iretexhibit991.htm

Minot, ND – Investors Real Estate Trust (tickers: IRET and IRETP; exchange: NASDAQ Global Select Market) reported financial and operating results today for the quarter ended October 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 October 31, 2008 (click on “Investors”, “Financial Reporting” and then on “SEC Filings”).

During the second quarter of fiscal year 2009, IRET’s revenues increased from the year-earlier period, due primarily to property acquisitions. 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 an increase in operating expenses in the three and six months ended October 31, 2008 compared to the three and six months ended October 31, 2007. Additionally, an increase in vacancy rates in our portfolio and associated operating costs for the vacant space unreimbursed by tenants impacted net income in the second quarter of fiscal year 2009. For the three month period ended October 31, 2008, as compared to the same period of the prior fiscal year:

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 two of our five reportable segments during the three months ended October 31, 2008, compared to the three months ended October 31, 2007. Economic occupancy levels on an all-property basis decreased or were flat in two of our five reportable segments during the three months ended October 31, 2008, compared to the three months ended October 31, 2007. Economic occupancy rates on a stabilized property and all-property basis for the three months ended October 31, 2008, as compared to the three months ended October 31, 2007, were as follows:

Multi-Family Residential -	Indian Hills, Sioux City, IA; Cottonwood IV Apartments, Bismarck, ND; Greenfield Apartments, Omaha, NE; Minot 4th Street Apartments, Minot, ND; Minot 11th Street Apartments, Minot, ND; Minot Fairmont Apartments, Minot, ND; Minot Westridge Apartments, Minot, ND; Thomasbrook Apartments, Lincoln, NE and Evergreen Apartments, Isanti, MN.
	Total number of units, 611. Occupancy % for the three and six months ended October 31, 2008, 92.6% and 88.4%, respectively.

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; Edgewood Vista Norfolk, Norfolk, NE and 2828 Chicago Avenue, Minneapolis, MN.

Total square footage, 597,265. Occupancy % for the three and six months ended October 31, 2008, 95.2% and 97.0%, respectively.

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.

During the second quarter of fiscal year 2009, IRET acquired a 36-unit apartment building located in Isanti, Minnesota, for a purchase price of $3.1 million, consisting of approximately $1.3 million in cash and limited partnership units of IRET’s operating partnership valued at approximately $1.8 million, and also acquired an approximately 22,500 square foot one-story office building, on approximately 2.5 acres in Bismarck, North Dakota, for a purchase price of approximately $2.2 million. The office building is connected to a vacant four-story office property that the Company is demolishing; this vacant property is classified as Unimproved Land in the table below. The Company had no material dispositions in the second quarter of fiscal year 2009.

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 $2.0 million. The Company had no dispositions in the first quarter of fiscal year 2009.

During the three months ended October 31, 2008, IRET completed the remaining interior work and tenant improvements in its approximately 31,643 square foot addition to the Company’s Southdale Medical Building in Edina, Minnesota. The cost of the expansion project was approximately $6.5 million, excluding relocation, tenant improvement and leasing costs incurred to relocate tenants in the existing facility. Also during the second quarter of fiscal year 2009, IRET completed construction of an approximately 56,239 square foot medical office building and adjoining parking ramp next to the Company’s existing five-story medical office building located at 2828 Chicago Avenue in Minneapolis, Minnesota. The new medical office building and adjoining parking ramp cost approximately $11.3 million to construct.

	(in thousands)
Acquisitions	Land		Building		Intangible Assets		Acquisition Cost

Multi-Family Residential
33-unit Minot Westridge Apartments – Minot, ND	$	67	$	1,887	$	0	$	1,954
12-unit Minot Fairmont Apartments – Minot, ND		28		337		0		365
4-unit Minot 4th Street Apartments – Minot, ND		15		74		0		89
3-unit Minot 11th Street Apartments – Minot, ND		11		53		0		64
36-unit Evergreen Apartments – Isanti, MN		380		2,720		0		3,100
		501		5,071		0		5,572
Commercial Property - Office
22,500 sq. ft. Bismarck 715 E. Broadway – Bismarck, ND		389		1,267		255		1,911
		389		1,267		255		1,911
Commercial Property - Medical
56,239 sq. ft. 2828 Chicago Avenue – Minneapolis, MN*		727		11,319		0		12,046
31,643 sq. ft. Southdale Medical Expansion (6545 France) – Edina, MN**		0		6,473		0		6,473
		727		17,792		0		18,519
Unimproved Land
Bismarck 2130 S. 12th Street – Bismarck, ND		576		0		0		576
Bismarck 700 E. Main – Bismarck ND		314		0		0		314
		890		0		0		890

Total Property Acquisitions	$	2,507	$	24,130	$	255	$	26,892

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, consisting of 71 apartments and 60,100 rentable square feet of office and retail space. The Company will move its Minot, North Dakota offices to this location, occupying approximately one-third of the proposed office/retail space. Apartment marketing at the project commenced in November 2008. Current estimates are that the commercial portion of the project will be completed in the third quarter of the Company’s fiscal year 2009. The expected total cost of the project is approximately $20.7 million. As of October 31, 2008, the Company has incurred approximately $16.9 million of the estimated construction cost of this project.

As of October 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 2nd Quarter Earnings is scheduled for Friday, December 12, 2008 at 9:00 A.M. Central Standard 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 Standard Time on Wednesday, December 11, 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 77 multi-family residential properties with 9,564 apartment units; and 66 office properties, 49 medical properties (including senior housing), 17 industrial properties and 33 retail properties with a total of approximately 11.6 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, except share data)
	October 31, 2008			April 30, 2008
ASSETS
Real estate investments
Property owned	$	1,690,763		$	1,648,259
Less accumulated depreciation		(240,452	)		(219,379	)
		1,450,311			1,428,880
Development in progress		17,603			22,856
Unimproved land		5,036			3,901
Mortgage loans receivable, net of allowance of $11 and $11, respectively		528			541
Total real estate investments		1,473,478			1,456,178
Other assets
Cash and cash equivalents		40,855			53,481
Marketable securities – available-for-sale		420			420
Receivable arising from straight-lining of rents, net of allowance of $787 and $992, respectively		14,962			14,113
Accounts receivable, net of allowance of $291 and $261, respectively		3,676			4,163
Real estate deposits		86			1,379
Prepaid and other assets		1,813			349
Intangible assets, net of accumulated amortization of $39,845 and $34,493, respectively		56,576			61,649
Tax, insurance, and other escrow		6,182			8,642
Property and equipment, net of accumulated depreciation of $951 and $1,328, respectively		1,432			1,467
Goodwill		1,392			1,392
Deferred charges and leasing costs, net of accumulated amortization of $8,751 and $7,265, respectively		16,037			14,793
TOTAL ASSETS	$	1,616,909		$	1,618,026

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Accounts payable and accrued expenses	$	26,645		$	33,757
Revolving lines of credit		15,000			0
Mortgages payable		1,066,113			1,063,858
Other		703			978
TOTAL LIABILITIES		1,108,461			1,098,593

COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN PARTNERSHIPS		13,098			12,609
MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP		157,622			161,818
(21,287,484 units at October 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 October 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, 58,713,015 shares issued and outstanding at October 31, 2008, and 57,731,863 shares issued and outstanding at April 30, 2008)		448,803			440,187
Accumulated distributions in excess of net income		(138,392	)		(122,498	)
Total shareholders’ equity		337,728			345,006
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,616,909		$	1,618,026

	Three Months Ended October 31						Six Months Ended October 31
	(in thousands, except per share data)
	2008			2007			2008			2007
REVENUE
Real estate rentals	$	48,857		$	44,543		$	96,514		$	88,636
Tenant reimbursement		10,716			9,668			21,905			19,148
TOTAL REVENUE		59,573			54,211			118,419			107,784
EXPENSES
Interest		17,078			15,687			33,966			31,129
Depreciation/amortization related to real estate investments		13,480			12,164			26,798			24,353
Utilities		4,607			4,296			9,041			8,244
Maintenance		6,585			6,021			13,584			12,027
Real estate taxes		7,487			6,463			14,857			12,892
Insurance		754			606			1,504			1,256
Property management expenses		4,520			3,667			8,771			7,508
Administrative expenses		1,125			1,101			2,356			2,223
Advisory and trustee services		114			166			214			240
Other expenses		482			457			844			710
Amortization related to non-real estate investments		479			340			928			683
TOTAL EXPENSES		56,711			50,968			112,863			101,265
Interest income		210			339			433			693
Other income		78			92			103			373
Income before gain on sale of other investments and minority interest and discontinued operations		3,150			3,674			6,092			7,585
Gain on sale of other investments		54			3			54			2
Minority interest portion of operating partnership income		(700	)		(855	)		(1,347	)		(1,835	)
Minority interest portion of other partnerships’ loss		19			0			82			36
Income from continuing operations		2,523			2,822			4,881			5,788
Discontinued operations, net of minority interest		0			14			0			29
NET INCOME		2,523			2,836			4,881			5,817
Dividends to preferred shareholders		(593	)		(593	)		(1,186	)		(1,186	)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	1,930		$	2,243		$	3,695		$	4,631
Earnings per common share from continuing operations	$	.03		$	.04		$	.06		$	.09
Earnings per common share from discontinued operations		.00			.00			.00			.00
NET INCOME PER COMMON SHARE – BASIC AND DILUTED	$	.03		$	.04		$	.06		$	.09

	(in thousands, except per share amounts)
Three Months Ended October 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		$	2,523								$	2,836
Less dividends to preferred shareholders			(593	)								(593	)
Net income available to common shareholders			1,930			58,374		$	.03			2,243			49,675		$	.04
Adjustments:
Minority interest in earnings of Unitholders			700			21,294						859			20,483
Depreciation and amortization(1)			13,840									12,452
Gain on depreciable property sales			(54	)								(3	)
Funds from operations applicable to common shares and Units		$	16,416			79,668		$	.21		$	15,551			70,158		$	.22

	(in thousands, except per share amounts)
Six Months Ended October 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		$	4,881								$	5,817
Less dividends to preferred shareholders			(1,186	)								(1,186	)
Net income available to common shareholders			3,695			58,145		$	.06			4,631			49,169		$	.09
Adjustments:
Minority interest in earnings of Unitholders			1,347			21,296						1,846			20,383
Depreciation and amortization(4)			27,481									24,937
Gain on depreciable property sales			(54	)								(2	)
Funds from operations applicable to common shares and Units		$	32,469			79,441		$	.41		$	31,412			69,552		$	.45

(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 $13,959 and $12,504, and depreciation/amortization from Discontinued Operations of $0 and $13, less corporate-related depreciation and amortization on office equipment and other assets of $119 and $65, for the three months ended October 31, 2008 and 2007, respectively.

(4)

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 $27,726 and $25,036, and depreciation/amortization from Discontinued Operations of $0 and $29, less corporate-related depreciation and amortization on office equipment and other assets of $245 and $128, for the six months ended October 31, 2008 and 2007, respectively.

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

Real estate revenue		$	19,402	$	20,723	$	12,960	$	2,975	$	3,513	$	59,573
Real estate expenses			8,929		9,203		3,863		802		1,156		23,953
Net operating income		$	10,473	$	11,520	$	9,097	$	2,173	$	2,357		35,620
Interest													(17,078	)
Depreciation/amortization													(13,959	)
Administrative, advisory and trustee fees													(1,239	)
Other expenses													(482	)
Other income													288
Income before gain on sale of other investments and minority interest and discontinued operations												$	3,150

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

Real estate revenue		$	18,268	$	20,611	$	8,920	$	3,027	$	3,385	$	54,211
Real estate expenses			8,676		8,721		2,043		626		987		21,053
Net operating income		$	9,592	$	11,890	$	6,877	$	2,401	$	2,398		33,158
Interest													(15,687	)
Depreciation/amortization													(12,504	)
Administrative, advisory and trustee fees													(1,267	)
Other expenses													(457	)
Other income													431
Income before gain on sale of other investments and minority interest and discontinued operations												$	3,674

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

Real estate revenue		$	38,003	$	41,529	$	25,825	$	6,071	$	6,991	$	118,419
Real estate expenses			17,654		18,647		7,625		1,535		2,296		47,757
Net operating income		$	20,349	$	22,882	$	18,200	$	4,536	$	4,695		70,662
Interest													(33,966	)
Depreciation/amortization													(27,726	)
Administrative, advisory and trustee fees													(2,570	)
Other expenses													(844	)
Other income													536
Income before gain on sale of other investments and minority interest and discontinued operations												$	6,092

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

Real estate revenue		$	35,987	$	41,206	$	17,885	$	5,689	$	7,017	$	107,784
Real estate expenses			16,960		17,437		4,316		1,125		2,089		41,927
Net operating income		$	19,027	$	23,769	$	13,569	$	4,564	$	4,928		65,857
Interest													(31,129	)
Depreciation/amortization													(25,036	)
Administrative, advisory and trustee fees													(2,463	)
Other expenses													(710	)
Other income													1,066
Income before gain on sale of other investments and minority interest and discontinued operations												$	7,585

Segments	Stabilized Properties(a)						All Properties
	2nd Quarter			2nd Quarter			2nd Quarter			2nd Quarter
	Fiscal 2009			Fiscal 2008			Fiscal 2009			Fiscal 2008
Multi-Family Residential		95.1	%		94.2	%		94.9	%		93.8	%
Commercial Office		88.5	%		92.9	%		88.8	%		92.9	%
Commercial Medical		95.8	%		95.6	%		95.6	%		95.6	%
Commercial Industrial		96.5	%		98.4	%		97.3	%		97.2	%
Commercial Retail		88.8	%		86.9	%		88.8	%		86.9	%

Commercial Office -	610 Business Center, Brooklyn Park, MN; Intertech, Fenton, MO; Plymouth 5095, Plymouth, MN and Bismarck 715 E Broadway, Bismarck, ND.
	Total square footage, 185,825. Occupancy % for the three and six months ended October 31, 2008, 95.4% and 95.1%, respectively.

Commercial Industrial -	Cedar Lake Business Center, St. Louis Park, MN; Urbandale, Urbandale, IA; Woodbury 1865, Woodbury, MN and Eagan 2785 & 2795 Highway 55, Eagan, MN.
	Total square footage, 846,953. Occupancy % for the three and six months ended October 31, 2008, 100.0% and 100.0%, respectively.

Multi-Family Residential -	405 Grant Avenue Apartments, Harvey, ND and Sweetwater – Green Acres 1&2 Apartments, Devils Lake, ND.
	Total number of units, 60.

Commercial Office -	Minnetonka Office Building, Minnetonka, MN.
	Total square footage, 1,142.