SOURCE: Investors Real Estate Trust

September 09, 2005 17:40 ET

Investors Real Estate Trust Announces First Quarter Fiscal 2006 Financial Results

MINOT, ND -- (MARKET WIRE) -- September 9, 2005 -- Investors Real Estate Trust's (NASDAQ: IRETS) (NASDAQ: IRETP) financial results for the first three months of its fiscal year 2006 are summarized below. For the full report, please access our 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, 2005 (click on "Investor Relations" and then on "SEC Filings").

During the first quarter of fiscal year 2006, IRET purchased two medical office buildings in Minneapolis and St. Paul, Minnesota, for a total of approximately $19.8 million, and completed construction of a 36-unit apartment building in Grand Forks, North Dakota, at a cost of approximately $2.4 million, bringing property owned (at cost, before depreciation/amortization) to $1,202.7 million. No properties were sold this quarter.

For the three-month period ended July 31, 2005, as compared to the same period of the prior fiscal year:

--  Revenues increased to $41.8 million from $38.4 million.
--  Funds From Operations were $10.7 million compared to $11.4 million.
--  Net Income Available to Common Shareholders, as computed under
    generally accepted accounting principles, was $1.1 million, compared to
    $4.9 million.
    
Factors that contributed to the decline in first quarter Net Income Available to Common Shareholders included:
--  Approximately $2.6 million received from discontinued operations
    (property sales) last year, and none this year.
--  Approximately $850,000 in lease buy-out income received last year, and
    none this year.
--  Increased accounting, consultant and wage expense resulting from
    Sarbanes-Oxley compliance.
--  Increased depreciation/amortization expense. Our real estate portfolio
    increased 2% but depreciation/amortization increased at a significantly
    higher rate, largely as a result of the "in-place lease" amortization
    accounting rule that applies to our new acquisitions.
    
Occupancy levels for our portfolio were not materially different from the first quarter of the prior year:

Three Months Ended July 31:
                                   (in thousands)
                                2005            2004            Change
                                --------------------------------------
Multi-Family Residential        90.9%           90.2%            0.7%
Commercial-Office               90.5%           91.4%           (0.9%)
Commercial-Medical              93.4%           90.9%            2.5%
Commercial-Industrial           86.6%           90.4%           (3.8%)
Commercial-Retail               88.6%           90.2%           (1.6%)
We are experiencing some increase in tenant demand in the markets in which we operate, due to the continued economic recovery, but we continue to expect only a slight improvement in occupancy and concession levels during the remainder of our current fiscal year.

Acquisitions for the Three Months Ended July 31, 2005:

During the three months ended July 31, 2005, IRET acquired two medical office properties for a total purchase price of approximately $19.8 million, excluding closing costs, and completed construction on one apartment building. The Company did not dispose of any properties during the first quarter of fiscal year 2006.

Acquisitions                                     (in thousands)
                                                 Acquisition Cost
                                                 ----------------
Multi-Family Residential
  36 - Unit Legacy 7 - Grand Forks, ND              $  2,445
                                                    --------
Commercial Property - Medical
  54,971 sq. ft. 2800 Medical Building -
   Minneapolis, MN                                     9,000
  50,409 sq. ft. Ritchie Medical Plaza -
   St. Paul, MN                                       10,750
                                                   ---------

Total Property Acquisitions                        $  22,195
                                                 ================



                     SUMMARY OF FINANCIAL INFORMATION
               INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
             FOR THE THREE MONTHS ENDED JULY 31, 2005 AND 2004

                                      Three Months Ended July 31
                                (in thousands, except per share data)
                                       2005              2004
                                     ----------       ----------
REVENUE
     Real estate rentals             $   34,305       $   32,195
     Tenant reimbursement                 7,448            6,240
                                     ----------       ----------
TOTAL REVENUE                            41,753           38,435
                                     ----------       ----------
OPERATING EXPENSE
     Interest                            12,223           11,410
     Depreciation/amortization
      related to real estate
      investments                         9,244            7,833
     Utilities                            2,879            2,599
     Maintenance                          5,095            4,253
     Real estate taxes                    5,002            4,512
     Insurance                              669              672
     Property management expenses         3,139            2,374
     Property management related
      party                                   0              150
     Administrative expense                 916              693
     Advisory and trustee services           48               27
     Other operating expenses               293              188
     Amortization                           365              274
     Amortization of related party
      costs                                  15               15
                                     ----------       ----------
TOTAL OPERATING EXPENSE                  39,888           35,000
                                     ----------       ----------
Operating income                          1,865            3,435
Non-operating income                        202              210
                                     ----------       ----------
Income before minority interest and
 discontinued operations and gain on
 sale of other investments                2,067            3,645
Gain on sale of other investments             1                0
Minority interest portion of other
 partnerships' income                       (78)             (89)
Minority interest portion of operating
 partnership income                        (318)            (705)
                                     ----------       ----------
Income from continuing operations         1,672            2,851
Discontinued operations, net                  0            2,619
NET INCOME                                1,672            5,470
     Dividends to preferred
      shareholders                         (593)            (593)
                                     ----------       ----------
NET INCOME AVAILABLE TO COMMON
 SHAREHOLDERS                        $    1,079       $    4,877
                                     ==========       ==========
Earnings per common share from
 continuing operations               $      .02       $      .06
Earnings per common share from
 discontinued operations                    .00              .06
                                     ----------       ----------
NET INCOME PER COMMON SHARE - BASIC  $      .02       $      .12
                                     ==========       ==========
DILUTED
Earnings per common share from
 continuing operations               $      .02       $      .06
Earnings per common share from
 discontinued operations                    .00              .06
                                     ----------       ----------
NET INCOME PER COMMON SHARE          $      .02       $      .12
                                     ==========       ==========
CASH DIVIDENDS DECLARED PER COMMON
 SHARE                               $   0.1625       $   0.1605
                                     ==========       ==========


        RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS

                                (in thousands, except per share amounts)
Three Months Ended July 31,         2005                     2004
                                  Weighted                 Weighted
                                    Avg      Per             Avg      Per
                                   Shares   Share           Shares   Share
                                    and      and             and      and
                            Amount Units(2) Unit(3) Amount Units(2) Unit(3)
                           ------- ------- ------- ------- ------- -------
Net income                 $ 1,672         $       $ 5,470         $
Less dividends to
 preferred shareholders       (593)                   (593)
                           ------- ------- ------- ------- ------- -------
Net income available to
 common shareholders         1,079  45,224     .02   4,877  41,981     .12
Adjustments:
Minority interest in
 earnings of Unitholders       318  13,250           1,474  11,987
Depreciation and
 Amortization(1)             9,332                   8,139
Gains on depreciable
 property sales                 (1)                 (3,064)
                           ------- ------- ------- ------- ------- -------
Funds from operations
 applicable to common
 shares and Units          $10,728  58,474 $   .18 $11,426  53,968 $   .21
                           ======= ======= ======= ======= ======= =======


(1)     Real estate depreciation and amortization consists of the sum of
        depreciation/amortization related to real estate investments;
        amortization; and amortization of related party costs from the
        Condensed Consolidated Statements of Operations, totaling $9,624
        and $8,122, and depreciation and amortization from Discontinued
        Operations (excluding amortization of financing charges) of $0 and
        $286, less corporate-related depreciation and amortization on
        office equipment and other assets of $59 and $44 and less
        amortization of financing costs of $233 and $225, for the three
        months ended July 31, 2005 and 2004, respectively.

(2)     UPREIT Units of the Operating Partnership are exchangeable for
        common shares of beneficial interest on a one-for-one basis.

(3)     Net income is calculated on a per share basis. Funds from
        Operations is calculated on a per share and unit basis.
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 risk, 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.

Contact Information

  • Michelle R. Saari
    Investors Real Estate Trust's
    PO Box 1988
    12 South Main Street
    Minot, North Dakota 58701
    701.837.4738 phone
    701.838.8875 fax
    Email Contact email
    WEBSITE: www.iret.com