iretexhibit991-09092008.htm

Minot, ND – Investors Real Estate Trust (IRET) (NASDAQ:IRET) (NASDAQ:IRETP) reported financial and operating results today for the quarter ended July 31, 2008. These results are summarized below; for the full report, please access the IRET website at www.iret.com to view the quarterly report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended July 31, 2008 (click on “Investor Relations” and then on “SEC Filings”).

During the first quarter of fiscal year 2009, IRET’s revenues increased from the year-earlier period, due primarily to property acquisitions and a decrease in the level of tenant concessions offered. Funds From Operations (FFO)1 increased on an absolute basis from the year-earlier period, but declined slightly on a per share and unit basis, primarily due to dilution following the Company’s October 2007 public offering of 6.9 million common shares. Net income declined from the year-earlier period, primarily due to a decrease in lease termination fees and an increase in amortization expense related to in-place leases in the three months ended July 31, 2008 compared to the three months ended July 31, 2007. Additionally, an increase in vacancy rates in our portfolio and associated operating costs for the vacant space impacted net income in the first quarter of fiscal year 2009. For the three month period ended July 31, 2008, as compared to the same period of the prior fiscal year:

1 The National Association of Real Estate Investment Trusts, Inc. (NAREIT) defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains/losses from sales of property plus real estate depreciation and amortization. We consider FFO to be a standard supplemental measure for equity real estate investment trusts because it facilitates an understanding of the operating performance of properties without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values instead historically rise or fall with market conditions, we believe that FFO provides investors and management with a more accurate indication of our financial and operating results.

Economic occupancy4 levels on a stabilized property basis declined in all but one of our five reportable segments during the three months ended July 31, 2008, compared to the three months ended July 31, 2007. Economic occupancy levels on an all-property basis declined in three of our five reportable segments during the three months ended July 31, 2008, compared to the three months ended July 31, 2007. Economic occupancy rates on a stabilized property and all-property basis for the three months ended July 31, 2008, as compared to the three months ended July 31, 2007, were as follows:

Commercial Medical -

Barry Point, Kansas City, MO; Edgewood Vista Billings, Billings, MT; Edgewood Vista East Grand Forks, East Grand Forks, MN; Edgewood Vista Sioux Falls, Sioux Falls, SD; Edina 6405 France Medical, Edina, MN; Edina 6363 France Medical, Edina, MN; Minneapolis 701 25th Ave Medical (Riverside), Minneapolis, MN; Burnsville 303 Nicollet Medical (Ridgeview), Burnsville, MN; Burnsville 305 Nicollet Medical (Ridgeview South), Burnsville, MN; Eagan 1440 Duckwood Medical, Eagan, MN; Edgewood Vista Belgrade, Belgrade, MT; Edgewood Vista Columbus, Columbus, NE; Edgewood Vista Fargo, Fargo, ND; Edgewood Vista Grand Island, Grand Island, NE and Edgewood Vista Norfolk, Norfolk, NE.

2 We measure the performance of our segments based on NOI, which we define as total revenues less property operating expenses and real estate taxes. We believe that NOI is an important supplemental measure of operating performance for a real estate investment trust’s operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing and general and administrative expense. NOI does not represent cash generated by operating activities in accordance with GAAP, and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance. See tables below for a reconciliation of NOI to the condensed consolidated financial statements.

3 Stabilized properties are those properties owned for the entirety of both periods being compared. While results presented on a stabilized property basis are not determined in accordance with GAAP, management believes that measuring performance on a stabilized property basis is useful to investors and to management because it enables evaluation of how the Company’s properties are performing year over year.

During the first quarter of fiscal year 2009, IRET acquired a parcel of unimproved land in Bismarck, North Dakota for approximately $576,000, and four small apartment buildings with a total of 52 units in Minot, North Dakota, for a total purchase price (excluding closing costs) of approximately $2.5 million, including the issuance of limited partnership units of IRET Properties, the Company’s operating partnership, valued at approximately $2.0 million. The Company had no dispositions in the first quarter of fiscal year 2009. The following table details the Company’s acquisitions during the three months ended July 31, 2008:

	(in thousands)
Acquisitions	Land		Building		Acquisition Cost

Multi-Family Residential
33-unit Minot Westridge Apartments – Minot, ND	$	67	$	1,887	$	1,954
12-unit Minot Fairmont Apartments – Minot, ND		28		337		365
4-unit Minot 4th Street Apartments – Minot, ND		15		74		89
3-unit Minot 11th Street Apartments – Minot, ND		11		53		64
		121		2,351		2,472
Unimproved Land
Bismarck 2130 S. 12th Street – Bismarck, ND		576		0		576
		576		0		576

Total Property Acquisitions	$	697	$	2,351	$	3,048

2828 Chicago Avenue Medical Building: In fiscal year 2006, IRET purchased an approximately 55,000 square foot, five-story medical office building located in Minneapolis, Minnesota. During fiscal year 2007, IRET committed to construct an approximately 56,239 square foot medical office building adjacent to the existing structure, and an adjoining parking ramp, with planned project completion in the second quarter of IRET’s fiscal year 2009 and an estimated total project cost of $15.7 million. As of July 31, 2008, approximately 73% of this new medical office building was pre-leased to two tenants. Construction on the project began in August 2007, and as of July 31, 2008, the Company has incurred approximately $14.2 million in construction costs.

Southdale Medical Building Expansion Project: In July 2007, the Company signed a lease with an anchor tenant committing the Company to construct an approximately 27,750 square foot addition to the Company’s existing Southdale Medical Building located in Edina, Minnesota. The estimated cost of this expansion project is approximately $11.0 million, including relocation, tenant improvement and leasing costs expected to be incurred to relocate tenants in the existing facility. Construction began in September 2007. The exterior shell of the expansion project was completed in July 2008. Certain interior work and tenant improvements are ongoing and are scheduled for completion in the second quarter of fiscal year 2009. As of July 31, 2008, the Company has incurred approximately $7.5 million in construction costs for this expansion project.

IRET Corporate Plaza: During fiscal year 2007, the Company purchased an unimproved parcel of land in Minot, North Dakota for approximately $1.8 million. The Company is constructing a mixed-use project on this site, to consist of approximately 71 apartments and 60,100 rentable square feet of office and retail space. The Company plans to move its Minot, North Dakota offices to this location, occupying approximately one-third of the proposed office/retail space. Current estimates are that the project will be completed in the second quarter of the Company’s fiscal year 2009, at an expected total cost of approximately $20.7 million, including estimated future tenant build-outs and out-lot development. As of July 31, 2008, the Company has incurred approximately $13.2 million of the estimated construction cost of this project.

As of July 31, 2008, IRET had a total capitalization of $1.9 billion. Total capitalization is defined as the market value (closing price at end of period) of the Company’s outstanding common shares and the imputed market value of the outstanding limited partnership units of IRET Properties (which are convertible, at the expiration of a specified holding period, into cash or, at the Company’s sole discretion, into common shares of the Company on a one-to-one basis), plus the book value of the Company’s preferred shares and the outstanding principal balance of the consolidated debt of the Company.

The Conference Call for 1st Quarter Earnings is scheduled for Thursday, September 11, 2008 at 9:00 A.M. Central Daylight Time. In order to use the limited time available more efficiently, the Company requests that questions be submitted in advance, via e-mail to the attention of IRET’s Investor Relations Director at msaari@iret.com, by 5:00 p.m. Central Daylight Time on Wednesday, September 10, 2008. During the question and answer period, priority will be given to addressing questions submitted in advance. The call will be limited to one hour, including questions and answers. Conference call access information is as follows:

IRET is a self-administered, equity real estate investment trust investing in income-producing properties located primarily in the upper Midwest. IRET owns a diversified portfolio of properties consisting of 76 multi-family residential properties with 9,528 apartment units; and 65 office properties, 48 medical properties (including senior housing), 17 industrial properties and 33 retail properties with a total of approximately 11.5 million square feet of leasable space. IRET’s distributions have increased every year for 38 consecutive years. IRET common and preferred shares are publicly traded on the NASDAQ Global Select Market (symbols: IRET and IRETP). IRET’s press releases and supplemental information 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 from projected results. Such risks, uncertainties and other factors include, but are not limited to: fluctuations in interest rates, the effect of government regulation, the availability of capital, changes in general and local economic and real estate market conditions, competition, our ability to attract and retain skilled personnel, and those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including our 2008 Form 10-K. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

	(in thousands)
	July 31, 2008			April 30, 2008
ASSETS
Real estate investments
Property owned	$	1,655,778		$	1,648,259
Less accumulated depreciation		(229,691	)		(219,379	)
		1,426,087			1,428,880
Development in progress		35,231			22,856
Unimproved land		4,567			3,901
Mortgage loans receivable, net of allowance		534			541
Total real estate investments		1,466,419			1,456,178
Other assets
Cash and cash equivalents		42,351			53,481
Marketable securities – available-for-sale		420			420
Receivable arising from straight-lining of rents, net of allowance		14,383			14,113
Accounts receivable, net of allowance		4,395			4,163
Real estate deposits		1,048			1,379
Prepaid and other assets		2,324			349
Intangible assets, net of accumulated amortization		58,936			61,649
Tax, insurance, and other escrow		7,888			8,642
Property and equipment, net		1,450			1,467
Goodwill		1,392			1,392
Deferred charges and leasing costs, net		15,155			14,793
TOTAL ASSETS	$	1,616,161		$	1,618,026

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Accounts payable and accrued expenses	$	32,917		$	33,757
Mortgages payable		1,068,267			1,063,858
Other		830			978
TOTAL LIABILITIES		1,102,014			1,098,593

COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN PARTNERSHIPS		13,186			12,609
MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP		159,984			161,818
(21,292,531 units at July 31, 2008 and 21,238,342 units at April 30, 2008)
SHAREHOLDERS’ EQUITY
Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 1,150,000 shares issued and outstanding at July 31, 2008 and April 30, 2008, aggregate liquidation preference of $28,750,000)		27,317			27,317
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 58,202,448 shares issued and outstanding at July 31, 2008, and 57,731,863 shares issued and outstanding at April 30, 2008)		444,134			440,187
Accumulated distributions in excess of net income		(130,474	)		(122,498	)
Total shareholders’ equity		340,977			345,006
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,616,161		$	1,618,026

	Three Months Ended July 31
	(in thousands, except per share data)
	2008			2007
REVENUE
Real estate rentals	$	47,657		$	44,093
Tenant reimbursement		11,189			9,480
TOTAL REVENUE		58,846			53,573
EXPENSES
Interest		16,888			15,442
Depreciation/amortization related to real estate investments		13,318			12,189
Utilities		4,434			3,948
Maintenance		6,999			6,006
Real estate taxes		7,370			6,429
Insurance		750			650
Property management expenses		4,251			3,841
Administrative expenses		1,231			1,122
Advisory and trustee services		100			74
Other expenses		362			253
Amortization related to non-real estate investments		449			343
TOTAL EXPENSES		56,152			50,297
Interest income		223			354
Other income		25			281
Income before minority interest and discontinued operations and loss on sale of other investments		2,942			3,911
Loss on sale of other investments		0			(1	)
Minority interest portion of operating partnership income		(647	)		(981	)
Minority interest portion of other partnerships’ loss		63			36
Income from continuing operations		2,358			2,965
Discontinued operations, net of minority interest		0			16
NET INCOME		2,358			2,981
Dividends to preferred shareholders		(593	)		(593	)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	1,765		$	2,388
Earnings per common share from continuing operations	$	.03		$	.05
Earnings per common share from discontinued operations		.00			.00
NET INCOME PER COMMON SHARE – BASIC AND DILUTED	$	.03		$	.05

	(in thousands, except per share amounts)
Three Months Ended July 31,	2008									2007
	Amount				Weighted Avg Shares and Units(2)		Per Share and Unit(3)			Amount				Weighted Avg Shares and Units(2)		Per Share and Unit(3)



Net income		$	2,358								$	2,981
Less dividends to preferred shareholders			(593	)								(593	)
Net income available to common shareholders			1,765			57,916		$	0.03			2,388			48,663		$	0.05
Adjustments:
Minority interest in earnings of Unitholders			647			21,298						987			20,284
Depreciation and amortization(1)			13,641									12,485
(Gain)/loss on depreciable property sales			0									1
Funds from operations applicable to common shares and Units		$	16,053			79,214		$	0.20		$	15,861			68,947		$	0.23

(1)

Real estate depreciation and amortization consists of the sum of depreciation/amortization related to real estate investments and amortization related to non-real estate investments from the Condensed Consolidated Statements of Operations, totaling $13,767 and $12,532, and depreciation/amortization from Discontinued Operations of $0 and $16, less corporate-related depreciation and amortization on office equipment and other assets of $126 and $63, for the three months ended July 31, 2008 and 2007, respectively.

	(in thousands)
Three Months Ended July 31, 2008	Multi-Family Residential			Commercial- Office		Commercial- Medical		Commercial- Industrial		Commercial- Retail		Total

Real estate revenue		$	18,601	$	20,806	$	12,866	$	3,096	$	3,477	$	58,846
Real estate expenses			8,724		9,444		3,762		734		1,140		23,804
Net operating income		$	9,877	$	11,362	$	9,104	$	2,362	$	2,337		35,042
Interest													(16,888	)
Depreciation/amortization													(13,767	)
Administrative, advisory and trustee fees													(1,331	)
Other expenses													(362	)
Other income													248
Income before minority interest and discontinued operations and (loss) gain on sale of other investments												$	2,942

	(in thousands)
Three Months Ended July 31, 2007	Multi-Family Residential			Commercial-Office		Commercial-Medical		Commercial-Industrial		Commercial-Retail		Total

Real estate revenue		$	17,719	$	20,594	$	8,966	$	2,662	$	3,632	$	53,573
Real estate expenses			8,284		8,716		2,273		499		1,102		20,874
Net operating income		$	9,435	$	11,878	$	6,693	$	2,163	$	2,530		32,699
Interest													(15,442	)
Depreciation/amortization													(12,532	)
Administrative, advisory and trustee fees													(1,196	)
Other expenses													(253	)
Other income													635
Income before minority interest and discontinued operations and (loss) gain on sale of other investments												$	3,911

Segments	Stabilized Properties(a)						All Properties
	1st Quarter			1st Quarter			1st Quarter			1st Quarter
	Fiscal 2009			Fiscal 2008			Fiscal 2009			Fiscal 2008
Multi-Family Residential		92.8	%		92.2	%		92.3	%		91.8	%
Commercial Office		88.9	%		93.3	%		89.1	%		93.3	%
Commercial Medical		95.7	%		96.0	%		96.5	%		96.1	%
Commercial Industrial		95.9	%		98.6	%		96.8	%		98.1	%
Commercial Retail		86.6	%		87.0	%		86.6	%		87.0	%