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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Indicate
by check mark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Applicant is
a North Dakota Real Estate Investment Trust. As of February 28, 2003,
it had 35,885,337 shares of beneficial interest outstanding.
Part I Financial
Page
Financial Statements - Third Quarter - Fiscal 2003 (unaudited)
Consolidated Balance Sheet
3
Consolidated Statements of Operations (unaudited)
4
Consolidated Statements of Cash Flows (unaudited)
6
Consolidated Statements of Shareholders Equity (unaudited)
8
Notes to Consolidated Financial Statements (unaudited)
9
Managements Discussion and Analysis of Financial Condition and
20
Quantitative and Qualitative Disclosures About Market Risk 38
Item 4.
Controls and Procedures
38
Part II Other Information Legal Proceedings
39 Changes in Securities
and Use of Proceeds - None
39 Defaults Upon
Senior Securities - None
39 Submission of
Matters to a Vote of Security Holders - None
39 Other Information
- None
39 Exhibits and
Reports on Form 8-K filed
39 Signatures and
Certifications
39-44
ASSETS
Real Estate Investments
Property Owned
$ 740,319,436
Less Accumulated Depreciation
Mortgage Loans Receivable
Total Real Estate Investments
OTHER ASSETS
Cash
Marketable Securities Available for Sale
Rent Receivable
Real Estate Deposits
Notes Receivable
Prepaid and Other Assets
Tax, Insurance and Other Escrow
Deferred Charges and Leasing Costs
Furniture & Fixtures, Net
Goodwill
TOTAL ASSETS
LIABILITIES
Accounts Payable and Accrued Expenses
Mortgages Payable
Investment Certificates Issued
TOTAL LIABILITIES
Commitments and Contingencies (Note 9)
Minority Interest in Partnerships
Minority Interest of Unit Holders in Operating Partnership
SHAREHOLDERS' EQUITY
Accumulated Distributions in Excess of Net Income
Total Shareholders Equity
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
REVENUE
Real Estate Rentals *
Interest, Discounts and Fees
Total Revenue
OPERATING EXPENSE
Interest
Depreciation
Utilities and Maintenance
Taxes
Insurance
Property Management Expenses
Administrative Expense &
Trustee Services
Operating Expenses
Amortization
Total Expenses
INCOME BEFORE PROPERTY DISPOSITIONS
AND
MINORITY INTEREST $
3,787,364 $
11,063,212
GAIN ON SALE OF PROPERTIES
MINORITY INTEREST
PORTION OTHER
MINORITY INTEREST
PORTION OPERATING
PARTNERSHIP
INCOME FROM CONTINUING OPERATIONS
2,753,971
8,896,122
Discontinued operations net of minority
interest (including net
loss on property
dispositions of
$151,173 for
the three and
nine months
ended January
31, 2003)
-302,648
-448,577
NET INCOME Statements
of Operations - continued
PER SHARE
Net Income Per Share
Dividends Paid Per Share
Average Number of Shares
* Includes $360,181 for the
3 months ended January 31, 2003, and $295,426 for the 3 months ended
January 31, 2002, and $1,206,764 for the 9 months ended January 31,
2003, and $953,616 for the 9 months ended January 31, 2002, of straight-line
rents. Straight-line rents are the amounts to be collected in
future years from tenants occupying commercial properties under leases
which provide for periodic increases in rents. It is determined
by dividing the total rent payable for the lease term by the total rental
period and allocating the resulting average rent to the period covered
by the report.
Adjustments to reconcile net income to net cash
(Increase) decrease in real estate deposits
(Increase) decrease in notes receivable
(Increase) decrease in other assets
(Increase) decrease in rent receivable
(Increase) decrease in tax, insurance and
other escrow
(Increase) decrease in deferred charges
Increase (decrease) in accounts payable
Proceeds from sale of marketable securities -
held-to-maturity
Proceeds from sale of property
Proceeds from notes receivable
Principal payments on mortgage loans receivable
Payments for acquisition and improvements of properties
Purchase of Marketable Securities available-for-sale
Investment in mortgage loan receivable
Proceeds from sale of shares, net of issue costs
Proceeds from sale of minority interest units
Proceeds from investment certificates issued
Proceeds from mortgages payable
Repurchase of shares and minority interest units
Distributions paid to shareholders
Distributions paid to unitholders of operating
partnership
Distributions paid to other minority partners
Redemption of investment certificates
Principal payments on mortgage loans
Distribution reinvestment plan
Interest reinvested directly in investment certificates
UPREIT units converted to shares
Real estate investment and mortgage loans receivable
Minority partner interest in IRET-BD
Direct transfer of investment certificates to shares
Proceeds from Sale of Properties paid directly
to mortgage
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest paid on mortgages
DISTRIBUTIONS
$ -13,073,157
10,600,129
-15,325,390
$ -17,798,418
8,447,545
-14,851,296
$ -24,202,169
Note 1 - Organization
Note 2 Basis of Presentation and Significant Accounting Policies Basis of Presentation The accompanying consolidated
financial statements include the accounts of IRET and its 76.1% general
partnership interest in the operating partnership. Such interest has
been calculated as the percentage of outstanding common shares divided by
the total outstanding common shares and operating partnership units ("UPREIT
Units") outstanding. The remaining 23.9% is reflected as Minority
Interest of Unit Holders in Operating Partnership in these consolidated
financial statements. On April 30, 2002, IRET owned a 74.3% general
partnership interest in the operating partnership with the remaining 25.7%
owned by others. The consolidated
financial statements also include the ownership by IRET Properties of:
(1) a 60.31% ownership interest in Minnesota Medical Investors LLC, SMB
Operating Company LLC, and SMB MM LLC, collectively known as Southdale Medical
Center; (2) a 51% ownership interest in Mendota Properties, LLC, a Minnesota
limited liability company, 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 which are the owners of five multi-tenant commercial real
estate properties in Dakota County, Minnesota, and (3) a 51% ownership interest
in IRET-BD, LLC, a Minnesota limited liability company, the holder of all
of the issued and outstanding membership interests in IRET DMS, LLC and
IRET Brenwood, LLC, which are the owners of a warehouse facility in Des Moines,
Iowa and a four building office complex in Minnetonka, MN, respectively.
These companies are consolidated into IRET's other operations with minority
interests reflecting the minority partners share of ownership and income
and expenses. Note 2 continued All material
inter-company transactions and balances have been eliminated in the consolidated
financial statements. Unaudited Interim Financial Statements The current
period's results of operations are not necessarily indicative of results
which ultimately may be achieved for the year. The interim consolidated
financial statements and notes thereto should be read in conjunction with
the consolidated financial statements and notes thereto included in the
company's form 10-K405 for the year ended April 30, 2002. Significant Accounting Policies Recent Accounting Pronouncements Note 3 Goodwill Note 4 - Earnings Per Share The exchange
of outstanding operating partnership units for common shares will have
no effect on EPS as unitholders and shareholders presently share equally
in the net income of the operating partnership. The following
table reconciles amounts reported in the consolidated financial statements
for the three months and nine months ended January 31, 2003, and 2002.
01/31/03
01/31/02
01/31/03
01/31/02
$ 2,451,323
$ 2,240,252
$ 8,447,545
$ 7,961,895
852,166
1,334,128
2,892,020
2,787,789
$ 3,303,489
$ 3,574,380
$ 11,339,565
$ 10,749,684
32,186,651
25,910,587
31,489,758
24,875,028
10,690,233
8,718,315
10,037,426
8,118,521
42,876,884
34,628,902
41,527,184
32,993,549
$
.08
$
.09
$
.27
$
.32
$
.08
$
.10
$
.27
$
.32 Note 5 Investment Certificates Issued Note 6 UPREIT Loan Program At this
time, no UPREIT loans are outstanding. Note 7 - Segment Reporting Three Months Ended January 31, 2003 Three Months Ended January 31, 2002 Note 7 - Segment Reporting -
continued Nine Months Ended January 31, 2003 Nine Months Ended January 31, 2002 Segment Assets and Accumulated Depreciation January 31, 2003 Note 8 Market Price Range of Shares IRET Shares
of Beneficial Interest trade on the NASDAQ National Market under the symbol
IRETS. On April 9, 2002, IRET moved it's listing from the Nasdaq
SmallCap Market to the Nasdaq National Market. For the three months
ended January 31, 2003, a total of 2,137,008 shares were traded in 4,863
separate trades. The high trade price during the period was $11.00,
the low was $9.66, and the closing price on January 31, 2003, was $9.88.
For the three months ended January 31, 2002, a total of 1,476,237 shares
were traded in 2,052 separate trades on the NASDAQ National Market.
The high trade price during the period was $10.00, the low was $9.00, and
the closing price on January 31, 2002, was $9.63. For the nine months
ended January 31, 2003, a total of 7,655,062 shares were traded in 15,962
separate trades. The high trade price during the period was $11.90,
the low was $8.55, and the closing price on January 31, 2003, was $9.88.
For the nine months ended January 31, 2002, a total of 5,095,292 shares
were traded in 8,494 separate trades on the NASDAQ. The high trade
price during the period was $10.49, the low was $8.25, and the closing price
on January 31, 2002, was $9.63. Note 9 - Commitments and Contingencies Insurance
IRETs portfolio-wide general liability and property insurance
policies expired on April 30, 2002. IRET renewed its policies at
similar coverage levels in the first quarter ending July 31, 2002, but
at a price that was $464,992 or 41% higher than the prior fiscal year's
cost. The addition of more property to IRET's portfolio accounted
for $90,745 while $374,247 was the general price increase for insurance
coverage implemented by the insurance industry on stabilized properties.
A portion of IRETs insurance costs are passed through to certain commercial
tenants pursuant to the terms of the applicable lease agreement.
Of IRETs total insurance costs from May 2002, of $1,613,552, $281,737
or 17.46% will be billed back to IRETs commercial tenants. For Fiscal
2003, all of IRET's real estate properties are insured against customary
casualties and liability claims except for acts of terrorism, which are
excluded under IRETs current insurance policy. IRET has elected not
to pay the additional premium of $88,090 for six months of coverage under
the Federal Terrorism Insurance Act. As a result, a majority of IRETs
assets are not covered by insurance for an act of terrorism. Real
Estate Expansions IRET is committed to provide equity
capital of approximately $5,000,000 to the NCSM Partnership (in which IRET
holds a majority interest) for the purpose of constructing a 70,000 square
foot addition to the Southdale Medical Center in Edina, Minnesota, for
an estimated total cost of $13,200,000. IRET is expecting to finance
the balance of the construction cost. As of January 31, 2003, IRET
has advanced $2,473,164 for the expansion project. IRET is
also committed to provide equity capital of approximately $5,000,000 to
Edgewood Vista Senior Living, Inc. for the purpose of constructing a 68-unit
addition consisting of a 15-unit Alzheimer facility, a 53-unit assisted
living facility, and an additional formal dining facility to Edgewood Vista
Hermantown in Hermantown, Minnesota. As of January 31, 2003, IRET has
advanced $2,078,812 for the expansion project. Note 9 continued On November
13, 2002, the Board of Trustees of IRET approved a $5,000,000 expansion
to the Edgewood Vista property located in Virginia, Minnesota. The
expansion will include 43 assisted living apartments, 19 independent living
apartments, and an underground parking/storage shed. Upon completion,
the expansion facility will be leased to a third-party operator for a lease
term of twenty years, with an initial annual rental payment amount of $550,000,
plus all costs for insurance, taxes, maintenance and repairs. As of
January 31, 2003, IRET has not advanced any monies for the expansion project. 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 owners or operators 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 indicates 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. Note 9 continued 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 January 31, 2003, IRET does
not own and has not sold any properties that contain known material environmental
liabilities. Note 10 Discontinued Operations In accordance
with SFAS 144 "Accounting for the Impairment or Disposal of Long Lived
Assets," effective for financial statements issued for fiscal years beginning
after December 15, 2001, net income and gain/(loss) on disposition of real
estate for properties sold subsequent to May 1, 2002, are reflected in
the consolidated statements of operations as discontinued operations.
The proceeds from dispositions of properties for the three and nine months
ended January 31, 2003, were $763,633 and $1,766,637 respectively.
Below is a summary of the results of operations of the properties disposed
of through their respective disposition dates:
2003
2002
2003
2002
$ 29,618
$ 97,629
$ 264,411
$ 288,050
29,618
97,629
264,411
288,050
196,225
99,075
390,229
299,595
39,914
46,710
128,132
140,130
29,236
46,320
109,771
137,140
6,805
28,554
55,467
86,143
3,938
17,528
12,687
30,157
2,486
4,118
11,656
21,127
$ 278,604
$ 242,305
$ 707,942
$ 714,292
$ -248,986
$ -144,676
$ -443,531
$ -426,242
97,511
37,982
146,127
108,236
-151,475
-106,694
-297,404
-318,006
-151,173
-151,173
$ -302,648
$ -106,694
$ -448,577
$ -318,006 Note 10
continued Prior periods
(three months and 9 months ended January 31, 2002) have been restated to
classify operations of these two properties as discontinued. This
reclassification has no impact on net income of IRET as previously reported. Note 11 Subsequent
Events Distribution
Declaration. On February 12, 2003, the Board of
Trustees of IRET declared a distribution of $0.158 per share, payable April
1, 2003, to shareholders of record at the close of business on March 14,
2003.
Rapid City Commercial Building; Conseco Finance Services Corporation.
On January 29, 2003, the United States Bankruptcy Court for the
Northern District of Illinois (Eastern Division) entered an order approving
Conseco Finance Services Corporations motion to reject the lease dated December
12, 1999, under which Conseco Finance Services Corporation leased the building
owned by IRET at 900 Concourse Drive, Rapid City, South Dakota. As
a result of the lease rejection, IRET did not receive January rent in the
amount of $53,386. Until such time as the building is sold or re-leased,
gross rental income on an annual basis will decline by $640,632 and annual
expenses that were paid by the tenant in the approximate amount of $105,550
will now be IRETs responsibility. Additionally, as a result of the
lease rejection, IRET wrote off $304,679 in straight-line rent that had
previously been included in reserve but not actually received from the
tenant. However, after application of IRET's straight-line rent reserve
of $240,785, only $63,894 of this $304,679 sum was reflected on IRET's
Statements of Operations.
TF James Merger. On February
1, 2003, Investors Real Estate Trust entered into a merger agreement
with the T. F. James Company, a privately held Iowa corporation primarily
engaged in the development and ownership of retail and commercial real estate
in Minnesota and surrounding states. Under the terms of the Agreement
and Plan of Reorganization all of the assets and liabilities of the T. F.
James Company, including the company office located at 21500 Highway 7,
Greenwood, Minnesota, will be merged into IRET, Inc., the wholly-owned subsidiary
of Investors Real Estate Trust. As a result of the merger, IRET will
acquire approximately 52 retail and commercial real estate properties containing
approximately 807,154 square feet of rentable space as well as eight underdeveloped
or primarily vacant parcels of real estate. Once completed, the merger
will increase IRETs real estate portfolio by $70,197,945, and is expected
to increase gross rental revenues by $6,356,000 on an annual basis.
As part of the merger, IRET will also be acquiring all of the outstanding
debt and liabilities of the T. F. James Company in the amount of $37,732,004
at closing.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and
analysis should be read in conjunction with the consolidated financial
statements included in this report as well as the financial statements audited
by Brady Martz & Associates, P.C. of Minot, North Dakota, certified
public accountants for the period ended April 30, 2002, which financial
statements were attached to the Form 10-K405 on file for Investors Real
Estate Trust.
Forward Looking Statements Certain matters included in this
discussion are forward looking statements within the meaning of federal securities
laws. Although we believe that the expectations reflected in the following
statements are based on reasonable assumptions, we can give no assurance
that the expectations expressed will actually be achieved. Many factors
may cause actual results to differ materially from our current expectations,
including general economic conditions, local real estate conditions, the
general level of interest rates, and the availability of financing, timely
completion and lease-up of properties under construction and various other
economic risks inherent in the business of owning and operating investment
real estate. Revenues
Rent from 19 properties acquired in 2002 in excess of
$ 3,646,740
$ 13,412,787
Rent from 6 properties acquired in Fiscal 2003
3,126,967
5,289,965
Increase in rental receipts on existing properties due to
391,965
1,259,470
Increase (decrease) in interest income
-101,815
47,498
An increase in straight-line rents
64,756
253,149
A decrease in ancillary income
-14,777
-11,691
A decrease in rental receipts due to the sale of properties for
properties not classified as discontinued
operations
-150,837
-315,350
A decrease in rental receipts due to the Conseco bankruptcy and
-53,387
-53,387
$ 6,909,612
$ 19,882,441
Straight-Line Rents
As a result of straight-line rents, the
amount of revenue we have included in our financial statements that is
in excess of the amount of cash we have actually collected is:
3 Months Ended 01/31/03
$ 360,181
9 Months Ended 01/31/03
$ 1,206,764
3 Months Ended 01/31/02
$ 295,426
9 Months Ended 01/31/02
$ 953,616 An allowance
for loss account was established to provide for a reserve in event of default
of lease where straight-line rents apply. Due to the rejection by
Conseco of their lease agreement, IRET needed to write off $304,679 against
the allowance account of prepaid rent due to straight-line rents.
The balance in the allowance account at the time of default was $240,785,
thus the net effect was an additional $63,894 loss in the third quarter.
IRET will accrue $30,000 per month to this allowance account to establish
a reserve balance sufficient to cover our exposure in the event of lease
default. Capital Gain Income
Expenses and Net Income Expenses and Net
Income continued
1,573,435
Expenses and Net Income continued Factors Impacting Net Income
During the
first nine months of Fiscal 2003 ended January 31, 2003, there were a number
of continuing factors as well as one new factor that continued to limit the
growth of our total revenue and ultimately negatively impacted our net income
per share. While most of these negative influences show no signs of
lessening in the next twelve months, the most significant negative factor,
our uninvested cash, was solved during the 2nd quarter. Despite the
positive development pertaining to our uninvested cash, the same factor reduced
our earnings in the prior two quarters. ·
Increased Vacancy
During the third quarter of Fiscal 2003, vacancy levels
continued to increase throughout our entire portfolio. Our same store apartment
vacancy increased to 8.0% from 6.3% for the three months ended January
31, 2003. For the nine months ended January 31, 2003, our same store
apartment vacancy increased to 7.3% from 5.2%. Likewise, vacancy
levels at our same store commercial properties increased from 2.6% to 5.6%
for the three months ended January 31, 2002. For nine months ended
January 31, 2002, same store commercial vacancy increased from 2.2% to
5.2%. A majority of the markets that we operate in continue to experience
overall poor economic conditions. The poor economic climate has translated
directly into increased vacancy at most of our properties. Our commercial vacancy is primarily
due to our inability to either renew existing leases or to re-lease
space being vacated by tenants at the expiration of their lease.
While not necessarily indicative of future business cycles, in past economic
downturns, a recovery in occupancy levels generally trails the pick up
in economic activity by twelve months or more. Despite some positive
economic developments, we have yet to see an increase in demand for apartments
or for commercial space. As a result, we do not expect our occupancy
levels to improve during the remaining three months of Fiscal 2003 ending
in April 30, 2003. Our expectation is that demand in IRETs markets
for both apartments and commercial space will remain weak through the
balance of 2003. ·
Uninvested
Cash The most significant reason for the decline in
net income per share during the first nine months of Fiscal 2003 ended
January 31, 2003, as compared to the corresponding year earlier periods
is the large balance of cash and marketable securities. While this
money was invested in short-term income producing investments, we ordinarily
seek to invest in income producing real estate. During the
first and second quarters, we were able to fully invest the proceeds from
the new equity raised during first quarter 2003 into income producing
real estate. This delay in investing the stock sale proceeds we
raised in May 2002 resulted in a reduction in earnings per share for the
nine-month period ended January 31, 2003. ·
Increased Real
Estate Taxes Taxes imposed on our real estate properties
increased by $1,236,778 or 54.7% for the three months ended January 31,
2003, and $3,367,154 or 51.4% for the nine months ended January 31, 2003,
as compared to the corresponding periods of Fiscal 2002. Of the
increased real estate taxes for the three months ended January 31, 2003,
$848,357 or 68.6% is attributable to the addition of new real estate,
while $388,420 or 31.4% is due to increased costs for real estate taxes
on existing real estate assets. For the nine months ended January
31, 2003, increased real estate taxes of $2,420,357 or 71.9% is attributable
to the addition of new real estate, while $946,797 or 28.1% is due to
increased costs for real estate taxes on existing real estate assets.
Most of our new property acquisitions during the past year were in Minnesota,
a jurisdiction with higher property taxes than North Dakota and the other
states in which we own property. Under the terms of most of our
commercial leases, the full cost of real estate tax is paid by the tenant
as additional rent. One commercial property, Southdale Medical located
in Edina, Minnesota, accounts for $680,072 or 20.2% of the increase in
real estate tax costs for the nine months ended January 31, 2003.
Due to increased vacancy at Southdale during the first nine months of Fiscal
2003 ending January 31, 2003, we were unable to fully recover the real
estate tax cost from the tenants. We expect that the increased
vacancy at Southdale will persist for the remaining three months of this
fiscal year and for at least the first three months of our next fiscal
year. For our noncommercial real estate properties, any increase
in our real estate tax costs must be collected from tenants in the form
of a general rent increase. While we have implemented portfolio wide
rent increases, the current economic conditions and increased vacancy levels
have prevented us from raising rents in the amount necessary to fully
recover our increased real estate tax costs. To further compound
the problem, a number of states in which IRET operates are facing record
state budget shortfalls. Our past experience is such shortfalls translate
into local governments raising property taxes. ·
Increased Maintenance
Expense The maintenance expense category increased by
$1,460,241 or 86.1% for the three months ended January 31, 2003, and $3,452,630
or 63.7% for the nine months ended January 31, 2003, as compared to the
corresponding periods of Fiscal 2002. Of the increased maintenance
costs for the three months ended January 31, 2003, $1,022,950 or 70.1%
is attributable to the addition of new real estate, while $437,291 or
29.9% is due to increased costs for maintenance on existing real estate
assets. For the nine months ended January 31, 2003, increased
maintenance costs of $2,490,950 or 72.1% is attributable to the addition
of new real estate, while $961,680 or 27.9% is due to increased costs for
maintenance on existing real estate assets. Under the terms of most
of our commercial leases, the full cost of maintenance is paid by the tenant
as additional rent. One commercial property, Southdale Medical located
in Edina, Minnesota, accounts for $622,271 or 18.0% of the increase in maintenance costs for the nine months ended
January 31, 2003. Due to increased vacancy at Southdale during
the first nine months of Fiscal 2003 ending January 31, 2003, we were
unable to fully recover the maintenance cost from the tenants. We
expect that the increased vacancy at Southdale will persist for the remaining
three months of the fiscal year. For our noncommercial real estate
properties, any increase in our maintenance costs must be collected from
tenants in the form of a general rent increase. While we have implemented
portfolio wide rent increases, the current economic conditions and increased
vacancy levels have prevented us from raising rents in the amount necessary
to fully recover our increased maintenance costs. ·
Increased Utility
Expense The utility expense category increased by $651,393
or 51.8% for the three months ended January 31, 2003, and $1,834,249
or 50.9% for the nine months ended January 31, 2003, as compared to the
corresponding periods of Fiscal 2002. Of the increased utility
costs for the three months ended January 31, 2003, $416,955 or 64.0%
is attributable to the addition of new real estate, while $234,438 or
36.0% is due to increased costs for utilities on existing real estate
assets. For the nine months ended January 31, 2003, increased utility
costs of $1,252,948 or 68.3% is attributable to the addition of new
real estate, while utility costs on our existing portfolio increased $581,301
or 31.7%. Under the terms of most of our commercial leases, the
full cost of utilities is paid by the tenant as additional rent.
One commercial property, Southdale Medical located in Edina, Minnesota,
accounts for $495,904 or 27.0% of the increase in utility costs for the
nine months ended January 31, 2003. Due to increased vacancy at
Southdale during the first nine months of Fiscal 2003 ending January 31,
2003, we were unable to fully recover the utility cost from the tenants.
We expect that the increased vacancy at Southdale will persist for the
remaining three months of the fiscal year. For our other noncommercial
real estate properties, any increase in our utility costs must be collected
from tenants in the form of a general rent increase. While we have
implemented portfolio wide rent increases, the current economic conditions
and increased vacancy levels have prevented us from raising rents in the
amount necessary to fully recover our increased utility costs. Since
our real estate portfolio is primarily located in Minnesota and North Dakota,
the severity of winters will have a large impact on our utility costs. ·
Increased Administrative
and Operating Expense Administrative and operating expenses
increased by $218,115 or 41.3% for the three months ended January 31,
2003, and $637,342 or 41.0% for the nine months ended January 31, 2003,
as compared to the corresponding periods of Fiscal 2002. Of this
increase in administrative and operating expense for the nine months ended
January 31, 2003, $139,000 or 21.8% was due to professional fees and costs
associated with our most recent stock offering in the first quarter of
this fiscal year. In prior years, the work associated with offerings
of company stock to the public was largely done by our employees in-house.
Over the past nine months we have hired three new employees. These
new employees as well as increases in the wages and benefits paid to existing
employees account for $213,756 or 33.5% of the increase in administrative
and operating costs for the nine months ended January 31, 2003, and $62,946
or 28.9% of the increase for three month period ending January 31,
2003. ·
Increased Insurance
Premiums Insurance expense increased by $189,061 or 52.6%
for the three months ended January 31, 2003, and $598,028 or 61.3% for
the nine months ended January 31, 2003, compared to an increase in revenues
of $7,026,204 or 30.3% for the three months ended January 31, 2002,
and $19,846,633 or 29.3% for the nine months ended January 31, 2002.
Of the increased insurance costs for the three months ended January
31, 2003, $83,685 or 44.3% is attributable to the addition of new
real estate, while $105,376 or 55.7% is due to increased premium costs
for coverage on existing real estate assets. For the nine months ended
January 31, 2003, increased insurance costs of $226,212 or 37.8% is attributable
to the addition of new real estate, while $371,816 or 62.2% is due to
increased premium costs for coverage on existing real estate assets. Under
the terms of most of our commercial leases, the full cost of insurance
is paid by the tenant as additional rent. For our other real estate
properties, any increase in our insurance costs must be collected from
tenants in the form of a general rent increase. While we have implemented
portfolio wide rent increases, the current economic conditions and increased
vacancy levels have prevented us from raising rents in the amount necessary
to fully recover our increased insurance costs. We expect our insurance
expense to continue at its current level for the remaining three months
of this fiscal year as well as for the next fiscal year. ·
Slower Increase
of Interest Expense Our mortgage debt increased $6,378,460
or 1.3% for the three months ending January 31, 2003, and $45,310,752
or 9.9% for the nine months ending January 31, 2003. Due to the
fact that interest rates on new mortgages incurred during those periods
were at lower rates than mortgages in prior periods, our interest expense
increased by only $1,880,309 or 25.7% for the three months ended January
31, 2003, and $4,949,894 or 23.2% for the nine months ended January 31,
2003, as compared to the corresponding periods of Fiscal 2002. Of
the increased interest expense for the three months ended January 31,
2003, $2,155,974 or 114.7% is attributable to the addition of new real
estate, while interest expenses on existing real estate assets actually
declined by $275,665 or 14.7%. For the nine months ended January
31, 2003, increased interest expense of $5,402,203 or 109.1% is attributable
to the addition of new real estate, while interest expenses on existing
real estate assets actually declined by $452,309 or 9.1%. ·
Increased Minority
Partnership Interests In addition to the factors discussed
above that have negatively impacted our earnings per share despite an
overall increase in gross revenue, the increase in the number of limited
partnership units issued by our operating partnership has also impacted
our revenue per share. Even though our revenue increased by
$7,026,204 or 30.3% for the quarter ending January 31, 2003, our net income
only increased $211,071 or 9.4%. During the three months ending January
31, 2003, outstanding limited partnership units in our operating partnership
decreased by 152,638 units converted to shares. However, for the
nine months ending January 31, 2003, outstanding limited partnership units
in our operating partnership actually increased by 519,293. Under the terms
of our operating partnership, each limited partner is entitled to an
equal allocation of net income or net loss. Limited partnership units are
issued by us in exchange for the contribution of an interest in real estate.
If capital gain income and the limited partnership ownership interest
reflected as minority interests on the financial statements are excluded,
the increase in net income is more closely related to the increase in
revenue:
For the Three Months Ended
01/31/03
01/31/02
% Change
Net Income
$ 2,451,323
$ 2,240,252
9.4%
Add back portion allocated to:
minority interests other partnerships
210,773
71,655
minority interests operating partnerships
888,900
1,372,109
Add back Discontinued Operations
302,648
106,694
Subtract capital gain income
-0
- -3,346
Total Portfolio Net Income
$ 3,853,644
$ 3,787,364
1.8%
For the Nine Months Ended
01/31/03
01/31/02
% Change
Net Income
$ 8,447,545
$ 7,961,895
6.1%
Add back portion allocated to:
minority interests other partnerships
673,550
214,964
minority interests operating partnerships
2,928,754
2,896,025
Add back Discontinued Operations
448,577
318,006
Subtract capital gain income
-315,342
-327,678
Total Portfolio Net Income
$ 12,183,084
$ 11,063,212
10.1% Results from Stabilized
Properties Comparison of Residential
and Commercial Properties Net Real Estate Operating
Income
Three Months Ended
Total
15.1%
Nine Months Ended
Total
The growth in the two operating segments resulted primarily from the acquisition
of real estate properties during the prior and current fiscal years. Occupancy Rates and Credit
Risk
Three Months Ended
Nine Months Ended
The following table shows our tenants in commercial property that account
for three percent or more of the total scheduled rent on February 1, 2003,
from all commercial properties owned by IRET:
On January 15, 2003, Conseco Finance Service Corp rejected its lease
for our 75,815 square foot commercial office facility in Rapid City, South
Dakota. The lease term extended through June 30, 2015. The
lease required Conseco to pay $640,632 per year in rent as well as all taxes,
insurance and repairs. The estimated annual financial impact is $746,182,
or approximately 3.8 cents per share assuming all of our other business activities
remain unchanged.
Property Acquisitions and Dispositions
Acquisition Cost These
two apartment complexes were acquired by the issuance of 227,826 partnership
units in exchange for $2,412,681 of equity and $1,512,372 cash and debt
assumption. Dispositions In
the second quarter ended October 31, 2002, the 15,217 square foot Cottage
Grove Strip Center in Cottage Grove, Minnesota, was sold at a gain of $52,774.
In the third quarter ended January 31, 2003, the 34,603 square foot Creekside
Office Building in Billings, Montana, was sold at a gain of $154,584.
Americas Best, a 69,599 square foot retail building located in Boise, Idaho
was sold at a loss of $305,757.
Funds From Operations
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 as determined
in accordance with accounting principles generally accepted in the United
States of America as a measure of IRETs liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of IRETs needs or its ability
to service indebtedness or make distributions.
Funds from Operations for IRET for the three months ended January 31, 2003,
increased to $8,454,805 compared to $7,564,429 for the three months ended
January 31, 2002, an increase of 11.8%.
Funds from Operations for IRET for the nine months ended January 31, 2003,
increased to $25,405,094, compared to $21,826,610 for the nine months ended
January 31, 2002, an increase of 16.4%.
Three Months Ended
Net Income Allocation to Minority Interests
01/31/03
Net Income Allocation to Minority Interests
(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.
*
Includes $360,181 and $295,426 for
3 months ended January 31, 2003 and October 31, 2002, and $1,206,764
and $953,616 for the nine months ended January 31, 2003 and January
31, 2002, of straight-line rents.
Distributions
2003
2002
Percent Change
$
.1540
$
.1450
6.2%
$
.1560
$
.1475
5.8%
$
.1570
$
.1500
4.7%
The Board of Trustees of IRET has declared a distribution of $0.158 per
share, payable April 1, 2003 to shareholders of record at the close of business
on March 14, 2003. Liquidity and Capital
Resources
·
Real Estate Owned
$ 7,367,227
$ 13,010,645
$ 2,520,354
$ 1,417,699
$ 7,407,752
$ 2,952,053
$ 4,678,418
$ 12,993,496
$ 14,014,085
$ 11,872,351
$ 3,357,662
$ 11,509,091
$ -540,120
$ -421,001
$ -292,238
$ -1,131,693
$ -2,071,336
$ -4,789,365
229,521 shares
238,763 shares Pending Acquisitions and Dispositions
Total
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
of the Securities Exchange Act of 1934
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
12 South Main Suite 100
Minot, ND
(Address of principal executive offices)
(Zip code)
(Registrant's telephone number,
including area code)
January 31, 2003 (unaudited)
and April 30, 2002
For the Three
Months and Nine Months ended
January 31, 2003, and
2002
For the Nine
Months ended January 31, 2003, and 2002
For the Periods
ended January 31, 2003, and April 30, 2002
Results of Operations
Item 1. Financial Statements - Third Quarter - Fiscal 2003
(unaudited)
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet
(unaudited)
01/31/03
04/30/02
$
838,880,283
-71,192,670
-58,925,517
$
767,687,613
$
681,393,919
5,279,735
3,952,762
$
772,967,348
$
685,346,681
$
17,930,052
$
12,333,426
3,070,897
10,500,000
4,440,528
3,233,765
214,100
422,045
0
3,500,000
790,034
3,513,791
7,985,040
6,210,450
4,687,548
3,498,922
639,338
209,121
1,440,817
1,440,817
$
814,165,702
$
730,209,018
$
22,054,937
$
10,596,277
504,879,656
459,568,905
11,798,340
25,186,582
$
538,732,933
$
495,351,764
14,248,864
12,819,077
10,155,540 on 01/31/03
9,636,247 on 04/30/02
$
81,035,331
$
76,460,046
Shares of Beneficial Interest
32,415,937 on 01/31/03
27,847,079 on 04/30/02
$
204,350,743
$
163,376,549
-24,202,169
-17,798,418
$
180,148,574
$
145,578,131
$
814,165,702
$
730,209,018
For the Three Months and Nine Months Ended January 31, 2003,
and 2002
(unaudited)
3 Months
Ended
01/31/03
3 Months
Ended
01/31/02
9 Months
Ended
01/31/03
9 Months
Ended
01/31/02
$
30,225,594
$
23,199,390
$
87,301,502
$
67,454,869
192,161
308,753
853,795
817,987
$
30,417,755
$
23,508,143
$
88,155,297
$
68,272,856
$
9,444,445
$
7,724,668
$
27,134,538
$
22,319,564
4,933,482
3,951,008
14,081,207
11,232,678
5,065,774
2,954,140
14,312,632
9,025,753
3,495,919
2,259,141
9,918,486
6,551,332
548,699
359,638
1,573,435
975,407
2,130,873
1,803,803
6,266,132
5,147,017
489,297
445,095
1,444,515
1,236,727
257,258
83,345
747,107
317,553
198,364
139,941
494,161
403,613
$
26,564,111
$
19,720,779
$
75,972,213
$
57,209,644
$
3,853,644
$
12,183,084
0
3,346
315,342
327,678
PARTNERSHIP
-210,773
-71,655
-673,550
-214,964
-888,900
-1,372,109
-2,928,754
-2,896,025
8,279,901
-318,006
$
2,451,323
$
2,240,252
$
8,447,545
$
7,961,895
$
.08
$
0.09
$
.27
$
0.32
$
.1570
$
0.1500
$
.4670
$
0.4425
Outstanding
32,186,651
25,910,587
31,489,758
24,875,028
(unaudited)
01/31/03
01/31/02
CASH FLOWS FROM OPERATING
ACTIVITIES
NET INCOME
$
8,447,545
$
7,961,895
provided by operating activities
Depreciation
and amortization
14,703,500
11,776,421
Minority
interest portion
3,456,177
3,002,753
Gain on sale of properties
-164,169
-327,678
Interest reinvested in
investment certificates
311,812
325,063
Changes in other assets
and liabilities:
224,560
-1,376,000
0
-3,500,000
2,723,757
-287,668
-1,206,764
-953,616
-1,774,591
-1,634,328
-1,682,786
-660,636
& accrued expenses
11,507,849
961,946
Net cash provided from
operating activities
$
36,546,890
$
15,288,152
CASH FLOWS FROM INVESTING
ACTIVITIES
available-for-sale
$
43,100,000
$
0
0
3,085,209
1,766,637
269,501
3,500,000
0
959,797
282,898
-65,807,793
-38,973,863
-35,670,897
0
-2,111,769
-7,222,393
Net cash used for investing
activities
$
-54,264,025
$
-42,558,649
Consolidated Statements of Cash
Flows continued
CASH FLOWS FROM FINANCING
ACTIVITIES
01/31/03
01/31/02
$ 31,678,318
$ 12,981,239
0
345,603
0
20,031,446
35,825,000
29,550,783
-20,923
-28,138
-8,505,976
-6,025,889
-4,096,283
-3,208,779
-729,872
-150,083
-13,700,055
-1,561,656
-17,136,448
-8,075,128
Net cash provided from
financing activities
$ 23,313,761
$ 43,859,398
NET INCREASE IN CASH
$ 5,596,626
$ 16,588,901
CASH AT BEGINNING OF YEAR
$ 12,333,426
$ 6,356,063
CASH AT END OF 3rd PERIOD
$ 17,930,052
$ 22,944,965
SUPPLEMENTARY SCHEDULE
OF NON-CASH INVESTING AND FINANCING ACTIVITIES 2003 and 2002
$
6,889,638
$
5,427,679
Proceeds
from sale of properties deposited directly
with escrow agent
4,562,915
856,411
Properties
acquired through the issuance of minority
interest units in the operating partnership
8,860,420
15,896,705
311,812
325,063
2,427,160
0
acquired through
assumption of mortgage loans
payable and
accrual of costs
27,803,654
13,956,134
1,486,108
0
0
9,880,225
holder or assumption of
debt
1,006,454
439,623
$
26,314,320
$
20,439,343
Interest
paid on investment certificates
782,334
505,864
Interest
paid on margin account and other
0
1,438
$
27,096,654
$
20,946,645
7
Consolidated Statements of Shareholders Equity
For the Periods Ended January 31, 2003, and April 30, 2002
(unaudited)
NUMBER
OF SHARES
SHARES OF BENEFICIAL
INTEREST
IN EXCESS OF
NET INCOME
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
TOTAL SHARE- HOLDERS
EQUITY
Balance May 1, 2002
24,068,346
$
132,148,768
$
-130,451
$
118,945,160
Comprehensive Income
Net income
10,600,129
Unrealized
gain on
securities available-for-sale
130,451
130,451
Total
comprehensive income
$
10,730,580
Distributions
-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
$
0
$
145,578,131
Comprehensive Income
Net income
8,447,545
Unrealized
gain on
securities available-for-sale
0
0
Total
comprehensive income
$
8,447,545
Distributions
-14,851,296
Distribution reinvestment
plan
693,100
6,889,638
6,889,638
Sale of shares
3,877,852
34,105,479
34,105,479
Fractional shares repurchased
-2,094
-20,923
________
_________
-20,923
Balance January 31, 2003
32,415,937
$
204,350,743
$
0
$
180,148,574
For the Nine Months Ended January 31, 2003, and 2002
Investors Real Estate Trust
("IRET") elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856-860 of the Internal Revenue Code of 1986, as amended,
commencing with its taxable year ended April 30, 1971. REITs are subject
to a number of organization and operational requirements, including a requirement
to distribute 90% of ordinary taxable income to its shareholders and, generally,
are not subject to Federal income tax on net income. IRET is engaged
in the acquisition and ownership of residential apartment communities and
commercial properties located mainly in the states of North Dakota and Minnesota
but also in the states of Colorado, Idaho, Iowa, Georgia, Kansas, Montana,
Nebraska, South Dakota, Texas, Michigan and Washington. As of January
31, 2003, IRET owned 65 apartment communities with 8,347 apartments 74 commercial
buildings totaling 5,155,260 net rentable square feet. IRET conducts
a majority of its business activities through its operating partnership,
IRET Properties, a North Dakota Limited Partnership, as well as through a
number of other subsidiary entities.
The consolidated financial
statements include the accounts of IRET and all its subsidiaries in which
it maintains a controlling interest. The financial statements have
been prepared on the basis of accounting principles that are in effect as
of the financial statement date. IRET operates on a fiscal year commencing
May 1 and ending April 30.
The interim consolidated financial statements of IRET have been prepared
in accordance with accounting principles generally accepted in the United
States of America for interim financial information and the applicable rules
and regulations of the Securities and Exchange Commission. Accordingly,
certain disclosures accompanying annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America are omitted. The year-end balance sheet data was derived
from audited financial statements, but does not include all disclosures required
by accounting principles generally accepted in the United States of America.
In the opinion of management, all adjustments, consisting solely of normal
recurring adjustments, necessary for the fair presentation of the consolidated
financial statements for the interim periods have been included.
IRET has not made any significant
changes in accounting policy and practices since the most recent audited
financial statements.
The Financial Accounting Standards Board 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, 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, and SFAS No. 146 "Accounting For Costs Associated
with Exit or Disposal Activities" addresses the recognition of liabilities
for costs associated with exit or disposal activities. The adoption
of SFAS 141 had no effect of IRET’s financial position or results of operations.
SFAS 144 was adopted by IRET on May 1, 2002, the impact of which is reflected
as "discontinued operations" on the Statements of Operations. SFAS
No. 146 was adopted December 31, 2002, with no significant financial impact.
There was no change in the carrying amount of goodwill for the nine months
ended January 31, 2003. Goodwill is tested on an annual basis and any
impairment adjustments are reflected at that time. SFAS No. 142 has
no significant impact on IRETs net income or earnings per share when comparing
the nine months ended January 31, 2003, to January 31, 2002.
Earnings per share ("EPS") is computed as net income available to common
shareholders divided by the weighted average number of common shares outstanding
for the period. The company has no outstanding warrants, convertible
stock, or other contractual obligations requiring issuance of additional
common shares that would result in a dilution of earnings.
NUMERATOR
Net income applicable to
shares
Minority interest portion of
operating partnership income
Numerator for diluted earnings
per share
DENOMINATOR
Weighted average shares
Weighted Average Convertible
operating partnership units
Denominator for diluted
earnings per share
Earnings per share
Diluted earnings per share
11
IRET has sold investment certificates to the public. The interest rates
vary from 5% 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 outstanding certificates will be redeemed at
maturity as follows:
Ending April 30,
Three Months remaining Fiscal 2003
$
2,778,779
2004
1,942,833
2005
2,286,599
2006
2,243,648
2007
2,546,481
$
11,798,340
On January 16, 2002, IRETs Board
authorized an UPREIT unit loan program available to holders of $1,000,000
or more of limited partnership units in IRETs operating partnership.
IRET will lend, for a term of two years or less, up to 50% of the value
of the units based on the closing price of IRET shares on the NASDAQ market
secured by the borrower's limited partnership units in IRET Properties,
at a variable interest rate 1.5% over the interest rate charged IRET by
its participating lender. The interest rate adjusts on the first
of each month. IRET charges a .5% loan fee.
The following information
summarizes IRET's segment reporting for residential and commercial properties
along with reconciliations to the consolidated financial statements:
Commercial
Residential
Total
Segment Revenue
Rental Revenue
$
15,130,851
$
15,094,743
$
30,225,594
Segment Expenses
Mortgage Interest
$
4,824,534
$
4,381,859
$
9,206,393
Utilities and
Maintenance
2,231,891
2,833,883
5,065,774
Real Estate Taxes
1,794,303
1,701,616
3,495,919
Insurance
151,742
396,957
548,699
Property Management
583,890
1,546,983
2,130,873
Total Segment Expense
$
9,586,360
$
10,861,298
$
20,447,658
Segment Gross Profit
$
5,544,491
$
4,233,445
$
9,777,936
Reconciliation to consolidated operations:
Interest Discounts
and Fee Revenue
$
192,161
Other Interest
Expense
-238,052
Depreciation
-4,933,482
Administrative
Expense and Trustee Fees
-489,297
Operating Expenses
-257,258
Amortization
-198,364
Income Before Gain/Loss on Properties
and Minority Interest
$
3,853,644
Commercial
Residential
Total
Segment Revenue
Rental Revenue
$
8,282,290
$
14,917,100
$
23,199,390
Segment Expenses
Mortgage Interest
$
3,026,644
$
4,299,440
$
7,326,084
Utilities and
Maintenance
470,298
2,483,842
2,954,140
Taxes
697,865
1,561,276
2,259,141
Insurance
47,316
312,322
359,638
Property Management
299,460
1,504,343
1,803,803
Total Segment Expense
$
4,541,583
$
10,161,223
$
14,702,806
Segment Gross Profit
$
3,740,707
$
4,755,877
$
8,496,584
Reconciliation to consolidated operations:
Interest Discounts
and Fee Revenue
$
308,753
Other Interest Expense
-398,584
Depreciation
-3,951,008
Advisory and Trust
Fees
-445,095
Operating Expenses
-83,345
Amortization
-139,941
Income Before Gain/Loss on Properties
and Minority Interest
$
3,787,364
13
The following information summarizes
IRET's segment reporting for residential and commercial properties along
with reconciliations to the consolidated financial statements:
Commercial
Residential
Total
Segment Revenue
Rental Revenue
$
41,788,961
$
45,512,541
$
87,301,502
Segment Expenses
Mortgage Interest
$
13,199,330
$
13,114,435
$
26,313,765
Utilities and
Maintenance
5,716,964
8,595,668
14,312,632
Real Estate Taxes
4,819,078
5,099,408
9,918,486
Insurance
394,029
1,179,406
1,573,435
Property Management
1,711,870
4,554,262
6,266,132
Total Segment Expense
$
25,841,271
$
32,543,179
$
58,384,450
Segment Gross Profit
$
15,947,690
$
12,969,362
$
28,917,052
Reconciliation to consolidated operations:
Interest Discounts
and Fee Revenue
$
853,795
Other Interest
Expense
-820,773
Depreciation
-14,081,207
Administrative
Expense and Trustee Fees
-1,444,515
Operating Expenses
-747,107
Amortization
-494,161
Income Before Gain/Loss on Properties
and Minority Interest
$
12,183,084
Commercial
Residential
Total
Segment Revenue
Rental Revenue
$
23,330,103
$
44,124,766
$
67,454,869
Segment Expenses
Mortgage Interest
$
8,817,346
$
12,446,858
$
21,264,204
Utilities and
Maintenance
1,200,653
7,825,100
9,025,753
Taxes
1,727,781
4,823,551
6,551,332
Insurance
121,145
854,262
975,407
Property Management
687,520
4,459,497
5,147,017
Total Segment Expense
$
12,554,445
$
30,409,268
$
42,963,713
Segment Gross Profit
$
10,775,658
$
13,715,498
$
24,491,156
Reconciliation to consolidated operations:
Interest Discounts
and Fee Revenue
$
817,987
Other Interest Expense
-1,055,360
Depreciation
-11,232,678
Advisory and Trust
Fees
-1,236,727
Operating Expenses
-317,553
Amortization
-403,613
Income Before Gain/Loss on Properties
and Minority Interest
$
11,063,212
14
Commercial
Residential
Total
Segment Assets
Property Owned
$
438,506,652
$
400,373,631
$
838,880,283
Less Accumulated
Depreciation
-22,302,371
-48,890,299
-71,192,670
Total Property Owned
$
416,204,281
$
351,483,332
$
767,687,613
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 Property Owned
$
333,092,927
$
348,300,992
$
681,393,919
15
REVENUE
Real
Estate Rentals
Total Revenue
OPERATING EXPENSE
Interest
Depreciation
Utilities
and Maintenance
Taxes
Insurance
Property
Management Expenses
INCOME BEFORE GAIN/(LOSS) ON PROPERTIES
AND MINORITY INTEREST
MINORITY INTEREST PORTION OF OPERATING
PARTNERSHIP LOSS
Loss from operations
LOSS ON SALE OF DISCONTINUED OPERATIONS
Discontinued Operations, Net
18
19
20
Three Months and Nine Months Ended
January 31, 2003 and January 31, 2002
Total IRET revenues for the
third quarter of Fiscal 2003 ended January 31, 2003, were $30,417,755 compared
to $23,508,143 received in the third quarter of the prior fiscal year ended
January 31, 2002. This is an increase of $6,909,612 or 29%.
Total revenues for the first nine months of Fiscal 2003 ended January 31,
2003, were $88,155,297 compared to $68,272,856 for the same period of the
prior year, an increase of $19,882,441 or 29% for the first nine months
of the prior fiscal year ended January 31, 2002. These increases in
revenue resulted primarily from the additional investments in real estate
made by IRET as well as other factors shown by the following analysis for
the first three quarters of Fiscal 2003:
Increase in Total Revenue
3 months
Ended 01/31/03
9 Months
Ended 01/31/03
that received in 2002
increased occupancy
the rejection of the lease in
Rapid City, South Dakota
Generally Accepted Accounting
Principles require us to record as revenue "straight-line rents" on our commercial
property leases that contain future rental increases. This rule requires
us to include in monthly income an amount equal to the total rent a tenant
has contracted to pay during the term of the lease divided by the number
of months of the lease. This results in recording as revenue an amount
that exceeds the actual cash rent collected. In the later years of
such leases, revenue recorded is an amount less than the actual cash being
received.
21
IRET realized capital gain
loss of $151,173 during the third quarter, compared to $3,346 realized
during the third quarter of the prior year. For the nine-month periods
ended January 31, 2003 and January 31, 2002, capital gain income was $164,169
and $327,678 respectively.
The following table shows
the changes in revenues, operating expenses, interest, and depreciation
for the three months and nine months ended January 31, 2003, as compared
to the three months and nine months ended January 31, 2002:
Three Months Ended
01/31/03
01/31/02
Change
Percent
Change
Real Estate Rental Income
$ 30,225,594
$ 23,199,390
$ 7,026,204
30.3%
Real Estate Operating Expenses
Utilities
$
1,909,203
$
1,257,810
$
651,393
51.8%
Maintenance
3,156,571
1,696,330
1,460,241
86.1%
Real Estate Taxes
3,495,919
2,259,141
1,236,778
54.7%
Insurance
548,699
359,638
189,061
52.6%
Property Management
2,130,873
1,803,803
327,070
18.1%
Interest on Mortgage
Indebtedness
9,206,393
7,326,084
1,880,309
25.7%
Total Property Expenses
$ 20,447,658
$ 14,702,806
$
5,744,852
39.1%
Net Real Estate Operating
Income
$
9,777,936
$
8,496,584
$ 1,281,352
15.1%
Interest Discount and
Fee Income
192,161
308,753
-116,592
-37.8%
Other Interest Expense
-238,052
-398,584
160,532
40.3%
Depreciation
-4,933,482
-3,951,008
-982,474
-24.9%
Administrative Trustee &
Operating
-746,555
-528,440
-218,115
-41.3%
Amortization Expense
-198,364
-139,941
-58,423
-41.7%
Gain on Sale of Investments
0
3,346
-3,346
N/A
Minority Interest Portion-
Other Partnerships
-210,773
-71,655
-139,118
-194.1%
Minority Interest
Portion-Operating
Partnership
-888,900
-1,372,109
483,209
35.2%
22
Income from Continuing
Operations
2,753,971
2,346,946
407,025
17.3%
Discontinued Operations net of
Minority Interest (including
net loss on property dispositions
of $151,173 for the three months
ended January 31, 2003)
-302,648
-106,694
-195,954
-183.7%
Net Income for Generally
Accepted Accounting
Purposes
$
2,451,323
$
2,240,252
$ 211,071
9.4%
Nine Months Ended
01/31/03
01/31/02
Change
Percent
Change
Real Estate Rental Income
$ 87,301,502
$ 67,454,869
$ 19,846,633
29.4%
Real Estate Operating Expenses
Utilities
$
5,440,077
$
3,605,828
$
1,834,249
50.9%
Maintenance
8,872,555
5,419,925
3,452,630
63.7%
Real Estate Taxes
9,918,486
6,551,332
3,367,154
51.4%
Insurance
975,407
598,028
61.3%
Property Management
6,266,132
5,147,017
1,119,115
21.7%
Interest on Mortgage
Indebtedness
26,313,765
21,363,871
4,949,894
23.2%
Total Property Expenses
$ 58,384,450
$ 43,063,380
$ 15,321,070
35.6%
Net Real Estate Operating
Income
$ 28,917,052
$ 24,391,489
$
4,525,563
18.6%
Interest Discount and Fee
Income
853,795
817,987
35,808
4.4%
Other Interest Expense
-820,773
-955,693
134,920
14.1%
Depreciation
-14,081,207
-11,232,678
-2,848,529
-25.4%
Administrative Trustee &
Operating
-2,191,622
-1,554,280
-637,342
-41.0%
Amortization Expense
-494,161
-403,613
-90,548
-22.4%
Gain on Sale of Investments
315,342
327,678
-12,336
-3.8%
Minority Interest Portion-Other
Partnerships
-673,550
-214,964
-458,586
-213.3%
Minority Interest Portion-
Operating Partnership
-2,928,754
-2,896,025
-32,729
-1.1%
23
Income from Continuing
Operations
8,896,122
8,279,901
616,221
7.4%
Discontinued Operations net of
Minority Interest (including
net loss of property
dispositions of $151,173
for the nine months
ended January 31, 2003)
-448,577
-318,006
-130,571
-41.1%
Net Income for Generally
Accepted Accounting
Purposes
$
8,447,545
$
7,961,895
$
485,650
6.1%
28
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 the three months and nine months ended January 31, 2003 and 2002
for residential and commercial were:
Same-Store Residential
01/31/03
01/31/02
% Change
01/31/03
01/31/02
% Change
Total Receipts
$
14,264,346
$
14,409,956
-1.0%
$
43,217,699
$ 43,383,257
-0.4%
Expenses:
Utilities & Maintenance
2,624,630
2,385,014
10.0%
8,009,968
7,656,451
4.6%
Property Management
1,436,613
1,435,231
N/A
4,243,038
4,355,217
-2.6%
Taxes
1,608,104
1,591,815
1.0%
4,834,613
4,789,058
1.0%
Insurance
354,613
289,789
22.4%
1,064,257
792,884
34.2%
Mortgage Interest
4,068,540
4,106,668
-0.9%
12,271,646
12,298,497
-0.2%
Total Expenses
10,092,500
9,808,517
2.9%
30,423,522
29,892,107
1.8%
Net Operating Income
$
4,171,846
$
4,601,439
-9.3%
$
12,794,177
$ 13,491,150
-5.2%
Same-Store Commercial
01/31/03
01/31/02
% Change
01/31/03
01/31/02
% Change
Total Receipts
$
7,229,986
$
7,076,683
2.2%
$ 22,402,969
$ 21,346,870
4.9%
Expenses:
Utilities & Maintenance
756,735
324,623
133.1%
2,182,617
993,153
119.8%
Property Management
274,557
263,360
4.3%
929,058
641,963
44.7%
Taxes
794,453
506,777
56.8%
2,351,219
1,482,033
58.6%
Insurance
67,184
31,798
111.3%
201,078
95,394
110.8%
Mortgage Interest
2,635,747
2,733,970
-3.6%
8,041,391
8,314,740
-3.3%
Total Expenses
4,528,676
3,860,528
17.3%
13,705,363
11,527,283
18.9%
Net Operating Income
$
2,701,310
$
3,216,155
-16.0%
$
8,697,606
$
9,819,587
-11.4%
29
The following is a comparison of the
net operating income from the two types of real estate investments owned
by IRET - residential and commercial - for the three months and nine months
ended January 31, 2003 and 2002:
01/31/03
01/31/02
Percent Change
Segment
Residential
$
4,233,445
$
4,755,877
-11.0%
Commercial
5,544,491
3,740,707
48.2%
$
9,777,936
$
8,496,584
01/31/03
01/31/02
Percent Change
Segment
Residential
$
12,969,362
$
13,715,498
-5.4%
Commercial
15,947,690
10,775,658
48.0%
$
28,917,052
$
24,491,156
18.1%
30
Occupancy rates are calculated as a percentage of the actual rent paid to
IRET versus the scheduled rent charged by IRET for the period of time presented.
The following tables compare occupancy rates for stabilized properties
for the three months and nine months ended January 31, 2003 and 2002:
01/31/03
01/31/02
Percent Change
Segment
Residential
91.97%
93.67%
-1.7%
Commercial
94.45%
97.39%
-3.0%
01/31/03
01/31/02
Percent Change
Segment
Residential
92.74%
94.83%
-2.1%
Commercial
94.83%
97.83%
-3.0%
Lessee
Monthly Rent
% of Total
Step II, Inc. DBA Edgewood Vista
$
264,489
6%
Health East Medical
159,720
4%
Great Plains Software, a subsidiary
of Microsoft, Inc.
156,250
4%
Wilsons Leather
113,750
3%
All Others
3,768,293
83%
Total Scheduled Rent on February
1, 2003
$
4,462,502
100%
During the nine months ended
January 31, 2003, IRET acquired 10 commercial properties and 2 apartment
complexes:
Commercial Property
75,526 sq. ft. Three Paramont Plaza
- Bloomington, MN
$
7,367,227
353,049 sq. ft. Wilsons Leather
- Brooklyn Park, MN
13,010,645
43,046 sq. ft. UH Medical St. Paul,
MN
7,407,752
10,008 sq. ft. Park Dental Brooklyn
Center, MN
2,952,053
24,218 sq. ft. Park Nicollet Clinic
Bloomington, MN
4,678,418
60,095 sq. ft. Abbott Northwestern
Specialty Care Center - Sartell, MN
12,993,496
176,917 sq. ft. Brenwood Office
Park Minnetonka, MN
14,014,085
604,711 sq. ft. Dixon Avenue Industrial
Park - Des Moines, IA
11,872,351
27,297 sq. ft. Plaza VII - Boise,
ID
3,357,662
73,403 sq. ft. Westgate Boise, ID
11,509,091
$
89,162,780
Apartments
84 units East Park Apartments Sioux
Falls, SD
$
2,520,354
48 units Sycamore Village Apartments
Sioux Falls, SD
1,417,699
$
3,938,053
Total Property Acquisitions and
Dispositions
$
93,100,833
The
37-unit Eastwood, 27-unit Oak Manor, and 17-unit Jenner apartment complexes
in Dickinson, North Dakota, were sold during the first quarter of Fiscal
2003 at a gain of $262,568.
IRET considers Funds from Operations (FFO) a useful measure of performance
for an equity REIT. FFO is defined as net income available to shareholders
determined in accordance with accounting principles generally accepted
in the United States of America ("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 Trusts (NAREIT)
definition of FFO as amended by NAREIT effective January 1, 2000, and as
amended as of April 2002.
01/31/03
01/31/02
Percent
Change
Net Income Available to IRET Shareholders
$ 2,451,323
$ 2,240,252
9.4%
Operating
Partnership
852,166
1,372,109
-37.9%
Adjustments:
Depreciation/Amortization
(1)
5,000,143
3,955,414
26.4%
Net
(gain) loss on sales of discontinued
operations
151,173
0
N/A
(Gain)
loss on sale of properties
$
0
$
-3,346
N/A
Funds from operations
$ 8,454,805
$ 7,564,429
11.8%
Weighted average shares and units
outstanding (2)
42,876,884
34,628,902
23.8%
Distributions paid to Shareholders/Unitholders
(3)
$ 6,646,401
$ 5,312,850
25.2%
Nine Months Ended
01/31/02
Percent
Change
Net Income Available to IRET Shareholders
$ 8,447,545
$ 7,961,895
6.1%
Operating
Partnership
2,892,020
2,896,025
-0.1%
Adjustments:
Depreciation/Amortization
(1)
14,229,698
11,296,368
26.0%
Net
(gain) loss on sales of discontinued
operations
151,173
0
N/A
(Gain)
loss on sale of properties
$
-315,342
$ -327,678
-3.8%
Funds from operations
$ 25,405,094
$ 21,826,610
16.4%
Weighted average shares and units
outstanding (2)
41,527,184
32,993,549
25.9%
Distributions paid to Shareholders/Unitholders
(3)
$ 19,941,898
$ 14,648,821
32.0%
(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) Distributions
are paid equally on shares and units. It is our intent to
distribute approximately 70% of FFO to our shareholders and unitholders.
34
The following distributions were paid during the Nine months ended October
31st of Fiscal years 2003 and 2002:
Date
July 1
October 1
January 1
The important changes in IRETs
balance sheet during the first nine months of Fiscal 2003 ended January 31,
2003, were:
Real estate owned increased to $838,880,283 from the April 30, 2002,
figure of $740,319,436. The increase resulted from the acquisition
of additional investment properties net of dispositions as described
below:
Acquired
Three Paramont Plaza, Bloomington,
MN
Wilsons Leather, Brooklyn Park,
MN
East
Park Apartments, Sioux Falls, SD
Sycamore
Village Apartments, Sioux Falls, SD
UH
Medical, St. Paul, MN
Park
Dental, Brooklyn Center, MN
Park
Nicollet Clinic, Burnsville, MN
Abbott
Northwestern Specialty Care Center, Sartell, MN
Brenwood
Office Park, Minnetonka, MN
Dixon
Avenue Industrial Park, Des Moines, IA
Plaza
VII, Boise, ID
Westgate,
Boise, ID
Sold
Eastwood Apartments, Dickinson,
ND
Oak Manor Apartments, Dickinson,
ND
Jenner
Apartments, Grand Forks, ND
Cottage
Grove Strip Center, Cottage Grove, MN
Creekside
Office Building, Billings, MT
Americas
Best, Boise, ID
35
Mortgage loans receivable increased to $5,279,735 from
$3,952,762 from April 30, 2002. This increase resulted from construction
loan to the developer for an addition to Edgewood Vista facility in,
Hermantown, MN, net of scheduled payments received.
Cash on hand on January 31, 2003, was $17,930,052 compared
to $12,333,426 on April 30, 2002. This increase was due primarily
to transfer of marketable securities to cash.
During the first nine months ended January 31, 2003,
IRET decreased its investment in marketable securities classified as
available-for-sale to $3,070,897 from $10,500,000 on April 30, 2002.
This decrease was primarily due to the transfer of marketable securities
to cash.
Mortgages payable on January 31, 2003, totaled $504,879,656,
compared to $459,568,905 at April 30, 2002. This increase resulted
from refinancing of maturing mortgages and the placement of new mortgages.
The average weighted interest rate payable on the outstanding indebtedness
on January 31, 2003, was 7.49%.
Investment Certificates outstanding on January 31, 2003,
totaled $11,798,340, compared to $25,186,582 on April 30, 2002.
This decrease resulted from the redemption of maturing investment certificates.
Outstanding Limited Partnership units in the Operating
Partnership increased to 10,155,540 partnership units on January 31,
2003, as compared to the 9,636,247 units outstanding on April 30, 2002.
The increase resulted from the issuance of additional partnership units
to acquire the Three Paramont Plaza, East Park Apartments, Sycamore Village
Apartments and Abbott Northwestern Specialty Care Center.
Shares of beneficial interest outstanding on January 31, 2003,
totaled 32,415,937, as compared to 27,847,079 shares outstanding on April
30, 2002. This increase in shares outstanding is due to the sale
of 3.6 million shares of stock on April 25, 2002, to the general public
at $9.50 per share resulting in gross proceeds of $31,663,100, as well as
shares issued pursuant to our distribution reinvestment plan in the total
amount of $6,889,638 as follows:
July 1, 2002
October 1, 2002
224,816 shares
January 2, 2003
36
As of
January 31, 2003, IRET had entered into contracts to acquire certain real
estate assets:
Property Acquisitions
Total Cost
Loan or Equity
Contribution
Cash
Required
NCSM Partnership (Southdale) Edina, MN
$ 13,200,000
$ 8,200,000
$ 5,000,000
Expansion of Edgewood Vista
Hermantown, MN
5,000,000
3,250,000
1,750,000
Expansion of Edgewood Vista
Virginia, MN
5,000,000
3,250,000
1,750,000
TF James Properties, MN
70,197,945
70,197,945
0
$ 93,397,945
$ 84,897,945
$ 8,500,000
Property Dispositions
We are currently negotiating
the potential sale of the Century Apartments in Dickinson, ND.
IRET had cash on hand of $17,930,052 and marketable securities of $3,070,897 on January 31, 2003. As of January 31, 2003, IRETs unsecured credit lines with First International Bank & Trust, Bremer Bank, and First Western Bank & Trust, all of Minot, North Dakota, totaled $19,000,000. None of the credit lines were in use on January 31, 2003.
IRET believes that its existing cash and borrowing capacities are adequate to fund all of its acquisition and development obligations and all of its other short and long-term liquidity requirements. IRET believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and the payment of dividends in accordance with Internal Revenue Code provisions pertaining to real estate investment trusts in both the short and long term. Budgeted expenditures for ongoing maintenance, capital improvements and renovations to its real estate portfolio are expected to be funded from the cash flow generated from the operation of these properties.
Item 3. Quantitative and Qualitative Disclosures
about Market Risk
Our exposure to market risk is limited to
fluctuations in the general level of interest rates on our 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
variable rate debt, on any future repricing or refinancing of fixed rate
debt and on future debt.
We primarily use long-term (more than nine years) and medium-term (five to seven years) debt as a source of capital. We do not currently use derivative securities, interest-rate swaps or any other type of hedging activity to manage our costs of capital. As of January 31, 2003, we had the following amount of future principal payments on mortgages secured by our real estate:
Long Term Debt |
2003 | 2004 | 2005 | 2006 | 2007 | Thereafter | Total |
Fixed Rate | $11,652,937 | $10,497,625 | $11,387,817 | $12,231,366 | $13,140,123 | $422,297,971 | $481,207,839 |
Variable Rate | 368,762 | 1,541,419 | 1,642,722 | 1,750,895 | 1,866,416 | 16,501,603 | 23,671,817 |
(1) $504,879,656 |
(1) The weighted average interest rate as of January 31, 2003, was 7.49%. 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 $23,671,817 of variable rate indebtedness would increase our annual interest expense by $236,718.
Item 4. Control and Procedures
The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of a date within 90 days prior to the date of the filing of this Report on Form 10-Q, that the Companys controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed by it under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Companys management, including the Chief Executive Officer and Chief Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure.
There were no significant changes in the Companys internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 1. 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 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
99.1 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
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Form Filed | File No. |
Earliest Event |
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8-K - Option Agreement dated January 31, 2003,
between Thomas F. James Properties, LLC, an Arkansas limited liability corporation and IRET Properties, a North Dakota Limited Partnership. |
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8-K - Acquisitions - Plaza VII Office Building, Westgate Plaza Dispositions - America's Best Warehouse Other Events - T.F. James Merger |
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|
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8-K - Other Events - T.F. James Merger |
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|
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8-K - Certification of CEO & CFO for October 31, 2002, 10-Q |
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|
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8-K/A Financial Statements, Pro-Forma & Exhibits |
|
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Filing Date |
Form Filed |
|
Earliest Event |
|
8-K - Acquisitions - Three Paramount Plaza, Bermans
East Park Apts, Sycamore Village, Park Dental, Park Nicollet Clinic, GardenView Medical, Abbott Northwestern Specialty Care, Brenwood Office Complex |
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8-K - Other Events - UPREIT Unit Loan Program |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
INVESTORS REAL ESTATE TRUST
(Registrant)
By: _/s/Thomas A. Wentz
_________________
Thomas A. Wentz, Sr., President & Chief
Executive
Officer
By: _/s/Diane
K. Bryantt __________________
Diane
K. Bryantt, Senior Vice President &
Chief
Financial Officer
Date: March 12, 2003
I, Thomas A. Wentz, Sr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 12, 2003
By:
_/s/Thomas A. Wentz, Sr. _____________
Thomas
A. Wentz, Sr., President & CEO
I, Diane K. Bryantt certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 12, 2003
By:
_/s/Diane K. Bryantt_____________ _____
Diane
K. Bryantt, Senor Vice President & CFO
The undersigned, being the Chief Executive Officer of Investors Real Estate Trust (the "Issuer"), hereby certifies that the Quarterly Report on Form 10-Q (the "Periodic Report") of the Issuer for the quarter ended January 31, 2003, which accompanies this Certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m(a) or 78o(d)) and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
Date: March 12, 2003
By:
/s/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr., President & CEO
The undersigned, being the Chief Financial Officer of Investors Real Estate Trust (the "Issuer"), hereby certifies that the Quarterly Report on Form 10-Q (the "Periodic Report") of the Issuer for the quarter ended January 31, 2003, which accompanies this Certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m(a) or 78o(d)) and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
Date: March 12, 2003
By: /s/
Diane K. Bryantt
Diane K. Bryantt, Senior Vice President & CFO
These certifications accompany the Periodic Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Issuer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.