Dakota limited partnership. We have fundamental strategies of focusing our real estate investments in the upper Midwest, primarily in Minnesota, North Dakota, South Dakota, Montana and Nebraska, and of diversifying our investments between multi-family residential and commercial properties. For the twelve months ended April 30, 2002, our real estate investments in the states listed above accounted for 79% of our total gross revenue.

Our 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, adhering to targeted returns by acquiring properties in an attempt to create value for our investors.  We have increased our cash distributions every year since our inception 32 years ago and every quarter since 1988.

We seek to diversify our investments between multi-family residential and commercial properties. As of April 30, 2002, our real estate portfolio consisted of:

  • 66 multi-family residential properties, containing 8,296 apartment units and having a total investment (less accumulated depreciation) of $348 million; and
  • 67 commercial properties, containing 3,796,480 square feet of leasable space and having a total investment (less accumulated depreciation) of $333 million.
Typically, we attempt to concentrate our multi-family residential properties in communities with populations of approximately 35,000 to 500,000 and we attempt to concentrate our commercial holdings in metropolitan areas with populations of approximately 100,000 to three million. Our multi-family residential properties include apartment buildings, complexes, and communities. Our commercial properties include office buildings, warehouse and industrial facilities, medical office and health care facilities, and retail stores and centers. As of April 30, 2002, no single tenant accounted for more than 10% of our total commercial rental revenues. At April 30, 2002, the economic occupancy rates for our multi-family residential properties and our
2 
commercial properties were 94.4% and 97.2%, respectively. Our average economic occupancy rates for stabilized properties for the twelve-month period ended April 30, 2002, were 95.2% for multi-family residential properties and 96.6% for commercial properties. Economic occupancy rates are calculated by dividing the rent collected by the rent scheduled.

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 70% of the acquisition cost. In appropriate circumstances, we also may acquire one or more properties in exchange for limited partnership units of IRET Properties, which are convertible into IRET Shares of Beneficial Interest ("Shares") on a one-to-one basis after the expiration of a minimum holding period of one-year or longer. Subject to our continued ability to raise equity capital and exchange limited partnership units, we anticipate acquiring $100 million to $200 million of real estate assets on an annual basis.

We contract with locally based third-party management companies to handle all onsite management duties necessary for the proper operation of our properties.  Substantially, all of our management contracts provide for compensation ranging from 2.8% to five percent of gross rent collections and may be terminated by us in 60 days or less by providing written notice of termination. The use of locally-based management companies allows us to enjoy the benefits of 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 operate.
 

Business Developments Since May 1, 2001


Investments.  During the past fiscal year we acquired 10 commercial properties consisting of 1,276,603 leasable square feet for $119,329,418.  We also acquired five residential apartment communities containing 517 units for $23,950,924.  In order to complete these acquisitions, we used $33,249,171 of our own cash, issued 2,269,642 operating units in our operating partnership with a value of $20,138,748 and borrowed the balance of $89,892,423 from various lenders.

In December 2001, we issued 3,100,000 shares of beneficial interest for a sales price of $8.75 per share, raising net proceeds of $24,955,000.

In April 2002, we issued 3,600,000 shares of beneficial interest for a sales price of $9.50 per share, raising net proceeds of $31,806,000.

In April of 2002, we discontinued the issuance of investment certificates and the outstanding certificates will be redeemed as they mature.  The amount of certificates to be redeemed in fiscal 2003 and succeeding years is as follows:
 

Year Ending April 30,
  
2003
$  16,484,256
2004
1,995,822
2005
2,221,533
2006
2,177,886
2007
     2,307,085
$  25,186,582

3

Other Developments During the Past Year
Property Dispositions. During the past fiscal year, we sold three commercial properties for a total of $2,032,213 and two residential apartment communities for a total $1,395,000 resulting in a total gain of $604,282 for fiscal 2002.

Employees
As of April 30, 2002, we had 18 full time employees.

Environmental Matters
Under various federal, state and local laws, ordinances and regulations, owners as well as tenants and operators of real estate may be required to investigate and clean up hazardous 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 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.  We have reviewed some preliminary environmental surveys of the facilities we own.  Based upon that review we do not believe that any of these properties are subject to any material environmental contamination.  However, no assurances can be given that:
 

  • a prior owner, operator or occupant of our facilities 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.
Structure
We were organized as a REIT under the laws of the State of North Dakota on July 31, 1970. We will continue in existence until the expiration of 20 years after the death of the last survivor of the seven original members of our Board of Trustees, unless sooner terminated or extended by a vote of shareholders holding a majority of the issued and outstanding Shares. Five of the seven original members of our Board of Trustees are still living, the youngest being 67 years of age. Our existence may be extended indefinitely by an action of the members of the Board of Trustees, which is approved by the vote of shareholders holding fifty per cent or more of the outstanding Shares.

Since our formation, we have operated as a REIT under Sections 856-858 of the Internal Revenue 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 the State 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 apartment buildings 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

4

REIT subsidiaries) and liabilities were contributed to IRET Properties, through IRET, Inc., in exchange for the sole general partnership interest in IRET Properties, which is held by IRET, Inc. As of April 30, 2002, IRET, Inc. owned a 74% interest in IRET Properties. The remaining ownership of IRET Properties is held by individual limited partners, none of whom own more than ten percent of the outstanding limited partnership units.

Competition
Investing in and operating real estate is a very competitive business.  We compete against other REITs, numerous financial institutions and numerous individuals and public and private companies who are actively engaged in this business.  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 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 which have and will allow us to operate our business successfully despite the competitive nature of our business.

Investment Strategy and Policies
Our investment strategy is to invest in multi-family apartment communities and certain commercial properties, such as warehouses, retirement homes, manufacturing plants, offices and retail 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 do have real estate investments in South Dakota, Montana and Nebraska, as well as, Colorado, Georgia, Idaho, Iowa, Kansas, Michigan, Washington and Texas. We generally seek to leverage all of the property that we acquire so that the debt on such property is approximately 70% of the property's value.

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

  •  Investments in Real Estate or Interests in Real Estate.  We currently own multi-family residential real estate properties and/or commercial real estate 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, Montana, and South Dakota. 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, except we may not invest more than ten percent of our total assets in unimproved real estate, excluding property being developed or property where development will be commenced within one year.e operation of our real estate, as it pertains to the day-to-day management, is delegated to third-party professional real estate management companies. All major operating decisions concerning the operation of our real estate are made by the Board of Trustees.
5
The method of financing the purchase of real estate investments is primarily from borrowed funds and the sale of Shares.

We intend to distribute all of the net income generated from rental income and interest income to our shareholders and limited partners in quarterly cash distributions in January, April, July, and October.

There is no limitation on the number or amount of mortgages that may be placed on any one piece of property, unless we seek to borrow an amount in excess of 300% of our total net assets, in which case our Second Restated Declaration of Trust requires that such amount be approved by a majority of the independent members of the Board of Trustees and disclosed to the shareholders in the next quarterly report, along with justification for such excess. In addition to the 300% limitation on total indebtedness, it is our policy that we will not exceed a 70% debt level on our real estate assets. As of April 30, 2002, our ratio of total real estate mortgages to total real estate assets was 67%, while our ratio of total indebtedness as compared to our net assets was 223%. This policy may be changed at anytime, or from time to time, without notice to, or approval of, our shareholders.

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 the price of our Shares as a result of the increase in value of the underlying 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 the trustees at anytime without notice to or a vote of the shareholders.

  • Investments in Real Estate Mortgages.  While not our primary business focus, we do make loans to others that are secured by mortgages, liens or deeds of trust covering real estate. Over the last three years, we have made a number of mortgage loans, most of which are still outstanding. 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 underlying property.


    • Unless otherwise approved by the 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% of the property's appraised value.
     

    We can invest in second mortgages without notice to, or the approval of, our shareholders. As of April 30, 2002, we only had two second mortgages with a principal balance of $145,387.  We do not currently plan to invest in any other second mortgages.
     
6
Our policies relating to mortgage loans, including second mortgages, may be changed by the Board of Trustees at any time, or from time to time, without notice to, or a vote of, the shareholders.
  • Investments in the Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Securities.  We are permitted to invest in the securities of other entities engaged in the ownership and operation of real estate. Over the past three years, we have purchased United States guaranteed obligations and common shares of five other publicly traded REITs. These purchases were made solely for the purpose of holding cash until future real estate investments were identified.


    • In no event were the purchases of the shares of publicly traded REITs made for the purpose of exercising control over such issuer. No further such investments are currently planned.

    We have a number of wholly owned limited partnerships and companies that were organized for the sole purpose of conducting our real estate business activities.

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

Total Real Estate Rental Revenue
As of April 30, 2002, our real estate portfolio consisted 53% of multi-family apartment complexes, based on the dollar amount of our original investment plus capital improvements through April 30, 2002, and 47% of commercial buildings, and based on the dollar amount of our original investment plus capital improvements through April 30, 2002. The dollar amounts and percentages of total real estate rental revenue by property group for each of the three most recent fiscal years ended April 30, were as follows:
 
Apartment
Gross Revenue
%
Commercial
Gross Revenue
%
Total Revenue
       
2002
$   59,052,950
64%
$   32,685,652
36%
$   91,738,602
2001
  55,806,712
75%
  18,994,010
25%
74,800,722
2000
42,379,855
78%
11,878,026
22%
54,257,881

Increase of Commercial Property Investments
Historically, the assets in our portfolio consisted predominantly of multi-family residential properties, as compared to commercial properties. More recently, our investment activities have caused this balance to shift so that the percentage of commercial properties held in our portfolio has increased significantly. Specifically, approximately 85% of our property acquisitions made in within the past 24 months have been commercial properties. This change is predominantly due to the greater availability of commercial properties on terms that meet our financial and strategic objectives. If current market conditions continue, we anticipate that the percentage of commercial properties could equal or exceed the percentage of multi-family residential properties during

7

fiscal 2003. This may not, however, be a long-term trend as in future periods we may purchase a greater percentage of multi-family residential properties depending on market conditions.

Recent Acquisitions, Dispositions and Tenants
During the three most recent fiscal years ending April 30, we acquired 15 apartment communities, consisting of 2,401 units, for a total cost of $163 million, and 48 commercial properties, containing 2.8 million square feet of space, for a total cost of $273 million. During the most recent fiscal year ended April 30, 2002, we sold 5 properties, realizing a net gain of $600,000. No single tenant accounted for more than ten percent of revenues during any of the past three fiscal years. As of April 30, 2002, our three largest commercial tenants as a percentage of total commercial rents were: Step II, INc. DBA Edgewood Vista 9%, HealthEast Medical 6% and Great Plains Software, a subsidiary of Microsoft, Inc. 6%.

Economic Occupancy Rates
Economic occupancy rates are shown below for each property group in each of the three most recent fiscal years ending April 30. Economic occupancy rates are calculated by dividing the rent collected by the rent scheduled. In the case of apartment properties, lease arrangements with individual tenants vary from month-to-month to one-year leases, with the normal term being six months. Leases on commercial properties vary from one to 20 years.
 

 
2002
2001
2000
Apartment Occupancy
94.40%
93.96%
93.24%
Commercial Occupancy
97.90%
97.20%
97.80%

Material Lease Terms
     Residential.  Our typical residential lease terms are as follows:

          (i)         Terms of three to twelve months.

          (ii)        Month-to-month occupancy is generally not permitted.

          (iii)       Water, sewer and garbage are included in the monthly rent, and all other utilities and services are the direct  responsibility of  the tenant.

          (iv)       Tenants are not required to carry renter's insurance.

     Commercial.  Our typical commercial least terms are as follows:

          (i)         Terms from one to 20 years plus guaranteed renewal terms.

          (ii)        Renewal term rents will be equal to current market rents at time of renewal, and in no event less than the most  recent rental rate.

          (iii)       Tenant pays all expenses associated with taxes, insurance, repairs, daily operations and maintenance.

8

          (iv)       Rent is payable in fixed monthly amounts (less than five percent of rental income is based on our commercial tenant's sales).

          (v)       Tenants are prohibited from assigning their lease or subleasing without our written approval.

          (vi)       We may sell the property and assign the lease at any time without the approval of the tenant.

          (vii)      We do not grant tenants an option to purchase the property.

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 two 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.

Selection, Management and Custody of Our Real Estate Assets
The day to day management of our real estate assets is handled by third-party professional real estate management companies. Day-to-day management activities include, the negotiation of potential leases, the preparation of proposed operating budgets and the supervision of routine maintenance and capital improvements that have been authorized by us. All activities relating to the purchase, sale, insurance coverage, capital improvements, approval of commercial leases and annual operating budgets and major renovations are made exclusively by our employees and are then implemented by the third-party property management companies.

9

As of April 30, 2002, we had property management contracts with the following companies:
 

Firm
Address
 
 
Bayport Properties
300 S. Hwy. 169, Suite 120, Minneapolis, MN 55426
Builder's Management & Investment Co.
1445 1st Avenue North, Fargo, ND 58102
Coast Management
PO Box 2066, Boise, ID 83701-2066; 
2610 Wetmore Avenue, Everett, WA 98206
Coldwell Banker First Realty
PO Box 9379, Fargo, ND 58106-9379
ConAm
2301 Ohio Dr., Suite 285, Plano, TX 75093; 
10800 E. Bethany Dr., Aurora, CO 80014
Dakota Commercial
1197 B S. Columbia Rd., Grand Forks, ND 58201
Fischer & Erwin Property Management
730 Main Street, Suite 204, Billings, MT 59107
Hoyt Properties, Inc
5700 Smetana Dr., Minnetonka, MN 55343
Investors Management and Marketing, Inc
PO Box 2064, Minot, ND 58702-2064
Illies Nohave Heinen Property  Mgmt.
300 E. Germain St., St. Cloud, MN 56304
Kahler Property Management
2020 W. Omaha, Rapid City, SD 57702
Opus Northwest Management, L.L.C.
10350 Bren Rd. W., Minnetonka, MN 55343;
PO Box 59110, Minneapolis, MN 55459-0110
Remada
12400 Whitewater Dr, Suite 140, Minnetonka, MN 55343
Sand Companies, Inc.
PO Box 727, Waite Park, MN 56387-0727
United Properties
3500 West 80th Street, Minneapolis, MN 55431
Weis Management
2227 7th St. NW, Rochester, MN 55901

All management contracts may be terminated by us without cause or penalty upon no more than 60-days written notice. It is our understanding that each of the property management companies listed above are properly licensed, insured and bonded to the extent required for their particular duties.

With the exception of Hoyt Properties, Inc., none of the firms engaged to provide property management services are affiliated with IRET, its officers or members of its Board of Trustees. Hoyt Properties, Inc. is owned 100% by Steven B. Hoyt, a member of our Board of Trustees, and his wife.  Hoyt Properties manages the commercial buildings we acquired from him pursuant to written management contracts.
 
 

10

With respect to multi-tenant commercial properties, we rely almost exclusively on third-party brokers to locate potential tenants. As compensation, most brokers receive a commission of up to seven percent of the total rent to be paid over the term of the lease. This commission rate is the industry standard and, in our opinion, commercially reasonable.

Policies With Respect to Certain of Our Activities
The following information is a statement of our current policies as they pertain to the described activities.
 

  • Cash Distributions to Shareholders and Unitholders.  We intend to continue our policy of making cash distributions to our shareholders and unitholders of approximately 70% of our funds from operations and to use the remaining 30% 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.

    •  
  • Issuing Senior Securities.  We have issued and outstanding investment certificates, which are issued for a definite term and annual interest rate. In the event of our dissolution, the investment certificates would be paid in preference to our Shares.
    •  
    We do not plan to issue other senior securities in the future.  Our Second Restated Declaration of Trust does not, however, prohibit us from issuing additional senior securities with liquidation preferences superior to our Shares.  The decision regarding whether to issue additional senior securities may be made by the members of the Board of Trustees at any time, or from time to time without notice to, or approval of our shareholders.
  • Borrowing Money.  We rely on borrowed funds in pursuing our investment objectives and goals. It is our policy to seek to borrow up to 70% of the cost of all new real estate acquired or developed. This policy concerning borrowed funds is vested solely with the Board of Trustees and can be changed by the Board of Trustees at any time, or from time to time, without notice to, or a vote of, the shareholders. Such policy is subject, however, to the limitation in our Second Restated Declaration of Trust, which provides that unless justified and approved by a majority of the independent members of the Board of Trustees and disclosed to shareholders in the next quarterly report along with justification for such excess, we may not borrow more than 300% of the value of our total portfolio of assets. Our Second Restated Declaration of Trust does not impose any limitation on the amount that we may borrow against any one particular property.
For the three most recent fiscal years ended April 30, we have borrowed funds on new property acquisitions and developments as follows:
 
2002
2001
2000
 
      
Cost of property acquired or developed
$143,280,342
$143,042,292
$ 154,094,051
Net increase in borrowings
$  90,611,975
$  93,794,047
$  89,985,698
Borrowing as a percentage of cost
63%
65%
58%

11

  •  Underwriting Securities of Other Issuers.  We have not, for the past three years, engaged in, and we are not currently engaging in, the underwriting of securities of other issuers. Our Second Restated Declaration of Trust does not impose any limitation on our ability to underwrite the securities of other issuers. Any decision to do so is vested solely in the Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, the shareholders.

    •  
  • Engaging in the Purchase and Sale or Turnover of Investments.  We have not, for the past three years, engaged in, and we are not currently engaging in the purchase and sale or turnover of investments. It is our policy to acquire or develop real estate that will be held for a period of at least ten years. Even though we have not engaged, and we are not currently engaging in this practice, our Second Restated Declaration of Trust does not impose any limitation on our ability to do so. Any decision to do so is vested solely in the Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, the shareholders.

    •  
  • Offering Securities in Exchange for Property.  Our organizational structure allows us to offer IRET Properties limited partnership units in exchange for real estate, and we plan to do such on a continuous and ongoing basis. The IRET Properties limited partnership units are convertible into shares on a one-for-one basis after a minimum one-year holding period. All IRET Properties limited partnership units receive the same cash distributions as those paid on shares. Limited partners of IRET Properties are not entitled to vote on any matters affecting us until they convert their IRET Properties limited partnership units to shares. All exchanges of IRET Properties limited partnership units to shares are subject to approval by the Board of Trustees, on such terms and conditions that are deemed reasonable by the Board.


    • Our Second Restated Declaration of Trust does not contain any restrictions on our ability to offer IRET Properties limited partnership units in exchange for property. As a result, any decision to do so is vested solely in the 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 ending April 30, we have issued the following IRET Properties limited partnership units in exchange for properties:

 
2002
2001
2000
 
      
Limited partnership units issued
2,269,643
 2,968,030
2,709,253
Dollar value
$20,138,748
   $25,344,059
$ 21,602,838
  • Acquiring or Repurchasing Shares.  As a REIT, it is our intention to only invest in real estate assets. Our Second Restated Declaration of Trust does not prohibit the acquisition or repurchase of our 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 our shares or other securities is vested solely in the Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, the shareholders.
12

Over the past three years, we have repurchased shares under the terms of our distribution reinvestment plan for allocation to those shareholders that elect to reinvest their distributions in additional shares. For the three most recent fiscal years ended April 30, we have repurchased the following number and amount of shares:

For the Period Ending April 30
2002
2001
2000
 
      
Number of shares
16,200
555,785
372,500
Total price paid by IRET
$    134,986
$ 4,478,401
$  2,97,0675
Average price per share
$        8.332
$        8.057
$           7.97

IRET Properties Agreement of Limited Partnership
The material terms of the IRET Properties Agreement of Limited Partnership are as follows:
 

  • Authority of the Sole General Partner.  As the sole general partner, IRET, Inc. has full, exclusive and complete authority, responsibility and discretion in the management and control of IRET Properties, and the limited partners have no authority in their capacity as limited partners to transact business for, or participate in, the management activities or decisions of IRET Properties, except as required by applicable law.

    •  
  • Amendment of the Agreement of Limited Partnership.  Any amendment to the Agreement of Limited Partnership that would (i) adversely affect the exchange rights, as described below, (ii) adversely affect the limited partners' rights to receive cash distributions, or (iii) alter the limited partnership's allocations of capital, requires the consent of more than 50% of the limited partnership units.

    •  
  • Transferability of General Partnership and Limited Partnership Interests and Certain Transactions. IRET, Inc. may not (i) voluntarily withdraw as the sole general partner of IRET Properties, or (ii) transfer or assign its general partnership units, unless the transaction in which such withdrawal or transfer occurs results in the limited partners receiving property in an amount equal to the amount they would have received had they exercised their exchange rights, as discussed below, immediately prior to such transaction, or unless the successor to IRET, Inc. contributes substantially all of its assets to the IRET Properties in return for an interest in IRET Properties. With certain limited exceptions, the limited partners may not transfer their limited partnership units, in whole or in part, without the written consent of IRET, Inc., which may be withheld in its sole discretion. IRET, Inc. may not consent to any transfer that would cause IRET Properties to be treated as a corporation for federal income tax purposes.
IRET Properties may not engage in any transaction that would result in a change of control transaction unless, in  connection with the transaction, the limited partners receive or have the right to receive cash or other property equal to the product of the number of our shares into which each limited partnership unit is then exchangeable and the greatest amount of cash, securities or other property paid in the transaction to the holder of one of our shares in consideration of one such share. If, in connection with the transaction, a


13

purchase, tender or exchange offer has been made to, and accepted by, the holders of more than fifty percent (50%) of our outstanding shares, each holder of limited partnership units will receive, or will have the right to elect to receive, the greatest amount of cash, securities or other property that such holder would have received had he or she exercised his or her right to redemption and received shares in exchange for his or her limited partnership units immediately prior to the expiration of such purchase, tender or exchange offer and had accepted such purchase, tender or exchange offer.
Despite the foregoing paragraph, we may merge, or otherwise combine our assets, with another entity if, immediately after such merger or other combination, substantially all of the assets of the surviving entity, other than our ownership in IRET Properties, are contributed to IRET Properties as a capital contribution in exchange for general partnership units of IRET  Properties with a fair market value, as reasonable determined by us, equal to the agreed value of the assets so contributed.    In connection with any transaction described in this or the preceding paragraph, we are required to use our commercially reasonable efforts to structure such transaction to avoid causing the limited partners to recognize gain for federal income tax purposes by virtue of the occurrence of, or their participation in, such transaction; provided that such efforts are consistent with the exercise of the fiduciary duties of the members of the Board of Trustees under applicable law.
  • Capital Contributions to IRET Properties.  All of our assets were contributed to, and are now held, by IRET Properties or a subsidiary of IRET Properties. Under the Agreement of Limited Partnership, IRET, Inc. is obligated to contribute, or cause us to contribute, the proceeds of any offering of Shares as additional capital to IRET Properties. As such, any proceeds that we receive from future stock offerings will be contributed to IRET Properties and will be deemed to be a capital contribution to IRET Properties in the amount of the gross proceeds of the offering.  IRET Properties will simultaneously be deemed to have paid the expenses incurred in connection with any such offering.


    • Upon the contribution of the proceeds from offerings of Shares or other capital contributions, we or IRET, Inc., as applicable, will receive additional general partnership units and our or IRET, Inc.'s percentage interest, as applicable, in IRET Properties will be increased on a proportionate basis based upon the amount of such contributions. Conversely, the percentage interests of the limited partners will be decreased on a proportionate basis. In the event that a capital contribution in the form of property is made by us or IRET, Inc., as applicable, to IRET Properties, IRET, Inc. will revalue the property of IRET Properties to its fair market value as determined by IRET, Inc. and the capital accounts of the partners will be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property, which has not been reflected in the capital accounts previously, would be allocated among the partners under the terms of the Agreement of Limited Partnership if there were a taxable disposition of such property at fair market value on the date of the revaluation.

14

The Agreement of Limited Partnership further provides that if at any time, or from time to time, IRET Properties requires additional funds in excess of funds available to IRET Properties from borrowing or capital contributions, either we or IRET, Inc. may borrow such funds from a financial institution or other lender and lend such funds to IRET Properties on the same terms and conditions as are applicable to us or IRET, Inc., as applicable, in connection with the borrowing of such funds.

Furthermore, IRET, Inc. is authorized to cause IRET Properties to issue partnership units for less than fair market value if we (i) have concluded in good faith that such issuance is in the best interest of us and IRET Properties and (ii) IRET, Inc. makes a capital contribution in an amount equal to the proceeds of such issuance.

  • Exchange Rights of Limited Partners.  Pursuant to the Agreement of Limited Partnership of IRET Properties, the limited partners have exchange rights that enable them to cause IRET Properties to exchange their limited partnership units for cash, or at the option of IRET, Inc., our shares, on a one-for-one basis. The exchange price will be paid in cash in the event that the issuance of our shares to the exchanging limited partner would:


    • (i)      result in any person owning, directly or indirectly, shares in excess of the ownership limitation of 50% of the outstanding shares;

    (ii)     result in our shares being owned by fewer than 100 persons;

    (iii)    result in us being "closely held" within the meaning of Section 856(h) of the Code;

    (iv)    cause us to own, actually or constructively, ten percent or more of the ownership interest in on our or IRET Properties' tenants' real estate, within the meaning of Section 856(d)(2)(D) of the Code; or

    (v)     cause the acquisition of our shares by such redeeming limited partner to be "integrated" with any other distribution of our shares for purposes of complying with the Securities Act of 1933.

The exchange may be exercised by the limited partners at any time after the first anniversary of the date of the acquisition of the limited partnership units; provided, however, that not more than two exchanges may occur during  each calendar year, and each limited partner may not exercise the exchange for less than 1,000 units or, if such limited partner holds less than 1,000 units, all of the units held by such limited partner. The number of our shares issuable upon an exchange will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro rata share transactions, which otherwise would have the effect of diluting the ownership interests of the limited partners or our shareholders.
15
  • Operation of IRET Properties and Payment of Expenses.  The Agreement of Limited Partnership of IRET Properties requires that the partnership be operated in a manner that will enable us to satisfy the requirements for being classified as a REIT for federal tax purposes, to avoid any federal income or excise tax liability imposed by the Code and to ensure that IRET Properties will not be classified as a publicly traded partnership for purposes of Section 7704 of the Code. In addition to the administrative and operating costs and expenses incurred by IRET Properties, IRET Properties will pay all of the administrative costs and expenses for us and IRET, Inc. All of our expenses will be considered expenses of IRET Properties. Our expenses generally include:


    • (i)      all expenses relating to the operation and continuity of existence of both us and IRET, Inc.;

    (ii)     all of our expenses relating to the public offering and registration of our securities;

    (iii)    all expenses incurred by us that are associated with the preparation and filing of any periodic reports required under federal, state or local laws or regulations;

    (iv)    all expenses incurred by us or IRET, Inc. that are associated with the compliance with laws, rules and regulations promulgated by any regulatory body; and

    (v)     all other operating or administrative costs of IRET, Inc. incurred in the ordinary course of its business on behalf of IRET Properties.
     

  • Distributions and Liquidation.  The Agreement of Limited Partnership of IRET Properties provides that it will distribute cash from operations on a quarterly basis, in amounts determined by IRET, Inc. in its sole discretion, to the partners in accordance with their respective percentage interests in IRET Properties. Upon the liquidation of IRET Properties, and after payment of, or adequate provision for, debts and obligations of IRET Properties, any remaining assets will be distributed to all partners with positive capital accounts in accordance with their respective positive capital account balances. In the event that we have a negative balance in our capital account following a liquidation, we will be obligated to contribute cash equal to the negative balance in our capital account.

    •  
  • Allocations.  Income, gain and loss of IRET Properties for each fiscal year is allocated among the partners in accordance with their respective interests, subject to compliance with the provisions of Code Sections 704(b) and 704(c) regulations issued thereunder.

    •  
  • Term.  IRET Properties will continue until April 30, 2050, or until sooner dissolved upon:


    • (i)      the bankruptcy, dissolution or withdrawal of IRET, Inc.;

    (ii)     the sale or other disposition of all or substantially all of its assets;

16
(iii)    the redemption of all limited partnership interests; or
 
(iv)    the election by IRET, Inc.
  • Fiduciary Duty.  Before becoming a limited partner, each limited partner must agree that in the event of any conflict in the fiduciary duties owed by us to our shareholders and by IRET, Inc. to such limited partners, IRET, Inc. will fulfill its fiduciary duties to such limited partnership by acting in the best interests of our shareholders.

    •  
  • Tax Matters.  IRET, Inc. is the tax matters partner of IRET Properties and, as such, has authority to handle tax audits and to make tax elections under the Code on behalf of IRET Properties and the limited partners.
17

Item 2.  Properties

IRET is a qualified "real estate investment trust" under Section 856-858 of the Internal Revenue Code, and is in the business of making passive investments in real estate equities and mortgages. These real estate investments are managed by third-party professional real estate management companies on behalf of IRET.
Summary of Real Estate Investment Portfolio
 
April 30, 2002
  
April 30, 2001
  

Real Estate Investments

        
      Real Estate Owned
$   740,319,436
  
$   591,636,468
  
      Less Depreciation Reserve
    -58,925,517
  
    -44,093,145
  
 
$   681,393,919
93.3%
$   547,543,323
96.0%
 
        
      Mortgage Loans Receivable
       3,952,762
     ..5%
       1,037,095
     ..2%
      Total Real Estate Investments
$   685,346,681
  
$   548,580,418
  

Other Assets
April 2002
  
April 2001
  
      Cash & Marketable Securities
$    22,833,426
  
$       9,368,176
  
      Furniture & Fixtures
209,121
  
187,313
  
      Goodwill
1,440,817
  
1,550,246
  
      Deposits & Accruals
    20,378,973
  
     10,635,971
  
      Total Other Assets
$    44,862,337
    6.2%
$     21,741,706
    3.8%
      Total Assets
$  730,209,018
100.0%
$   570,322,124
100.0%

18

Summary of Individual Properties Owned as of April 30, 2002

Commercial Properties

State & City
Property Type
Square Feet
Investment
Fiscal 2002
Economic
Occupancy
 
 
 
 
 
Georgia
 
      
Lithia Springs
 
      
   Wedgewood
Retirement Center
29,408
$    3,971,878
100.00%
Georgia Total
 
29,408
$    3,971,878
100.00%
Idaho
 
      
Boise
 
      
   America's Best
Furniture Store
69,599
$    4,788,294
0.00%
Idaho Total
 
69,599
$    4,788,294
0.00%
Michigan
 
      
Kentwood
 
      
   Comp USA
Retail
16,080
$    2,121,474
100.00%
Michigan Total
 
16,080
$    2,121,474
100.00%
Minnesota
 
      
Bloomington
 
      
   Bloomington Bus. Ctr. 
Office Building
121,064
$     7,445,108
              n/a 
   Pillsbury Business Ctr.
Office Building
42,220
  1,842,601
67.09%
Burnsville
 
      
   Burnsville Bluffs
Office Building
45,158
2,453,911
100.00%
   Nicollet VII
Office Building
125,385
7,360,670
100.00%
Cottage Grove
 
      
   Cottage Grove Center
Strip Mall
15,217
1,116,089
               n/a
Duluth
 
      
   Edgewood Vista I & II
Assisted Living
74,984
7,183,519
100.00%
Eagan
 
      
   2030 Cliff Road
Office Building
13,374
982,763
100.00%
   Lexington Commerce
Office Building
89,840
5,486,349
76.66%
   S.E. Tech Center
Office Building
58,300
6,115,854
100.00%
East Grand Forks
 
      
   East Grand Station
Convenience Store
16,103
1,392,251
100.00%
   Edgewood Vista I & II
Assisted Living
16,392
1,430,136
100.00%
Eden Prairie
 
      
   Flying Cloud Drive
Office Building
62,585
5,160,600
93.97%
   Lindberg Building
Office / Warehouse
41,880
1,608,535
100.00%
   ViroMed
Office Building
48,700
4,863,634
100.00%
Edina
 
      
   Dewey Hill Business Ctr.
Office Building
73,338
4,869,054
100.00%
   Interlachen
Office Building
105,084
16,691,307
            n/a
   Southdale Medical Center
Office Building
195,983
32,588,538
100.00%

19



 
 
 

State & City
Property Type
Square Feet
Investment
Fiscal 2002
Economic Occupancy
 
 
      
Minnesota - continued
 
      
Golden Valley
 
      
   Wirth Corporate Center
Commercial Office
75,216
8,629,281
              n/a
Maple Grove
 
      
   Northgate II
Office Building
25,999
2,357,893
100.00%
Maplewood & Woodbury
 
      
   HealthEast I & II
Office Building
114,316
21,600,999
100.00%
Mendota Heights
 
      
   Mendota Center I
Office Building
59,852
10,196,443
n/a
   Mendota Center II
Office Building
88,398
8,014,563
n/a
   Mendota Center III
Office Building
60,776
6,853,818
n/a
   Mendota Center IV
Office Building
72,231
8,604,537
n/a
   Mendota Northland
Office Building
146,808
17,610,899
n/a
Minnetonka
 
      
   Hospitality Associates
Office Building
4,000
405,548
100.00%
   Wayroad
Commercial Office
62,383
5,394,985
n/a
Minneapolis
 
      
   Thresher Square East
Office Building
57,891
6,560,775
n/a
   Thresher Square West
Office Building
54,945
4,559,183
n/a
Moorhead
 
      
   Pioneer Seed Co.
Office/Warehouse
13,600
653,876
0.00%
 New Brighton 
 
      
   Morgan Chemical
Industrial Building
49,620
2,428,810
n/a
Plymouth
 
      
   Plymouth Tech IV
Office Building
53,309
5,901,898
100.00%
   Plymouth Tech V
Office Building
73,500
8,445,892
100.00%
Rochester
 
      
   Maplewood Square
Strip Mall
118,398
11,906,217
94.08%
Roseville
 
      
   Stone Container
Distribution Center
229,072
8,265,239
n/a
St. Cloud
 
      
   Cold Spring Center
Office Building
77,533
8,397,336
100.00%
Virginia
 
      
   Edgewood Vista
Assisted Living
70,313
6,958,383
n/a%
Waconia
 
      
   Stone Container
Distribution Center
29,440
1,666,518
100.00%
Winsted
 
      
   Sterner Lighting
Manufacturing Plant
    38,000
$      1,000,789
100.00%
Minnesota Total
 
2,721,207
$  265,004,801
97.44%

20

State & City
Property Type
Square Feet
Investment
Fiscal 2002 Economic Occupancy
 
 
      
Montana
 
      
Belgrade
 
      
   Edgewood Vista
Assisted Living
5,100
$      453,494
100.00%
Billings
 
      
   Creekside Office Park
Office Building
34,603
2,045,789
100.00%
   Edgewood Vista
Assisted Living
11,800
980,218
100.00%
Kalispell
 
      
   Edgewood Vista
Assisted Living
5,895
588,113
100.00%
Missoula
 
      
   Edgewood Vista
Assisted Living
10,150
      962,429
100.00%
Montana Total
 
67,548
5,030,043
100.00%
Nebraska
 
      
Columbus
 
      
   Edgewood Vista
Assisted Living
5,100
$      455,626
100.00%
Fremont
 
      
   Edgewood Vista
Assisted Living
6,042
552,172
100.00%
Grand Island
 
      
   Edgewood Vista
Assisted Living
5,100
455,626
100.00%
Hastings
 
      
   Edgewood Vista
Assisted Living
6,042
571,538
100.00%
Omaha
 
      
   Ameritrade Headquarters
Office Building
73,742
8,348,798
100.00%
   Barnes & Noble
Retail Bookstore
27,500
3,699,197
100.00%
   Edgewood Vista
Assisted Living
    6,042
          641,252
100.00%
Nebraska Total
 
129,568
$    14,724,209
100.00%
North Dakota
 
      
Fargo
 
      
   Barnes & Noble
Retail
30,000
3,274,996
100.00%
   Great Plains Software
Campus Facility
122,040
15,375,154
100.00%
   Petco
Retail
18,040
1,278,934
100.00%
   Stone Container
Office/Manufacturing
195,075
7,105,566
100.00%
Grand Forks
 
      
   Carmike Theatre
Retail
28,528
2,545,737
100.00%
   MedPark Mall
Retail
59,177
5,696,588
100.00%
Minot
 
      
   1st Avenue Building
Office Building
15,357
537,189
52.70%
   12 South Main
Office Building
10,126
411,487
93.50%
   17 South Main
Office Building
3,250
90,000
100.00%
   401 South Main
Office Building/Parking
8,597
617,282
83.04%
   Arrowhead Shopping Ctr.
Strip Mall
76,424
3,005,419
95.94%

21


State & City
Property Type
Square Feet
Investment
Fiscal 2002 Economic Occupancy
 
 
      
North Dakota - continued
        
Minot
 
      
   Edgewood Vista
Assisted Living
97,821
6,270,707
100.00%
   Minot Plaza
Retail
    11,020
        519,615
100.00%
North Dakota Total
 
675,455
$  46,728,674
98.32%
South Dakota
 
      
Rapid City
 
      
   Conseco
Office Building
75,815
$     7,044,870
100.00%
Sioux Falls
 
      
   Edgewood Vista
Assisted Living
    11,800
        974,739
100.00%
South Dakota Total
 
87,615
$     8,019,609
100.00%
 
 
      
Total Commercial
 
3,796,480
$ 350,388,982
96.84%

Apartment Communities

State & City
Units
Investment
Fiscal 2002  Occupancy
 
 
 
 
Colorado
 
 
 
Colorado Springs
 
 
 
   Neighborhood
192
$    11,556,236
94.35%
Ft. Collins
      
   MiraMont
210
14,458,518
94.90%
   Pine Cone
195
    13,322,465
92.14%
Colorado Total
597
$    39,337,219
93.17%
Idaho
      
Boise
      
   Clearwater
60
$      3,873,512
90.75%
Idaho Total
60
$      3,873,512
90.75%
Iowa
      
Sioux City
      
   Ridge Oaks
132
$      4,595,627
92.70%
Iowa Total
132
$      4,595,627
92.70%
Kansas
      
Topeka
      
   Crown Colony
220
$    10,881,547
93.31%
   Sherwood
300
     16,268,055
93.64%
Kansas Total
520
$    27,149,602
93.50%

22



 
 
 

State & City
Units
Investment
Fiscal 2002 Economic Occupancy
 
      
Minnesota
      
Moorhead
      
   Eastgate
116
$      2,521,483
95.99%
Rochester
      
   Heritage Manor
182
7,897,920
93.51%
   Woodridge
108
6,849,155
97.56%
   Sunset Trail
73
7,772,834
87.24%
   Sunset Trail II
73
6,858,532
73.01%
   Sunset Trail III
n/a
329,227
n/a
St. Cloud
      
   Lancaster Place
    84
3,260,739
92.74%
   Park Meadows
360
12,010,183
96.47%
   West Stonehill
   313
    11,970,748
98.47%
Minnesota Total
1,309
$   59,470,821
95.60%
Montana
      
Billings
      
   Castle Rock
165
$     5,828,773
92.38%
   Country Meadows I
67
4,371,416
96.42%
   Country Meadows II
67
4,364,972
93.65%
   Olympic Village
274
11,983,207
96.34%
   Pinehurst
21
751,310
n/a
   Rimrock West
  78
3,987,318
99.13%
   Rocky Meadows
  98
      6,772,511
97.40%
Montana Total
770
$   38,059,507
95.57%
Nebraska
      
Lincoln
      
   Thomasbrook
264
$     10,155,696
95.91%
Omaha
      
   Applewood on the Green
234
    10,810,426
n/a
Nebraska Total
498
$   20,966,122
95.91%
North Dakota
      
Bismarck
      
   Cottonwood Lake I
67
$     4,706,021
92.55%
   Cottonwood Lake II
67
4,276,777
91.34%
   Cottonwood Lake III
67
4,604,910
93.20%
   Cottonwood Lake IV
n/a
263,966
n/a
   Crestview
152
5,075,589
99.04%
   Kirkwood Manor
108
3,790,492
94.24%
   North Pointe
49
2,449,895
98.96%
   Pebble Springs
16
796,799
99.08%

23



 
 
 

State & City
Units
Investment
Fiscal 2002 Economic Occupancy
 
      
North Dakota - - continued
      
Bismarck      
   Westwood Park
64
2,253,752
99.79%
Dickinson
      
   Century
120
2,448,472
96.28%
   Eastwood
37
539,559
88.14%
   Oak Manor
27
404,129
96.58%
Fargo
      
   Candlelight
44
1,031,859
96.08%
   Park East
122
5,196,596
99.19%
   Prairiewood Meadows
85
2,896,253
95.37%
Grand Forks
      
   Forest Park Estates
270
7,640,288
96.51%
   Jenner Properties
107
2,266,932
95.40%
   Legacy I
116
7,236,236
97.87%
   Legacy II
67
3,859,538
98.19%
   Legacy IV
67
7,084,888
98.27%
   Southwinds
164
6,088,737
97.04%
   Valley Park Manor
168
5,171,931
95.53%
Minot
      
   Chateau
64
2,522,589
83.84%
   Colton Heights
18
971,797
96.03%
   Dakota Arms
18
633,823
99.21%
   Magic City
220
5,040,460
96.86%
   South Pointe
195
10,381,859
95.03%
   Southview
24
733,498
95.18%
Williston
      
   Century
192
4,230,209
86.39%
Other Communities
      
   408 1st Street SE - Minot
--
46,907
---------
   Beulah Condominiums - Beulah
26
488,324
74.64%
   Parkway Apartments - Beulah
36
181,421
82.48%
   Bison Properties - Carrington & Cooperstown
35
624,590
79.74%
   Sweetwater Properties - Devils Lake & Grafton
90
1,705,184
81.92%
   Lonetree Manor - Harvey
12
237,579
68.91%
   The Meadows I - Jamestown
27
1,836,114
98.13%
   The Meadows II - Jamestown
27
1,923,199
98.08%
   The Meadows III - Jamestown
     27
       2,198,016
89.98%
North Dakota Total
2,995
$  113,839,188
95.27%

24

State & City
Units
Investment
Fiscal 2002 Economic Occupancy
 
      
South Dakota
      
Rapid City
      
   Canyon Lake
109
$      4,280,120
n/a
   Pointe West
90
4,314,422
93.10%
Sioux Falls
      
  Oakmont
80
5,257,468
n/a
   Oakwood Estates
160
5,794,377
93.32%
   Oxbow
120
5,063,044
95.39%
   Prairie Winds
     48
      2,027,036
93.96%
South Dakota Total
607
$   26,736,467
94.00%
Texas
      
Irving
      
   Dakota Hill at Valley Ranch
504
$   37,814,473
91.30%
Texas Total
504
$   37,814,473
91.30%
Washington
      
Vancouver
      
   Ivy Club
204
$    11,896,204
90.14%
   Van Mall Woods
    100
       6,191,712
96.81%
Washington Total
304
$    18,087,916
92.40%
 
      
Total Apartment Communities
8,296
$ 389,930,454
94.40%
 
      
Total Real Estate Owned
  
$ 740,319,436
  

               n/a = Property held less than 12 months.

Mortgage Loans Payable
As of April 30, 2002, the above properties were encumbered with individual first mortgage liens totaling $459,568,905.  The following table shows each mortgage, the interest rate, maturity date, payment terms, original and current balance:
 

Interest
Rate
Final
Maturity
Date
Periodic
Payment Terms
Face Amount
of Mortgage
Carrying
Amount of
Mortgage
Delinquent
Principal 
or Interest
 
        
1112 32nd Avenue SW - Minot, ND
4.75%
7/20/2010
Monthly
$     425,000
$     275,671
$             0
2030 Cliff Road - - Eagan, MN
7.40%
4/1/2011
Monthly
650,000
635,246
              0
 America's Best Furniture - Boise, ID
9.75%
3/29/2003
Monthly
3,750,000
3,215,954
0
 Ameritrade - - Omaha, NE
7.25%
05/1/2019
Monthly
6,150,000
5,690,814
0
 Applewood on the Green - Omaha, NE
6.55%
10/10/2008
Monthly
8,000,000
7,666,696
0
 Arrowhead Shopping CTR - Minot, ND
8.25%
1/1/2020
Monthly
1,325,000
1,260,551
0
 Barnes & Noble Stores - ND & NE
7.98%
12/1/2010
Monthly
4,900,000
3,479,579
0
 Bloomington Bus Plaza - Blgtn, MN
7.05%
12/1/2011
Monthly
5,000,000
4,975,289
0
 Burnsville Bluffs - Burnsville, MN
8.25%
1/1/2021
Monthly
1,644,551
1,607,250
0

 

25



 
 
 

Interest
Rate
Final
Maturity
Date
Periodic
Payment Terms
Face Amount
of Mortgage
Carrying
Amount of
Mortgage
Delinquent
Principal 
or Interest
Mortgage Loans Payable - continued
        
 
        
 Candlelight Apts - Fargo, ND
7.50%
12/1/2004
Monthly
$       578,000
$       376,467
$          0
 Canyon Lake Apts - Rapid City, SD
6.82%
10/1/2011
Monthly
3,000,000
 2,984,495
              0
 Carmike - Grand Forks, ND
7.75%
2/1/2007
Monthly
2,000,000
1,789,250
0
 Castle Rock - - Billings, ND
6.66%
3/1/2009
Monthly
3,950,000
3,808,271
0
 Century Apts - - Dickinson, ND
7.11%
8/1/2011
Monthly
1,750,000
1,737,077
0
 Century Apts - - Williston, ND
4.01%
3/1/2006
Monthly
2,700,000
2,253,325
0
 Chateau Apts - - Minot, ND
7.11%
8/1/2011
Monthly
2,000,000
1,985,231
0
 Clearwater Apts - Boise, ID
6.47%
1/1/2009
Monthly
2,660,000
2,555,331
0
 Cold Springs Center - St. Cloud, MN
7.40%
4/1/2011
Monthly
5,250,000
5,151,199
0
 Colton Heights - - Minot, ND
8.35%
3/1/2007
Monthly
730,000
222,762
0
 CompUSA - Kentwood, MI
7.75%
2/1/2011
Monthly
1,565,361
1,314,397
0
 Conseco Bldg - - Rapid City, SD
8.07%
8/1/2015
Monthly
4,795,000
4,501,251
0
 Cottonwood Phase I - Bismarck, ND
6.59%
1/1/2009
Monthly
2,800,000
2,692,153
0
 Cottonwood Phase II - Bismarck, ND
7.55%
11/1/2009
Monthly
2,850,000
2,783,608
0
 Cottonwood Phase III - Bismarck, ND
6.66%
1/1/2009
Monthly
2,600,000
2,600,000
0
 Country Meadows PHS I - Billings, MT
7.51%
1/1/2008
Monthly
2,660,000
2,474,624
0
 CTRY Meadows PHS II - Billings, MT
8.10%
1/1/2008
Monthly
2,600,000
2,506,975
0
 Creekside - - Billings, MT
7.38%
6/1/2013
Monthly
1,250,000
1,047,811
0
 Crestview Apts - Bismarck, ND
6.91%
7/1/2008
Monthly
3,400,000
3,182,021
0
 Crown Colony APTS - Topeka, KS
7.55%
8/1/2009
Monthly
7,350,000
7,178,779
0
 Dakota Hill - - Irving, TX
7.88%
1/1/2010
Monthly
25,550,000
25,053,761
0
 Dewey Hill Business CTR - Edina, MN
7.93%
12/1/2010
Monthly
3,125,000
3,072,774
0
 East Grand Station - East G. F., MN
6.85%
8/1/2015
Monthly
970,000
896,618
0
 Eastgate - - Moorhead, MN
7.19%
9/1/2009
Monthly
1,627,500
1,583,875
0
 Edgewood Vista - Billings, MT
7.13%
10/1/2013
Monthly
720,000
608,676
0
 Edgewood Vista - Columbus & G. I., NE
6.15%
7/1/2015
Monthly
624,000
582,369
0
 Edgewood Vista - Duluth, MN
7.24%
5/1/2011
Monthly
4,821,000
4,636,535
0
 Edgewood Vista - East GF, MN
6.85%
8/1/2011
Monthly
980,000
954,846
0
 Edgewood Vista - Fremont, NE
6.75%
9/5/2011
Monthly
365,645
357,092
0
Edgewood Vista - - Hastings, NE
6.75%
9/5/2011
Monthly
368,611
368,611
            0
 Edgewood Vista - Kalispell, MT
5.98%
10/1/2011
Monthly
383,000
375,117
0
 Edgewood Vista - Minot, ND
7.52%
8/1/2012
Monthly
4,510,000
3,574,461
0
 Edgewood Vista - Missoula & Belgrade,  MT
6.17%
4/15/2012
Monthly
945,000
867,741
0
 Edgewood Vista - Omaha, NE
6.75%
9/1/2011
Monthly
436,415
426,206
0
 Edgewood Vista - Sioux Falls, SD
7.52%
7/1/2013
Monthly
720,000
614,742
0
 Edgewood Vista - Virginia, MN
6.95%
5/1/2012
Monthly
4,900,000
4,900,000
0
 Flying Cloud - - Eden Prairie, MN
8.61%
7/1/2009
Monthly
3,830,000
3,787,713
0
 Forest Park Estates - G Forks, ND
7.33%
8/1/2009
Monthly
7,560,000
7,263,862
0
 Great Plains Software - Fargo, ND
7.08%
10/1/2013
Monthly
9,500,000
8,412,862
0
 Health Investors Business Trust
7.94%
2/1/2019
Monthly
19,482,851
18,845,934
0
 Heritage Manor - Rochester, MN
6.80%
10/1/2018
Monthly
5,075,000
4,603,177
0
 Interlachen Corp Ctr - Edina, MN
7.09%
10/11/2011
Monthly
11,550,000
11,464,408
0
 Ivy Club APTS  - Vancouver, WA
6.98%
9/1/2011
Monthly
8,050,000
8,004,379
0
 Jenner Properties - - G Forks, ND
5.00%
11/1/2004
Monthly
1,391,585
971,066
0
 Kirkwood Manor - Bismarck, ND
8.15%
5/1/2010
Monthly
2,293,900
2,235,518
0
 Lancaster APTS  - St. Cloud, MN
7.04%
8/1/2018
Monthly
1,769,568
1,664,127
0

26



 
 

InterestRate
Final
Maturity
Date
PeriodicPaymentTerms
Face Amount
of Mortgage
Carrying
Amount of
Mortgage
Delinquent
Principal
or Interest
Mortgage Loans Payable - continued
        
 
        
 Legacy APTS PHS I - Grand Forks, ND
7.07%
1/1/2005
Monthly
$    4,000,000
$   3,632,380
$             0
 Legacy APTS PHS II - Grand Forks, ND
7.07%
5/29/2008
Monthly
2,575,000
2,409,455
0
 Legacy APTS PHS IV - G Forks, ND
8.10%
7/31/2020
Monthly
3,000,000
2,892,659
0
 Lexington Commerce CTR - Eagan, MN
8.09%
2/1/2010
Monthly
3,431,750
3,331,065
0
 Lindberg Bldg. - Eden Prairie, MN
7.63%
2/1/2007
Monthly
1,200,000
1,119,526
0
 Magic City APTS - Minot, ND
4.75%
10/10/2010
Monthly
2,794,299
1,548,360
0
 Maplewood Square - Rochester, MN
6.90%
8/1/2009
Monthly
7,670,000
6,815,104
0
 Meadows I & II - Jamestown, ND
8.16%
7/1/2010
Monthly
1,975,000
1,949,096
0
 Meadows Phase III - Jamestown, ND
7.19%
11/1/2011
Monthly
1,150,000
1,143,030
0
 MedPark Mall - - Grand Forks, ND
8.08%
2/1/2010
Monthly
3,425,000
3,333,723
0
 Mendota I, II, & Northland - Mendota  Heights, MN
7.90%
11/1/2009
Monthly
18,000,000
17,397,810
0
 Mendota I, II, & Northland  - Mendota  Heights, MN 
5.50%
11/1/2009
Monthly
7,200,000
5,799,270
0
 Mendota III - - Mendota Heights, MN
3.74%
Construction Loan
Balloon
3,813,000
3,813,000
0
 Mendota IV - - Mendota Heights, MN
3.60%
Construction Loan
Balloon
5,487,000
5,487,000
0
 Miramont APTS - Ft. Collins, CO
8.25%
8/1/2036
Monthly
11,582,472
11,325,252
0
 Neighborhood APTS - C. Springs, CO
7.98%
1/1/2007
Monthly
7,525,000
6,906,344
0
 Nicollet VII - Burnsville, MN
8.05%
11/29/2010
Monthly
4,784,880
4,715,739
0
 NorthGate II - Maple Grove, MN
8.09%
2/1/2010
Monthly
1,576,750
1,530,489
0
 North Pointe - - Bismarck, ND
7.12%
2/1/2007
Monthly
1,700,000
1,619,231
0
 Oakmont Apts - - Sioux Falls, SD
7.00%
9/1/2011
Monthly
4,100,000
4,070,001
0
 Olympic Village - - Billings, MT
7.62%
11/1/2010
Monthly
8,400,000
8,309,021
0
 Oxbow - Sioux Falls, SD
6.67%
6/1/2011
Monthly
4,250,000
4,211,888
0
 Park East APTS - Fargo, ND
6.82%
5/1/2008
Monthly
3,500,000
3,340,379
0
 Park Meadows PHS I - Waite Park,MN
7.19%
10/1/2013
Monthly
3,022,500
2,941,482
0
 Park Meadows PHS II - Waite Park,MN
7.90%
10/1/2005
Monthly
2,214,851
2,005,967
0
 Park Meadows PHS III-Waite Park,MN
4.00%
30 yr bond
Monthly
3,235,000
2,995,000
0
 Pebble Springs - - Bismarck, ND
8.10%
7/30/2020
Monthly
455,000
438,705
0
 PETCO Warehouse - - Fargo, ND
7.28%
9/1/2008
Monthly
1,100,000
814,033
0
 Pillsbury Business CTR - BLMGTN,MN
7.40%
4/1/2011
Monthly
1,260,000
1,231,400
0
 Pinecone - - Fort Collins, CO
7.13%
12/1/33
Monthly
10,685,215
10,237,879
0
 Plymouth IV & V - Plymouth, MN
8.17%
1/1/2011
Monthly
9,280,912
9,150,597
0
 Pointe West APTS - Minot, ND
6.91%
7/1/2008
Monthly
2,400,000
2,246,132
0
 Prairie Winds APTS - Sioux Falls, SD
7.04%
7/1/2009
Monthly
1,325,000
1,285,892
0
 Prairiewood Meadows - Fargo, ND
7.70%
11/1/2020
Monthly
2,088,973
2,012,579
0
 Ridge Oaks APTS - Sioux City, IA
7.05%
1/1/2031
Monthly
2,900,000
2,865,759
0
 Rimrock APTS - - Billing, MT
7.33%
8/1/2009
Monthly
2,660,000
2,555,803
0
 Rocky Meadows - - Billings, MT
7.33%
8/1/2009
Monthly
3,780,000
3,631,931
0
 RoseWood/Oakwood - - S. Falls, SD
6.67%
6/1/2011
Monthly
3,900,000
3,865,026
0
 Sherwood APTS - Topeka, KS
7.55%
8/1/2009
Monthly
11,025,000
10,768,169
0
 South Pointe - - Minot, ND
7.12%
2/1/2007
Monthly
6,500,000
6,191,178
0
 Southdale Medical CTR - Edina, MN
7.80%
1/1/2011
Monthly
24,000,000
23,735,922
0
 SouthEast Tech Center - Eagan, MN
8.09%
2/1/2010
Monthly
4,266,500
4,141,324
0
 Southwind APTS - Grand Forks, ND
7.12%
2/1/2007
Monthly
4,100,000
3,905,205
0
 Sunset Trail Phase I - Rochester, MN
7.80%
3/1/2011
Monthly
4,350,000
4,308,910
0
 Stone Container - - Fargo, ND
8.25%
2/1/2011
Monthly
3,300,000
2,388,678
0
 Stone Container - - Roseville, MN
7.05%
2/1/2012
Monthly
5,300,000
5,279,715
0

27



 
 
 
 
 

InterestDate
Final
Maturity
Date
Periodic
Payment
Terms
Face Amount
of Mortgage
Carrying
Amount of
Mortgage
Delinquent
Principal or Interest
Mortgage Loans Payable - continued
        
 
        
 Stone Container - - Waconia, MN
8.79%
10/15/2006
Monthly
$  1,329,381
$  1,262,420
$            0
 Thomasbrook - - Lincoln, NE
7.22%
10/1/2009
Monthly
6,200,000
5,968,856
0
 Thresher Square East - MPLS, MN
6.75%
5/1/2015
Monthly
4,335,000
3,655,000
0
 Thresher Square West - MPLS, MN
7.60%
6/1/2010
Monthly
3,805,000
2,580,000
0
 Valley Park Manor - G. Forks, ND
8.38%
10/1/2001
Monthly
3,000,000
2,965,218
0
 Van Mall Woods - Vancouver, WA
6.86%
12/1/2003
Monthly
4,070,426
3,760,821
0
 VIROMED  - - Eden Prairie, MN
6.98%
4/1/2014
Monthly
3,120,000
2,726,385
0
 Wayroad Corp - - Minnetonka, MN
6.99%
2/1/2012
Monthly
3,700,000
3,626,993
0
  Wedgewood RETIRE - l. Springs, GA
4.18%
5/1/2017
Monthly
1,566,720
1,375,218
0
 West Stonehill - - St. Cloud, MN
7.93%
6/1/2017
Monthly
8,232,569
7,401,005
0
 Westwood Park - Bismarck, ND
7.88%
12/1/2009
Monthly
1,200,000
1,163,738
0
 Wirth Corp Center - Gldn Valley, MN
6.90%
3/1/2012
Monthly
5,500,000
5,500,000
0
 Woodridge APTS - Rochester, MN
7.85%
1/1/2017
Monthly
    4,410,000
     3,807,589
_           0
TOTAL
  
$486,640,185
$459,568,905
$              0
  • Title

    • The title to the interest owned by IRET in all of the above properties is in the name of either IRET Properties, a North Dakota Limited Partnership, IRET or a wholly owned subsidiary of IRET, in fee simple (in each case, IRET has in its files an attorney's title opinion or a title insurance policy evidencing its title).
  • Insurance

    • In the opinion of management, all of said properties are adequately covered by casualty and liability insurance.
  • Planned Improvements

    • There are no plans for material improvements to any of the above properties other than in the ordinary course of IRET's business, except for the planned expansion of the Southdale Medical Center at a cost of approximately $13,000,000.
  • Contracts or Options to Sell

    • As of April 30, 2002, IRET had not entered into any contracts or options to sell any of the above properties.
  • Occupancy and Leases

    • Occupancy rates shown above are for the fiscal year ended April 30, 2002. In the case of apartment properties, lease arrangements with individual tenants vary from month-to-month to one-year leases, with the normal term being six months. Leases on commercial properties vary from one year to 20 years.
28

Summary of Real Estate Investment by State


State
Total Real Estate 
Investment
Percent of Total
 
  
Colorado
  
   Residential
$    39,337,219
  Commercial
                   0
  Total
$    39,337,219
5.3%
Georgia
  
   Residential
$                   0
  Commercial
      3,971,878
  Total
$      3,971,878
.5%
Idaho
  
   Residential
$      3,873,512
   Commercial
      4,788,294
   Total
$      8,661,806
1.2%
Iowa
  
   Residential
$      4,595,627
   Commercial
                   0
   Total
$      4,595,627
.6%
Kansas
  
   Residential
$    27,149,602
   Commercial
                   0
   Total
$    27,149,602
3.7%
Michigan
  
   Residential
$                    0
   Commercial
      2,121,474
   Total
$      2,121,474
.3%
Minnesota
  
   Residential
$    59,470,821
   Commercial
  265,004,801
   Total
$  324,475,622
43.7%
Montana
  
   Residential
$    38,059,507
   Commercial
      5,030,043
   Total
$    43,089,550
5.8%
Nebraska
  
   Residential
$    20,966,122
   Commercial
    14,724,209
   Total
$    35,690,331
4.8%
North Dakota
  
   Residential
$  113,839,188
   Commercial
    46,728,674
   Total
$  160,567,862
21.9%

29



 
 

State
Total Real Estate Investment
Percent of Total
 
  
South Dakota
  
   Residential
$    26,736,467
   Commercial
     8,019,609
   Total
$    34,756,076
4.7%
Texas
  
   Residential
$    37,814,473
   Commercial
                   0
   Total
$    37,814,473
5.1%
Washington
  
   Residential
$    18,087,916
   Commercial
                   0
   Total
$    18,087,916
2.4%
 
Total
     $    40,319,436
100%

Mortgage Loans Receivable


Location
April 30, 2002 Balance
Rate
Other Mortgages
  
   $501,000 and higher
$    3,200,000
10%
   $100,000 to $500,000
713,212
8-11%
   $50,000 to $99,999
0
n/a
   $20,000 to $49,999
39,550
8%
   Less than $20,000
                  0
 n/a
            Total
$    3,952,762

Item 3.  Legal Proceedings

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

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

      None.
30

PART II

Item 5.  Market for the Registrant's Common Stock and Related Securityholder Matters

Quarterly Share Data


Since April 9, 2002, IRET's shares of beneficial interest have traded on the Nasdaq National Market under the symbol IRETS. Prior to April 9, 2002, and from October of 1997, IRET's shares of beneficial interest traded on the Nasdaq SmallCap Market. The following table reflects the range of high and low prices of IRET's shares of beneficial interest of each full quarterly period within the two most recent years. This information is based on selling prices as report on the Nasdaq National Market and Nasdaq SmallCap Market, as applicable.
 

Fiscal Quarter Ended
High

Low
   
07/31/00
8.125
7.375
10/31/00
8.25
7.59
01/31/01
8.5
7.44
04/30/01
8.98
8.06
07/31/01
10.39
8.26
10/31/01
9.42
8.80
01/31/02
9.99
9.00
04/30/02
10.44
9.52

Holders
On April 30, 2002, IRET had 4,235 shareholders of record.

Registered Sale of Shares and Repurchase of Shares
During fiscal 2002, IRET offered primary shares of beneficial interest for sale to the public under Best Efforts offerings through various brokers registered with the National Association of Securities Dealers. Primary shares were sold at $8.75 per share and at $9.50 per share and IRET also issued shares pursuant to its distribution reinvestment plan.  During fiscal 2002, IRET did not sell any unregistered securities.   IRET also repurchased its shares during fiscal 2002. Following is a two-year summary, by quarter-year, of the sale of primary shares, issuance of distribution reinvestment shares, and repurchase of shares by IRET:
 

 
Shares
Dollars
05/01/00 Beginning Balance
22,452,069
$  119,233,170
 
    
Quarter Ended 07/31/00
    
   Shares Sold
288,677
$      2,437,091
   Commissions Paid
  
-173,256
   Distribution Reinvestment Plan
141,736
1,157,349
   Shares Redeemed
           - -716
            - -5,470
 
22,881,766
$  122,648,884

31



 
 
 

 
Shares
Dollars
Quarter Ended 10/31/00
    
   Shares Sold
158,248
$      1,360,601
   Commissions Paid
  
-99,949
   Distribution Reinvestment Plan
40,603
330,957
   Shares Redeemed
           - -289
             - -2,277
 
23,080,328
$  124,238,216
Quarter Ended 01/31/01
    
   Shares Sold
286,868
$       2,465,230
   Commissions Paid
  
-193,123
  DistributionReinvestment Plan
12,813
103,169
   Shares Redeemed
      - -39,561
        - -306,722
 
23,340,448
$  126,306,770
Quarter Ended 04/30/01
    
   Shares Sold
610,833
$      5,197,960
   Commissions Paid
  
-312,251
   Distribution Reinvestment Plan
117,286
958,177
   Shares Redeemed
           - -221
            - -1,888
 
24,068,346
$  132,148,768
Quarter Ended 07/31/01
    
   Shares Sold
            0
 $                    0
   Distribution Reinvestment Plan
193,687
    1,609,600
   Shares Redeemed
          - -816 
            - -7,101
 
24,261,217
$  133,751,267
Quarter Ended 10/31/01
    
   Shares Sold
60,140
$         516,800
   Distribution Reinvestment Plan
208,952
1,736,807
   Shares Redeemed
          - -300
           - -2,573
 
24,530,009
$  136,002,301
Quarter Ended 01/31/02
    
   Shares Sold
2,789,249
$    23,367,681
   Commissions Paid
  
-1,308,100
   Distribution Reinvestment Plan
221,169
2,463,087
   Shares Redeemed
          - -843
            - -8,032
 
27,539,584
$  160,516,937
Quarter Ended 04/30/02
    
   Shares Sold
98,598
$         857,626
   Commissions Paid
  
-1,285
   Distribution Reinvestment Plan
209,072
2,005,001
   Shares Redeemed
          - -175
         - -1,730
 
27,847,079
$163,376,549

32

Distributions
IRET has paid quarterly cash distributions since July 1, 1971. Cash distributions paid during the past three fiscal years were as follows:
 
 

Fiscal Year
2002
2001
2000
July 1st
$   .1450
$   .1325
$   .1240
October 1st
.1475
.1350
.1260
January 15th
.1500
.1400
.1280
April 1st
   .1520
   .1425
   .1300
 
$   .5945
$   .5500
$   .5080

Item 6.  Selected Financial Data for Fiscal Years Ended April 30

Set forth below is selected financial data for the periods and dates indicated.  This information should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and notes included in this report on Form 10-K.
 

 
2002
 2001
2000
1999
1998
Consolidated Income Statement Data
          
     Revenue 
$  93,016,069
$  75,767,150
$  55,445,193
$  39,927,262
$  32,407,545
     Income before gain/loss on properties  and minority interest
13,865,934
10,187,812
8,548,558
6,401,676
4,691,198
     Gain on repossession/ sale of 
               properties
546,927
601,605
1,754,496
1,947,184
 465,499
     Minority interest of portion of   operating partnership income 
-3,812,732
-2,095,177
-1,495,209
-744,725
 -141,788
 
          
      Net income
10,600,129
8,694,240
8,807,845
7,604,135
5,014,909
Consolidated Balance Sheet Data
          
     Total real estate investments
$685,346,681
$548,580,418
$418,216,516
$280,311,442
$213,211,369
     Total assets 
730,209,018
570,322,124
432,978,299
291,493,311 
224,718,514
     Shareholders' equity 
145,578,131
118,945,160
109,920,591
85,783,294
68,152,626
Consolidated Per Share Data 
     (basic and diluted)		          
     Net Income 
.42
.38
.42
.44
.32
     Distributions 
.59
.55
.51
.47
.42
 
          
CALENDAR YEAR
2001
2000
1999
1998
1997
Tax status of distribution
          
     Capital gain
0%
.72%
30.3%
6.3%
 2.9%
     Ordinary income 
65.98%
86.76%
69.7%
76.0%
97.1%
     Return of capital 
34.02%
12.52%
0%
17.7%
0.0%

33

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

Results from Operations for the Fiscal Years Ended April 30, 2002, 2001, and 2000
IRET operates on a fiscal year ending on April 30.  The following discussion and analysis is for the fiscal years ended April 2002, 2001, and 2000.

Revenues
Total revenues of the operating partnership for fiscal 2002 were $93,016,069, compared to $75,767,150 in fiscal 2001 and $55,445,193 in fiscal 2000.  The increase in revenues received during fiscal 2002 in excess of the prior year revenues was $17,248,919.  This increase resulted from:
 

Rent from 28 properties acquired in fiscal 2001 in excess of that received in 2001
$    11,236,492
Rent from 14 properties in excess of fiscal 2002
4,737,866
Increase in rental income on existing properties
1,086,695
An increase in interest income
309,122
An increase in straight-line rents
96,726
An increase in ancillary income
            1,917
A decrease in rent - properties sold
       - -219,899
 
$   17,248,919

The increase in revenues received during fiscal 2001 in excess of that received in fiscal 2000 was $20,321,957.  This increase resulted from:
 

Rent from 27 properties acquired in fiscal 2000 in excess of


      that received in 2000
$   12,888,919
Rent from 28 properties acquired/completed in fiscal 2001
6,890,585
An increase in ancillary income
        506,308
An increase in rents
383,015
An increase in rental income on existing properties
93,420
An increase in interest income
-371,585
A decrease in Boise Warehouse rent (bankruptcy of tenant)
-36,301
A decrease in rent - properties sold during 2001
         - -32,404
 
$   20,321,957

As shown by the above analysis, the fiscal 2002 and 2001 increases in revenues resulted primarily from the addition of new real estate properties to the operating partnership's portfolio.  Rents received on properties owned at the beginning of fiscal 2001 increased by $11,236,492 in

34

fiscal 2002 and $12,888,919 in fiscal 2001.  Thus, new properties generated most of the new revenues during the past two years.

Straight-Line Rents
Beginning with our fiscal year 2000, an accounting rule required us to record as revenue "straight-line rents" on our commercial property leases that contain future rental increases.  This rule requires us to calculate the total rents that the tenant has contracted to pay us for the entire term of the lease and to divide that total by the number of months of the lease and to record as revenue each month the resulting average monthly rent.  The result is that, in the beginning years of a lease, we must record as revenue an amount that exceeds the actual cash rent we have collected.  In the later years of such leases, we, of course, will record as revenue an amount less than the actual cash then being received.

The amount of "straight-line rents" (that is, the amount that the recorded rent is greater than the actual cash rent we have collected) we have recorded in the past three years is:
 

 
2002
2001
2000
 
      
Straight-line Rents
$     1,311,105
$     1,214,379
$     831,364

Our revenues, net income and funds from operations shown in this report are increased by the above described "straight-line rents."

Capital Gain Income
The operating partnership realized capital gain income for fiscal 2002 of $546,927.  This compares to $601,605 of capital gain income recognized in fiscal 2001 and the $1,754,496 recognized in fiscal 2000.  A list of the properties sold during each of these years showing sales price, depreciated cost plus sales costs and net gain (loss) is included in a later section of this discussion.

Expenses and Net Income
The operating partnership's operating income for fiscal year 2002 increased to $13,865,934 from $10,187,812 earned in fiscal 2001 and $8,548,558 earned in fiscal 2000.  IRET's net income for generally accepted accounting purposes for fiscal 2002 were $10,600,129, compared to $8,694,240 in fiscal 2001 and $8,807,845 in fiscal 2000.  On a per share basis, net income was $.42 per share in fiscal 2002 compared to $.38 in fiscal 2001 and $.42 in fiscal 2000.

35

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

For fiscal 2002, an increase in net income of $1,905,889, resulting from:
 

An increase in net rental income
     (rents, less utilities, maintenance, taxes, insurance and management)
$    12,413,637
A increase in interest income
309,122
An increase in ancillary income
1,917
An increase in interest expense
-5,373,448
An increase in depreciation expense
-3,215,636
An increase in minority interest of operating partnership income
-1,518,991
An increase in operating expenses, administrative, advisory & trustee services
-336,458
An increase in minority interest of other partnership
       - -198,564
An increase in amortization expense
-121,012
A decrease in gain on sale of investments 
         - -54,678
 
$     1,905,889

For fiscal 2001, a decrease in net income of $113,605, resulting  from:
 

An increase in net rental income
$   12,572,228
A decrease in loss on impairment
    1,319,316
An increase in ancillary income
506,308
An increase in interest expense
-8,217,228
An increase in depreciation expense
-3,839,420
A decrease in gain from sale of investments 
         - -1,152,891
An increase in minority interest of operating partnership
-598,968
A decrease in interest income
-371,585
An increase in amortization expense
-212,091
An increase in operating expenses, administrative, advisory 
      &  trustee services
      - -119,274
 
$      - -113,605

 Telephone Endorsement Fee
During fiscal 2001, IRET received a payment of $869,505 from a major telecommunications provider for allowing marketing access by that company to residents of apartment communities owned by IRET, totaling 5,863 units.  The contract provides that IRET will allow promotional materials to be placed in its apartment communities advertising the availability of tele-communication services over a 12-year period.  Of this payment, $110,979 was recognized as income by IRET during fiscal 2001 and $65,959 in fiscal 2002.  The balance of $692,567 will be recognized ratably over the remaining portion of the contract period and there is a possibility of a refund of these monies if IRET should violate the contractual terms of the agreement.

36

Comparison of Results from Commercial and Residential Properties
The following is an analysis of the contribution by each of the two categories of real estate owned by IRET - residential and commercial:
 

Fiscal Years Ended 4/30
2002
     %
2001
    %
2000
    %
 
            
Real Estate Investments  - net of accumulated depreciation
   Commercial
$ 333,092,927
49%
$ 218,261,880
40%
$ 112,511,467
27%
   Residential
 348,300,992
   51%
 329,281,443
   60%
 304,175,471
   73%
Total
$ 681,393,919
100%
$ 547,543,323
100%
$ 416,686,938
100%
 
            
Gross Real Estate Rental Revenues
   Commercial
$   32,685,652
37%
$   18,994,010
25%
$  11,878,026
22%
   Residential
   59,052,950
   63%
    55,806,712
   75%
   42,379,855
   78%
Total
$   91,738,602
100%
$   74,800,722
100%
$  54,257,881
100%
 
            
Expenses  - - cbefore depreciation - see Note 11 to Financial Statement for detail
   Commercial
$   18,456,441
31%
$   10,649,488
21%
$    6,417,909
18%
   Residential
   40,939,389
   69%
   39,500,071
   79%
   29,288,023
   82%
Total
$   59,395,830
100%
$   50,149,559
100%
$  35,705,932
100%
 
 
 
 
 
 
 
Segment Gross Profit - before depreciation
   Commercial
$   14,229,211
44%
$    8,344,522
34%
$    5,460,117
29%
   Residential
   18,113,561
   56%
   16,306,641
   66%
   13,091,832
   71%
Total
$   32,342,772
100%
$   24,651,163
100%
$  18,551,949
100%

37





Commercial Properties - Analysis of Lease Expirations and Credit Exposure
The following table shows the annual lease expiration percentages for the commercial properties owned by IRET as of April 30, 2002, for fiscal years 2003 through 2012 and the leases that will expire during fiscal year 2013 and beyond.
 

Year of Lease
Expiration
Square Footage of
Expiring Leases
Percentage of 
Total Leased
Square Footage
Annualized Base
Rent of Expiring
Leases at Expiration
Percentage of
Total Annualized
Base Rent
 
        
2003
377,198
11.80%
$       1,317,369
4.55%
2004
215,934
6.76%
1,420,605
4.91%
2005
158,690
4.96%
1,390,429
4.80%
2006
265,262
8.30%
2,400,751
8.29%
2007
99,393
3.11%
1,132,872
3.91%
2008
244,985
7.66%
1,849,752
6.39%
2009
196,973
6.16%
2,511,946
8.68%
2010
171,752
5.37%
1,470,944
5.08%
2011
98,325
3.08%
  1,056,612
3.65%
2012
371,182
11.61%
2,419,949
8.36%
2013 and beyond
     996,481
   31.19%
     11,984,253
   41.38%
Total
 3,196,175
100.00%
$    28,955,481
100.00%

The following table shows the percentage of commercial leases by size of leased space in 10,000 square foot increments as of April 30, 2002:
 

Square Feet Under Lease
Percentage of Aggregate 
Portfolio Leased 
Square Feet
Annualized 
Base Rent
Percentage of 
Aggregate Portfolio 
Annualized 
Base Rent
 
 
  
10,000 or Less
16.16%
$    6,746,536
23.30%
10,001 - - 20,000
13.76%
3,896,629
13.46%
20,001 - - 30,000
11.82%
3,422,639
11.82%
30,001 - - 40,000
7.50%
2,161,604
7.47%
40,001 - - 50,000
5.79%
1,608,402
5.55%
50,001 +
   44.97%
   11,119,671
   38.40%
Total
100.00%
$  28,955,481
100.00%

38

Significant Property Acquisitions
The significant property acquisitions made by IRET during fiscal 2001 and fiscal 2002, including details of such acquisitions and their performance since acquisition are as follows:
 

 
HealthEast
Southdale
Medical*
Oakmont Apartments
Canyon Lake Apartments
Morgan
hemical
 
 
 
 
 
 
Description
114,216 Sq. Ft. Medical Office Buildings
195,983 Sq.  Ft.


Medical Office Buildings
83,117 Sq. Ft. 80-unit Apartment Community
78,701 Sq. Ft. 109-unit Apartment Community
49,620 Sq. Ft. Industrial Office
 
 
 
 
 
 
Address
St. Johns Medical Office Building - 1600 Beam Ave, Maplewood, MN
Woodwinds Medical Office Bldgs. - 1875 Woodwinds Dr, Woodbury, MN
6545 France Ave South, Edina, MN
1301, 1305,1309, 1313 North Star Lane,


Sioux Falls, SD
3741 Canyon Lake Drive,


Rapid City, SD
2172 Old Highway 8, New Brighton, MN
 
 
 
 
 
 
Date of Acquisition
12/13/2000
04/30/02
09/27/01
04/30/02
 
 
 
 
 
 
Purchase Price
$     21,600,999
$   32,421,070
$   5,230,000 
$     4,200,000
$     2,425,000
Loan
$    19,482,851
$   24,000,000
$   4,077,688 
$     3,000,000
n/a
Interest Rate - fixed for 10 years or longer
7.940%
7.8%
7.0%
6.82%
n/a
Limited Partnership Units Issued
n/a
n/a
n/a
719,190
n/a
Cash Investment
$      1,775,978
$     5,000,000
$        700,192
$        442,728
$     2,341,695
 
        
Fiscal 2002
 
 
    
   Rental Income
$      2,107,256
$    3,390,878
$                   0
$        471,427
n/a
   Expenses
                    - - 0
       - - 279,668
                     0
         - -190,107
n/a
   Gross Income
2,107,256
3,111,210
0
281,320
n/a
   Mortgage Interest Paid
-1,509,384
-1,860,521
0
-119,131
n/a
   Depreciation
          - -459,047
        - -723,027
             - -5,036
           - -63,109
n/a
   Net Income
138,825
527,662
-5,036
99,080
n/a
Fiscal 2001
        
   Rental Income
$      1,916,636
$        954,315
n/a
n/a
n/a
   Expenses
                    - - 0
         - - 30,852
n/a
n/a
n/a
   Gross Income
1,916,636
923,463
n/a
n/a
n/a
   Mortgage Interest Paid
-1,533,964
-686,068
n/a
n/a
n/a
   Depreciation
          - -439,868
       - -210,883
n/a
n/a
n/a
   Net Income
-57,196
26,512
n/a
n/a
n/a

*     IRET owns a 60% interest in this property. Data shown is the full income and expense for this property.

39

Significant Property Acquisitions - continued


 
Mendota **
Heights Office
Complex
Interlachen
Thresher Square East & West
Applewood on
the Green
Wirth Corporate Center
 
 
 
 
 
 
Description
428,065 Sq. Ft. Multi-tenant Office Building
105,084 Sq. Ft. Multi-tenant Office Building
113,736 Sq. Ft. Multi-tenant Office Building
87,200 Sq. Ft. 234-unit Apartment Community
75,216 Sq. Ft. Commercial Office
 
 
 
 
 
 
Address
1210, 1230, 1250, 1270, 1285 & 1295 Northland Drive, Mendota Heights, MN
5050 Lincoln Drive, Edina, MN
700/708 South 3rd Street, Minneapolis, MN
9670 Suffold Plaza & South 96th Court, Omaha, NE
4101 Dahlberg Drive, Golden Valley, MN
 
 
 
 
 
 
Date of Acquisition
04/20/02
08/10/01
01/02/02
10/31/01
04/01/02
 
 
 
 
 
 
Purchase Price
 $ 52,644,251
$    16,500,000
$    10,943,414
$    10,200,000
$       8,600,000
Loan
$  32,497,080
$   11,550,000
$     6,235,000
$     7,721,134
$      6,500,000
Interest Rate -
fixed for 10 years or longer
3.6% to 7.9%
7.09%
7.715%
6.55%
6.90%
Limited Partnership Units Issued
n/a
3,587,127
4,365,801
n/a
n/a
Cash Investment
$    9,869,989
$        926,039
$     1,007,376
$     2,444,737
$      1,074,809
 
        
Fiscal 2002
 
 
    
   Rental Income
$                  0
$     1,784,682
$        748,218
$        496,825
$         128,960
   Expenses
                     0
        - - 594,180
         - -339,980
         - -276,777
            - -47,466
   Gross Income
0
1,190,502
408,238
220,048
81,494
   Mortgage Interest       Paid
0
-544,528
-147,250
-264,623
-30,938
   Depreciation
           - -46,269
        - -272,918
           - -73,103
         - -110,378
              - -7,978
   Net Income
-46,269
373,056
187,885
-154,953
42,578
Fiscal 2001
        
   Rental Income
n/a
n/a
n/a
n/a
n/a
   Expenses
n/a
n/a
n/a
n/a
n/a
   Gross Income
n/a
n/a
n/a
n/a
n/a
   Mortgage Interest       Paid
n/a
n/a
n/a
n/a
n/a
   Depreciation
n/a
n/a
n/a
n/a
n/a
   Net Income
n/a
n/a
n/a
n/a
n/a

*IRET owns a 51% interest in this property.  Data shown is the full income and expense for this property.
 
 

40

Significant Property Acquisitions - continued


 
Stone 
Container
Bloomington Business Plaza
Edgewood
Vista
Wayroad
Cottage 
Grove Center
 
 
 
 
 
 
Description
229,072 Sq. Ft. Industrial Building
114,819 Sq. Ft. Multi-tenant Office Building
70,313 Sq. Ft. Assisted Living Center
62,383 Sq. Ft. Commercial Office
15,217 Sq. Ft. Strip Mall
 
 
 
 
 
 
Address
3075 Long Lake Road, Roseville, MN
9201 East Bloomington Freeway, Bloomington, MN
605 17th Street North, Virginia, MN
12400 Whitewater Drive, Minnetonka, MN
7150 80th Street, Cottage Grove, MN
 
 
 
 
 
 
Date of Acquisition
12/20/01
10/01/01
04/30/02
04/01/02
07/06/01
 
 
 
 
 
 
Purchase Price
 $    8,100,000
$     7,201,680
$     6,900,000
$     5,375,000
$     1,100,000
Loan
$     5,300,000
$     4,010,074
$       4,900,000
$     3,634,489
$        800,000
Interest Rate -
fixed for 10 years or longer
7.05%
7.05%
6.94%*
6.99%
6.75%**
Limited Partnership Units Issued
n/a
2,953,425
n/a
n/a
276,594
Cash Investment
$     2,800,000
$        318,989
$      2,000,000
$        433,015
$          15,209
 
        
Fiscal 2002
 
 
    
   Rental Income
$        338,678
$        651,464
n/a
$        80,251
$        153,751
   Expenses
              - -4,846
       - - 218,449
n/a
           - -18,341
            51,019
   Gross Income
333,832
433,015
n/a
61,910
102,732
   Mortgage Interest       Paid
-62,216
-170,671
n/a
-21,171
-17,946
   Depreciation
            - -69,742
          - -83,131
n/a
             - -5,223
            - -15,832
   Net Income
201,874
179,213
n/a
35,516
68,954
Fiscal 2001
        
   Rental Income
n/a
n/a
n/a
n/a
n/a
   Expenses
n/a
n/a
n/a
n/a
n/a
   Gross Income
n/a
n/a
n/a
n/a
n/a
   Mortgage Interest       Paid
n/a
n/a
n/a
n/a
n/a
   Depreciation
n/a
n/a
n/a
n/a
n/a
   Net Income
n/a
n/a
n/a
n/a
n/a
*     Fixed for three years.


**   Tied to Prime.

41


 

Significant Property Acquisitions - continued


 
Pinehurst 
Apartments
 
 
Description
17,150 Sq. Ft. 21-unit Apartment Community
 
 
Address
608 North 30th Street, Billings, MT
 
 
Date of Acquisition
02/28/02
 
 
Purchase Price
$           715,000
Loan
n/a
Interest Rate -
fixed for 10 years or longer
n/a
Limited Partnership Unites Issued
290,000
Cash Investment
$           450,023
 
  
Fiscal 2002
 
   Rental Income
$             17,618
   Expenses
              - -7,571
   Gross Income
10,047
   Mortgage Interest Paid
0
   Depreciation
              - -3,541
   Net Income
6,506
Fiscal 2001
  
   Rental Income
n/a
   Expenses
n/a
   Gross Income
n/a
   Mortgage Interest Paid
n/a
   Depreciation
n/a
   Net Income
n/a

42

The following table shows the lessees of commercial property that account for five percent or more of the total scheduled rent on May 1, 2002, from all commercial properties owned by IRET:
 

Lessee
Monthly Rent
% of Total
 
    
Step II, Inc. DBA Edgewood Vista
$       258,668
9%
HealthEast Medical
159,720
5%
Great Plains Software, a subsidiary of Microsoft, Inc.
156,250
5%
All Others
     2,451,626
   81%
Total Scheduled Rent on May 1, 2002
$    3,026,264
100%

Results from Stabilized Properties
IRET defines fully stabilized properties as those both owned at the beginning of the prior fiscal year and having completed the rent-up phase (90% occupancy).  "Same-store" results for fiscal 2002 and 2001 for residential and commercial were:
 

Same-Store Residential
2002
2001
% Change
 
      
Scheduled Rent
$   54,486,817
$   53,613,453
   1.6%
 
      
Total Receipts
$   52,910,814
$   52,451,090
     ..9%
 
      
Utilities & Maintenance
9,464,313
10,450,515
-9.4%
Management YTD
5,357,847
5,309,518
.9%
Taxes & Insurance
6,862,813
6,113,675
12.3%
Mortgage Interest
  14,441,214
   14,170,529
   1.9%
Total Expenses
$  36,126,187
$   36,044,237
     ..2%
 
      
Net Operating Income
$  16,784,627
$   16,406,853
2.3%

 
Same-Store Commercial
2002
2001
% Change
 
      
Scheduled Rent
$   6,439,820
$   6,298,261
   2.2%
 
      
Total Receipts
$   6,318,864
$   6,146,533
   2.8%
 
      
Utilities & Maintenance
336,672
285,478
17.9%
Management YTD
73,638
58,356
26.2%
Taxes & Insurance
210,145
200,784
7.7%
Mortgage Interest
   2,799,274
   2,831,082
-11.2%
Total Expenses
$   3,419,729
$   3,375,700
   1.3%
 
      
Net Operating Income
$   2,899,135
$   2,770,833
   4.6%

43

Funds from Operations
IRET considers funds from operations ("FFO") a useful measure of performance for an equity REIT.  FFO herein is defined as net income available to shareholders determined in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures.  IRET uses the National Association of Real Estate Investment Trust's ("NAREIT") definition of FFO as amended by NAREIT to be effective January 1, 2000.

FFO presented herein is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition.

FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as a measure of IRET's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of IRET's needs or its ability to service indebtedness or make distributions.

FFO for the operating partnership increased to $29,143,549 for fiscal 2002, compared to $22,440,463 for fiscal 2001, and $18,327,986 for fiscal 2000.

Calculations of funds from operations for the operating partnership are as follows:
 

Item
2002
2001
2000
 
      
Net income available to IRET shareholders and unitholders from operations and capital gains
$ 14,412,861 
$  10,789,417
$  11,622,370
Less gain from property sales
      - -546,927
      - -601,605
   -1,754,496
Operating income
$ 13,865,934 
$  10,187,812
$    9,867,874
Less minority interest portion - other partnerships
      - -198,564
                 0
                  0
Net operating income
$  13,667,370
  $  10,187,812
$    9,867,874
Plus real estate depreciation and amortization (1)
  15,476,179 
  12,252,651
    8,460,112
Funds from operations
$  29,143,549 
$  22,440,463
$  18,327,986
Weighted average shares and units outstanding - basic and diluted (2)
  33,781,369 
  28,577,700
   24,476,984
Cash distributions paid to shareholders/unitholders (3)
$ 20,272,212 
$  15,732,399
$  12,492,067
(1)         Depreciation on office equipment and other assets used by IRET are excluded. Amortization of financing and other expenses are excluded, except for amortization of leasing commissions which are included.
(2)         Limited partnership units of the operating partnership are exchangeable for shares of beneficial interest of IRET only on a one-for-one basis.
(3)         Cash distributions are paid equally on shares and units.  It is our intent to distribute approximately 70% of FFO to our shareholders and unitholders.
44

Self-Advised Status
On July 1, 2000, IRET Properties became self-advised.  Prior to that date, Odell-Wentz and Associates, L.L.C., pursuant to an advisory contract with IRET, provided all office space, personnel, office equipment, and other equipment and services necessary to conduct all of the day-to-day operations of IRET.  Odell-Wentz and its predecessor firms had acted as advisor to IRET since its inception in 1970.  IRET obtained an independent appraisal of the value of the advisory business and assets from certified public accountants not otherwise employed by either IRET or the advisory company.  The purchase price for the business and assets was $2,083,350 allocated as follows:
 

Real Estate
$         475,000
Furniture, Fixtures & Vehicles
193,350
Goodwill
1,645,000
Less Real Estate Mortgages Assumed
        - -230,000
 
$      2,083,350

IRET Properties issued 255,000 of its limited partnership units in exchange for the above-described assets.  Except for Roger R. Odell, who retired on July 1, 2000, all officers and employees of Odell-Wentz and Associates, L.L.C. were retained by IRET Properties.
 
 

45

Property Acquisitions
The operating partnership added $143,280,342 of real estate investments to its portfolio during fiscal 2002, compared to $143,042,292 added in fiscal 2001 and $155,284,745 in fiscal 2000.  The fiscal 2002 and 2001 additions are detailed below:

Fiscal 2002 Property Acquisitions - For the Period of May 1, 2001 to April 30, 2002


Commercial
Location
Property Type
Net Rentable
Sq. Ft.
Purchase
Price
 
 
 
    
Mendota Hghts. Office Complex
Mendota Heights, MN
Multi-tenant Office Building
428,065
$  51,280,260
Interlachen
Edina, MN
Multi-tenant Office Building
105,084
16,691,306
Thresher Square E & W
Minneapolis, MN
Multi-tenant Office Building
113,736
11,119,958
Wirth Corporate Center
Golden Valley, MN
Commercial Office
75,216
8,629,281
Stone Container
Roseville, MN
Industrial Building
229,072
8,265,238
Bloomington Bus. Plaza
Bloomington, MN
Multi-tenant Office Building
114,819
7,445,108
Edgewood Vista
Virginia, MN
Assisted Living Center
70,313
6,958,383
Wayroad
Minnetonka, MN
Commercial Office
62,383
5,394,985
Morgan Chemical
New Brighton, MN
Industrial Building
49,620
2,428,810
Cottage Grove Center
Cottage Grove, MN
Strip Mall
     15,217
     1,116,089
   Total Commercial
 
 
1,263,525
$119,329,418
Residential
Location
Property Type
Units
Purchase
Price
 
  
Applewood on the Green
Omaha, NE
Apt. Community
234
$   10,810,426
Oakmont Apartments
Sioux Falls, SD
Apt. Community
80
5,257,468
Canyon Lake Apartments
Rapid City, SD
Apt. Community
109
4,280,120
Pinehurst Apartments
Billings, MT
Apt. Community
  21
        751,310
Sunset Trail Phase II*
Rochester, MN
Apt. Community
  73
     2,851,600
   Total Residential
 
 
517
$   23,950,924
 
 
 
  
$143,280,342

*  Represents costs to complete a project started in year ending April 30, 2001.

46

Fiscal 2001 Property Acquisitions - For the Period of May 1, 2000 to April 30, 2001


Commercial
Location
Property Type
Net Rentable
Sq. Ft.
Purchase
Price
 
 
 
 
 
12 South Main
Minot, ND
Office
11,300
$        385,000
17 South Main
Minot, ND
Office/Apartments
6,500
90,000
2030 Cliff Road
Eagan, MN
Office
13,374
950,000
Burnsville Bluffs
Burnsville, MN
Office
26,186
2,400,000
Cold Springs Center
St. Cloud, MN
Office
77,533
8,250,000
Conseco Financial Bldg.
Rapid City, SD
Office
  75,815
6,850,000
Dewey Hill Business Ctr.
Edina, MN
Office
73,338
4,472,895
Edgewood Vista Addition
Duluth, MN
Assisted Living
26,412
2,200,000
Edgewood Vista Addition
East Grand Forks, MN
Assisted Living
5,100
516,700
Edgewood Vista
Fremont, NE
Assisted Living
5,100
535,550
Edgewood Vista
Hastings, NE
Assisted Living
5,100
550,800
Edgewood Vista
Kalispell, MT
Assisted Living
5,895
560,000
Edgewood Vista
Omaha, NE
Assisted Living
5,100
610,800
HealthEast I & II
Woodbury &
Maplewood, MN
Medical Office
114,216
21,588,498
Hospitality Associates
Minnetonka, MN
Office
4,000
400,000
Nicollet VII
Burnsville, MN
Office
118,400
7,200,000
Pillsbury Business Center
Bloomington, MN
Office
42,220
1,800,000
Plymouth IV & V
Plymouth, MN
Office
   126,809
13,750,000
Sterner Lighting
Winsted, MN
Manufacturing
38,000
1,000,000
Stone Container Addition
Fargo, ND
Manufacturing
41,500
2,001,879
Stone Container
Waconia, MN
Warehouse
  29,440
1,666,500
Southdale Medical Center
   (60.31% part int.)
Edina, MN
Medical Office
   195,983
   32,421,070
 
 
 
1,047,321
$ 110,199,692
 
 
 
    
Residential
 
 
Units
Purchase
Price
 
 
 
 
 
Cottonwood Phase III
Bismarck, ND***
 
  67
$     1,854,800
Meadows, Phase III
Jamestown, ND***
 
27
1,865,182
Olympic Village
Billings, MT
 
274
11,616,500
Prairiewood Meadows
Fargo, ND
 
85
2,811,000
Ridge Oaks
Sioux City, IA
 
132
4,195,036
Sunset Trail, Phase I
Rochester, MN
 
  73
6,493,150
Sunset Trail, Phase II
Rochester, MN**
 
n/a 
     4,006,932
 
 
 
658
$   32,842,600
Total
 
 
  
$143,042,292

**           Property not placed in service at April 30, 2001.  Additional costs are still to be incurred.
***         Represents costs to complete a project started in year ending April 30, 2000.

47

Property Dispositions
Real Estate assets sold by the operating partnership during fiscal 2002 and 2001 were as follows:
 

Property Sold
Sales Price
Book Value & Sales Costs
Gain
 
 
 
 
2002
      
   Sunchase Apartments
$  1,100,000
$    803,591
$       296,409
   Lester Chiropractic Clinic
317,500
232,221
85,279
   Carmen Court - Magic City Apartments
295,000
291,654
3,346
   Walter's Building
0
35,062
-35,062
   Corner Express
1,714,713
1,460,403
       254,310
Total Fiscal 2002 Gain
    
$       604,282
 
      
2001
      
   Evergreen Shopping Center
$  1,450,000
$  1,448,310
$           1,689
   Chalet Apartments
390,000
366,566
23,434
   Hill Park aka Garden Grove
2,400,000
1,823,518
       576,482
Total Fiscal 2001 Gain
    
$       601,605

Cash Distributions
The following cash distributions were paid to IRET shareholders and IRET Properties limited partners during fiscal years 2002, 2001, and 2000:
 

Date
2002
2001
2000
 
 
 
 
July 1,
$     ..1450
$      ..1325
$     ..1240
October 1,
.1475
.1350
.1260
January 15,
    .1500
.1400
.1280
April 1,
      ..1520
       ..1425
    .1300
 
$     ..5945
$      ..5500
$     ..5080

The fiscal 2002 cash distributions increased 8.1% over the cash distributions paid during fiscal year 2001 and 17.0% over fiscal 2000.

Liquidity and Capital Resources
Important equity capital and financing events in fiscal 2002 were:

  • As a result of the sale of additional shares of beneficial interest, shareholder equity increased during fiscal 2002 by $31,227,781 and, in addition, the equity capital of the operating partnership was increased by $17,456,852 as a result of contributions of real estate in exchange for operating units, resulting in a total increase in equity capital for the operating partnership of $48,684,633.
48
  • Cash and marketable securities on April 30, 2002, totaled $22,833,426 compared to $9,368,176 on the same date in 2001 and $6,623,495 in 2000.
  • Mortgage loan indebtedness increased due to the acquisition of new investment properties to $459,568,905 on April 30, 2002, from $368,956,930 on April 30, 2001, and $265,056,767 on April 30, 2000.  The weighted interest rate on these loans decreased to 7.41% per annum from 7.56% on April 30, 2001, and compared to 7.59% at the end of fiscal 2000.
  • The issuance of investment certificates was discontinued in April of 2002 and the $25,186,582 of certificates outstanding on April 30, 2002, will be redeemed upon maturity as follows:
Certificates Maturing
Face Amount
 
Fiscal 2003
$    16,484,256
Fiscal 2004
1,995,822
Fiscal 2005
2,221,533
Fiscal 2006
2,177,886
Fiscal 2007
     2,307,085
Total
$   25,186,582
  • New real estate investments of $143,280,342 were made by the operating partnership in fiscal 2002, compared to $143,042,292 in fiscal 2001 and $155,284,745 in fiscal 2000.
  • Net cash provided from operating activities increased to $26,918,213 from $22,328,745 due to the addition of new investments to our real estate portfolio.
  • Net cash used in investing activities decreased to $75,862,027 from the $76,165,151 used in fiscal 2001.  This decrease resulted because less cash was needed to acquire new investment properties.
  • Net cash provided from financing activities also decreased to $54,921,177 from the year earlier figure of $56,743,205 because of a small decrease in our activity in acquiring new properties using borrowed funds.
IRET expects that its short-term liquidity requirements will be met through the net cash provided by its operations and also expects that it will meet its long-term liquidity requirements including scheduled debt maturities maturing investment certificates, construction and development activities, and property acquisitions through long-term secured borrowings and the issuance of additional equity securities including shares of beneficial interest of the company as well as limited partnership units of the operating partnership to be issued in connection with acquisitions of improved real estate properties.
49

IRET believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and cash distribution to its shareholders in accordance with REIT requirements in both the short and long term.  Budgeted expenditures for ongoing maintenance and capital improvements and renovations to its real estate portfolio are expected to be funded from cash flow generated from operations of these properties.

Of the $459,568,905 of mortgage indebtedness on April 30, 2002, $31,003,091 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 and the balance of fixed rate mortgages was $428,565,814.  The principal payments due on all of the mortgage indebtedness are as follows:
 

Year Ending April 30
Mortgage Principal
 
  
2003
$        19,162,590
2004
10,630,799
2005
11,517,237
2006
12,356,777
2007
13,260,789
Later Years
     392,640,713
Total
$     459,568,905

In addition to its cash and marketable securities, IRET Properties has unsecured line of credit agreements with First International Bank & Trust, Bremer Bank, and First Western Bank & Trust, all of Minot, North Dakota, totaling $19,000,000, none of which were in use on April 30, 2002 and 2001.  On April 30, 2000, $6,452,420 was in use.

Increased Costs and Economic Slowdown
In fiscal 2001, IRET experienced a sharp increase in the cost of utilities (primarily natural gas) in its apartment communities.  Since that time, natural gas prices have retreated, but it is possible that IRET's apartment communities will again experience a sharp increase in utility expenses which may not be recoverable in the form of increased rent.  Maintenance and other rental expenses also continue to increase at the general inflationary rate of 2-3%.  In most cases, IRET has been able to increase rental income sufficient to cover the normal inflationary increases in rental expenses, but did experience a substantial loss as a result of increased natural gas and snow removal expenses in fiscal 2001.  With respect to IRET's commercial properties, in virtually all cases, the tenant is responsible to pay utilities and most other rental expenses.  However, commercial leases tend to be of a longer term and IRET is precluded from increasing rent to compensate for inflationary changes in currency values.  In the case of residential properties, no leases are longer than one year and the majority are for six months or less and thus IRET may raise rent to cover inflationary changes in expenses and the value of its capital investment, subject to market conditions.
 
 

50

IRET's insurance costs will increase substantially during the coming year.  This increase in insurance costs, prior to September 2001, was not anticipated by management.  Given the weakened economic state, it is unlikely IRET will be able to increase rents sufficiently to fully offset its increased costs.  As a result, our expectation is that net income and FFO will still increase over the prior year, but at a lower rate than the 10% FFO growth of fiscal 2002.

Increasing Ownership of Commercial Properties
Historically, the assets in our investment portfolio consisted predominantly of multi-family residential properties, as compared to commercial properties. More recently, our investment activities have caused this balance to shift so that the percentage of commercial properties held in our portfolio has increased significantly. Within the past two years, approximately 80% of our property acquisitions have been commercial properties due to the greater availability of these properties on terms that meet our financial and strategic objectives. If current market conditions continue, we anticipate that the percentage of commercial properties could equal or exceed the percentage of multi-family residential properties during fiscal 2003. This may not, however, be a long-term trend as in future periods we may purchase a greater percentage of multi-family residential properties depending on market conditions.

Our historical experience in acquiring multi-family residential properties may not be directly applicable to the acquisition of a greater percentage of commercial properties. Commercial properties involve different risks than multi-family residential properties, including: direct exposure to business and economic downturns; exposure to tenant lease terminations or bankruptcies; and competition from real estate investors with greater experience in developing and owning commercial properties.

Current and Future Vacancies
In the twelve months subsequent to April 30, 2002, leases covering approximately 11.80% of our total commercial square footage will expire. At April 30, 2002, approximately 2.1% of our total commercial square footage was vacant. Of that vacancy, approximately 54.04% is represented by the warehouse in Boise, Idaho, which has been vacant for the last 24 months. At April 30, 2002, approximately 6.96% of the units in our multi-family stabilized residential properties were vacant.  Due to the overall general economic slowdown, we are expecting that our vacancy rates will increase over the next 12 to 18 months.  Additionally, rent rates for commercial property in the Minneapolis area have stagnated at current levels with little possibility for increases in the next 12 to 18 months.

Geographic Concentration in North Dakota and Minnesota
The majority of our assets are presently invested in real estate properties in North Dakota and Minnesota. For the year ended April 30, 2002, we received 68% of our commercial gross revenue from commercial properties in Minnesota and 20% of our commercial gross revenue from commercial properties in North Dakota. Minnesota accounts for 72% of our commercial real estate portfolio by square footage, while North Dakota accounts for 18%.
 
 

51

For the year ended April 30, 2002, we received 17% of our apartment gross revenue from multi-family residential properties in Minnesota and 32% of our apartment gross revenue from multi-family properties in North Dakota. As of that same date, we owned 1,309 apartment units, 16% of our total number of apartment units, in Minnesota, and 2,995 apartment units, 36% of our total number of apartment units, in North Dakota.  We intend to continue focusing on real estate activities in the state of Minnesota which will result in an increase to our current concentration in the upper Midwest.

Critical Accounting Policies
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 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 rent receivable, net of allowance for doubtful accounts.  IRET evaluates the need for an allowance for doubtful accounts periodically. In performing its evaluation, management assesses the recoverability of individual real estate mortgage loans and rent receivables by a comparison of their carrying amount with their estimated net realizable value.

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 its multi-tenant commercial tenants throughout the year based on estimates.  Differences between estimated recoveries and the final billed amounts, which are immaterial, are recognized in the subsequent 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 and are included in rental income at that time.

Profit on sales of real estate shall be recognized in full when the real estate is sold, provided the collectibility of the sales price is reasonably assured or the amount that will be collectible can be estimated and the seller is not obliged to perform significant activities after the sale to earn the profit.  Any gain or loss on a sale or disposition is recognized in accordance with accounting principles generally accepted in the United States of America.

Accounting for Property Owned.  Real estate is stated at cost. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Refurbishment type costs such as property-wide painting, carpeting, wallpaper, tiling, replacement of worn out appliances, replacement of worn out bathroom fixtures, replacement of worn out windows, siding, roofs, walkways, parking lots or landscaping, and any other type of refurbishment activity is capitalized.  Interest, real estate taxes, and other development costs relating to the acquisition and development of certain qualifying properties are also capitalized. Expenditures for routine maintenance and repairs, such as individual apartment painting, wallpapering, cleaning, and appliance repair, which do not add to the value or extend useful lives, are charged to expense as incurred.
 
 

52

IRET assesses whether there has been impairment in the value of its real estate by comparing its carrying amount to the aggregate undiscounted future cash flows without interest charges.  Such cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors.  Such market factors include a lessee's ability to pay rent under the terms of the lease.  If a property is leased at a significantly lower rent, IRET may recognize a loss if the income stream is not sufficient to recover its investment.  If impairment is determined to be present, the loss is measured as the amount by which the carrying value exceeds the property's fair value.

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is limited to fluctuations in the general level of interest rates on its current and future fixed and variable rate debt obligations. Even though our philosophy is to maintain a fairly low exposure to interest rate fluctuation risk, we are still vulnerable to significant fluctuations in interest rates on its variable rate debt, on any future repricing or refinancing of its fixed rate debt and on future debt.

We primarily use long-term (more than ten 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 costs of capital. As of April 30, 2001, we had the following amount of future principal payments on mortgages secured by our real estate:
 

Long Term Debt
2002
2003
2004
2005
2006
Thereafter
Total
Fixed Rate
$3,209,699
$6,949,388
$7,482,220
$8,183,905
$10,998,715
$291,141,854
$337,364,781
Variable Rate
$1,265,409
$1,348,758
$1,458,692
$1,563,065
$ 2,734,650
$ 23,221,575
$ 31,592,149
 
 
 
 
 
 
 
$368,956,930
Average Interest Rate (%)
              (1)
            (1)
            (1)
            (1)
              (1)
                (1)
 

(1) The weighted average interest rate as of April 30, 2001, was 7.56%. Any fluctuations on the variable interest rates could increase or decrease our interest expenses. For example, an increase of one percent per annum on our $31,592,149 of variable rate indebtedness would increase our annual interest expense by $315,921.

Item 8.  Financial Statements and Supplementary Data

The financial statements and supplementary data listed in the accompanying Index to Financial Statements and Supplementary Data are filed as a part of this report and incorporated herein by reference.

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

None.

53

PART III

Item 10. Directors 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 IRET's definitive Proxy Statement for its 2002 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 IRET's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders and such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item will be contained in IRET's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders and such information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

The information required by this Item will be contained in IRET's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders and such information is incorporated herein by reference.

54

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 
 
The following documents are filed as part of this report:
 
1. 
Financial Statements
      See the table of contents to Financial Statements and Supplemental Data.
 
2.
Financial Statement Schedules
The following financial statement schedules should be read in conjunction with the financial statements incorporated by reference in Item 8 of this Annual Report on   Form 10-K:
 
 
      I           Marketable Securities - Other Investments
      IV         Non-current Indebtedness of Related Parties - Mortgage Loans Receivable
      X          Supplemental Income Statement Information
      XI         Real Estate Owned and Accumulated Depreciation
      XII        Investments in Mortgage Loans on Real Estate
      XIII      Other Investments - Partnerships
 
3.
Exhibits
 
 
See the list of exhibits set forth in part (c) below.
(b)
 
On March 15, 2002, IRET filed a Form 8-K/A reporting items under Item 7-Financial Statements, Pro Forma Financial Information and Exhibits.
 On January 2, 2002, IRET filed a Form 8-K announcing that it had purchased seven properties that individually were insignificant, as defined in Regulation S-X, but in the aggregate constituted a significant amount of assets, as defined in Regulation S-X.  This Form 8-K/A includes the financial statements relating to the assets that comprise a substantial majority of the individually insignificant assets as measured by cost.
(c)
 
The following is a list of Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 30, 2002. The Registrant will furnish a copy of any exhibit listed below to any security holder of the Registrant who requests it upon payment of a fee of 15 cents per page. All Exhibits are either contained in this Annual Report on Form 10-K or are incorporated by reference as indicated below.

55



 
 
 
 
3(i)
Second Restated Declaration of Trust of Investors Real Estate Trust, dated February 10, 1999, and filed as Exhibit 3(i) to Form S-11 Registration Statement effective June 4, 1999, (SEC File No. 333 21945) filed for the Registrant (File No. 0-14851) and incorporated herein by reference.
 
 
3(ii)
Governing Provisions (Bylaws) of IRET, Inc. as adopted on January 15, 1997, amended on July 15,1998, amended on June 20, 2001, and filed herewith.
 
 
10(i)
Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership, dated January 31, 1997, filed as Exhibit 3(ii) to Form S-11 Registration Statement effective March 14, 1997 (SEC File No. 333-21945) filed for the Registrant (File No. 0-14851) and incorporated herein by reference.
 
 
21
Subsidiaries of Investors Real Estate Trust

56

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 

Investors Real Estate Trust
Date: July 29, 2002
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 29, 2002
 
 
 
/S/ C. Morris Anderson
C. Morris Anderson
Trustee & Vice Chairman
July 29, 2002
 
 
 
/S/ Daniel L. Feist
Daniel L. Feist
Trustee & Vice Chairman
July 29, 2002
 
 
 
/S/ Thomas A. Wentz, Jr.
Thomas A. Wentz, Jr.
Trustee,Vice President & General Counsel
July 29, 2002
 
 
 
/S/ Timothy P. Mihalick
Timothy P. Mihalick
Trustee, Senior Vice President & Chief Operating Officer
July 29, 2002
 
 
 
/S/ Diane K. Bryantt
Diane K. Bryantt
Secretary & Chief Financial Officer
July 29, 2002
 
 
 
/S/ John F. Decker
John F. Decker
Trustee
July 29, 2002
 
 
 
/S/ Steven B. Hoyt
Steven B. Hoyt
Trustee
July 29, 2002
 
 
 
/S/ Patrick G. Jones
Patrick G. Jones
Trustee
July 29, 2002
 
 
 
/S/ Stephen L. Stenehjem
Stephen L. Stenehjem
Trustee
July 29, 2002

57


 

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
 

CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
April 30, 2002, 2001 and 2000
and
INDEPENDENT AUDITOR'S REPORT
 
 

PO Box 1988
12 South Main Street - Suite 100
Minot, ND  58702-1988
701-837-4738
fax: 701-838-7785
email: info@iret.com
www.iret.com

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

TABLE OF CONTENTS

PAGE
INDEPENDENT AUDITORS REPORT
1
CONSOLIDATED FINANCIAL STATEMENTS  
      Consolidated Balance Sheets
2 - 3
      Consolidated Statements of Operations
4
      Consolidated Statements of Shareholders' Equity
5
      Consolidated Statements of Cash Flows
6 - 7
      Notes to Consolidated Financial Statements
8 - 26
   
ADDITIONAL INFORMATION  
      Independent Auditor's Report on Additional Information
28
      Marketable Securities
29
      Supplemental Income Statement Information
30
      Real Estate Accumulated Depreciation
31 - 39
      Investments in Mortgage Loans on Real Estate
40
      Selected Financial Data
41
      Gain From Property Dispositions
42
      Mortgage Loans Payable
43 - 45
      Significant Property Acquisitions
46
   
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 financial statement on notes thereon.
  
   
      Quarterly Results of Consolidated Operations (unaudited)
47

INDEPENDENT AUDITOR'S REPORT






Board of Trustees
Investor Real Estate Trust
and Subsidiaries
Minot, North Dakota

We have audited the accompanying consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 2002, and 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended April 30, 2002, 2001, and 2000.  These consolidated financial statements are the responsibility of the Trust's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Investors Real Estate Trust and Subsidiaries as of April 30, 2002, and 2001, and the consolidated results of its operations and cash flows for the years ended April 30, 2002, 2001, and 2000, in conformity with accounting principles generally accepted in the United States of America.
 
 

/S/ Brady Martz and Associates, P.C.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota, USA
 
 

May 22, 2002

F-1

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 2002 and 2001



 
 
 
 
 
 
 

ASSETS
           2002
           2001
REAL ESTATE INVESTMENTS
   Property owned
$  740,319,436
$  591,636,468
   Less accumulated depreciation
  - 58,925,517
  - 44,093,145
 
$  681,393,919
$  547,543,323
 
    
   Mortgage loans receivable
      3,952,762
      1,037,095
   Total real estate investments
$  685,346,681
$  548,580,418
 
    
OTHER ASSETS
    
   Cash
$    12,333,426
$     6,356,063
   Marketable securities - held-to-maturity
0
2,351,248
   Marketable securities - available-for-sale
10,500,000
660,865
   Rent receivable
3,233,765
1,925,429
   Real estate deposits
422,045
522,500
   Notes Receivable
3,500,000
0
   Prepaid and other assets
3,513,791
799,973
   Tax, insurance, and other escrow
6,210,450
4,323,960
   Furniture & fixtures
209,121
187,313
   Goodwill
1,440,817
1,550,246
  Deferred charges and leasing costs
      3,498,922
      3,064,109
TOTAL ASSETS
$  730,209,018
$  570,322,124

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-2

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
April 30, 2002 and 2001

LIABILITIES AND SHAREHOLDERS' EQUITY
            2002
           2001
LIABILITIES
     Accounts payable and accrued expenses
$     10,596,277
$      8,252,758
     Mortgages payable
459,568,905
368,956,930
     Investment certificates issued
     25,186,582
    11,876,417
          Total Liabilities
$   495,351,764
$  389,086,105
 
    
COMMITMENTS AND CONTINGENCIES (NOTE 14)
    
 
    
MINORITY INTEREST IN PARTNERSHIPS
$     12,819,077
$      3,287,665
 
    
MINORITY INTEREST OF UNIT HOLDERS IN
   OPERATING PARTNERSHIP
$     76,460,046
$    59,003,194
 
    
SHAREHOLDER'S EQUITY
    
   Shares of beneficial interest (unlimited authorization, no 
    par value, 27,847,079 shares outstanding in 2002 and 
   24,068,346 shares outstanding in 2001)
$  163,376,549
$  132,148,768
   Accumulated distributions in excess of net income
-17,798,418
-13,073,157
   Accumulated other comprehensive loss
                    0
        - -130,451
   Total shareholders' equity
$  145,578,131
$  118,945,160
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$  730,209,018
$  570,322,124

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-3

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended April 30, 2002, 2001, and 2000

 
        2002
        2001
         2000
REVENUE
      
   Real estate rentals
$ 91,738,602
$  74,800,722
$  54,257,881
   Interest, discounts and fees
    1,277,467
       966,428
    1,187,312
   Total revenue
$ 93,016,069
$  75,767,150
$  55,445,193
 
      
EXPENSES
      
   Interest
$ 30,604,846
$  25,231,398
$  17,014,170
   Depreciation
15,515,168
12,299,532
8,460,112
   Utilities and maintenance
12,709,614
11,546,566
8,044,530
   Taxes
9,184,599
7,545,182
5,282,361
   Insurance
1,352,622
831,963
476,962
   Property management expenses
6,985,542
5,784,423
4,290,275
   Loss on impairment of properties
0
0
1,319,316
   Administrative expenses
1,569,853
1,057,469
0
   Advisory and trustee services
112,889
423,227
1,159,120
   Operating expenses
565,802
431,390
633,692
   Amortization
      549,200
       428,188
       216,097
   Total expenses
$ 79,150,135
$  65,579,338
$  46,896,635
 
      
INCOME BEFORE GAIN/LOSS ON 
    PROPERTIES AND MINORITY INTEREST
$ 13,865,934
$  10,187,812
$    8,548,558
GAIN ON SALE OF PROPERTIES
546,927
601,605
1,754,496
MINORITY INTEREST PORTION -
   OTHER PARTNERSHIPS
-198,564
0
0
MINORITY INTEREST PORTION -
   OPERATING PARTNERSHIP
  -3,614,168
   -2,095,177
   -1,495,209
NET INCOME
$ 10,600,129
$    8,694,240
$    8,807,845
 
      
Net income per share (basic and diluted)
$              42
$              ..38
$             ..42

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-4

INVESTORS REAL ESTATE TRUSTAND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended April 30, 2002, 2001, and 2000


NUMBER OF SHARES
SHARES OF BENEFICIAL INTEREST
DISTRIBUTIONS 
IN EXCESS OF 
NET INCOME
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
TOTAL SHAREHOLDER'S EQUITY
BALANCE MAY 1, 1999
 19,066,954
$ 93,095,819
$  -7,255,958
$       - - 56,567
$   85,783,294
Comprehensive income
          
   Net income
0
0
8,807,845
0
8,807,845
   Unrealized loss on
   securities available-for-sale
0
0
0
-161,938
     - -161,938
Total comprehensive income
        
$8,645,907
Distributions
0
0
-10,645,963
0
-10,645,963
Distribution reinvestment plan
803,192
6,330,301
0
0
6,330,301
Sale of shares
3,115,789
24,022,246
0
0
24,022,246
Shares repurchased
     - -533,866
    - -4,215,194
                 0
                  0
    - -4,215,194
BALANCE APRIL 30, 2000
 22,452,069
$ 119,233,172
$  -9,094,076
$      - -218,505
$ 109,920,591
Comprehensive Income
          
   Net income
0
0
 8,694,240
0
8,694,240
   Unrealized gain on 
   securities available-for-sale
0
0
0
88,054
          88,054
Totalcomprehensive income
        
$     8,782,294
Distributions
0
0
-12,673,321
0
-12,673,321
Distribution reinvestment plan
273,155
2,230,445
0
0
2,230,445
Sale of shares
1,383,908
11,001,509
0
0
11,001,509
Fractional shares repurchased
     - -40,786
       - -316,358
                   0
                  0
       - - 316,358
BALANCE APRIL 30, 2001
24,068,346
$ 132,148,768
$  -13,073,157
$      - -130,451
   $  118,945,160
Comprehensive Income
  
 
      
   Net income
    
 10,600,129
  
10,600,129
   Unrealized gain on 
   securities available-for-sale		      
130,451
                         ____130,451
Totalcomprehensive income
        
$   10,730,580
Distributions
    
-15,325,390
  
-15,325,390
Distribution reinvestment plan
832,708
7,297,694
    
7,297,694
Sale of shares
2,947,986
23,949,523
    
23,949,523
Fractional shares repurchased
        - -1,961
        - -19,436
__________
__________
____-19,436
BALANCE APRIL 30, 2002
 27,847,079
$163,376,549
$ -17,798,418
$                  0
$ 145,578,131

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-5

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended April 30, 2002, 2001, and 2000


 
        2002
       2001
       2000
CASH FLOWS FROM OPERATING ACTIVITIES
      
   Net Income
$     10,600,129
$      8,694,240 
$      8,807,845
   Adjustments to reconcile net income to net cash 
      provided by operating activities:		      
         Depreciation and amortization
16,064,368
12,727,720
8,676,209
         Minority interest portion of operating partnership 
             income
3,812,732
2,095,177
1,495,209
         Accretion of discount on contracts
0
0
-1,506
         Gain on sale of properties
-546,927
-601,605
-1,754,496
         Loss on impairment of properties
0
0
1,319,316
         Interest reinvested in investment certificates
486,198
360,181
363,935
  Effects on operating cash flows due to changes in:
      
         Real estate deposits
1,062,876
246,350
-467,950
         Rent receivable
-1,308,336
-990,213
-1,055,922
         Other assets
-2,850,807
-201,547
-283,838
         Tax, insurance and other escrow
-1,886,489
-1,105,357
-1,457,408
         Deferred charges
-874,584
-805,364
-1,319,634
         Accounts payable and accrued expenses
__ _2,359,053
       1,909,163
       1,955,325
Net cash provided from operating activities
$     26,918,213
$     22,328,745
$     16,277,085
 
      
CASH FLOWS FROM INVESTING ACTIVITIES
      
   Proceeds from maturity of marketable securities 
       held-to-maturity
$       3,085,208
 $          250,172
$          363,014
   Principal payments on mortgage loans receivable
5,591,429
613,934
492,547
   Proceeds from sale of property
269,501
0
7,326,563
   Payments for acquisitions and improvement 
       of properties
-62,301,069
-72,319,419
-121,931,571
   Purchase of marketable securities available-for-sale
-10,500,000
0
0
   Investment in mortgage loans receivable
-8,507,096
      - -4,709,838
     - - 6,291,617
   Investment in Notes Receivable
_ _-3,500,000
__________0
__________0
   Net cash used for investing activities
$   -75,862,027
$  - 76,165,151
$ -120,041,064

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-6

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended April 30, 2002, 2001, and 2000


 
       2002
       2001
       2000
CASH FLOWS FROM FINANCING ACTIVITIES
      
   Proceeds from sale of shares, net of issue costs
$     13,520,867
$    11,001,509
$    24,022,246
   Proceeds from investment certificates issued
24,109,305
3,257,574
3,769,003
   Proceeds from mortgages payable
43,093,345
79,369,000
93,969,098
   Proceeds from sale of minority interest units
345,603
0
0
   Repurchase of shares and minority interest units
-29,868
-5,497,952
-4,832,012
   Distributions paid
-8,362,657
-5,963,290
-4,315,662
   Distributions paid to minority interest unitholders
-4,476,875
-3,059,078
-1,846,104
   Distributions paid to other minority partners
-150,082
0
0
   Redemption of investment certificates
-2,195,531
-1,828,594
-5,815,818
   Principal payments on mortgage loans
-10,932,930
-14,083,544
-7,902,981
   Net increase (decrease) in short-term lines of credit
__________0
      - -6,452,420
       6,452,420
   Net cash provided from financing activities
$    54,921,177
$     56,743,205
$    103,500,190
NET INCREASE (DECREASE) IN CASH
$      5,977,363
$       2,906,799
$          - -263,789
CASH AT BEGINNING OF YEAR
      6,356,063
       3,449,264
       3,713,053
CASH AT END OF YEAR
  $    12,333,426
       $       6,356,063
    $       3,449,264
 
      
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
      
   Distribution reinvestment plan
$      7,297,694
$      2,230,445
$       6,330,301
   Real estate investment and mortgage loans
   receivable acquired through assumption of
  mortgage loans payable and accrual of costs
59,650,208
38,611,547
4,049,568
   Mortgage loan receivable transferred to property owned
0
4,709,838
15,000,000
   Proceeds from sale of properties deposited directly
   with escrow agent
856,411
4,093,684
0
   Properties and goodwill acquired through the issuance of
   minority interest units in the operating partnership
19,793,183
25,543,524
21,602,841
   Minority partner interest in Southdale Medical Center
0
3,287,655
0
   Minority partner interest in Mendota Properties
9,482,931
0
0
   Interest reinvested directly in investment certificates
486,198
360,181
363,935
   Investment certificates transferred to shares
9,089,807
0
0
   UPREIT units converted to shares
1,338,849
0
0
 
      
SUPPLEMENTAL DISCLOSURE OF CASH FLOW 
   INFORMATION		      
   Cash paid during the year for:
      
      Interest paid on mortgages
$   27,318,816
$     23,763,584
$    15,670,488
      Interest paid on investment certificates
       663,774
          745,391
         544,977
      Interest paid on margin account and other
__  ___1,438
___________0
__________0
 
$   27,984,028
$     24,508,975
$    16,215,465

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-7

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2002, 2001, and 2000

NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS  Investors Real Estate Trust ("IRET") qualifies under Section 856 of the Internal Revenue Code as a real estate investment trust. IRET has real estate properties located primarily throughout the upper Midwest, with its principal office located in Minot, North Dakota. IRET invests in commercial and residential real estate, real estate mortgages, governmental backed securities and equity securities in other real estate investment trusts.  Gross rental revenues were derived 64% from residential property assets and 36% from commercial property assets.

Effective February 1, 1997, IRET reorganized its structure in order to convert to Umbrella Partnership Real Estate Investment Trust (UPREIT) status. IRET established an operating partnership (IRET Properties, a North Dakota Limited Partnership) with a wholly owned corporate subsidiary acting as its sole general partner (IRET, Inc., a North Dakota corporation). IRET transferred substantially all of its assets and liabilities to the operating partnership in exchange for general partnership units.

The general partner has full and exclusive management responsibility for the real estate investment portfolio owned by the operating partnership. The partnership is operated in a manner that allows IRET to continue its qualification as a real estate investment trust under the Internal Revenue Code.

All limited partners of IRET Properties have certain exchange rights allowing the exchange of limited partnership units for IRET shares on a one-for-one basis. The exchange rights are subject to certain restrictions including no exchanges for at least one year following the acquisition of the limited partnership units.  Each limited partnership unit is entitled to receive a cash distribution equal to any distribution paid on a share of IRET stock.

Effective July 1, 2000, IRET became self-administered as a result of the acquisition of its former advisory company, Odell-Wentz & Associates, LLC.  Virtually all officers and employees of Odell-Wentz & Associates, LLC were retained by IRET.  Please refer to Note 9 for information concerning the impact of this acquisition on the accompanying financial statements.

BASIS OF PRESENTATION  The consolidated financial statements include the accounts of IRET and all of its subsidiaries in which it maintains a controlling interest.  IRET is the sole shareholder of IRET, Inc., which is the general partner of the operating partnership, IRET Properties. IRET is also the sole shareholder of Miramont IRET Inc. and Pine Cone IRET Inc., both Colorado business corporations.

IRET is the sole shareholder of the following entities:  Forest Park - IRET, Inc., Thomasbrook - IRET, Inc., Dakota - IRET, Inc., MedPark - IRET, Inc., Flying Cloud - IRET, Inc.,  Meadows II - IRET, Inc., IRET - Ridge Oaks, LLC, and Applewood - IRET, Inc.  The entities in the preceding sentence are the sole general partners and IRET Properties is the sole limited partner for the following limited partnerships, respectively:  Forest Park Properties, a North Dakota limited partnership; Thomasbrook Properties, a Nebraska limited partnership; Dakota Hill Properties, a Texas limited partnership; MedPark Properties, a North Dakota limited partnership; and 7901 Properties, LP, a Minnesota limited partnership, Meadows 2 Properties, LP, a North Dakota limited partnership, Ridge Oaks, LP, an Iowa limited partnership, and Applewood - IRET Properties, a Nebraska limited partnership.  IRET Properties is also the sole owner of Health Investors Business Trust, a Delaware business trust and IRET - Oakmont, LLC.  These entities are all invested in real estate and are formed and acquired solely so the underlying real estate may be encumbered by mortgage indebtedness.

F-8

NOTE 1 - (continued)

The consolidated financial statements also include the ownership by IRET Properties of a  60.31% in Minnesota Medical Investors LLC, SMB Operating Company LLC, and SMB MM LLC, collectively known as Southdale Medical Center and a 51% ownership interest in Mendota Properties, LLC, a Minnesota limited liability company.  Mendota Properties,  LLC, is the holder of all of the issued and outstanding membership interests in Mendota Office Holding LLC, a Minnesota limited liability company and Mendota Office Three and Four, LLC, a Minnesota limited liability company.  The three Mendota LLCs are the owner of five multi-tenant commercial real estate properties in Dakota County, Minnesota.  These companies are consolidated into the IRET's other operations with minority interests reflecting the minority partners' share of ownership and income and expenses.

All material inter-company transactions and balances have been eliminated in the consolidated financial statements.

ACCOUNTING POLICIES

NEW ACCOUNTING PRONOUNCEMENTS  Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, established accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value.  The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.  Certain provisions of SFAS 133 were amended by SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" an amendment of Statement 133.  The impact of SFAS 133 is not significant.

In 2001 the FASB issued SFAS No. 141 "Business Combinations" ("SFAS 141") which requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method, SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which provides new guidance in accounting for goodwill and intangible assets and SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  The adoption of SFAS 141 had no effect of IRET's financial position or results of operations.  IRET is required to adopt SFAS 142 and SFAS 144 on May 1, 2002.  The impact of the adoption of SFAS 142 and SFAS 144 is not expected to have a significant impact.

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.

PROPERTY OWNED  Real estate is stated at cost. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Refurbishment type costs such as property-wide painting, carpeting, wallpaper, tiling, replacement of worn out appliances, replacement of worn out bathroom fixtures, replacement of worn out windows, siding, roofs, walkways, parking lots or landscaping, and any other type of refurbishment activity is capitalized.  Interest, real estate taxes, and other development costs relating to the acquisition and development of certain qualifying properties are also capitalized. Expenditures for routine maintenance and repairs, such as individual apartment painting, wallpapering, cleaning, and appliance repair, which do not add to the value or extend useful lives are charged to expense as incurred.

F-9

NOTE 1 - (continued)

IRET assesses whether there has been impairment in the value of its real estate by comparing its carrying amount to the aggregate undiscounted future cash flows without interest charges.  Such cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors.  Such market factors include a lessee's ability to pay rent under the terms of the lease.  If a property is leased at a significantly lower rent, IRET may recognize a loss if the income stream is not sufficient to recover its investment.  If impairment is determined to be present, the loss is measured as the amount by which the carrying value exceeds the property's fair value.

The fair value of the property is the amount which would be recoverable upon the disposition of the property.  Techniques used to establish fair value include: present value of estimated expected future cash flows using a discount rate commensurate with the risks involved, the appraised value, and recent sales of comparable assets in close proximity to IRET's property.

IRET's acquisitions for the fiscal year 2002 in order of size:
 

Property
Location
Type
Cost
Date
Acquired
Mendota Heights Office Complex  Mendota Heights, MN Multi-tenant Office Building
$  51,280,260
04/30/02
Interlachen  Edina, MN Multi-tenant Office Building
16,691,306
08/10/01
Thresher Square - East & West Minneapolis, MN Multi-tenant Office Building
11,119,958
01/02/02
Applewood on the Green Omaha, NE 234-unit Apt Community
10,810,426
10/31/01
Wirth Corporate Center Golden Valley, MN Commercial Office
8,629,281
04/01/02
Stone Container Roseville, MN Industrial Building
8,265,238
12/20/01
Bloomington Business Plaza Bloomington, MN Multi-tenant Office Building
7,445,108
10/01/01
Edgewood Vista Virginia, MN Assisted Living Center
6,958,383
04/30/02
Wayroad Minnetonka, MN Commercial Office
5,394,985
04/01/02
Oakmont Apartments Sioux Falls, SD 80-unit Apt Community
5,257,468
04/30/02
Canyon Lake Apartments Rapid City, SD 109-unit Apt Community
4,280,120
09/27/01
Sunset Trail Phase II* Rochester, MN 73-unit Apt Community
2,851,600
04/01/02
Morgan Chemical New Brighton, MN Industrial Building
2,428,810
04/30/02
Cottage Grove Center Cottage Grove, MN Strip Mall
    1,116,089
07/06/01
Pinehurst Apartments Billings, MT 21-unit Apt Community
       751,310
02/28/02
 
TOTAL
  
$143,280,342
  

*  Represents costs to complete a project started in year ending April 30, 2001.

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.

In the normal course of business IRET will receive offers for sale of its properties, either solicited or unsolicited.  For those offers that are accepted, the prospective buyer will usually acquire a due diligence period before completion of the transaction.  It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process.  As a result, real estate is not classified

F-10

NOTE 1 - (continued)

as "held-for-sale" until it is likely, 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.

FURNITURE AND FIXTURES consists of office furniture, fixtures, and equipment located at IRET's operational headquarters and is stated at cost net of accumulated depreciation.   Accumulated depreciation was $289,089 and $215,757 as of April 30, 2002, and 2001, respectively.

DEPRECIATION is provided to amortize the cost of individual assets over their estimated useful lives using principally the straight-line method. Useful lives range from 5 - 12 years for furniture and fixtures and 20 - 40 years for buildings and improvements.

MORTGAGE LOANS RECEIVABLE are shown at cost.  Interest income is accrued and reflected in the related balance.

MARKETABLE SECURITIES  IRET's investments in securities are classified as securities "held-to-maturity" and securities "available-for-sale."  The securities classified as "available-for-sale" as of April 30, 2002, represents an investment in a Merrill Lynch money market mutual fund and is stated at fair value. As of April 30, 2001, the "available-for-sale" investments consisted of equity shares in other real estate investment trusts which were also stated at fair value.  Unrealized gains and losses on securities "available-for-sale" are recognized as direct increases or decreases in shareholders' equity.  The securities classified as "held-to-maturity" consist of Government National Mortgage Association securities. In June 2001, IRET sold these GNMA securities.  They are reported at cost, adjusted by amortization of premiums and accretion of discounts which are recognized in interest income using the straight-line method over the period to maturity which approximates the effective interest method.  Cost of securities sold is recognized on the basis of specific identification.

TAX, INSURANCE, AND OTHER ESCROW   includes reserve for replacement 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 consist of funds held by an escrow agent to be applied toward the purchase of real estate qualifying for gain deferral as a like-kind exchange of property under Section 1031 of the Internal Revenue Code. It also consists of earnest money, or "good faith deposits," to be used by IRET toward the purchase of property or the payment of loan costs associated with loan placement or refinancing.

GOODWILL has been amortized on a straight-line basis over a period of 15 years.  IRET periodically reviews goodwill for impairment and if a permanent decline in value has occurred, IRET will reduce its goodwill balance to fair value.  Accumulated amortization of goodwill was $200,620 and $91,191 as of April 30, 2002, and 2001, respectively.  See previous note for the impact of the new accounting pronouncement SFAS No. 142 "Goodwill and Other Intangible Assets."

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 over the life of the loan and charged to amortization expense over the terms of the related debt agreements.

MINORITY INTEREST  Interests in the operating partnership held by limited partners are represented by operating partnership units. The operating partnerships' 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 the Southdale Medical Center and Mendota Heights Office Complex on the balance sheet for the portion of properties consolidated by IRET that are not wholly


F-11

NOTE 1- (continued)

owned by IRET.  The earnings or losses from these properties attributable to the minority interests are reflected as limited partner minority interests in the consolidated statements of operations.

NET INCOME PER SHARE  IRET adopted Statement of Financial Accounting Standard No. 128 - Earnings Per Share. Basic net income per share is computed using the weighted average number of shares outstanding over the earnings period. There is potential for dilution of net income per share due to the conversion option of operating partnership units. However, basic and diluted net income per share are the same. The computation of basic and diluted net income per share can be found in Note 12.

INCOME TAXES   IRET intends to continue to qualify as a real estate investment trust as defined by the Internal Revenue Code and, as such, will not be taxed on the portion of the income that is distributed to the shareholders, provided at least 90% of its real estate investment trust taxable income is distributed and other requirements are met. IRET intends to distribute all of its taxable income and realized capital gains from property dispositions within the prescribed time limits and, accordingly, there is no provision or liability for income taxes shown on the financial statements.

IRET conducts all of its business activity as an umbrella real estate investment trust through its operating partnership, IRET Properties.  This UPREIT status allows IRET to accept the contribution of real estate in exchange for limited partnership units.  Generally, such a contribution to a limited partnership allows for the non-recognition of gain by an owner of appreciated real estate.  The UPREIT concept is based on the combination of  the non-recognition provisions of Section 721 of the Internal Revenue Code and the limited partnership conversion rights which allow the contributing partner to exchange the limited partnership interest received in exchange for the appreciated real estate for IRET's stock. Upon conversion of the partnership units to IRET shares, a taxable event occurs for that limited partner.

Income or loss of the operating partnership shall be allocated among its partners in compliance with the provisions of the Internal Revenue Code Section 701(b) and 704(c).

REVENUE RECOGNITION  Residential rental properties are leased under operating leases with terms generally of one year or less. Commercial properties are leased under operating leases to tenants for various terms 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 is reflected as rent receivable, net of allowance for doubtful accounts.  IRET evaluates the need for an allowance for doubtful accounts periodically. In performing its evaluation, management assesses the recoverability of individual real estate mortgage loans and rent receivables by a comparison of their carrying amount with their estimated net realizable value. A summary of the changes in the allowance for doubtful accounts for the years ended April 30, 2002, and 2001, are as follows:
 

 
      2002
     2001
Balance at beginning of year
$    120,315
$               0
Provision for doubtful accounts
30,000
120,315
Write-offs
       - -9,530
              0 
Balance at close of year
$    140,785
$    120,315

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 its multi-tenant commercial tenants throughout the year based on estimates.  Differences between estimated recoveries and the final billed amounts, which are immaterial, are recognized in the subsequent year.

F-12

NOTE 1- (continued)

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 and are included in rental income at that time.

Profit on sales of real estate shall be recognized in full when the real estate is sold, provided the collectibility of the sales price is reasonably assured or the amount that will be collectible can be estimated and the seller is not obliged to perform significant activities after the sale to earn the profit.  Any gain or loss on a sale or disposition is recognized in accordance with accounting principles generally accepted in the United States of America.

Interest on mortgage loans receivable is recognized in income as it accrues during the period the loan is outstanding. In the case of non-performing loans, income is recognized as discussed in Note 4.

RECLASSIFICATIONS  Certain previously reported amounts have been reclassified to conform with the current financial statement presentation.

THE DISTRIBUTION REINVESTMENT PLAN is available to all 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 distribution used to purchase additional IRET shares.

NOTE 2 - OFF-BALANCE-SHEET RISK

IRET had deposits at First Western Bank, Bremer Bank, First International Bank, Associated Bank and Washington County Bank which exceeded Federal Deposit Insurance Corporation limits by $8,517,162, $454,088, $2,748,210, $934,773 and $150,383, respectively, as of April 30, 2002.

As of April 30, 2002, IRET has agreements whereby First Western Bank provides additional coverage through repurchase agreements totaling $15,075,000.  First Western Bank has pledged U.S. Government Securities or U.S. Government Agency Securities under the repurchase agreements.  The repurchase agreements have no impact on the fair market value of the underlying bank account balances since IRET is entitled to recover only up to the par value of their accounts, subject to the above maximum threshold.

NOTE 3 - PROPERTY OWNED UNDER LEASE

Property consisting principally of real estate owned under lease is stated at cost less accumulated depreciation and is summarized as follows:
 

 
April 30, 2002
April 30, 2001
 
    
Residential
$  389,930,454
$   361,577,622
   Less accumulated depreciation
   -41,629,462
    - -32,296,179
 
$  348,300,992
$   329,281,443
 
    
Commercial
$  350,388,982
$   230,058,846
   Less accumulated depreciation
   -17,296,055
    - -11,796,966
 
$  333,092,927
$   218,261,880
 
    
Remaining Cost
$  681,393,919
$   547,543,323

            There were no repossessions during the years ended April 30, 2002, and 2001.

F-13

NOTE 3- (continued)

The above cost of residential real estate owned included construction in progress of $0 and $6,307,018 as of April 30, 2002, and 2001, respectively. As of April 30, 2002, IRET had no plans to fund any construction projects other than an expansion of the Southdale Medical Center in Edina, Minnesota, at an estimated cost of $13,000,000 and to finance a $5,000,000 addition to the existing facility of Edgewood Vista, in Hermantown, Minnesota.  As of year-end April 30, 2002, IRET committed to purchase the Three Paramont office building in Bloomington, Minnesota, for $7,350,000.  In addition, as of April 30, 2002, IRET has outstanding offers to purchase selected properties as part of their normal operations.

IRET committed to sell Oak Manor Apartments in Dickinson, North Dakota for $420,000 (book value of $306,856), Oak Park Apartments in Dickinson, North Dakota for $275,000 (book value of $257,715), and Eastwood Apartments in Dickinson, North Dakota for $620,000 (book value of $406,512).

Construction period interest of $99,668, $316,644, and $404,089 has been capitalized for the year ended April 30, 2002, 2001, and 2000, respectively.

Residential apartment units are rented to individual tenants with lease terms up to one year. Gross revenues from residential rentals totaled $59,052,950, $55,806,712, and $42,379,855 for the year ended April 30, 2002, 2001, and 2000, respectively.

Gross revenues from commercial property rentals totaled $32,685,652, $18,994,010 and $11,878,026 for the year ended April 30, 2002, 2001, and 2000, respectively. Commercial properties are leased to tenants under terms  expiring at various dates through 2024. Lease terms often include renewal options and, in limited instances, buyout options. In addition, a number of the commercial leases provide for a base rent plus a percentage rent based on gross sales in excess of a stipulated amount. Rents based on a percentage of sales totaled $116,239, $124,092, and $102,659 for the years ended April 30, 2002, 2001, and 2000, respectively.

The future minimum lease payments to be received under leases for commercial properties as of April 30, 2002, assuming that no options to renew or buy out the lease are exercised, are as follows:

Year ending April 30,
 
   2003
$   27,628,991
   2004
26,707,051
   2005
25,120,322
   2006
23,093,777
   2007
21,511,722
   Thereafter
 133,182,414
 
$ 257,244,277

Loss on impairment of two commercial properties totaled $1,319,316 for the year ended April 30, 2000.  Impairment losses were determined based on present value of estimated expected future cash flows from each property.  The carrying value of the First Avenue Building, located in Minot, North Dakota, was reduced by $311,202.  The carrying value of a commercial building located in Boise, Idaho was reduced by $1,008,114.  There were no losses on impairment of properties for the years ended April 30, 2002, and 2001.

F-14

NOTE 4 - MORTGAGE LOANS RECEIVABLE

Mortgage loans receivable consists of five separate loans which are secured by real estate. Contract terms call for monthly payments of principals and interest. Interest rates range from 7% to 11%. Mortgage loans receivable have been evaluated for possible losses considering repayment history, market value of underlying collateral, and economic conditions.

Future principal payments due under the mortgage loans contracts as of April 30, 2002, are as follows:

Year ending April 30,
   2003
$     3,783,217
   2004
39,545
   Later years
        130,000
 
$     3,952,762

There were no significant non-performing mortgage loans receivable as of April 30, 2002, or 2001. Non-performing loans are recognized as impaired in conformity with FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan. The average balance of impaired loans for the years ended April 30, 2002, and 2001, was not significant. For impairment recognized in conformity with FASB Statement No. 114, the entire change in present value of expected cash flows is reported as bad debt expense in the same manner in which impairment initially was recognized or as a reduction in the amount of bad debt expense that otherwise would be reported.

Additional interest income that would have been earned on loans if they had not been non-performing was not significant in fiscal 2002, 2001, or 2000. There was no interest income on non-performing loans recognized on a cash basis for fiscal 2002, 2001, and 2000.

NOTE 5 - MARKETABLE SECURITIES

The amortized cost and estimated market values of marketable securities held-to-maturity at April 30, 2001, are as follows:
 

Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
2001
ISSUER GNMA
$    2,351,248
$        80,159
$        77,389
$   2,354,018
Marketable securities held-to-maturity consists of Governmental National Mortgage Association (GNMA) securities.  During the first quarter ended July 31, 2001, IRET sold its GNMA  securities to use these proceeds to acquire real estate properties.  IRET held no marketable securities as of April 30, 2002, that were classified as held-to-maturity.
There was a realized gain on sales of securities held-to-maturity at the year ended April 30, 2002, of $11,525.  There were no realized gains or losses for the years ended April 30, 2001, and 2000.
F-15

NOTE 5- (continued)

The amortized cost and estimated market values of marketable securities available-for-sale at April 30, 2002, and 2001, are as follows:
 

 
Amortized
          Cost
Gross
Unrealized
         Gains
Gross
Unrealized
     Losses
Fair
        Value
2002
ISSUER Merrill Lynch
$    10,500,000
$                    0
$                    0
$   10,500,000
2001
Equity shares in other REIT's
$         791,316
$            97,209
$         227,660
$        660,865

There was a $68,881 realized loss on sales of securities available-for-sale for the year ended April 30, 2002. There were no realized gains or losses for the years ended April 30, 2001, and 2000.

NOTE 6 - NOTES PAYABLE
 

As of April 30, 2002, IRET had lines of credit available from three financial institutions. The first unsecured line of credit is with First Western Bank & Trust in the amount of $5,000,000 carrying a variable interest rate equal to prime and maturing August 15, 2002.   The weighted average interest rate for the year ended April 30, 2002, was 6.46%.  The second unsecured line of credit is with First International Bank & Trust in the amount of $4,000,000 with a variable interest rate equal to prime and maturing October 15, 2002.  The weighted average interest rate for year ended April 30, 2002, was 6.46%.  The third unsecured line of credit is with Bremer Bank in the amount of $10,000,000 with a variable interest rate equal to Bremer's reference rate and maturing September 30, 2002.  The weighted average interest rate for the year ended April 30, 2002, was 6.50%.  Interest payments are due monthly on all three notes. As of April 30, 2002, and April 30, 2001, IRET had no unpaid balances on any of their lines of credit.


NOTE 7 - MORTGAGES PAYABLE

Mortgages payable as of April 30, 2002, included mortgages on properties owned totaling $459,568,905. The carrying value of the related real estate owned was $716,964,492.

Mortgages payable as of April 30, 2001, included mortgages on properties owned totaling $368,956,930. The carrying value of the related real estate owned was $577,045,712.

Monthly installments are due on the mortgages with interest rates ranging from 5.80% to 9.8854% and with varying maturity dates through November 30, 2036.

Of the mortgages payable, the balances of fixed rate mortgages totaled $428,565,814 and $337,364,781, and the balances of variable rate mortgages totaled $31,003,091 and $31,592,149 as of April 30, 2002, and 2001, respectively.

F-16

NOTE 7- (continued)

Most of the fixed rate mortgages have substantial pre-payment penalties.  As of April 30, 2002, IRET did not plan to prepay any of its mortgage obligations.  The aggregate amount of required future principal payments on mortgages payable as of April 30, 2002, is as follows:
 

Year ending April 30,
 
   2003
$     19,162,590
   2004
10,630,799
   2005
11,517,237
   2006
12,356,777
   2007
13,260,789
  Later years
   392,640,713
  Total payments
$   459,568,905

NOTE 8 - INVESTMENT CERTIFICATES ISSUED
 

IRET has sold investment certificates to the public. The interest rates vary from 6% to 9% per annum, depending on the term of the security.  Interest is paid annually, semiannually, or quarterly on the anniversary date of issuance.   In April of 2002, IRET discontinued the sale of investment certificates and the outstanding certificates will be redeemed at maturity as follows:
Year ending April 30,
 
   2003
$   16,484,256
   2004
1,995,822
   2005
2,221,533
   2006
2,177,886
   2007
     2,307,085
 
$   25,186,582

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES

Acquisition of Odell-Wentz & Associates, L.L.C. On July 1, 2000, IRET Properties acquired assets from Odell-Wentz & Associates, L.L.C. in exchange for limited partnership units having a value of $2.1 million.  The acquired assets included real estate, furniture, fixtures, equipment and other assets valued at $675,000, goodwill of approximately $1.6 million, and the assumption of mortgages and other liabilities of approximately $236,000.  Included in such transactions was the assumption of a note receivable from Timothy Mihalick, an executive officer, in the amount of $101,002.  The proceeds of such note were used to purchase shares.  The note bears interest at New York Prime less 1% and is payable upon demand.  The note is current.  With the exception of Roger R. Odell, who retired, all officers and employees of Odell-Wentz and Associates, L.L.C. were retained by IRET.

Odell-Wentz & Associates, L.L.C. was owned equally by Thomas A. Wentz, Sr., IRET's current President and Chief Executive Officer, and Roger R. Odell, who, as of the acquisition date of July 1, 2000, was the President.  Mr. Odell retired in July 2000, and he did not seek re-election to the Board of Trustees in August 2000.  Currently, Mr. Odell has no relationship with the company as an employee, officer or trustee.

Prior to the acquisition, Odell-Wentz & Associates, L.L.C. acted as the sole advisor to IRET.  Pursuant to an advisory contract, IRET paid an advisor's fee based on its net assets and a percentage fee for investigating and negotiating the acquisition of new investments.  No fees were paid for fiscal year ended April 30, 2002.  For the fiscal year ended April 30, 2001, IRET paid $265,573 to Odell-Wentz & Associates L.L.C. under such contract.  For the fiscal year ended April 30, 2000, IRET paid $1,400,973 under such contract.

F-17

NOTE 9- (continued)

PROPERTY MANAGEMENT SERVICES  Investors Management and Marketing, Inc. ("IMM") provides property management services to IRET Properties and IRET.  Roger R. Odell is a shareholder in IMM.  From May 1, 2000, through June 30, 2000, (the last full month in which Mr. Odell served as President and as a member of the Board of Trustees), IRET paid $114,421 to IMM for services rendered.  For the fiscal year ended April 30, 2000, IRET paid $649,729 to IMM for management services.

With the exception of Hoyt Properties, Inc., none of the firms engaged to provide property management services are affiliated with IRET, its officers, or members of its Board of Trustees.  Hoyt Properties, Inc. is owned 100% by Steven B. Hoyt, a member of the Board of Trustees, and by his wife, Michelle E. Hoyt. As of April 30, 2002, Hoyt Properties, Inc. managed the following commercial buildings pursuant to written management contracts:
 

Cold Spring Center..........................................................
St. Cloud, MN 
2030 Cliff Road...............................................................
Eagan, MN 
Plymouth IV & V............................................................
Plymouth, MN
Nicollet VII.....................................................................
Burnsville, MN
Burnsville Bluffs..............................................................
Burnsville, MN
Pillsbury Business Center...............................................
Bloomington, MN
Bloomington Business Plaza...........................................
Bloomington, MN
Thresher Square.............................................................
Minneapolis, MN
Wirth Corporate Center...................................................
Golden Valley, MN
As compensation for its services, Hoyt Properties, Inc. receives a monthly fee of 5% of the gross rental income, provided that such management fee is reimbursable by the building's tenants pursuant to the tenant's lease agreement.  In the event IRET is not reimbursed for such fee by a tenant and must pay such fee from rent proceeds, the management fee declines to 3.5% of the gross rental proceeds.
Each of the written management contracts with Hoyt Properties, Inc. commenced on April 1, 2001, with the exception of the contracts for Bloomington Business Plaza, which commenced on October 1, 2001, Thresher Square, which commenced on January 2, 2002, and Wirth Corporate Center, which commenced on April 1, 2002.  All such management contracts may be terminated by either party on 30 days written notice for any reason and without penalty.  For the year ending April 30, 2002, IRET paid management fees to Hoyt Properties in the amount of $321,348, 100% of which has been reimbursed by IRET tenants.
Additionally, during the same period, IRET paid leasing commissions to Hoyt Properties in the amount of $27,324.  It is management's opinion that all of the terms of the management contracts are commercially reasonable and are on terms no less favorable than what could be obtained from unrelated property management firms.
Acquisition of Bloomington Business Plaza, Thresher Square and Wirth Corporate Center - -During the year ended April 30, 2002, IRET acquired two commercial buildings from affiliates of Steven B. Hoyt, a member of the Board of Trustees.  In October 2001, IRET acquired the Bloomington Business Plaza, a 121,063 square foot multi-tenant, office/warehouse from a general partnership owned by Mr. Hoyt.  In January 2002, IRET acquired Thresher Square, a 113,736 square foot, seven-story office building from WPT I, LLC, a limited liability company that is 78% owned by Mr. Hoyt.  Although the purchase agreements for the acquisition of each of these properties were negotiated and executed prior to the time that Mr. Hoyt became a member of the Board of Trustees, such acquisitions were closed after Mr. Hoyt had become a member of the Board.
F-18

NOTE 9- (continued)

The acquisition of the Bloomington Business Plaza was approved by  the Board of Trustees, based on an independent appraisal of the property and the determination that such acquisition was fair and reasonable to IRET.  The acquisition of Thresher Square was approved by the Board, other than Mr. Hoyt, who abstained from such vote, based on the determination by such members of the Board that the acquisition was fair and reasonable to IRET.  Such members of the Board further determined, based on an internal current appraisal of such property, that substantial justification existed to pay a value greater than the cost of the property.

On April 1, 2002, IRET acquired Wirth Corporate Center, an 89,384 square foot, four-story office building from Mr. Hoyt.  The Board of Trustees, other than Mr. Hoyt who abstained from the vote, approved the transaction as being fair and reasonable to IRET.  The purchase price was based on an appraisal from an independent third-party who determined the value of the property to be $8.6 million.

In addition to these acquisitions, on April 1, 2001, prior to the time that Mr. Hoyt was elected to the Board of Trustees, IRET acquired a group of six commercial properties from Mr. Hoyt, or affiliates of Mr. Hoyt.  Such properties included 2030 Cliff Road, a 13,374 square foot, multi-tenant office building located in Eagan, Minnesota; Burnsville Bluffs, a 26,186 square foot, multi-tenant office building located in Burnsville, Minnesota; Cold Spring Center, a 77,533 square foot, multi-tenant office building located in St. Cloud, Minnesota; Nicollet VII, a 118,400 square foot, multi-tenant office building located in Burnsville, Minnesota; Pillsbury Business Center, a 42,220 square foot, multi-tenant office building located in Bloomington, Minnesota; and Plymouth IV and V, two multi-tenant office buildings having an aggregate of 126,809 square feet and located in Plymouth, Minnesota.  The aggregate purchase price for these commercial properties was $34.4 million.  The acquisition of these commercial properties was approved by the Board of Trustees.

UPREIT UNIT LOAN PROGRAM  On January 16, 2002, the Board of Trustees authorized an UPREIT unit loan program that is available to persons that hold $1.0 million or more of IRET Properties limited partnership units.  Under such loan program, IRET may lend up to 50% of the value of the borrower's limited partnership units, with such value to be based on the closing price of IRET shares on the NASDAQ National Market on the date of the loan.   Such loans will be for terms of two years or less, they will be secured by the borrower's limited partnership units in IRET Properties and they will be at a variable interest rate of 1.5% over the interest rate charged to us by a participating lender.  The interest rate will adjust on the first of each month.  In connection with such loans, IRET will charge a .5% loan fee.

On January 30, 2002, a loan in the amount of $3.5 million was made to Steven B. Hoyt, a member of the Board of Trustees.  The Board of Trustees approved such loan.  The terms of the loan require Mr. Hoyt to make quarterly interest payments beginning April 1, 2002, with the full balance of the principal sum due on or before January 31, 2004.  The initial interest rate is equal to the Wall Street Journal Prime Rate as of January 31, 2002, plus 1.5%, which is equal to 6.25%.  Mr. Hoyt paid a $17,500 loan fee on the date of the loan.
 
 

UPREIT CONTRIBUTION   On April 30, 2002, Edgeview Estate I, Ltd., a North Dakota limited partnership contributed the proceeds from the sale of real estate pursuant to IRET Properties UPREIT Contribution Program.   The total amount contributed to IRET Properties by Edgeview in exchange for limited partnership units was $386,168.17.  A total of 38,908.632 units were allocated to the partnership at a price of $9.925 per unit.  The unit price of $9.925 was determined using the average NASDAQ closing price for the 14 trading days prior to April 30, 2002, excluding the highest close and the lowest close during the 14-day period.  No commissions, fees or other costs were paid or incurred by IRET Properties.
F-19

NOTE 9 - (continued)

Edgeview Estates I, Ltd is owned by current officers as well as current trustees and past trustees of IRET as follows:  Thomas A. Wentz Sr.,  6.67% - President, Investors Real Estate Trust; Thomas A. Wentz Jr., 26.67% - - Vice President and Trustee of Investors Real Estate Trust;  Roger R. Odell, 33.33%, Past President and former Trustee of Investors Real Estate Trust until July 1, 2000, and Mike F. Dolan, 33.33%, former Trustee of Investors Real Estate Trust until August, 1999.

SECURITY SALES AND SERVICE  Inland National Securities is a corporation that provides underwriting services in connection with the sale of IRET shares.  Roger R. Odell is a shareholder in Inland National Securities.  From May 1, 2000, through June 30, 2000, (the last full month in which Mr. Odell served as President and as a member of the Board of Trustees), IRET paid $6,861 in fees to Inland National Securities for security sales services.  For the fiscal year ended April 30, 2000, IRET paid $100,081 for such services.

D.A. Davidson & Co. is a corporation that has, and may in the future, on a best-efforts basis, participate in offerings of IRET securities.  John F. Decker, a member of the Board of Trustees, is an employee of D.A. Davidson.  D.A. Davidson participated in IRET's share offering and sold a total of 700,000 shares.  During the year ended April 30, 2002, IRET paid D.A. Davidson commissions in the amount of $490,000, and reimbursed them for legal and travel expenses in the amount of $4,814.  Of this amount, Mr. Decker personally received $26,117 in compensation from D.A. Davidson in connection with such offerings.  During the fiscal year ended April 30, 2001, IRET paid D.A. Davidson $50,000 for certain investment banking services.  For IRET's most recent offering on April 25, 2002, D.A. Davidson sold 600,000 shares and received $402,000 in commission and $13,761 for legal and travel expenses paid in May, 2002.

LEGAL SERVICES  In the past, IRET paid fees and expense reimbursements to Pringle & Herigstad, P.C., the law firm in which Thomas A. Wentz, Jr., IRET's Vice President and General Counsel, was a partner until December 31, 1999.  For the year ended, April 30, 2000, such fees and expense reimbursements totaled $89,497.  Thomas A. Wentz, Jr. has been a member of the Board of Trustees since 1996 and Vice President and General Counsel since June 2000.

NOTE 10 - MARKET PRICE RANGE OF SHARES

For the year ended April 30, 2002, a total of 7,644,522 shares were traded on the NASDAQ in 12,798 separate trades. The high was $10.49, low $8.25 and closing price on April 30, 2002, was $10.03.  For the year ended April 30, 2001, a total of 3,668,819 shares were traded in 4,692 separate trades.  The high trade price during the period was $8.980, the low was  $7.375, and the closing price on April 30, 2001, was $8.770. For the year ended April 30, 2000, a total of 4,058,018 shares were traded in 3,414 separate trades.  The high trade price during the period was $17.875, the low was $7.681, and the closing price on April 30, 2000, was $7.875.

NOTE 11 - OPERATING SEGMENTS

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief decision makers in deciding how to allocate resources and in assessing performance. Operating segments of IRET are determined to be commercial and residential rental operations. All properties falling into these categories have similar economic characteristics, as well as similar production processes, type of customers, distribution methods, and regulatory environments.  Although information is available on a property-by-property basis, including rental income and operating expenses, most analysis and decisions are primarily made based on residential and commercial segments.  Generally, segmental information follows the same accounting policies utilized for consolidated reporting except certain expenses such as depreciation are not allocated to segments for reporting purposes.

F-20

NOTE 11- (continued)

The following information summarizes IRET's segment reporting for residential and commercial properties along with reconciliations to the consolidated financial statements:
 

 
YEAR ENDING APRIL 30, 2002
Commercial
Residential
Total
 Segment Revenue
      
   Rental revenue
$    32,685,652
$    59,052,950
$    91,738,602
Segment Expenses
      
   Mortgage interest
12,475,652
16,687,801
29,163,453
   Utilities and maintenance 
2,117,993
10,591,621
12,709,614
   Taxes
2,685,880
6,498,719
9,184,599
   Insurance
236,814
1,115,808
1,352,622
   Property management
        940,102
      6,045,440
      6,985,542
      Total Segment Expense
$   18,456,441
$  40,939,389
$   59,395,830
Segment Gross Profit
$  14, 229,211
$  18,113,561
$   32,342,772
Reconciliation to consolidated operations:
 
   Interest discounts and fee revenue
$    1,277,467
   Other interest expense
-1,441,393
   Depreciation
-15,515,168
   Administration, advisory, and trust fees
-1,682,742
   Operating expenses 
-565,802
   Amortization 
      - -549,200
Consolidated income before gain/loss on properties and minority interest
$  13,865,934

 
APRIL 30, 2002
Commercial
Residential
Total
Segment Assets
   Property owned
$   350,388,982
$   389,930,454
$   740,319,436
   Less accumulated depreciation
    - -17,296,055
    - -41,629,462
    - -58,925,517
Total consolidated property owned
$   333,092,927
$   348,300,992
$   681,393,919

F-21

 NOTE 11 - (continued)
 

 
YEAR ENDING APRIL 30, 2001
Commercial
Residential
Total
 Segment Revenue
      
   Rental revenue
$    18,994,010
$     55,806,712
$    74,800,722
Segment Expenses
      
   Mortgage interest
8,043,382
16,398,046
24,441,428
   Utilities and maintenance 
1,012,658
10,533,905
11,546,563
   Taxes
1,083,759
6,461,423
7,545,182
   Insurance
161,941
670,022
831,963
   Property management
         347,748
      5,436,675
      5,784,423
      Total Segment Expense
$    10,649,488
$   39,500,071
$   50,149,559
Segment Gross Profit
$      8,344,522
$   16,306,641
$   24,651,163
Reconciliation to consolidated operations:
 
   Interest discounts and fee revenue
$        966,428
   Other interest expense
-789,973
   Depreciation
-12,299,532
   Administration, advisory, and trust fees
-1,480,696
   Operating expenses 
-431,390
   Amortization 
       - -428,188
Consolidated income before gain/loss on properties and minority interest
$   10,187,812
APRIL 30, 2001
Commercial
Residential
Total
Segment Assets
   Property owned
$   230,058,846
$   361,577,622
$   591,636,468
   Less accumulated depreciation
    - -11,796,966
    - -32,296,179
    - -44,093,145
Total consolidated property owned
$   218,216,880
$   329,281,443
$   547,543,323

F-22

NOTE 11 - (continued)
 
 

YEAR ENDING APRIL 30, 2000
Commercial
Residential
Total
 Segment Revenue
      
   Rental revenue
$    11,878,026
$   42,379,855
$   54,257,881
Segment Expenses
      
   Mortgage interest
3,980,450
12,312,038
16,292,488
   Utilities and maintenance 
452,229
7,592,301
8,044,530
   Taxes
481,191
4,801,170
5,282,361
   Insurance
52,288
424,674
476,962
   Property management
      132,435
   4,157,840
   4,290,275
   Loss on impairment of properties
     1,319,316
                   0
     1,319,316
      Total Segment Expense
 $     6,417,909
$   29,288,023
$   35,705,932
Segment Gross Profit
$     5,460,117
$   13,091,832
$   18,551,949
Reconciliation to consolidated operations:
 
   Interest discounts and fee revenue
$    1,187,312
   Other interest expense
-721,682
   Depreciation
-8,460,112
   Administration, advisory and trust fees
-1,159,120
   Operating expenses 
-633,692
   Amortization 
      - -216,097
Consolidated income before gain/loss on properties and minority interest
$    8,548,558

 
APRIL 30, 2000
Commercial
Residential
Total
Segment Assets
   Property owned
$  120,714,774
$   329,205,116
$   449,919,890
   Less accumulated depreciation
     - -8,203,307
    - -25,029,645
    - -33,232,952
Total consolidated property owned
$  112,511,467
$   304,175,471
$   416,686,938

F-23

NOTE 12 - EARNINGS PER SHARE

Basic earnings per share are computed by dividing the earnings available to stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if potential dilutive securities had been converted to shares. Operating partnership units can be exchanged for shares on a one-for-one basis after a holding period of one to two years. The following table reconciles amounts reported in the consolidated financial statements for the years ended April 30, 2002, 2001, and 2000:
 

 
         2002
        2001
        2000
NUMERATOR
 
 
 
Net income applicable to shares 
$    10,600,129
$     8,694,240
$     8,807,845
Numerator for basic earnings per share
10,600,129
8,694,240
8,807,845
Minority interest portion of operating 
   partnership income 
      3,614,168
    2,095,177
    1,495,209
Numerator for diluted earnings per share
$    14,214,297
$  10,789,417
$  10,303,054
DENOMINATOR
      
Denominator for basic earnings per share 
   Weighted average shares 
25,492,282
23,071,500
20,899,848
Effect of dilutive securities 
   Convertible operating partnership units 
      8,289,087
    5,506,200
    3,577,136
Denominator for diluted earnings per share
    33,781,369
  28,577,700
  24,476,984
Basic earnings per share
 $               0.42
$                ..38
$               ..42
Diluted earnings per share 
$               0.42
$                ..38
$               ..42

NOTE 13 - RETIREMENT PLAN

As part of the acquisition on July 1, 2000, of Odell-Wentz & Associates, LLC, IRET assumed a defined contribution profit sharing retirement plan and a defined contribution 401K retirement plan.  Employees over the age of 21 and after completion of one year of service are eligible to participate in the profit sharing plan.  Contributions to the profit sharing plan are at the discretion of the management. All employees are immediately eligible to participate in the 401K plan and may contribute up to 15% of their compensation subject to maximum levels.  IRET matches up to 3% of participating employees' wages.  Plan expenses to IRET for the years ended April 30, 2002, and 2001, were $90,455 and $45,301, respectively.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

INSURANCE IRET's portfolio-wide general liability and property insurance policies expired on April 30, 2002.  IRET renewed these policies at similar coverage levels, but at a price of $495,268 or 44.29% higher than the prior fiscal year's cost due to the addition of more property to IRET's portfolio as well as the general price increases for insurance coverage implemented by the insurance industry.  A portion of IRET's insurance costs are passed through to certain commercial tenants pursuant to the terms of the applicable lease agreement.  Of IRET's total insurance costs of  $1,613,552, $281,737 or 17.46% will be billed back to IRET's commercial tenants.  For fiscal 2002, all of IRET's real estate properties are insured against the customary casualty and liability claims except for acts of terrorism, which are excluded under IRET's new insurance policy. Management believes that IRET is in compliance with all insurance provisions of its debt agreements with the exception of one loan pertaining to an apartment complex in Rochester, Minnesota, held by Jefferson Pilot Financial in the

F-24

NOTE 14 - (continued)

amount of $3,807,590 as of April 30, 2002.  IRET has requested a waiver from the terror insurance requirement.  This waiver request is pending with the lender.  If the waiver is not granted, the increased cost to IRET for terrorism coverage on the apartment complex is expected to be $100,000.

ENVIRONMENTAL MATTERS   Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around or under property.  Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate any property containing such substances, may adversely affect the owner's or operator's ability to sell or rent the affected property or to borrow using such property as collateral.  Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal of, or remediation of, such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person.  Certain environmental laws impose liability for the release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials, as well as other hazardous or toxic substances.  The operation and subsequent removal of certain underground storage tanks are also regulated by federal and state laws.  In connection with the current or former ownership (direct or indirect), operation, management, development and/or control of real properties, IRET may be considered to be an owner or operator of such properties, or to have arranged for the disposal or treatment of hazardous or toxic substances.  As such, IRET may be potentially liable for removal or remediation costs, as well as certain other costs, including governmental fines and claims for injuries to persons and property.

It is currently IRET's policy to obtain a Phase I environmental study on each property that IRET seeks to acquire.  If the Phase I indicated any possible environmental problems, IRET's policy is to order a Phase II study, which involves testing the soil and ground water for actual hazardous substances.  No assurance can be given that the Phase I or Phase II environmental studies, or any other environmental studies undertaken with respect to any of IRET's current or future properties, will reveal the full extent of potential environmental liabilities, that any prior owner or operator of a property did not create any material environmental condition unknown to IRET, that a material environmental condition does not otherwise exist as to any one or more of such properties or that environmental matters will not have a material adverse effect on IRET, IRET's ability to make distributions to shareholders and IRET's ability to pay amounts due on debt.  IRET currently does not carry insurance for environmental liabilities.

Certain environmental laws impose liability on a previous owner of property to the extent that hazardous or toxic substances were present during the prior ownership period.  A transfer of the property does not relieve an owner of such liability.  As a result, in addition to any liability that IRET may have with respect to current properties, IRET may also have liability with respect to properties previously sold by IRET's predecessors or by IRET.  To management's knowledge, as of April 30, 2002, IRET does not own and has not sold any properties that contain known material environmental liabilities.

NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate value:

Mortgage loans receivable - Fair values are based on the discounted value of future cash flows expected to be received for a loan using current rates at which similar loans would be made to borrowers with similar credit risk and the same remaining maturities.

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

F-25

NOTE 15 - (continued)

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.

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 with similar remaining maturities.

Accrued interest payable - The carrying amount approximates fair value because of the short-term.

The estimated fair values of the company's financial instruments are as follows:
 

             2002
               2001
 
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
FINANCIAL ASSETS
        
Mortgage loan receivable
$      3,952,762
$       3,952,762
$      1,037,095
$      1,037,095
Cash
12,333,426
12,333,426
6,356,063
6,356,063
Marketable securities 
    held-to-maturity 
0
0
2,351,248
2,354,018
Marketable securities 
    available-for-sale 
10,500,000
10,500,000
660,865
660,865
FINANCIAL LIABILITIES
        
Notes payable 
$                    0
$                     0
$                   0
$                   0
Mortgages payable
459,568,905
446,861,536
368,956,930
356,434,028
Investment certificates issued 
25,186,582
24,880,390
11,876,417
11,804,535
Accrued interest payable
3,380,046
3,380,046
2,714,412
2,714,412

 F-26


 
 

ADDITIONAL INFORMATION
 
 

F-27

INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION






Board of Trustees
Investor Real Estate Trust
and Subsidiaries
Minot, North Dakota

Our report on our audit of the consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 2002, and 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended April 30, 2002, 2001, and 2000, appears on page 1.  Those audits were made for the purpose of forming an opinion on such consolidated financial statements taken as a whole.  The information on pages 29 through 46 related to the consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 2002, and 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended April 30, 2002, 2001, and 2000 is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements.  Such information, except for information on page 47 that is marked "unaudited" on which we express no opinion, has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements, and, in our opinion, the information is fairly stated in all material respects in relation to the consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 2002, and 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended April 30, 2002, 2001, and 2000 taken as a whole.

We also have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 2000, 1999, and 1998, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the two years ended April 30, 1999, and 1998, none of which is presented herein, and we expressed unqualified opinions on those consolidated financial statements.  In our opinion, the information on page 41 relating to the consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 2000, 1999, and 1998, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the two years ended April 30, 1999, and 1998, is fairly stated in all material respects in relation to the basic consolidated financial statements from which it has been derived.
 
 

/S/ Brady, Martz & Associates, P.C.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota, USA
 
 

May 22, 2002

F-28

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002 and 2001

Schedule I
MARKETABLE SECURITIES


     April 30, 2002
     April 30, 2001
Principal
Amount
Fair
Value
Principal
Amount
Fair
Value
Merrill Lynch
$     10,500,000
$     10,500,000
$                   0
$                   0
GNMA Pools
$                   0
$                    0
$    2,351,248 
$       2,354,018
 
 
Cost
Fair Value
Equity shares in other REIT's
$                    0
$                    0
$         791,316
$         660,865

F-29

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
for the years ended April 30, 2002, 2001 and 2000

Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION


 
Charges to Costs and Expenses
      2002
      2001
      2000
ITEM
 
    
Maintenance and repairs
$  7,453,193
$  6,436,205
$  4,564,693
Taxes, other than payroll and income taxes 
$  9,184,599
$  7,545,182
$  5,282,361
Royalties 
*
*
* 
Advertising costs
*
*
* 

                  *Less than 1 percent of total revenues

F-30

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION


 
INITIAL COST TO TRUST
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
APARTMENTS
ENCUMBRANCES
LAND
BUILDINGS & 
IMPROVEMENTS
IMPROVEMENTS
CARRYING
COSTS
 
          
408 1ST STREET SE - MINOT, ND
$                  0
$    10,000
$         36,907
$               0
$             0
APPLEWOOD ON THE GREEN - OMAHA, NE
7,666,696
706,200
9,493,800
515,770
94,656
BEULAH CONDOS - BEULAH, ND
  
6,360
476,774
5,190
0
BISON PROPERTIES - - CARRINGTON, ND
  
100,210
514,331
10,049
0
CANDLELIGHT APTS - - FARGO, ND
376,467
80,040
897,043
54,776
0
CASTLE ROCK - BILLINGS, MT
3,808,271
736,000
5,006,534
86,239
0
CANYON LAKE APTS - - RAPID CITY, SD
2,984,495
304,500
3,895,500
7,439
72,681
CENTURY APTS - DICKINSON, ND
1,737,077
100,000
2,221,814
126,658
0
CENTURY APTS - WILLISTON, ND
2,253,326
200,000
3,925,747
104,462
0
CHATEAU APTS - MINOT, ND
1,985,231
122,000
2,346,985
53,604
0
CLEARWATER - BOISE, ID
2,555,331
585,000
3,265,637
22,875
0
COLTON HEIGHTS - - MINOT, ND
222,762
80,000
887,553
4,244
0
COTTONWOOD LAKE - - BISMARCK, ND
8,075,762
1,055,862
12,562,420
119,039
114,353
COUNTRY MEADOWS PHASE I - BILLINGS, MT
2,474,624
245,624
3,994,690
10,281
120,821
COUNTRY MEADOWS PHASE II - BILLINGS, MT
2,506,975
245,624
4,114,094
5,254
0
CRESTVIEW APTS - - BISMARCK, ND
3,182,021
235,000
4,726,835
113,754
0
CROWN COLONY - TOPEKA, KS
7,178,779
620,000
10,197,090
64,457
0
DAKOTA ARMS - MINOT, ND
275,671
50,000
575,487
8,336
0
DAKOTA HILL AT VALLEY RANCH - IRVING, TX
25,053,761
3,650,000
33,967,107
197,366
0
EASTGATE PROPERTIES - - MOORHEAD, MN
1,583,875
23,917
2,401,820
95,746
0
EASTWOOD - DICKINSON, ND
  
40,000
432,394
67,165
0
FOREST PARK ESTATES - - GRAND FORKS, ND
7,263,862
810,000
6,672,837
157,451
0
HERITAGE MANOR - - ROCHESTER, MN
4,603,178
403,256
7,294,525
200,139
0
IVY CLUB - VANCOUVER, WA
8,004,379
1,274,000
10,553,863
68,341
0
JENNER PROPERTIES - - GRAND FORKS, ND
971,067
220,000
2,011,184
35,748
0
KIRKWOOD APTS - BISMARCK, ND
2,235,518
449,290
3,282,111
59,091
0
LANCASTER APTS - - ST. CLOUD, MN
1,664,127
289,000
2,937,626
34,113
0
LEGACY APTS - GRAND FORKS, ND
6,041,835
1,361,855
9,411,364
98,375
224,180
LEGACY IV - GRAND FORKS, ND
2,892,659
725,277
6,305,849
53,762
0
LONETREE APTS - HARVEY, ND
  
13,584
215,263
8,732
0
MAGIC CITY APTS - - MINOT, ND
1,548,360
462,000
4,578,460
0
0
MEADOWS PHASE I & II - JAMESTOWN, ND
1,949,096
111,550
3,645,722
2,041
0
MEADOWS PHASE III - - JAMESTOWN, ND
1,143,030
55,775
1,990,680
151,561
0
MIRAMONT - FORT COLLINS, CO
11,325,252
1,470,000
12,893,538
94,980
0
NEIGHBORHOOD APTS - - C. SPRINGS, CO
6,906,344
1,033,592
10,389,189
133,455
0
NORTH POINTE  - - BISMARCK, ND
1,619,231
143,500
2,179,488
3,220
123,687
OAK MANOR APTS - - DICKINSON, ND
  
25,000
349,730
29,399
0
OAKMONT APTS - SIOUX FALLS, SD
4,070,001
422,915
4,807,085
0
27,468
OLYMPIC VILLAGE - - BILLINGS, MT
8,309,021
1,164,000
10,618,852
200,355
0
OXBOW - SIOUX FALLS, SD
4,211,888
404,072
4,626,617
32,355
0
PARK EAST APTS - - FARGO, ND
3,340,379
83,000
5,053,953
59,643
0

F-31

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)


                                                                  INITIAL COST TO TRUST
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
APARTMENTS - - CONTINUED
ENCUMBRANCES
LAND
BUILDINGS & 
IMPROVEMENTS
IMPROVEMENTS
CARRYING
COSTS
 
          
PARK MEADOWS - WAITE PARK, MN
$    7,942,449
$ 1,143,450
$   10,530,133
$      336,600
$                    0
PARKWAY APTS - BEULAH, ND
0
7,000
143,912
30,509
0
PEBBLE SPRINGS - - BISMARCK, ND
438,705
7,200
777,762
11,837
0
PINE CONE APTS - - FORT COLLINS, CO
10,237,880
904,545
12,359,316
58,604
0
PINEHURST APTS - - BILLINGS, MT
 0
71,500
674,302
0
5,508
POINTE WEST APTS - - MINOT, ND
2,246,132
240,000
3,821,061
253,361
0
PRAIRIE WINDS APTS - - SIOUX FALLS, SD
1,285,892
144,097
1,868,959
13,980
0
PRAIRIEWOOD MEADOWS - - FARGO, ND
2,012,579
280,000
2,559,271
56,982
0
RIDGE OAKS APTS - - SIOUX CITY, IA
2,865,759
178,100
4,103,867
313,660
0
RIMROCK APTS - BILLINGS, MT
2,555,803
329,708
3,569,972
87,638
0
ROCKY MEADOWS 96 - - BILLINGS, MT
3,631,931
655,985
5,977,746
35,402
103,378
ROSEWOOD/OAKWOOD - - SIOUX FALLS, SD
3,865,026
542,800
5,122,191
129,386
0
SHERWOOD APTS - TOPEKA, KS
10,768,169
1,150,000
14,851,206
266,849
0
SOUTH POINTE - MINOT, ND
6,191,178
550,000
9,392,364
36,823
402,672
SOUTHVIEW APTS - - MINOT, ND
0
185,000
543,676
4,822
0
SOUTHWIND APTS - - GRAND FORKS, ND
3,905,205
400,000
5,572,073
116,664
0
SUNSET TRAIL PHASE I - ROCHESTER, MN
4,308,910
168,188
7,403,527
201,119
0
SUNSET TRAIL PHS II & III - ROCHESTER, MN
0
336,376
4,006,932
2,844,451
0
SWEETWATER PROP - - DEVILS LAKE, ND
0
90,767
1,235,531
378,886
0
THOMASBROOK - LINCOLN, NE
5,968,856
600,000
9,356,873
198,823
0
VALLEY PARK MANOR - - GRAND FORKS, ND
2,965,218
293,500
4,420,192
458,239
0
VAN MALL WOODS - - VANCOUVER, WA
3,760,821
600,000
5,551,762
39,950
0
WEST STONEHILL - - ST. CLOUD, MN
7,401,005
939,000
10,832,140
199,608
0
WESTWOOD PARK - BISMARCK, ND
1,163,738
161,114
2,044,374
48,264
0
WOODRIDGE APTS - - ROCHESTER, MN
      3,807,589
       370,000
       6,405,134
         74,021
                   0
               TOTAL
$  239,343,197
$ 30,466,333
$  348,882,774
$    9,291,944
$    1,289,403

F-32

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)


 
INITIAL COST TO TRUST
COST CAPITALIZATION 
SUBSEQUENT TO ACQUISITION
OFFICE BUILDINGS
ENCUMBRANCES
LAND
BUILDINGS & 
IMPROVEMENTS
IMPROVEMENTS
CARRYING
COSTS
 
          
1ST AVENUE BUILDING - - MINOT, ND
$                      0
$         30,000
$         503,765
$            3,424
$                0
12 SOUTH MAIN - MINOT, ND
0
29,000
360,205
22,282
0
17 SOUTH MAIN - MINOT, ND
0
15,000
75,000
0
0
401 SOUTH MAIN - - MINOT, ND
0
70,600
542,707
3,975
0
2030 CLIFF ROAD - - EAGAN, MN
635,246
145,900
834,966
1,897
0
7901 FLYING CLOUD DR - EDEN PR, MN
3,787,713
1,062,000
4,012,810
85,790
0
BLOOMINGTON BUS PLAZA - BLMGTN, MN
4,975,289
1,300,000
6,105,668
0
39,440
BURNSVILLE BLUFFS - - BURNSVILLE, MN
1,607,250
300,300
2,156,349
0
0
COLD SPRING CENTER - - ST. CLOUD, MN
5,151,199
588,000
7,807,539
1,797
0
CREEKSIDE OFF BLDG - - BILLINGS, MT
1,047,811
311,310
1,557,260
177,219
0
INTERLACHEN CORP CTR - EDINA, MN
11,464,408
1,650,000
14,850,000
0
191,306
LEXINGTON COMMERCE CTR - EAGAN, MN
3,331,065
453,400
5,036,323
0
0
MENDOTA CTR I - MENDOTA HGTS, MN
4,705,581
1,570,253
8,626,190
0
0
MENDOTA CTR II - - MENDOTA HGTS, MN
6,949,826
1,073,951
6,940,612
0
0
MENDOTA CTR III - - MENDOTA HGTS, MN
3,813,000
1,500,986
5,352,832
0
0
MENDOTA CTR IV - - MENDOTA HGTS, MN
5,487,000
1,385,330
7,219,207
0
0
MENDOTA N. CTR - - MENDOTA HGTS, MN
11,541,673
1,331,383
16,279,516
0
0
NICOLLET VII - BURNSVILLE, MN
4,715,739
429,400
6,931,270
0
0
NORTHGATE II - MAPLE GROVE, MN
1,530,489
357,800
1,991,179
8,914
0
PILLSBURY BUSINESS CENTER - EDINA, MN
1,231,400
284,400
1,558,570
0
0
PLYMOUTH IV & V - PLYMOUTH, MN
9,150,597
640,500
13,387,829
319,461
0
SOUTHDALE MEDICAL CENTER - EDINA, MN
23,735,922
3,500,000
28,921,070
167,468
0
SOUTHEAST TECH CENTER - EAGAN, MN
4,141,324
559,500
5,556,017
337
0
THRESHER SQUARE EAST - MPLS, MN
3,655,000
645,661
5,910,771
0
4,343
THRESHER SQUARE WEST - MPLS, MN
2,580,000
448,680
4,106,877
0
3,626
WAYROAD - MINNETONKA, MN
3,626,993
530,000
4,845,000
0
19,985
WIRTH CORP CTR - - GLDN VALLEY, MN
       5,500,000
        970,000
       7,630,000
                   0
         29,281
               TOTAL
$   124,364,526
$  21,183,354
$  169,099,532
$        792,564
$      287,981
 
 
 
 
 
 
COMMERCIAL
 
 
 
 
 
AMERICA'S BEST WAREHOUSE - BOISE, ID
$       3,215,954
$       765,000
$      4,023,294
$                   1
$                 0
AMERITRADE - OMAHA, NE
5,690,814
326,500
7,980,035
42,263
0
ARROWHEAD SHOPPING CTR - MINOT, ND
1,260,551
100,359
2,873,428
31,632
0
BARNES & NOBLE - - FARGO, ND
1,670,198
540,000
2,784,131
0
0
BARNES & NOBLE - - OMAHA, NE
1,809,381
600,000
3,099,197
0
0
CARMIKE THEATRE - - GRAND FORKS, ND
1,789,250
183,515
2,295,154
0
67,068
COMPUSA - KENTWOOD, MI
1,314,397
225,000
1,896,474
0
0
CONSECO BLDG - RAPID CITY, SD
4,501,251
285,000
6,759,870
0
0
COTTAGE GROVE STRIP - - C. GROVE, MN
0
321,078
780,470
0
14,540
DEWEY HILL BUSINESS CTR - EDINA, MN
3,072,774
985,000
3,507,381
376,673
0
EAST GRAND STATION - - EAST GF, MN
896,618
150,000
1,242,251
0
0

F-33

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)


 
INITIAL COST TO TRUST
COST CAPITALIZATION 
SUBSEQUENT TO ACQUISITION
COMMERCIAL - - CONTINUED
ENCUMBRANCES
LAND
BUILDINGS & 
IMPROVEMENTS
IMPROVEMENTS
CARRYING
COSTS
 
          
EDGEWOOD VISTA - - BELGRADE, MT
$            277,677
$     14,300
$           439,194
$                     0
$                0
EDGEWOOD VISTA - - BILLINGS, MT
608,676
130,000
850,218
0
0
EDGEWOOD VISTA - - COLUMBUS, NE
291,184
14,300
441,326
0
0
EDGEWOOD VISTA - - DULUTH, MN
4,636,535
390,000
5,291,187
1,446,716
0
EDGEWOOD VISTA - - EAST G. FORKS, MN
954,846
25,000
1,391,521
13,615
0
EDGEWOOD VISTA - - FREMONT, NE
357,092
56,000
490,410
5,762
0
EDGEWOOD VISTA - - GRAND ISLAND, NE
291,184
14,300
441,326
0
0
EDGEWOOD VISTA - - HASTINGS, NE
368,611
13,971
551,805
5,763
0
EDGEWOOD VISTA - - KALISPELL, MT
375,117
70,000
498,150
19,963
0
EDGEWOOD VISTA - - MINOT, ND
3,574,461
260,000
6,010,707
0
0
EDGEWOOD VISTA - - MISSOULA, MT
590,064
108,900
853,528
0
0
EDGEWOOD VISTA - - OMAHA, NE
426,206
88,567
522,803
29,882
0
EDGEWOOD VISTA - - SIOUX FALLS, SD
614,742
130,000
844,739
0
0
EDGEWOOD VISTA - - VIRGINIA, MN
4,900,000
246,370
6,653,630
0
58,383
HEALTHEAST MED CTR - WDBRY & ST JHNS, MN
18,845,934
3,238,275
18,362,724
0
0
HOSPITALITY ASSOC - - MINNETONKA, MN
0
40,000
360,898
4,650
0
GREAT PLAINS SOFTWARE - - FARGO, ND
8,412,862
125,501
15,249,652
1
0
LINDBERG BLDG - EDEN PRAIRIE, MN
1,119,526
198,000
1,410,535
0
0
MAPLEWOOD SQUARE - - ROCHESTER, MN
6,815,104
3,275,000
8,623,946
7,271
0
MED PARK MALL - GRAND FORKS, ND
3,333,723
680,500
4,962,449
53,639
0
MINOT PLAZA - MINOT, ND
0
50,000
459,079
10,536
0
MORGAN CHEMICAL - - NEW BRIGHTON, MN
 0
240,000
2,185,000
0
3,810
PETCO WAREHOUSE - - FARGO, ND
814,033
324,148
927,541
0
27,245
PIONEER SEED - MOORHEAD, MN
0
56,925
596,951
0
0
STERNER LIGHTING - - WINSTED, MN
0
100,000
900,789
0
  
STONE CONTAINER - - FARGO, ND
2,388,678
440,251
6,470,956
105,203
89,156
STONE CONTAINER - - ROSEVILLE, MN
5,279,715
810,000
7,290,000
0
165,238
STONE CONTAINER - - WACONIA, MN
1,262,420
165,000
1,501,518
0
0
VIROMED - EDEN PRAIRIE, MN
2,726,385
666,000
4,197,634
0
0
WEDGEWOOD - LITHIA SPRINGS, GA
         1,375,218
      334,346
        3,637,532
                     0
                 0
                   TOTAL
$       95,861,182
$16,787,106
$    139,659,435
$       2,153,569
$     425,441
 
          
TOTAL REAL ESTATE & ACCUMULATED
    DEPRECIATION
$     459,568,905
$68,436,793
$    657,641,741
$     12,238,077
$  2,002,825

F-34

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION


APARTMENTS
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED DEPRECIATION
DATE
ACQUIRED
LIFE ON WHICH LATEST INCOME 
STATEMENT IS COMPUTED
 
        
408 1ST STREET SE - MINOT, ND
$   10,000
$           36,907
$       46,907
$            29,578
2001
40 years
APPLEWOOD ON THE GREEN - OMAHA, NE
706,200
10,104,226
10,810,426
 113,881
2001
40 years
BEULAH CONDOS - BEULAH, ND
6,360
481,964
488,324
333,979
1983
15-40 years
BISON PROPERTIES - - CARRINGTON, ND
100,210
524,380
624,590
377,266
1972
25-40 years
CANDLELIGHT APTS - - FARGO, ND
80,040
951,819
1,031,859
211,793
1993
24-40 years
CASTLE ROCK - BILLINGS, MT
736,000
5,092,773
5,828,773
451,498
1999
40 years
CANYON LAKE APTS - - RAPID CITY, SD
304,500
3,975,620
4,280,120
63,109
2001
40 years
CENTURY APTS - DICKINSON, ND
100,000
2,348,472
2,448,472
846,896
1986
35-40 years
CENTURY APTS - WILLISTON, ND
200,000
4,030,209
4,230,209
1,616,146
1986
35-40 years
CHATEAU APTS - MINOT, ND
122,000
2,400,589
2,522,589
256,509
1997
12-40 years
CLEARWATER - BOISE, ID
585,000
3,288,512
3,873,512
306,772
1999
40 years
COLTON HEIGHTS - - MINOT, ND
80,000
891,797
971,797
442,446
1996
40 years
COTTONWOOD LAKE - - BISMARCK, ND
1,055,862
12,795,812
13,851,674
1,040,649
1999
40 years
COUNTRY MEADOWS PHS I - BILLINGS,MT
245,624
4,125,792
4,371,416
351,098
1984
33-40 years
COUNTRY MEADOWS PHS II - BILLINGS, MT
245,624
4,119,348
4,364,972
351,098
1997
40 years
CRESTVIEW APTS - - BISMARCK, ND
235,000
4,840,589
5,075,589
989,283
1994
24-40 years
CROWN COLONY - TOPEKA, KS
620,000
10,261,547
10,881,547
679,784
2000
40 years
DAKOTA ARMS - MINOT, ND
50,000
583,823
633,823
97,647
1996
24-40 years
DAKOTA HILL - IRVING, TX
3,650,000
34,164,473
37,814,473
1,909,459
2000
40 years
EASTGATE PROPERTIES - - MOORHEAD, MN
23,917
2,497,566
2,521,483
1,640,081
1970
33-40 years
EASTWOOD - DICKINSON, ND
40,000
499,559
539,559
132,095
1989
24-40 years
FOREST PARK ESTATES - - G. FORKS, ND
810,000
6,830,288
7,640,288
1,553,687
1993
24-40 years
HERITAGE MANOR - - ROCHESTER, MN
403,256
7,494,664
7,897,920
715,012
1999
40 years
IVY CLUB - VANCOUVER, WA
1,274,000
10,622,204
11,896,204
879,430
1999
40 years
JENNER PROPERTIES - - GRAND FORKS, ND
220,000
2,046,932
2,266,932
253,570
1996
40 years
KIRKWOOD APTS - BISMARCK, ND
449,290
3,341,202
3,790,492
417,532
1997
12-40 years
LANCASTER APTS - - ST. CLOUD, MN
289,000
2,971,739
3,260,739
163,637
2000
40 years
LEGACY APTS - GRAND FORKS, ND
1,361,855
9,733,919
11,095,774
1,306,492
1996
24-40 years
LEGACY IV - GRAND FORKS, ND
725,277
6,359,611
7,084,888
388,908
2000
40 years
LONETREE APTS - HARVEY, ND
13,584
223,995
237,579
56,512
1991
24-40 years
MAGIC CITY APTS - - MINOT, ND
462,000
4,578,460
5,040,460
561,412
1997
12-40 years
MEADOWS PHASE I & II - JAMESTOWN, ND
111,550
3,647,763
3,759,313
227,895
2000
40 years
MEADOWS PHASE III - - JAMESTOWN, ND
55,775
2,142,241
2,198,016
43,715
2002
40 years
MIRAMONT - FORT COLLINS, CO
1,470,000
12,988,518
14,458,518
1,806,144
1996
40 years
NEIGHBORHOOD APTS - - C. SPRINGS, CO
1,033,592
10,522,644
11,556,236
1,511,756
1996
40 years
NORTH POINTE  - - BISMARCK, ND
143,500
2,306,395
2,449,895
368,757
1995
24-40 years
OAK MANOR APTS - - DICKINSON, ND
25,000
379,129
404,129
99,068
1989
24-40 years
OAKMONT APTS - SIOUX FALLS, SD
422,915
4,834,553
5,257,468
5,036
2002
40 years

F-35

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION(continued)

APARTMENTS - CONTINUED
LAND
BUILDING & 
IMPROVEMENTS
TOTAL
ACCUMULATED DEPRECIATION
DATE 
ACQUIRED
LIFE ON WHICH 
LATEST INCOME 
STATEMENT IS COMPUTED
 
        
OLYMPIC VILLAGE - - BILLINGS, MT
$ 1,164,000
$        10,819,207
$  11,983,207
$       471,658
2001
40 years
OXBOW - SIOUX FALLS, SD
404,072
4,658,972
5,063,044
875,125
1994
24-40 years
PARK EAST APTS - - FARGO, ND
      83,000
         5,113,596
   5,196,596
         522,759
1997
12-40 years
PARK MEADOWS - WAITE PARK, MN
1,143,450
10,866,733
12,010,183
1,684,752
1997
40 years
PARKWAY APTS - BEULAH, ND
7,000
174,421
181,421
34,851
1988
5-40 years
PEBBLE SPRINGS - - BISMARCK, ND
7,200
789,599
796,799
51,938
2000
40 years
PINE CONE APTS - - FORT COLLINS, CO
904,545
12,417,920
13,322,465
2,189,659
1994
40 years
PINEHURST APTS - - BILLINGS, MT
71,500
679,810
751,310
3,541
2002
40 years
POINTE WEST APTS - - MINOT, ND
240,000
4,074,422
4,314,422
838,182
1994
24-40 years
PRAIRIE WINDS APTS - - SIOUX FALLS, SD
144,097
1,882,939
2,027,036
445,239
1993
24-40 years
PRAIRIEWOOD MEADOWS - - FARGO, ND
280,000
2,616,253
2,896,253
121,315
2001
40 years
RIDGE OAKS APTS - - SIOUX CITY, IA
178,100
4,417,527
4,595,627
222,845
2001
40 years
RIMROCK APTS - BILLINGS, MT
329,708
3,657,610
3,987,318
257,800
2000
40 years
ROCKY MEADOWS 96 - - BILLINGS, MT
655,985
6,116,526
6,772,511
860,379
1996
40 years
ROSEWOOD/OAKWOOD - - SIOUX FALLS, SD
542,800
5,251,577
5,794,377
1,044,188
1996
40 years
SHERWOOD APTS - TOPEKA, KS
1,150,000
15,118,055
16,268,055
994,218
2000
40 years
SOUTH POINTE - MINOT, ND
550,000
9,831,859
10,381,859
1,477,321
1995
24-40 years
SOUTHVIEW APTS - - MINOT, ND
185,000
548,498
733,498
111,848
1994
24-40 years
SOUTHWIND APTS - - GRAND FORKS,ND
400,000
5,688,737
6,088,737
914,243
1996
24-40 years
SUNSET TRAIL I - - ROCHESTER, MN
168,188
7,604,646
7,772,834
297,318
2001
40 years
SUNSET TRL II & III-ROCHESTER, MN
336,376
6,851,383
7,187,759
105,991
2002
40 years
SWEETWATER PROP-DEVILS LAKE,ND
90,767
1,614,417
1,705,184
963,270
1972
5-40 years
THOMASBROOK - LINCOLN, NE
600,000
9,555,696
10,155,696
716,299
2000
40 years
VALLEY PARK MANOR - - GRAND FORKS, ND
293,500
4,878,431
5,171,931
358,424
2000
40 years
VAN MALL WOODS - - VANCOUVER, WA
600,000
5,591,712
6,191,712
504,122
1999
40 years
WEST STONEHILL - - ST. CLOUD, MN
939,000
11,031,748
11,970,748
1,857,746
1995
40 years
WESTWOOD PARK - BISMARCK, ND
161,114
2,092,638
2,253,752
218,759
1999
40 years
WOODRIDGE APTS - - ROCHESTER, MN
     370,000
          6,479,155
     6,849,155
           915,623
1996
40 years
               TOTAL
$30,466,333
$      359,464,121
$389,930,454
$     41,659,040

F-36

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION(continued)

OFFICE BUILDINGS
LAND
BUILDING & 
IMPROVEMENTS
TOTAL
ACCUMULATED DEPRECIATION
DATE
ACQUIRED
LIFE ON WHICH 
LATEST INCOME 
STATEMENT IS 
COMPUTED
 
        
1ST AVENUE BUILDING - - MINOT, ND
$       30,000
$           507,189
$      537,189
$          409,196
1981
33-40 years
12 SOUTH MAIN - MINOT, ND
29,000
382,487
411,487
17,998
2001
40 years
17 SOUTH MAIN - MINOT, ND
15,000
75,000
90,000
3,359
2001
40 years
401 SOUTH MAIN - - MINOT, ND
70,600
546,682
617,282
181,908
1987
24-40 years
2030 CLIFF ROAD - - EAGAN, MN
145,900
836,863
982,763
21,789
1986
19-40 years
7901 FLYING CLOUD DR - EDEN PRAIRIE, MN
1,062,000
4,098,600
5,160,600
252,715
2000
40 years
BLOOMINGTON BUS PLAZA - BLMGTN, MN
1,300,000
6,145,108
7,445,108
83,131
2001
40 years
BURNSVILLE BLUFFS - - BURNSVILLE, MN
300,300
2,156,349
2,456,649
56,084
2001
40 years
COLD SPRING CENTER - - ST. CLOUD, MN
588,000
7,809,336
8,397,336
203,364
2001
40 years
CREEKSIDE OFF BLDG - - BILLINGS, MT
311,310
1,734,479
2,045,789
379,292
1992
40 years
INTERLACHEN CORP CTR - EDINA, MN
1,650,000
15,041,306
16,691,306
272,918
2001
40 years
LEXINGTON COMMERCE CTR - EAGAN, MN
453,400
5,036,323
5,489,723
297,976
2000
40 years
MENDOTA CTR I - MENDOTA HGTS, MN
1,570,253
8,626,190
10,196,443
8,986
2002
40 years
MENDOTA CTR II - - MENDOTA HGTS, MN
1,073,951
6,940,612
8,014,563
7,230
2002
40 years
MENDOTA CTR III - - MENDOTA HGTS, MN
1,500,986
5,352,832
6,853,818
5,576
2002
40 years
MENDOTA CTR IV - - MENDOTA HGTS, MN
1,385,330
7,219,207
8,604,537
7,520
2002
40 years
MENDOTA N. CTR - - MENDOTA HGTS, MN
1,331,383
16,279,516
17,610,899
16,958
2002
40 years
NICOLLET VII - BURNSVILLE, MN
429,400
6,931,270
7,360,670
180,502
2001
40 years
NORTHGATE II - MAPLE GROVE, MN
357,800
2,000,093
2,357,893
117,558
2000
40 years
PILLSBURY BUSINESS CENTER - EDINA, MN
284,400
1,558,570
1,842,970
40,574
2001
40 years
PLYMOUTH IV & V - PLYMOUTH, MN
640,500
13,707,290
14,347,790
335,881
2001
40 years
SOUTHDALE MEDICAL CENTER - EDINA, MN
3,500,000
29,088,538
32,588,538
933,910
2001
40 years
SOUTHEAST TECH CENTER - EAGAN, MN
559,500
5,556,354
6,115,854
331,121
2000
40 years
THRESHER SQUARE EAST - MPLS, MN
645,661
5,915,114
6,560,775
43,131
2002
40 years
THRESHER SQUARE WEST - MPLS, MN
448,680
4,110,503
4,559,183
29,972
2002
40 years
WAYROAD - MINNETONKA, MN
530,000
4,864,985
5,394,985
5,223
2002
40 years
WIRTH CORP CTR - - GLDN VALLEY, MN
      970,000
         7,659,281
8,629,281
               7,978
2002
40 years
               TOTAL
$21,183,354
$     170,180,077
$191,363,431
$       4,251,851
 
 
 
 
 
 
 
 
 
 
 
 
COMMERCIAL
 
 
 
 
AMERICA'S BEST WAREHOUSE - BOISE, ID
$     765,000
$         4,023,295
$   4,788,295
$       1,050,581
1994
40 years
AMERITRADE - OMAHA, NE
326,500
8,022,298
8,348,798
607,382
1999
40 years
ARROWHEAD SHOPPING CTR - MINOT, ND
100,359
2,905,060
3,005,419
2,255,939
1973
15 1/2-40 years
BARNES & NOBLE - - FARGO, ND
540,000
2,784,131
3,324,131
516,411
1994
40 years
BARNES & NOBLE - - OMAHA, NE
600,000
3,099,197
3,699,197
503,611
1995
40 years
CARMIKE THEATRE - - GRAND FORKS, ND
183,515
2,362,222
2,545,737
442,854
1994
40 years
COMPUSA - KENTWOOD, MI
225,000
1,896,474
2,121,474
259,885
1996
40 years
CONSECO BLDG - RAPID CITY, SD
285,000
6,759,870
7,044,870
302,737
2001
40 years

F-37

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION(continued)


COMMERCIAL - CONTINUED
LAND
BUILDING & 
IMPROVEMENTS
TOTAL
ACCUMULATED DEPRECIATION
DATE
ACQUIRED
LIFE ON WHICH 
LATEST INCOME 
STATEMENT IS 
COMPUTED
 
        
COTTAGE GROVE STRIP CTR - C. GROVE, MN
$    321,078
$            795,010
$   1,116,088
$            15,832
2001
40 years
DEWEY HILL BUSINESS CENTER - EDINA, MN
985,000
3,884,054
4,869,054
126,734
2001
40 years
EAST GRAND STATION - - EAST G. FORKS, MN
150,000
1,242,251
1,392,251
76,217
2000
40 years
EDGEWOOD VISTA - - BELGRADE, MT
14,300
439,194
453,494
30,327
2000
40 years
EDGEWOOD VISTA - - BILLINGS, MT
130,000
850,218
980,218
82,270
1999
40 years
EDGEWOOD VISTA - - COLUMBUS, NE
14,300
441,326
455,626
30,318
2000
40 years
EDGEWOOD VISTA - - DULUTH, MN
390,000
6,737,903
7,127,903
269,675
2000
40 years
EDGEWOOD VISTA - - EAST GRAND FORKS, MN
25,000
1,405,136
1,430,136
120,631
1997
40 years
EDGEWOOD VISTA - - FREMONT, NE
56,000
496,172
552,172
16,948
2001
40 years
EDGEWOOD VISTA - - GRAND ISLAND, NE
14,300
441,326
455,626
30,318
2000
40 years
EDGEWOOD VISTA - - HASTINGS, NE
13,971
557,568
571,539
18,687
2001
40 years
EDGEWOOD VISTA - - KALISPELL, MT
70,000
518,113
588,113
15,501
2001
40 years
EDGEWOOD VISTA - - MINOT, ND
260,000
6,010,707
6,270,707
678,710
1997
40 years
EDGEWOOD VISTA - - MISSOULA, MT
108,900
853,528
962,428
117,360
1997
40 years
EDGEWOOD VISTA - - OMAHA, NE
88,567
552,685
641,252
16,972
2001
40 years
EDGEWOOD VISTA - - SIOUX FALLS, SD
130,000
844,739
974,739
81,793
1999
40 years
EDGEWOOD VISTA - - VIRGINIA, MN
246,370
6,712,013
6,958,383
6,992
2002
40 years
HEALTHEAST MED CTR - WDBRY & ST JHNS, MN
3,238,275
18,362,724
21,600,999
898,916
2001
40 years
HOSPITALITY ASSOC - - MINNETONKA, MN
40,000
365,548
405,548
21,721
2001
40 years
GREAT PLAINS SOFTWARE - - FARGO, ND
125,501
15,249,653
15,375,154
1,032,383
2000
40 years
LINDBERG BLDG - EDEN PRAIRIE, MN
198,000
1,410,535
1,608,535
328,896
1992
40 years
MAPLEWOOD SQUARE - - ROCHESTER, MN
3,275,000
8,631,217
11,906,217
604,014
2000
40 years
MED PARK MALL - GRAND FORKS, ND
680,500
5,016,088
5,696,588
280,912
2000
40 years
MINOT PLAZA - MINOT, ND
50,000
469,615
519,615
110,117
1993
40 years
MORGAN CHEMICAL - - NEW BRIGHTON, MN
240,000
2,188,810
2,428,810
2,284
2002
40 years
PETCO WAREHOUSE - - FARGO, ND
324,148
954,786
1,278,934
178,288
1994
40 years
PIONEER SEED - MOORHEAD, MN
56,925
596,951
653,876
151,878
1992
40 years
STERNER LIGHTING - - WINSTED, MN
100,000
900,789
1,000,789
28,869
2001
40 years
STONE CONTAINER - - FARGO, ND
440,251
6,665,315
7,105,566
766,890
1995
40 years
STONE CONTAINER - - ROSEVILLE, MN
810,000
7,455,238
8,265,238
69,742
2001
40 years
STONE CONTAINER - - WACONIA, MN
165,000
1,501,518
1,666,518
64,127
2001
40 years
VIROMED - EDEN PRAIRIE, MN
666,000
4,197,634
4,863,634
336,610
1999
40 years
WEDGEWOOD - LITHIA SPRINGS, GA
     334,346
         3,637,532
    3,971,878
            464,296
1996
40 years
            TOTAL
$16,787,106
$     142,238,445
$159,025,551
$      13,014,626
 
 
 
 
 
 
 
 
 
TOTAL REAL ESTATE AND ACCUMULATED 
     DEPRECIATION
$68,436,793
   $    671,882,643
$740,319,436
$     58,925,517
 
 

F-38

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION

Reconciliations of total real estate carrying value for the three years ending April 30, 2002, 2001, and 2000 are as follows:
 

 
2002
2001
2000
Balance at beginning of year
$  591,636,468
$   449,919,890
$   295,825,839
Additions during year
      
    acquisitions
143,280,342
141,040,413
155,284,745
    improvements and other
   8,708,331
       5,583,148
       7,041,248
 
$  743,625,141
$   596,543,451 
$   458,151,832
Deduction during year
      
    cost of real estate sold
-3,305,705
-4,906,983
-6,912,626
    impairment valuation
                   0
                     0
       - -1,319,316
Balance at close of year
$  740,319,436
$    591,636,468
$    449,919,890

Reconciliations of accumulated depreciation for the three years ended April 30, 2002, 2001, and 2000, are as follows:
 

 
         2002
         2001
         2000
Balance at beginning of year
$ 44,093,145
$ 33,232,952
$ 26,112,399
Additions during year
      
    provisions for depreciation
15,515,168
12,299,532
8,460,112
Deduction during year
      
    accumulated depreciation on real estate sold
     - -682,796
  -1,439,339
  -1,339,559
Balance at close of year
$ 58,925,517
$ 44,093,145
$ 33,232,952

F-39

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

Schedule XII
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE


 
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 Interest
RESIDENTIAL
 
 
 
 
 
 
 
   Diamond T -Scottsbluff, NE
8.00%
11/01/02
Monthly
/Balloon
$    115,000
 $   105,837
$                 0
   KMOX - -Prior Lake, MN
8.00%
01/01/04
Monthly
/Balloon
46,500
39,550
0
   Duane Peterson
Variable
Quarterly
130,000
130,000
0
   Edgewood Norfolk, NE
11.00%
04/01/01
Balloon
       477,375
      477,375
                       0
COMMERCIAL
      
   Mankato Heights Plaza
10.00%
3/01/03
Balloon
    3,200,000
   3,200,000
                       0
 
$  3,968,875
$  3,952,762
$                 0
 
2002
2001
MORTGAGE LOANS RECEIVABLE, BEGINNING OF YEAR
$     1,037,095
$     1,650,284
New participations in and advances on mortgage loans 
    3,200,000
                   0
 
$     4,237,095
$     1,650,284
Collections
      - -284,333
      - -613,189
MORTGAGE LOANS RECEIVABLE, END OF YEAR
$     3,952,762
$     1,037,095

 F-40

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

SELECTED FINANCIAL DATA


 
           2002
           2001
           2000
           1999
           1998
Consolidated Income Statement Data
          
     Revenue 
$  93,016,069
$  75,767,150
$   55,445,193
$   39,927,262
$   32,407,545
     Income before gain/loss on properties
                and minority interest
13,865,934
10,187,812
8,548,558
6,401,676
4,691,198
     Gain on repossession/ Sale of 
                properties
546,927
601,605
1,754,496
1,947,184
 465,499
     Minority interest portion of operating 
                partnership income 
-3,812,732
-2,095,177
-1,495,209
-744,725
 -141,788
 
          
      Net income
10,600,129
8,694,240
8,807,845
7,604,135
5,014,909
Consolidated Balance Sheet Data
          
     Total real estate investments
$ 685,346,681
$ 548,580,418
$ 418,216,516
$ 280,311,442
$213,211,369
     Total assets 
730,209,018
570,322,124
432,978,299
291,493,311
224,718,514
     Shareholders' equity 
145,578,131
118,945,160
109,920,591
85,783,294
68,152,626
Consolidated Per Share Data 
     (basic and diluted)		          
     Net Income 
.42
.38
.42
.44
.32
     Distributions 
.60
.55
.51
.47
.42
 
          
CALENDAR YEAR
           2002
           2001
           2000
            1999
           1998
Tax status of distribution
          
     Capital gain
0%
.72%
30.3%
6.3%
 2.9%
     Ordinary income 
65.98%
86.76%
69.7%
76.0%
97.1%
     Return of capital 
34.02%
12.52%
0%
17.7%
0.0%

F-41

INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS
April 30, 2002, 2001 and 2000

 
GAIN FROM PROPERTY DISPOSITIONS
Total
Original
Gain(Loss)
Realized
04/30/02
Realized
04/30/01
Realized
04/30/00
 
        
Brooklyn Addition - - Minot, ND
$        25,000
$                0
$               0
$        1,000
Superpumper - Grand Forks, ND
86,479
0
0
86,479
Superpumper - Crookston, ND
89,903
0
0
89,903
Superpumper - Langdon, ND
64,352
0
0
64,352
Superpumper - Sidney, MT
17,161
0
0
17,161
Mandan Apartments - - Mandan, ND
75,612
0
0
75,612
Sweetwater Apts - - Devils Lake, ND
335,303
0
0
335,303
Hutchinson Technology - - Hutchinson, MN
1,109,003
0
0
1,109,003
Jenner 18-Plex  - - Devils Lake, ND
14,009
0
0
14,009
Virginia Apartments - - Minot, ND
10,308
0
0
10,308
Evergreen Shopping Center - Evergreen, CO
1,690
0
1,690
0
Chalet Apartments - - Minot, ND
23,434
0
23,434
0
Hill Park Apts - - Bismarck, ND
576,482
                  0
       576,482
                 0
Sunchase Apts - Fargo, ND
296,409
296,409
0
0
Lester Chiropractic Bldg - Bismarck, ND
85,279
85,279
0
0
Carmen Court - Minot, ND
3,346
3,346
0
0
Walters - Minot, ND
-35,062
-35,062
0
0
Corner Express - - Minot, ND
254,310
       254,310
                   0
                  0
 
  
$      604,282
$      601,605
$   1,754,496

F-42

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002


MORTGAGE LOANS PAYABLE
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms
Face Amount
of Mortgage
Carrying
Amount of
Mortgage
Delinquent
Principal or
Interest
 
        
 1112 32nd Ave SW - Minot, ND
4.75%
7/20/2010
Monthly
$             425,000
$          275,671
$0
 2030 Cliff Road - Eagan, MN
7.40%
4/1/2011
Monthly
650,000
635,246
0
 America's Best Furniture - Boise, ID
9.75%
3/29/2003
Monthly
3,750,000
3,215,954
0
 Ameritrade - - Omaha, NE
7.25%
05/1/2019
Monthly
6,150,000
5,690,814
0
 Applewood on the Green - Omaha, NE
6.55%
10/10/2008
Monthly
8,000,000
7,666,696
0
 Arrowhead Shopping CTR - Minot, ND
8.25%
1/1/2020
Monthly
1,325,000
1,260,551
0
 Barnes & Noble Stores - ND & NE
7.98%
12/1/2010
Monthly
4,900,000
3,479,579
0
 Bloomington Bus Plaza - Blgtn, MN
7.05%
12/1/2011
Monthly
5,000,000
4,975,289
0
 Burnsville Bluffs - Burnsville, MN
8.25%
1/1/2021
Monthly
1,644,551
1,607,250
0
 Candlelight Apts - Fargo, ND
7.50%
12/1/2004
Monthly
578,000
376,467
0
 Canyon Lake Apts - Rapid City, SD
6.82%
10/1/2011
Monthly
3,000,000
2,984,495
0
 Carmike - Grand Forks, ND
7.75%
2/1/2007
Monthly
2,000,000
1,789,250
0
 Castle Rock - - Billings, ND
6.66%
3/1/2009
Monthly
3,950,000
3,808,271
0
 Century Apts - - Dickinson, ND
7.11%
8/1/2011
Monthly
1,750,000
1,737,077
0
 Century Apts - - Williston, ND
4.01%
3/1/2006
Monthly
2,700,000
2,253,325
0
 Chateau AptS - - Minot, ND
7.11%
8/1/2011
Monthly
2,000,000
1,985,231
0
 Clearwater APTS - Boise, ID
6.47%
1/1/2009
Monthly
2,660,000
2,555,331
0
 Cold Springs Center - St. Cloud, MN
7.40%
4/1/2011
Monthly
5,250,000
5,151,199
0
 Colton Heights - - Minot, ND
8.35%
3/1/2007
Monthly
730,000
222,762
0
 CompUSA - Kentwood, MI
7.75%
2/1/2011
Monthly
1,565,361
1,314,397
0
 Conseco Bldg - - Rapid City, SD
8.07%
8/1/2015
Monthly
4,795,000
4,501,251
0
 Cottonwood Phase I - Bismarck, ND
6.59%
1/1/2009
Monthly
2,800,000
2,692,153
0
 Cottonwood Phase II - Bismarck, ND
7.55%
11/1/2009
Monthly
2,850,000
2,783,608
0
 Cottonwood Phase III - Bismarck, ND
6.66%
1/1/2009
Monthly
2,600,000
2,600,000
0
 Country Meadows PHS I - Billings, MT
7.51%
1/1/2008
Monthly
2,660,000
2,474,624
0
CTRY Meadows PHS II - Billings, MT
8.10%
1/1/2008
Monthly
2,600,000
2,506,975
0
 Creekside - - Billings, MT
7.38%
6/1/2013
Monthly
1,250,000
1,047,811
0
 Crestview Apts - Bismarck, ND
6.91%
7/1/2008
Monthly
3,400,000
3,182,021
0
 Crown Colony APTS - Topeka, KS
7.55%
8/1/2009
Monthly
7,350,000
7,178,779
0
 Dakota Hill - - Irving, TX
7.88%
1/1/2010
Monthly
25,550,000
25,053,761
0
 Dewey Hill Business CTR - Edina, MN
7.93%
12/1/2010
Monthly
3,125,000
3,072,774
0
 East Grand Station - East G. F., MN
6.85%
8/1/2015
Monthly
970,000
896,618
0
 Eastgate - - Moorhead, MN
7.19%
9/1/2009
Monthly
1,627,500
1,583,875
0
 Edgewood Vista - Billings, MT
7.13%
10/1/2013
Monthly
720,000
608,676
0
 Edgewood Vista - Columbus & G. I., NE
6.15%
7/1/2015
Monthly
624,000
582,369
0
 Edgewood Vista - Duluth, MN
7.24%
5/1/2011
Monthly
4,821,000
4,636,535
0
 Edgewood Vista - East GF, MN
6.85%
8/1/2011
Monthly
980,000
954,846
0
 Edgewood Vista - Fremont, NE
6.75%
9/5/2011
Monthly
365,645
357,092
0

F-43

 INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002


MORTGAGE LOANS PAYABLE (continued)
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms
Face Amount
of Mortgage
Carrying
Amount of
Mortgage
Delinquent
Principal or
Interest
 
        
 Edgewood Vista - Hastings, NE
6.75%
9/5/2011
Monthly
$            368,611
$         368,611
$                0
 Edgewood Vista - Kalispell, MT
5.98%
10/1/2011
Monthly
383,000
375,117
0
 Edgewood Vista - Minot, ND
7.52%
8/1/2012
Monthly
4,510,000
3,574,461
0
 Edgewood Vista - Missoula &
 Belgrade, MT
6.17%
4/15/2012
Monthly
945,000
867,741
0
 Edgewood Vista - Omaha, NE
6.75%
9/1/2011
Monthly
436,415
426,206
0
 Edgewood Vista - Sioux Falls, SD
7.52%
7/1/2013
Monthly
720,000
614,742
0
 Edgewood Vista - Virginia, MN
6.95%
5/1/2012
Monthly
4,900,000
4,900,000
0
 Flying Cloud - - Eden Prairie, MN
8.61%
7/1/2009
Monthly
3,830,000
3,787,713
0
 Forest Park Estates - G Forks, ND
7.33%
8/1/2009
Monthly
7,560,000
7,263,862
0
 Great Plains Software - Fargo, ND
7.08%
10/1/2013
Monthly
9,500,000
8,412,862
0
 Health Investors Business Trust
7.94%
2/1/2019
Monthly
19,482,851
18,845,934
0
 Heritage Manor - Rochester, MN
6.80%
10/1/2018
Monthly
5,075,000
4,603,177
0
 Interlachen Corp Ctr - edina, mn
7.09%
10/11/2011
Monthly
11,550,000
11,464,408
0
 Ivy Club APTS  - Vancouver, WA
6.98%
9/1/2011
Monthly
8,050,000
8,004,379
0
 Jenner Properties - - G Forks, ND
5.00%
11/1/2004
Monthly
1,391,585
971,066
0
 Kirkwood Manor - Bismarck, ND
8.15%
5/1/2010
Monthly
2,293,900
2,235,518
0
 Lancaster APTS  - St. Cloud, MN
7.04%
8/1/2018
Monthly
1,769,568
1,664,127
0
 Legacy APTS PHS I - Grand Forks, ND
7.07%
1/1/2005
Monthly
4,000,000
3,632,380
0
 Legacy APTS PHS II - Grand Forks, ND
7.07%
5/29/2008
Monthly
2,575,000
2,409,455
0
 Legacy APTS PHS IV - G Forks, ND
8.10%
7/31/2020
Monthly
3,000,000
2,892,659
0
 Lexington Commerce CTR - Eagan, MN
8.09%
2/1/2010
Monthly
3,431,750
3,331,065
0
 Lindberg Bldg. - Eden Prairie, MN
7.63%
2/1/2007
Monthly
1,200,000
1,119,526
0
 Magic City APTS - Minot, ND
4.75%
10/10/2010
Monthly
2,794,299
1,548,360
0
 Maplewood Square - Rochester, MN
6.90%
8/1/2009
Monthly
7,670,000
6,815,104
0
 Meadows I & II - Jamestown, ND
8.16%
7/1/2010
Monthly
1,975,000
1,949,096
0
 Meadows Phase III - Jamestown, ND
7.19%
11/1/2011
Monthly
1,150,000
1,143,030
0
 MedPark Mall - - Grand Forks, ND
8.08%
2/1/2010
Monthly
3,425,000
3,333,723
0
 Mendota I, II, & Northland - Mendota Heights, MN
7.90%
11/1/2009
Monthly
18,000,000
17,397,810
0
 Mendota I, II, & Northland  - Mendota Heights, MN
5.50%
11/1/2009
Monthly
7,200,000
5,799,270
0
 Mendota III - - Mendota Heights, MN
3.74%
Construction Loan
Balloon
3,813,000
3,813,000
0
 Mendota IV - - Mendota Heights, MN
3.60%
Construction Loan
Balloon
5,487,000
5,487,000
0
 Miramont APTS - Ft. Collins, CO
8.25%
8/1/2036
Monthly
11,582,472
11,325,252
0
 Neighborhood APTS - C. Springs, CO
7.98%
1/1/2007
Monthly
7,525,000
6,906,344
0
 Nicollet VII - Burnsville, MN
8.05%
11/29/2010
Monthly
4,784,880
4,715,739
0
 NorthGate II - Maple Grove, MN
8.09%
2/1/2010
Monthly
1,576,750
1,530,489
0
 North Pointe - - Bismarck, ND
7.12%
2/1/2007
Monthly
1,700,000
1,619,231
0
 Oakmont Apts - - Sioux Falls, SD
7.00%
9/1/2011
Monthly
4,100,000
4,070,001
0
 Olympic Village - - Billings, MT
7.62%
11/1/2010
Monthly
8,400,000
8,309,021
0
 Oxbow - Sioux Falls, SD
6.67%
6/1/2011
Monthly
4,250,000
4,211,888
0

F-44

 INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002


MORTGAGE LOANS PAYABLE (continued)
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms
Face Amount
of Mortgage
Carrying
Amount of
Mortgage
Delinquent
Principal or
Interest
 
        
 Park East Apts. - Fargo, ND
6.82%
5/1/2008
Monthly
$          3,500,000
$      3,340,379
$                   0
 Park Meadows PHS I - Waite Park, MN
7.19%
10/1/2013
Monthly
3,022,500
2,941,482
0
 Park Meadows PHS II - Waite Park, MN
7.90%
10/1/2005
Monthly
2,214,851
2,005,967
0
 Park Meadows PHS III - Waite Park, MN
4.00%
30 yr bond
Monthly
3,235,000
2,995,000
0
 Pebble Springs - - Bismarck, ND
8.10%
7/30/2020
Monthly
455,000
438,705
0
 PETCO Warehouse - - Fargo, ND
7.28%
9/1/2008
Monthly
1,100,000
814,033
0
 Pillsbury Business Ctr - BLMGTN, MN
7.40%
4/1/2011
Monthly
1,260,000
1,231,400
0
 Pinecone - - Fort Collins, CO
7.13%
12/1/33
Monthly
10,685,215
10,237,879
0
 Plymouth IV & V - Plymouth, MN
8.17%
1/1/2011
Monthly
9,280,912
9,150,597
0
 Pointe West Apts - Minot, ND
6.91%
7/1/2008
Monthly
2,400,000
2,246,132
0
 Prairie Winds Apts - Sioux Falls, SD
7.04%
7/1/2009
Monthly
1,325,000
1,285,892
0
 Prairiewood Meadows - Fargo, ND
7.70%
11/1/2020
Monthly
2,088,973
2,012,579
0
 Ridge Oaks Apts. - Sioux City, IA
7.05%
1/1/2031
Monthly
2,900,000
2,865,759
0
 Rimrock APTS - - Billing, MT
7.33%
8/1/2009
Monthly
2,660,000
2,555,803
0
 Rocky Meadows - - Billings, MT
7.33%
8/1/2009
Monthly
3,780,000
3,631,931
0
 RoseWood/Oakwood - - S. Falls, SD
6.67%
6/1/2011
Monthly
3,900,000
3,865,026
0
 Sherwood Apts - Topeka, KS
7.55%
8/1/2009
Monthly
11,025,000
10,768,169
0
 South Pointe - - Minot, ND
7.12%
2/1/2007
Monthly
6,500,000
6,191,178
0
 Southdale Medical Ctr - Edina, MN
7.80%
1/1/2011
Monthly
24,000,000
23,735,922
0
 SouthEast Tech Center - Eagan, MN
8.09%
2/1/2010
Monthly
4,266,500
4,141,324
0
 Southwind APTS - Grand Forks, ND
7.12%
2/1/2007
Monthly
4,100,000
3,905,205
0
 Sunset Trail Phase I - Rochester, MN
7.80%
3/1/2011
Monthly
4,350,000
4,308,910
0
 Stone Container - - Fargo, ND
8.25%
2/1/2011
Monthly
3,300,000
2,388,678
0
 Stone Container - - Roseville, MN
7.05%
2/1/2012
Monthly
5,300,000
5,279,715
0
 Stone Container - - Waconia, MN
8.79%
10/15/2006
Monthly
1,329,381
1,262,420
0
 Thomasbrook - - Lincoln, NE
7.22%
10/1/2009
Monthly
6,200,000
5,968,856
0
 Thresher Square East - MPLS, MN
6.75%
5/1/2015
Monthly
4,335,000
3,655,000
0
 Thresher Square West - MPLS, MN
7.60%
6/1/2010
Monthly
3,805,000
2,580,000
0
 Valley Park Manor - G. Forks, ND
8.38%
10/1/2001
Monthly
3,000,000
2,965,218
0
 Van Mall Woods - Vancouver, WA
6.86%
12/1/2003
Monthly
4,070,426
3,760,821
0
 Viromed  - - Eden Prairie, MN
6.98%
4/1/2014
Monthly
3,120,000
2,726,385
0
 Wayroad Corp - - Minnetonka, MN
6.99%
2/1/2012
Monthly
3,700,000
3,626,993
0
 Wedgewood Retire - l. Springs, GA
4.18%
5/1/2017
Monthly
1,566,720
1,375,218
0
 West Stonehill - - St. Cloud, MN
7.93%
6/1/2017
Monthly
8,232,569
7,401,005
0
 Westwood Park - Bismarck, ND
7.88%
12/1/2009
Monthly
1,200,000
1,163,738
0
 Wirth Corp Center - Gldn Valley, MN
6.90%
3/1/2012
Monthly
5,500,000
5,500,000
0
 Woodridge Apts - Rochester, MN
7.85%
1/1/2017
Monthly
         4,410,000
        3,807,589
_                  0
TOTAL
  
$     486,640,185
$   459,568,905
$                    0

F-45

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2002

PROPERTY ACQUISITIONS
Acquisitions for cash, assumptions of mortgages, and issuance of units in the operating partnership.
 

COMMERCIAL
 
     Mendota Heights Office Complex  - Mendota Heights, MN
$     51,280,260
     Interlachen - Edina, MN
16,691,306
     Thresher Square East & West - Minneapolis, MN
11,119,958
     Wirth Corporate Center - Golden Valley, MN
8,629,281
     Stone Container - Roseville, MN
8,265,238
     Bloomington Business Plaza - Bloomington, MN
7,445,108 
     Edgewood Vista - Virginia, MN
6,958,383
     Wayroad - Minnetonka, MN
5,394,985
     Morgan Chemical - New Brighton, MN
2,428,810
     Cottage Grove Center - Cottage Grove, MN
      1,116,089
 
$  119,329,418
 
  
RESIDENTIAL
  
     Applewood on the Green - Omaha, NE
$    10,810,426
     Oakmont Apartments - Sioux Falls, SD
    5,257,468
     Canyon Lake Apartments - Rapid City, SD
4,280,120
     Sunset Trail Phase II - Rochester, MN *
      2,851,600
     Pinehurst Apartments - Billings, MT
         751,310
 
$    21,099,324
 
  
TOTAL
$  143,280,342

       *  Represents costs to complete a project started in year ending April 30, 2001.

F-46

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)


                                                                                                           QUARTER ENDED
 
07-31-01
10-31-01
01-31-02
04-30-02
Revenues
$21,780,094
$23,175,041
$23,605,772
$24,455,162
Income before gain on properties and minority interest
3,250,866
3,743,415
3,642,689
3,228,964
Net gain on sale of properties
307,934
16,398
3,346
219,241
Minority interest portion of operating partnership income 
-783,073
-813,898
-1,405,783
-809,976
Net Income
2,775,727
2,945,915
2,240,252
2,638,235
Per share
        
   Net Income
.11
.12
.09
.10
                                                                                                           QUARTER ENDED
 
07-31-00
10-31-00
01-31-01
04-30-01
Revenues
$17,431,644
$18,404,260 
$19,004,737
$20,926,509
Income before gain(loss) on properties and minority    interest
2,565,131
2,707,811
2,719,679
2,195,191
Net gain(loss) on sale of properties
0
0
25,124
576,481
Minority interest portion of operating partnership income 
-425,667
-538,618
-426,316
-704,576
Net Income
2,139,464
2,169,193
2,318,487
2,067,096
Per share
        
   Net Income
.09
.10
.10
.09
                                                                                            QUARTER ENDED
 
07-31-99
10-31-99
01-31-00
04-30-00
Revenues
$ 11,201,913
$12,900,697
$14,054,660
$17,287,923
Income before gain on properties and minority interest
1,801,322
2,478,912
2,390,868
1,877,456
Net gain on sale of properties
257,895
1,519,918
0
-23,317
Minority interest portion of operating partnership income 
-235,935
-579,625
-369,028
-310,621
Net Income
1,823,282
3,419,205
2,021,840
1,543,518
Per share
        
   Net Income
.09
.16
.11
.06

The above financial information is unaudited. In the opinion of management, all adjustments (which are of a normal recurring nature) have been included for a fair presentation.

F-47

Exhibit 3(ii)

GOVERNING PROVISIONS

 (BYLAWS)

 OF

 IRET, INC.
(As Adopted on January 15, 1997)

 ARTICLE I.    STATUTORY PROVISIONS

          Section A. The provisions of the North Dakota Business Corporations Act (NDCC Sections 10-19. 1 - I0 and 26) govern this corporation as If set forth in full herein.

          Section B. The power to adopt, amend, or repeal governing provisions (bylaws) is vested in the board as provided herein.

          Section C. The affirmative vote of a majority of directors present is required for an action of the board.

          Section D.  A written action by the board taken without a meeting must be signed by all directors.

          Section E. The affirmative vote of the holders of a majority of the voting power of the shares present and entitled to vote at a duly held meeting Is required for an action of the shareholders, except where the affirmative vote of a majority of the voting power of all shares entitled to vote Is required by law, the articles of Incorporation, or these governing provisions.

          Section F. A director may call a board meeting, and the notice of the meeting shall state the purpose of the meeting.

          Section H. Regular meetings of shareholders need not be held, unless demanded by a shareholder under certain conditions as provided in Article IV D.2.

          Section G.  A majority of the board is a quorum for a board meeting.

          Section I.  The number of shares required for a quorum at a shareholders' meeting is a majority of the voting power of the shares entitled to vote at the meeting.

          Section J. The corporation may, but need not, have a corporate seal. The use or nonuse of a corporate seal does not affect the validity of a document or act.

Ex 3(ii)-1

If the corporation has a corporate seal, the use of the seal by the corporation on a document is not necessary.

 ARTICLE II. BOARD OF DIRECTORS

          Section A. The Board.

1.         The business and affairs of the corporation must be managed by or under the direction of the board, subject to subsection 2. The members of the first board may be elected by the Incorporators or by the shareholders.

2.         The holders of the shares entitled to vote for directors of the corporation may, by unanimous affirmative vote, take any action that law, the articles of incorporation or other governing provisions require or permit the board to take or the shareholders to take after action or approval of the board. As to an action taken by the shareholders in that manner:

 a.         The directors have no duties, liabilities, or responsibilities as directors with respect to or arising from the action.

b.         The shareholders collectively and individually have all of the duties, liabilities, and responsibilities of directors with respect to and arising from the action.

c.         If the action relates to a matter required or permitted to be approved or adopted by the board, either with or without approval or adoption by the shareholders, the action is deemed to have been approved or adopted by the board.

         Section B. Number. The board must consist of I0 directors. The number of directors may be increased or, subject to Section H, decreased at any time by amendment in the manner provided in Article VIII.

         Section C. Qualifications.  Directors must be individuals.

         Section D. Terms.  A director serves for an indefinite term that expires at the next regular meeting of the shareholders. A fixed term of a director may not exceed five years. A director holds office until a successor is elected and has qualified, or until the earlier death, resignation, removal, or disqualification of the director.

Section E.  Compensation.  The board may fix the compensation of the directors.

Section  F.  (Intentionally Omitted)

Section G.  Resignation. A director may resign at any time by giving written notice to the corporation. The resignation is effective without acceptance when the notice is given to the corporation, unless a later effective time is specified in the notice.

Ex 3(ii)-2

Section H.  Removal of directors.

 1.         A director may be removed at any time, with or without cause, if:

             a.         The director was named by the board to fill a vacancy;

             b.         The shareholders have not elected directors in the interval between the time of the appointment to fill a vacancy and the time of the removal; and

          c.         A majority of the remaining directors present affirmatively vote to remove the director.

2.         Any one or all of the directors may be removed at any time, with or without cause, by the affirmative vote  of the holders of the proportion or number of the voting power of the shares of the classes or series the director represents sufficient to elect them. If less than the entire board is to be removed, no one of the directors may be removed if the votes of a sufficient number of shares are cast against the director's             removal which, if then cumulatively voted at an election of the entire board of directors, would be sufficient to elect the director.

3.         New directors may be elected at a meeting at which directors are removed.

Section 1.  Vacancies.

1.         Vacancies on the board resulting from the death, resignation, removal, or disqualification of a director may be filled by the affirmative vote of a majority of the remaining directors, even though the remaining directors constitute less than a quorum; and

2.         Vacancies on the board resulting from newly created directorships may be filled by the affirmative vote of a majority of the directors serving at the time of the increase.

3.         Each director elected under this section to fill a vacancy holds office until a qualified successor is elected by the shareholders at the next regular or special meeting of the shareholders.

Section J.  Board Meetings.

1.         Meetings of the board may be held from time to time as provided by board resolution at any place within or without the state that the board may select or by any means described in subsection 2. If the board fails to select a place for a meeting, the meeting must be held at the principal executive office.

Ex 3(ii)-3

2.         A board meeting may be conducted by:

            a.         A conference among directors using any means of communication through which the directors may simultaneously hear each other during the conference constitutes a board meeting, if the same notice is given of the conference as would be required by subsection 3 for a meeting, and if  the number of directors participating in the conference would be sufficient to constitute a quorum at a meeting. Participation in a meeting by that means constitutes presence in person at the meeting; or

            b.         Any means of communication through which the director, other directors so participating, and all directors physically present at the meeting may simultaneously hear each other during the meeting. Participation in a meeting by that means constitutes presence in person at the meeting.

3.         A director may call a board meeting by giving ten days' notice to all directors of the date, time, and place of the meeting. The notice shall state the purpose of the meeting unless the director calling the meeting is chairman of the board or president of the corporation.

4.         If the day or date, time, and place of a board meeting have been announced at a previous meeting of the board, no notice is required. Notice of an adjourned meeting need not be given other than by announcement at the meeting at which adjournment is taken.

5.         A director may waive notice of a meeting of the board. A waiver of notice by a director entitled to notice is effective whether given before, at, or after a meeting, and whether given in writing or by attendance.  Attendance by a director at a meeting is a waiver of notice of that meeting, except where the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting.

         Section K. Absent Directors. A director may give advance written consent or opposition to a proposal to be acted on at a board meeting. If the director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition must be counted as a vote in favor of or against the proposal and must be entered in the minutes or other record of action at the meeting, if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the director has consented or objected.

Ex 3(ii)-4

            Section L. Act of the Board. The board shall take action by the affirmative vote of a majority of the directors present at a duly held meeting, except where law or the articles of Incorporation require the affirmative vote of a larger proportion or number. If the articles of incorporation require a larger proportion or number than is required by law for a particular action, the articles control.

         Section M.  Action without meeting.

            1.         An action required or permitted to be taken at a board meeting may be taken by written action signed by all of the directors.

            2.         The written action is effective when signed by the required number of directors, unless a different effective time is provided in the written action.

ARTICLE Ill. OFFICERS

            Section A. Officers. The officers of the corporation must consist of a president and a secretary, each of which must be elected by the board at such time and in such manner as may be provided in the bylaws. Any other officers, assistant officers, and agents, as necessary, may be elected or appointed by the board or chosen in such other manner as may be prescribed by the board.

Section B. Duties of Officers and Agents. All officers and agents of the corporation, as between themselves and the corporation, have such authority and must perform such duties in the management of the corporation as may be provided in the bylaws, or as may be determined by resolution of the board not inconsistent with the bylaws.

            Section C.  Multiple offices.  Any number of offices or functions of those offices may be held or exercised by the same person. If a document must be signed by persons holding different offices or functions and a person holds or exercises more than one of those offices or functions, that person may sign the document in more than one capacity, but only if the document indicates each capacity in which the person signs.

         Section D.  Contract rights.  The election or appointment of a person as an officer or agent does not, of itself, create contract rights. However, a corporation may enter into a contract with an officer or agent. The resignation or removal of an officer or agent is without prejudice to any contractual rights or obligations.

         Section E.  Resignation, Removal, and Vacancies.

1.         An officer may resign at any time by giving written notice to the corporation. The resignation is effective without acceptance when the notice is given to the corporation, unless a later effective date is specified in the notice.

Ex 3(ii)-5

2.         An officer may be removed at any time, with or without cause, by a resolution approved by the affirmative vote of a majority of the entire board of directors, subject to the provisions of a shareholder control agreement.

3.         A vacancy in an office because of death, resignation, removal, disqualification, or other cause may be filled for the unexpired portion of the term in the manner determined by the board.

            Section F.  Delegation.  Unless prohibited by a resolution approved by the affirmative vote of a majority of the entire board of directors, an officer elected or appointed by the board may, without the approval of the board, delegate some or all of the duties and powers of an office to other persons. An officer who delegates the duties or powers of an office remains subject to the standard of conduct for an officer with respect to the discharge of all duties and powers so delegated.

ARTICLE IV.  SHARES AND SHAREHOLDERS

         Section A.  Share certificates.  The shares of the corporation must be represented by certificates signed by the president or by a vice president, and by the secretary or by an assistant secretary of the corporation. A certificate signed as provided herein is prima facie evidence of the ownership of the shares referred to in the certificate.

            A new share certificate may be issued pursuant to NDCC section 41-08-41 in place of one that is alleged to have been lost, stolen or destroyed.

         Section B.  Regular meetings of shareholders.  A regular meeting of shareholders will be held on the third Wednesday in August of each year beginning in 1997.

         Section C. Election of directors. At each regular meeting of shareholders there must be an election of qualified successors for directors who serve for an indefinite term or whose terms have expired or are due to expire within six months after the date of the meeting.  No other particular business is required to be transacted at a regular meeting.  Any business appropriate for action by the shareholders may be transacted at a regular meeting.

         Section D.  Notice.

1.         Notice of all meetings of shareholders must be given to every holder of shares entitled to vote, except where the meeting is an adjourned meeting and the date, time, and place of the meeting were announced at the time of adjournment.

2.         The notice must be given at least ten days before the date of the meeting, and not more than fifty days before the date of the meeting.

Ex 3(ii)-6

3.         The notice must contain the date, time, and place of the meeting, and any other Information required by law. In the case of a special meeting, the notice must contain a statement of the purposes of the meeting. The notice may also contain any other Information required by the bylaws or deemed necessary or desirable by the board or by any other person or persons calling the meeting.

4.         A shareholder may waive notice of a meeting of shareholders. A waiver of notice by a shareholder entitled to notice is effective whether given before, at, or after the meeting, and whether given in writing,  or by attendance. Attendance by a shareholder at a meeting is a waiver of notice of that meeting, except where the shareholder objects at the beginning of the meeting to the transaction of business because the             meeting is not lawfully called or convened, or objects before a vote on an item of business because the item may not lawfully be considered at that meeting and does not participate in the consideration of the item at that meeting.

         Section E. Act of the shareholders. The shareholders shall take action by the affirmative vote of the holders of a majority of the voting power of the shares present and entitled to vote, except where law or the articles of incorporation require a larger proportion or number. If the articles of incorporation require a larger proportion or number than is required by law for a particular action, the articles control.

            Section F. Action without a meeting.  An action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting by written action signed by all of the shareholders entitled to vote on that action.  The written action is effective when it has been signed by all of those shareholders, unless a different effective time is provided in the written action.

ARTICLE V. OFFICE

            The corporation's principal office shall be in the City of Minot, North Dakota.

ARTICLE VI.  AMENDMENTS

            The power to amend or repeal any of the foregoing governing provisions or to adopt additional governing provisions is vested in the board, provided that any board action to amend, repeal or adopt governing provisions shall be reported to the Shareholders and may be countermanded by the vote of the holders of a majority of the voting power of the shares entitled to vote, and provided that provisions affecting quorum requirements for shareholder meetings and shareholder voting rights may be amended only by the vote of the holders of a majority of the voting power of the shares entitled to vote.

            These Bylaws were duly adopted by the Board of Directors of IRET, INC., at its organizational meeting held on January 15, 1997.

                                                                      /S/ Timothy P. Mihalick
                                                                        Timothy P. Mihalick, Secretary

ATTEST:

/S/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr., Director

 Ex 3(ii)-7

IRET, INC.

First Amendment to Bylaws
 (Adopted on July 15, 1998)

            Pursuant to Article VI of the Bylaws of IRET, Inc., a North Dakota corporation, which Bylaws were adopted on January 15, 1997, the following Amendment is adopted by the Board of Directors at its regular meeting, a quorum being present, by majority of Directors present:

            Article II, Section C, is hereby amended to read:

            "Section C.  Qualifications.  Effective with the 1999 annual shareholder meeting, Directors must be individuals at least 18 years of age and less than 72 years of age upon the date of the annual shareholder meeting at which such individual is elected as a director."

            Dated this 15th day of July, 1998.

                                                                                    IRET, INC.

                                                                                    By   /S/ Roger R. Odell
                                                                                          Roger R. Odell, President

ATTEST:

/S/ Diane K. Bryantt
Diane K. Bryantt, Secretary
 
 

 Ex 3(ii)-8

IRET, INC.

 Second Amendment to Bylaws
Adopted on June 20, 2001

             Pursuant to Article VI of the Bylaws of IRET, Inc., a North Dakota corporation, which Bylaws were adopted on January 15, 1997, the following Amendment is adopted by the Board of Directors at its regular meeting, a quorum being present, by majority of Directors present:

             Article II , Section C, is hereby amended to read:

            "Section C.  Qualifications. Effective with the September 2001 annual shareholder meeting, Directors must be individuals at least 18 years of age and less than 74 years of age upon the date of the annual shareholder meeting at which such individual is elected as a director."

            Dated this 20th day of June, 2001

                                                                                     IRET, INC.

                                                                                     By  /S/ Thomas A. Wentz, Sr.
                                                                                         Thomas A. Wentz, Sr., President

ATTEST:

/S/ Diane K. Bryantt
Diane K. Bryantt, Secretary

Ex 3(ii)-9

Exhibit 21
Subsidiaries of Investors Real Estate Trust

Subsidiary
State of Organization
Pinecone IRET, Inc.
North Dakota
Miramont IRET, Inc.
Colorado
IRET, Inc.
North Dakota
Forest Park - IRET, Inc.
North Dakota
Thomasbrook - IRET, Inc.
Nebraska
Dakota - IRET, Inc.
Texas
MedPark - IRET, Inc.
North Dakota
Flying Cloud - IRET, Inc.
Minnesota
Meadow 2 - IRET, Inc.
North Dakota
IRET - Ridge Oaks, LLC
Iowa
Applewood - IRET, Inc.
Nebraska
IRET Properties, a North Dakota Limited Partnership
North Dakota
Forest Park Properties, a North Dakota Limited Partnership
North Dakota
Thomasbrook Properties, a Nebraska Limited Partnership
Nebraska
Dakota Hill Properties, a Texas Limited Partnership
Texas
Medpark Properties Limited Partnership, a North Dakota Limited Partnership
North Dakota
7901 Properties, LP, a Minnesota Limited Partnership
Minnesota
Health Investors Business Trust
Delaware
Meadow 2 Properties, LP, a North Dakota Limited Partnership
North Dakota
Ridge Oaks, LP, an Iowa Limited Partnership
Iowa
Minnesota Medical Investors LLC
Minnesota
SMB Operating Company LLC
Minnesota
SMB MM LLC
Minnesota
Applewood - - IRET Properties, a Nebraska Limited Partnership
Nebraska
IRET - - Oakmont, LLC
South Dakota
Mendota Properties, LLC, a Minnesota Limited Liability Company
Minnesota
Mendota Office Holdings LLC
Minnesota
Mendota Office Three & Four LLC
Minnesota

Ex 21-1

 -----END PRIVACY-ENHANCED MESSAGE-----