SOURCE: Investors Real Estate Trust

March 12, 2007 13:06 ET

Investors Real Estate Trust Announces Third Quarter Fiscal 2007 Financial Results

MINOT, ND -- (MARKET WIRE) -- March 12, 2007 -- Investors Real Estate Trust's (NASDAQ: IRETS) (NASDAQ: IRETP) financial results for the three and nine months ended January 31, 2007 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 January 31, 2007 (click on "Investor Relations" and then on "SEC Filings").

During the third quarter of fiscal year 2007, IRET's revenues, funds from operations and net income increased from the year-earlier period, due to property acquisitions and improvements in occupancy levels and rental rates. For the three month period ended January 31, 2007, as compared to the same period of the prior fiscal year:

--  Revenues increased to $51.4 million from $42.7 million.
    
--  Funds From Operations increased to $15.6 million on approximately
    67,471,000 weighted average shares and units outstanding, from $11.7
    million on approximately 59,773,000 weighted average shares and units
    outstanding ($.23 per share and unit compared to $.20 per share and unit).
    
--  Net Income Available to Common Shareholders, as computed under
    generally accepted accounting principles, was $2.9 million, compared to
    $1.7 million.
    
For the nine month period ended January 31, 2007, as compared to the same period of the prior fiscal year:
--  Revenues increased to $144.9 million from $126.9 million.
    
--  Funds From Operations increased to $41.7 million on approximately
    63,832,000 weighted average shares and units outstanding, from $34.5
    million on approximately 59,154,000 weighted average shares and units
    outstanding ($.65 per share and unit compared to $.58 per share and unit).
    
--  Net Income Available to Common Shareholders, as computed under
    generally accepted accounting principles, was $8.3 million, compared to
    $4.8 million.
    
Occupancy levels in our portfolio showed improvement during the three and nine months ended January 31, 2007 compared to the three and nine months ended January 31, 2006, in three out of five segments. Economic occupancy rates on a stabilized property basis for the three and nine months ended January 31, 2007, as compared to the three months and nine months ended January 31, 2006, were as follows:
Three Months Ended January 31:

                                              (in thousands)
                                           --------------------
                                             2007       2006      Change
                                           ---------  ---------  --------
Multi-Family Residential                     93.3%      92.1%      1.2%
Commercial-Office                            89.9%      92.8%     (2.9%)
Commercial-Medical                           97.0%      95.7%      1.3%
Commercial-Industrial                        96.4%      86.7%      9.7%
Commercial-Retail                            89.4%      89.6%     (0.2%)


Nine Months Ended January 31:

                                              (in thousands)
                                           --------------------
                                             2007       2006      Change
                                           ---------  ---------  --------
Multi-Family Residential                     93.6%      91.7%      1.9%
Commercial-Office                            90.6%      92.4%     (1.8%)
Commercial-Medical                           96.8%      95.1%      1.7%
Commercial-Industrial                        93.9%      86.6%      7.3%
Commercial-Retail                            89.4%      89.5%     (0.1%)
Economic occupancy represents actual rental revenues recognized for the period indicated as a percentage of scheduled rental revenues for the period; percentage rents, tenant concessions, straight-line adjustments and expense reimbursements are not considered in computing either actual revenues or scheduled rent revenues. 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 third quarter of fiscal year 2007, we have experienced continued improvement in results at our multi-family residential properties. While we have had limited success in increasing scheduled rental rates at our apartment communities, the construction of competing apartment units, single-family homes and condominium units has abated in most of our markets. Combined with positive absorption of previously constructed housing, this reduction in construction of competing product has allowed us to reduce our levels of vacancy and tenant concessions in our multi-family residential segment. We have also seen during this period an accelerating demand for industrial space, although as in past periods rental rates in this segment continue to remain at levels lower than in prior fiscal years. We have yet to see any consistent sustained demand for commercial office space or for existing smaller retail developments, which comprise a majority of IRET's retail portfolio. Our expectation is that demand in IRET's markets for our office and retail locations will strengthen through the fourth quarter of fiscal year 2007.

Acquisitions and Dispositions for the Three and Nine Months Ended January 31, 2007:

During the three months ended January 31, 2007, IRET acquired an office property and two industrial properties for a total purchase price of approximately $29.3 million, excluding closing costs. The Company sold a parcel of vacant land and five small retail properties for a total sale price of approximately $2.7 million during the three months ended January 31, 2007.

During the first and second quarters of fiscal year 2007, the Company acquired a small retail property, five parcels of vacant land, two apartment complexes, and a senior housing complex with adjoining land. Additionally, the Company completed the largest acquisition in its history when it acquired in September 2006 a portfolio of nine office properties from subsidiaries of Magnum Resources, Inc., an Omaha, Nebraska-based real estate services and investment company. IRET has established an office in Omaha and property management offices in Kansas City and St. Louis to manage these new office properties. The Company also completed construction on a commercial retail property. The Company disposed of a parcel of vacant land, a small office building, an apartment complex, an assisted living facility and five small retail properties during the first and second quarters of fiscal year 2007.

The following table details the Company's acquisitions and dispositions during the nine months ended January 31, 2007:

Acquisitions                                                 (in thousands)
                                                            ---------------
                                                              Acquisition
                                                                 Cost
                                                            ---------------
Multi-Family Residential
 Arbors Apartments - Sioux City, NE                         $         7,000
 Quarry Ridge Apartments - Rochester, MN                             14,570
                                                            ---------------

Commercial Property - Office
 Pacific Hills - Omaha, NE                                           16,502
 Corporate Center West - Omaha, NE                                   21,497
 Farnam Executive Center - Omaha, NE                                 12,853
 Miracle Hills One - Omaha, NE                                       11,950
 Woodlands Plaza IV - Maryland Heights, MO                            5,840
 Riverport - Maryland Heights, MO                                    21,906
 Timberlands - Leawood, KS                                           14,546
 Flagship - Eden Prairie, MN                                         26,094
 Gateway Corporate Center - Woodbury, MN                              9,612
 Highlands Ranch I - Highlands Ranch, CO                             12,250
                                                            ---------------

Commercial Property - Medical (including assisted living)
 Fox River Cottages - Grand Chute, WI                                 3,200
                                                            ---------------

Commercial Property - Industrial
 Bloomington 2000 - Bloomington, MN                                   6,750
 Roseville 2929 - Roseville, MN                                      10,300
                                                            ---------------

Commercial Property - Retail
 Dakota West Plaza - Minot, ND                                          625
 Weston Walgreens - Weston, WI*                                       2,144
                                                            ---------------

Undeveloped Property
 Monticello Undeveloped Parcel (City) - Monticello, MN                    5
 St. Michaels Undeveloped - St. Michael, MN                             320
 Monticello Undeveloped Parcel (Other) - Monticello, MN                  75
 Weston Undeveloped - Weston, WI                                        800
 Quarry Ridge Undeveloped - Rochester, MN                               930
                                                            ---------------

Total Property Acquisitions                                 $       199,769
                                                            ===============

* Development property placed in service May 1, 2006.




Dispositions                                        (in thousands)
                                             -----------------------------
                                                         Book
                                                         Value
                                               Sales   and Sales
                                               Price     Cost    Gain/Loss
                                             --------- --------- ---------
Multi-Family Residential
 Clearwater Apartments - Boise, ID           $   4,000 $   3,382 $     618
                                             --------- --------- ---------
Commercial Property - Office
 Greenwood Office - Greenwood, MN                1,500       961       539
                                             --------- --------- ---------
Commercial Property - Medical (Assisted
  Living)
 Wedgewood Sweetwater - Lithia Springs, GA       4,550     3,836       714
                                             --------- --------- ---------
Commercial Property - Retail
 Moundsview Bakery - Mounds View, MN               380       287        93
 Howard Lake C-Store - Winsted, MN                 550       374       176
 Wilmar Sam Goody - Wilmar, MN                     450       409        41
 Winsted C-Store - Winsted, MN                     190       214       (24)
 Buffalo Strip Center - Buffalo, MN                800       567       233
 Long Prairie C-Store - Long Prairie, MN           302       304        (2)
 Faribault Checkers Auto - Faribault, MN           525       337       188
 Paynesville C-Store - Paynesville, MN             149       150        (1)
 Prior Lake Strip Center I - Prior Lake, MN      1,105       993       112
 Prior Lake Strip Center III - Prior Lake, MN      545       465        80
                                             --------- --------- ---------

Undeveloped Property
 IGH Land - Inver Grove Heights, MN                900       613       287
 Long Prairie Vacant Land - Long Prairie, MN        59        60        (1)
                                             --------- --------- ---------

Total Property Dispositions                  $  16,005 $  12,952 $   3,053
                                             ========= ========= =========



             INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
               for the three months and nine months ended
                    January 31, 2007 and 2006


                                Three Months Ended      Nine Months Ended
                                     January 31             January 31
                                --------------------  --------------------
                                  (in thousands, except per share data)
                                ------------------------------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
REVENUE
   Real estate rentals          $  42,560  $  36,332  $ 119,611  $ 105,935
   Tenant reimbursement             8,812      6,403     25,261     20,975
                                ---------  ---------  ---------  ---------
TOTAL REVENUE                      51,372     42,735    144,872    126,910
                                ---------  ---------  ---------  ---------
OPERATING EXPENSE
   Interest                        15,283     12,984     43,317     38,142
   Depreciation/amortization
    related to real estate
    investments                    11,756      9,204     32,778     27,608
   Utilities                        4,044      3,316     10,730      9,598
   Maintenance                      5,000      4,927     15,482     14,649
   Real estate taxes                6,174      4,755     17,038     14,682
   Insurance                          620        697      1,780      2,021
   Property management expenses     3,338      2,884     10,111      8,968
   Administrative expense           1,169        957      3,066      2,786
   Advisory and trustee
    services                           68         57        208        163
   Other operating expenses           319        399        933        951
   Amortization related to
    non-real estate investments       261        202        720        512
   Loss on impairment of real
    estate investments                  0          0        150          0
                                ---------  ---------  ---------  ---------
TOTAL OPERATING EXPENSE            48,032     40,382    136,313    120,080
                                ---------  ---------  ---------  ---------
Operating income                    3,340      2,353      8,559      6,830
Non-operating income                1,008        404      1,970        857
                                ---------  ---------  ---------  ---------
Income before minority interest
 and discontinued operations
 and (loss) gain on sale of
 other investments                  4,348      2,757     10,529      7,687
(Loss) gain on sale of other
 investments                            0          0        (36)         1
Minority interest portion of
 operating partnership income      (1,071)      (476)    (2,310)    (1,271)
Minority interest portion of
 other partnerships' loss
 (income)                              12        (73)       (13)      (256)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations                         3,289      2,208      8,170      6,161
Discontinued operations, net of
 minority interest                    165        113      1,905        405
                                ---------  ---------  ---------  ---------
NET INCOME                          3,454      2,321     10,075      6,566
   Dividends to preferred
    shareholders                     (593)      (593)    (1,779)    (1,779)
                                ---------  ---------  ---------  ---------
NET INCOME AVAILABLE TO COMMON
 SHAREHOLDERS                   $   2,861  $   1,728  $   8,296  $   4,787
                                =========  =========  =========  =========
Earnings per common share from
 continuing operations          $     .06  $     .04  $     .13  $     .09
Earnings per common share from
 discontinued operations              .00        .00        .04        .01
                                ---------  ---------  ---------  ---------
NET INCOME PER COMMON SHARE -
 BASIC AND DILUTED              $     .06  $     .04  $     .17  $     .10
                                =========  =========  =========  =========

The accompanying notes are an integral part of these unaudited condensed
 consolidated financial statements.





      RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS


                            (in thousands, except per share amounts)
Three Months    -----------------------------------------------------------
Ended January 31,            2007                           2006
                -----------------------------------------------------------
                         Weighted     Per               Weighted    Per
                         Avg Shares  Share             Avg Shares  Share
                            and       and                 and       and
                 Amount   Units(2)   Unit(3)   Amount   Units(2)   Unit(3)
                --------  --------- --------- --------  --------- ---------
Net income      $  3,454            $         $  2,321            $
Less dividends
 to preferred
 shareholders       (593)                         (593)
                --------                      --------
Net income
 available to
 common
 shareholders      2,861     47,895       .06    1,728     46,166       .04
Adjustments:
Minority
 interest in
 earnings of
 Unitholders       1,139     19,576                509     13,607
Depreciation
 and
 amortization
 (1)              11,971                         9,475
Gains on
 depreciable
 property sales     (349)                            0
                --------  --------- --------- --------  --------- ---------
Funds from
 operations
 applicable to
 common shares
 and Units      $ 15,622     67,471 $     .23 $ 11,712     59,773 $     .20
                ========  ========= ========= ========  ========= =========



                            (in thousands, except per share amounts)
Nine Months     -----------------------------------------------------------
Ended January 31,            2007                           2006
                -----------------------------------------------------------
                         Weighted     Per               Weighted    Per
                         Avg Shares  Share             Avg Shares  Share
                            and       and                 and       and
                 Amount   Units(2)   Unit(3)   Amount   Units(2)   Unit(3)
                --------  --------- --------- --------  --------- ---------
Net income      $ 10,075            $         $  6,566            $
Less dividends
 to preferred
 shareholders     (1,779)                       (1,779)
                --------                      --------
Net income
 available to
 common
 shareholders      8,296     47,466       .17    4,787     45,717       .10
Adjustments:
Minority
 interest in
 earnings of
 Unitholders       2,909     16,366              1,421     13,437
Depreciation
 and
 amortization
 (4)              33,439                        28,325
Gains on
 depreciable
 property sales   (2,986)                          (22)
                --------  --------- --------- --------  --------- ---------
Funds from
 operations
 applicable to
 common shares
 and Units      $ 41,658     63,832 $     .65 $ 34,511     59,154 $     .58
                ========  ========= ========= ========  ========= =========

(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 $12,017 and $9,406,
     and depreciation/amortization from Discontinued Operations of $12 and
     $126, less corporate-related depreciation and amortization on office
     equipment and other assets of $58 and $57, for the three months ended
     January 31, 2007 and 2006, 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. FFO is calculated on a
     per share and unit basis.
(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 $33,498 and $28,120,
     and depreciation/amortization from Discontinued Operations of $116 and
     $377, less corporate-related depreciation and amortization on office
     equipment and other assets of $175 and $172, for the nine months ended
     January 31, 2007 and 2006, respectively.

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 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 risk and uncertainties discussed in filings made by us with the Securities and Exchange Commission.

Contact Information

  • Contact:
    Michelle R. Saari
    PO Box 1988
    12 South Main Street
    Minot, North Dakota 58701
    701.837.4738 phone
    701.838.8875 fax
    Email: info@iret.com
    Website: www.iret.com