EX-99.1 2 iretex991632006.htm IRET EXHIBIT 99.1 IRET Exhibit 99.1 06/30/2006

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

Exhibit 99.1 

 

 

PRESS RELEASE

 

 

 

Date:  June 30, 2006

 

Contact: Michelle Saari

 

Website:  www.iret.com

 

NASDAQ: IRETS

INVESTORS REAL ESTATE TRUST
12 South Main Street
PO Box 1988
Minot, North Dakota  58702-1988
Phone: 701-838-4738
Fax: 701-838-8875
Email: info@iret.com 

FOR IMMEDIATE RELEASE 

Investors Real Estate Trust (tickers:  IRETS and IRETP; exchange:  NASDAQ)

News Release – 06/30/06 

 

INVESTORS REAL ESTATE TRUST ANNOUNCES RESULTS FOR THE THREE AND TWELVE MONTHS ENDED APRIL 30, 2006 

Minot, ND –Investors Real Estate Trust, a real estate investment trust with a diversified portfolio of multi-family residential and office, medical, industrial and retail properties located primarily in the upper Midwest, reported the following results today for the three and twelve months ended April 30, 2006: 

(unaudited; in thousands, except per share amounts)

 

For the three months
ended April 30,

For the twelve months
ended April 30,

 

2006

2005

2006

2005

 

 

 

 

 

 

 

 

 

Revenues

$

43,939

$

38,142

$

172,799

$

155,216

Net Income

$

5,001

$

2,417

$

11,567

$

15,076

Net Income available to common shareholders

$

4,408

$

1,824

$

9,195

$

12,704

Net Income Per Share – Diluted

$

.10

$

.04

$

.20

$

.30

Funds from Operations (“FFO”)

$

12,200

$

10,943

$

46,711

$

42,314

FFO Per Share – Diluted

$

.21

$

.19

$

.79

$

.76

- 1 -

 

Total revenues for the three months ended April 30, 2006 were $43.9 million, compared to $38.1 million for the same period in 2005, a 15.2% increase.  Total revenues were $172.8 million and $155.2 million for the twelve months ended April 30, 2006 and 2005, respectively, an 11.3% increase.  The increase in revenue for the three and twelve months ended April 30, 2006 was due primarily to rent from properties acquired during fiscal year 2006, and to increases in rent from properties acquired in fiscal year 2005 in excess of that received in fiscal year 2005 from the same properties.  

Net Income available to common shareholders for the three months ended April 30, 2006 was $4.4 million, compared to $1.8 million for the same period in 2005, a 144.4% increase due primarily to sales of property in the fourth quarter of fiscal year 2006.  Net income available to common shareholders was $9.2 million and $12.7 million for the twelve months ended April 30, 2006 and 2005, respectively, a 27.6% decrease.  The decrease in net income available to common shareholders for the twelve months ended April 30, 2006 was due primarily to gains from the sale of real estate during fiscal year 2005 of $8.6 million, compared to $3.3 million in fiscal year 2006. 

Net Income per diluted share for the three months ended April 30, 2006 was $0.10, compared to $0.04 for the same period in 2005, a 150.0% increase.  Net Income per  diluted share was $0.20 and $0.30 for the twelve months ended April 30, 2006 and 2005, respectively, a 33.3% decrease. The changes in net income per share for the three and twelve months ended April 30, 2006 compared to the year-earlier periods were due to the same factors discussed above affecting net income available to common shareholders. 

Funds from Operations (“FFO”), a non-GAAP financial measure, was $12.2 million for the three months ended April 30, 2006, compared to $10.9 million for the same period in 2005, an 11.9% increase.  FFO was $46.7 million and $42.3 for the twelve months ended April 30, 2006 and 2005, respectively, a 10.4% increase.  FFO per diluted share, a non-GAAP financial measure, for the three months ended April 30, 2006 was $0.21, representing a 10.5% increase from FFO per  diluted share of $0.19 for the three months ended April 30, 2005.  FFO per diluted share for the twelve months ended April 30, 2006 was $0.79, representing a 3.9% increase over FFO per diluted share of $0.76 for the twelve months ended April 30, 2005.  A reconciliation of net income to FFO is provided in the condensed consolidated statement of operations information below. 

Economic Occupancy rates for each of IRET’s property types are shown below for the three and twelve months ended April 30, 2006 and 2005: 

 

For the three months
ended April 30,

For the twelve months
ended April 30,

 

2006

2005

2006

2005

Multi-Family Residential Economic Occupancy

91.7%

90.0%

91.6%

90.1%

Commercial - Office Economic Occupancy

92.9%

90.9%

92.5%

90.8%

Commercial - Medical Economic Occupancy

96.8%

92.4%

96.2%

92.7%

Commercial - Industrial Economic Occupancy

89.0%

88.2%

87.2%

86.8%

Commercial - Retail Economic Occupancy

87.0%

88.0%

87.7%

88.6%
 

We define “economic occupancy” as total possible revenue less vacancy loss as a percentage of total possible revenue.  Total possible revenue is determined by valuing occupied units or square footage at contract rates and vacant units or square footage at market rates.

- 2 -

 

Thomas A. Wentz, Sr., President and Chief Executive Officer, stated, “During fiscal year 2006, IRET saw improvements in economic occupancy levels in all of our operating segments other than retail.  Our revenues increased by $17.6 million in fiscal year 2006 compared to fiscal year 2005, to $172.8 compared to $155.2 million.  However, we have been limited in our ability to raise rents and decrease tenant concessions in our multi-family residential segment, as attractive interest rates have increased the availability of housing alternatives for our prospective tenants. In fiscal year 2007, we will continue our focus on reducing vacancy levels, improving operations, and pursuing the acquisition of quality multi-family residential, office, medical, industrial and retail properties.” 

Company Information:  IRET is a self-advised equity real estate investment trust engaged in owning and operating income-producing properties located primarily in the upper Midwest.  IRET owns a diversified portfolio of 211 properties, consisting of 66 multi-family residential properties, 56 office properties, 11 industrial properties (including miscellaneous commercial properties), 45 retail properties and 33 medical properties (including assisted living facilities). 

IRET’s cash distributions to common shareholders/unitholders during fiscal year 2006 increased to 65.3 cents per share/unit, compared to 64.5 cents paid in the prior fiscal year, an increase of 1.2%.  In each of the last 35 calendar years, the annual distribution has increased over the amount paid in the preceding year. 

Annual Meeting of Shareholders:  IRET’s 36th Annual Meeting of Shareholders will be held on Tuesday, September 19, 2006 at 7:00 p.m. CDT at the Grand International, 1505 North Broadway, Minot, North Dakota.  

A full description and discussion of IRET’s results of operations for fiscal year 2006 will be contained in IRET’s Annual Report on Form 10-K, which will be filed with the Securities and Exchange Commission no later than July 14, 2006, and mailed to shareholders in August.  IRET’s press releases are available on the company website at www.iret.com or by contacting Investor Relations at 701-837-4738. 

Certain statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially.  Such risks, uncertainties and other factors include, but are not limited to:  potential fluctuations in our operating results; the need for additional capital; the direction of interest rates and their subsequent effect on our business; competition; our ability to attract and retain skilled personnel; and those risks and uncertainties discussed in filings made by us with the Securities and Exchange Commission.  Except as otherwise required by the federal securities laws, the Company assumes no liability to update the information in this press release.

 

- 3 -

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 2006 and 2005

 

(in thousands)

 

2006

2005

ASSETS

 

 

 

 

Real estate investments

 

 

 

 

Property owned

$

1,269,423

$

1,179,856

Less accumulated depreciation

(148,607)

 

(118,512)

 

 

1,120,816

 

1,061,344

Undeveloped land

 

5,175

 

5,382

Mortgage loans receivable, net of allowance

409

 

619

Total real estate investments

 

1,126,400

 

1,067,345

Other Assets

 

 

 

 

Cash and cash equivalents

 

17,485

 

23,538

Marketable securities - available-for-sale

 

2,402

 

2,459

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

 

9,474

 

7,213

Accounts receivable – net of allowance

 

2,364

 

1,390

Real estate deposits

 

1,177

 

2,542

Prepaid and other assets

 

436

 

1,160

Intangible assets, net of accumulated amortization

 

26,449

 

24,517

Tax, insurance, and other escrow

 

8,893

 

9,068

Property and equipment, net

 

1,506

 

2,462

Goodwill

 

1,441

 

1,441

Deferred charges and leasing costs – net

9,288

 

8,023

TOTAL ASSETS

$

1,207,315

$

1,151,158

 

- 4 -

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
April 30, 2006 and 2005 

 

(in thousands)

 

2006

2005

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

LIABILITIES

 

 

 

 

Accounts payable and accrued expenses

$

24,223

$

21,795

Notes payable

 

3,500

 

0

Mortgages payable

 

765,890

 

708,558

Investment certificates issued

 

2,451

 

4,636

Other

 

1,075

 

1,966

TOTAL LIABILITIES

 

797,139

 

736,955

COMMITMENTS AND CONTINGENCIES (NOTE 16)

 

 

 

 

MINORITY INTEREST IN OTHER PARTNERSHIPS

 

16,403

 

15,860

MINORITY INTEREST OF UNIT HOLDERS IN OPERATING PARTNERSHIP

 

104,213

 

103,171

(13,685,522 units at April 30, 2006 and 13,114,460  units at April 30, 2005)

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value,1,150,000  shares issued and outstanding at April 30, 2006 and 2005, aggregate liquidation preference of $28,750,000)

 

27,317

 

27,317

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 46,915,352 shares outstanding at April 30, 2006, and 45,187,676 shares outstanding at April 30, 2005)

 

339,384

 

324,180

Accumulated distributions in excess of net income

 

(77,093)

 

(56,303)

Accumulated other comprehensive loss

 

(48)

 

(22)

Total shareholders’ equity

 

289,560

 

295,172

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,207,315

$

1,151,158

 

- 5 -

INVESTORS REAL ESTATE TRUST
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER AND YEAR ENDED
APRIL 30, 2006 and 2005
(in thousands, except per share data)
(Unaudited)

Results from Operations
For the Three-Month and Twelve-Month Periods ended April 30, 2006 and 2005 (unaudited)

 

(in thousands, except per share amounts)

 

3 Months Ended

12 Months Ended

 

04-30-06

04-30-05

04-30-06

04-30-05

Revenues

$

43,939

$

38,142

$

172,799

$

155,216

 

 

 

 

 

 

 

 

 

Net income

$

5,001

$

2,417

$

11,567

$

15,076

Preferred stock dividends

 

(593)

 

(593)

 

(2,372)

 

(2,372)

Net income applicable to common shares

 

4,408

 

1,824

 

9,195

 

12,704

Minority interest in earnings of unitholders

 

1,284

 

19

 

2,705

 

3,873

 Diluted Net Income

$

5,692

$

1,843

$

11,900

$

16,577

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

$

.10

$

.04

$

.20

$

.30

Diluted

$

.10

$

.04

$

.20

$

.30

Average number of common shares and share equivalents outstanding:

 

 

 

 

 

 

 

 

Basic

 

45,585

 

44,662

 

45,717

 

43,214

Diluted

 

58,588

 

57,523

 

59,046

 

55,835

 

 

 

 

 

 

 

 

 

FFO applicable to common shares

$

12,200

$

10,943

$

46,711

$

42,314

 

 

 

 

 

 

 

 

 

FFO per diluted share

$

.21

$

.19

$

.79

$

.76

Average number of common shares and share equivalents outstanding used for determining funds from operations per diluted share

 

58,588

 

57,523

 

59,046

 

55,835

 

 

- 6 -

Reconciliation of Net Income to Funds From Operations 

For the Three-Month and Twelve-Month Periods ended April 30, 2006 and 2005 (unaudited) 

 

(in thousands, except per share amounts)

 

3 Months Ended

12 Months Ended

 

04-30-06

04-30-05

04-30-06

04-30-05

 

Amount

Weighted Average Shares

Per Share

Amount

Weighted Average Shares

Per Share

Amount

Weighted Average Shares

Per Share

Amount

Weighted Average Shares

Per Share

Net Income

$

5,001

 

 

 

$

2,417

 

 

 

$

11,567

 

 

 

$

15,076

 

 

 

Less distributions to preferred shareholders

 

(593)

 

 

 

 

(593)

 

 

 

 

(2,372)

 

 

 

 

(2,372)

 

 

 

Net Income Available For Common Shares

$

4,408

45,585

$

.10

$

1,824

44,662

$

.04

$

9,195

45,717

$

.20

$

12,704

43,214

$

.30

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority interest in earnings of unitholders

 

1,284

13,003

 

 

 

19

12,861

 

 

 

2,705

13,329

 

 

 

3,873

12,621

 

 

 Diluted Net Income

$

5,692

58,588

$

.10

$

1,843

57,523

$

.04

$

11,900

59,046

$

.20

$

16,577

55,835

$

.30

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

$

9,779

 

 

 

$

9,531

 

 

 

$

38,104

 

 

 

$

34,342

 

 

 

(Earnings)loss from depreciable property sales/impairment

 

(3,271)

 

 

 

 

(431)

 

 

 

 

(3,293)

 

 

 

 

(8,605)

 

 

 

 Diluted Funds From Operations

$

12,200

58,588

$

.21

$

10,943

57,523

$

.19

$

46,711

59,046

$

.79

$

42,314

55,835

$

.76

 

1.     The National Association of Real Estate Investment Trust (“NAREIT”) defines FFO as net income (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from sales of property plus real estate depreciation and amortization.  IRET management considers that FFO is a useful supplemental measure for equity real estate investment trusts.  Historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation, that the value of real estate assets decreases predictably over time.  However, real estate asset values have historically risen or fallen with market conditions.  FFO, by excluding depreciation costs, reflects the fact that real estate, as an asset class, generally appreciates over time and that depreciation charges required by GAAP may not reflect underlying economic realities.  FFO is used by investors to compare the performance of real estate investment trusts.  However, while FFO is widely used by real estate investment trusts as a performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way.  Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies.

  

- 7 -

Fiscal 2006 Acquisition and Disposition Summary 

Property Acquisitions 

During fiscal year 2006, IRET added seven medical properties (including five assisted living senior housing facilities), six office properties, one multi-family residential property and two small parcels of vacant land adjoining existing Company properties to our investment portfolio, for an aggregate purchase price of approximately $93.4 million.  During fiscal year 2005, IRET acquired or placed in service four multi-family residential complexes; eight office properties, three medical properties, two retail properties and one parcel of undeveloped land for a total purchase price of approximately $146.4 million.  Real estate assets acquired by IRET during fiscal year 2006 are as follows: 

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

 

(in thousands)

Fiscal 2006 Acquisitions

Purchase Price

Multi-Family Residential

 

 

36-unit Legacy 7 - Grand Forks, ND

$

2,445

 

 

2,445

 

 

 

Commercial Property—Office

 

 

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

 

1,250

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

 

1,375

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

 

1,275

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

 

1,250

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

 

2,100

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

 

18,597

 

 

25,847

 

 

Commercial Property—Medical (including assisted living)

 

 

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

 

10,750

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

 

6,687

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

 

10,625

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

 

12,315

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

 

10,750

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

 

9,000

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

 

4,215

 

 

64,342

 

 

 

Undeveloped Property

 

 

Stevens Point Undeveloped - Stevens Point, WI

 

310

Eagan Vacant Land - Eagan, MN

 

423

 

 

733

Total Fiscal 2006 Property Acquisitions

$

93,367

 

- 8 -

Property Dispositions 

During fiscal year 2006, IRET Properties disposed of 17 properties and two undeveloped properties for an aggregate sale price of $14.2 million, compared to 17 properties and one parcel of undeveloped land sold for $48.9 million in total during fiscal year 2005.  Real estate assets sold by IRET during fiscal year 2006 are as follows: 

  

 

(in thousands)

Fiscal 2006 Dispositions

Sales Price

Book Value
and Sales Cost

Gain

Commercial - Office

 

 

 

 

 

 

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

$

490

$

345

$

145

Commercial – Retail

 

 

 

 

 

 

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

 

340

 

324

 

16

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

 

660

 

498

 

162

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

 

650

 

462

 

188

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

 

1,280

 

940

 

340

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

 

3,350

 

2,990

 

360

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

 

965

 

891

 

74

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

 

383

 

308

 

75

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

 

1,050

 

745

 

305

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

 

465

 

431

 

34

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

 

610

 

436

 

174

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

 

450

 

345

 

105

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

 

380

 

296

 

84

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

 

400

 

326

 

74

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

 

990

 

599

 

391

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

 

845

 

365

 

480

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

 

550

 

358

 

192

Undeveloped Property

 

 

 

 

 

 

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

 

110

 

105

 

5

Andover Vacant Land - Andover, MN

 

230

 

164

 

66

Total Fiscal 2006 Property Dispositions

$

14,198

$

10,928

$

3,270

 

- 9 -