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IRET
INVESTORS REAL ESTATE TRUST
2004 Annual Report
Creating shareholder value
with a diversified real estate portfolio
Multi-Family Residential
Office
Retail
Medical
Industrial
908007ADP_CVR_R3 7/30/2004 3:08 PM Page 2
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data as of and for each of the fiscal years ended April 30, 2000 through
2004. The table illustrates the significant growth in revenue and real estate investment IRET experienced over the period
reported. Most of this growth was attributable to our addition of properties through acquisitions. These historical results are
not necessarily indicative of the results to be expected in the future. This information is only a summary, and you should refer
to our Consolidated Financial Statements and notes thereto, and the section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for additional information.
Years Ended April 30,
2004
2003
2002
2001
2000
Consolidated Income Statement Data
Revenue
Income before Gain/Loss on
$ 140,505
$ 118,765
Properties and Minority Interest
$
12,253
$
15,699
$
$
90,570
14,108
$
$
75,767
10,188
$
$
55,445
8,549
(in thousands, except per share data)
Gain on Repossession/Sale
of Properties
Minority Interest Portion of
662
1,595
547
602
1,754
Operating Partnership Income
(2,744)
(3,640)
(3,675)
(2,095)
(1,495)
Net Income*
$
9,440
$
12,248
$
10,600
$
8,694
$
8,808
Consolidated Balance Sheet Data
Total Real Estate Investments
$ 1,008,071
$ 845,325
$ 685,347
$ 548,580
$ 418,216
Total Assets
Mortgages Payable
Shareholders’ Equity
$ 1,076,317
$ 885,681
$ 730,209
$ 570,322
$ 432,978
$ 633,124
$ 539,397
$ 459,569
$ 368,957
$ 265,057
$ 278,629
$ 214,761
$ 145,578
$ 118,945
$ 109,921
Consolidated Per Common Share Data
(basic and diluted)
Net Income
Distributions
Funds From Operations**
$
$
$
.24
.64
36,638
$
$
$
.38
.63
34,178
$
$
$
.42
.59
29,143
$
$
$
.38
.55
22,440
$
$
$
.42
.51
18,328
*
Includes both continuing operations and discontinued operations (real estate that we sold) for the indicated fiscal years.
** For the definition of Funds from Operations and a reconciliation of this measure to measures under generally accepted accounting principles, you
should refer to the section entitled “Funds from Operations” within the section entitled “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations” in our Annual Report on Form 10-K.
REVENUE
in millions of dollars
FUNDS FROM OPERATIONS
in millions of dollars
DISTRIBUTIONS
per share
140.5
118.8
36.6
34.2
29.1
.63
.64
.59
.55
.51
90.6
75.8
55.4
22.4
18.3
TOTAL ASSETS
in millions of dollars
1,076.3
885.7
730.2
570.3
433.0
00
01 02 03 04
00
01 02 03 04
00
01 02 03 04
00
01 02 03 04
TRUSTEES
John F. Decker
Senior Vice President
D.A. Davidson & Co.
(investment banking firm)
Daniel L. Feist (2) (6) (8)
President
Feist Construction & Realty
(construction and real estate development company)
Steven B. Hoyt
Chief Executive Officer
Hoyt Properties, Inc.
(property management company)
Charles Wm. James
Senior Vice President
Investors Real Estate Trust
Patrick G. Jones (4) (6) (8)
Private Investor
Jeffrey L. Miller (1) (4) (5) (7)
President
M&S Concessions, Inc.
(food service and facility management company)
Timothy P. Mihalick
Senior Vice President & Chief Operating Officer
Investors Real Estate Trust
Stephen L. Stenehjem (3) (6) (8)
President and Chief Executive Officer
Watford City BancShares, Inc.
(bank holding company)
Thomas A. Wentz, Jr.
Senior Vice President
Investors Real Estate Trust
EXECUTIVE OFFICERS
Thomas A. Wentz, Sr.
President & Chief Executive Officer
Timothy P. Mihalick
Senior Vice President & Chief Operating Officer
Diane K. Bryantt
Senior Vice President & Chief Financial Officer
Charles Wm. James
Senior Vice President
Thomas A. Wentz, Jr.
Senior Vice President
Michael A. Bosh
General Counsel & Corporate Secretary
(1) Chairman, Board of Trustees
(2) Vice Chairman, Board of Trustees
(3) Chairman, Audit Committee
(4) Member, Audit Committee
(5) Chairman, Compensation Committee
(6) Member, Compensation Committee
(7) Chairman, Nominating Committee
(8) Member, Nominating Committee
SHAREHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders of the Company will be held at
7:00 p.m. on September 21, 2004, at the International Inn, 1505
North Broadway, Minot, North Dakota.
SHARES LISTED
The Company’s common shares of beneficial interest are listed on
the Nasdaq Stock Market under the symbol “IRETS.”
The Company’s series A cumulative redeemable preferred shares of
beneficial interest are listed on the Nasdaq Stock Market under the
symbol “IRETP.”
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
Minneapolis, Minnesota
INTERNAL AUDITORS
Brady, Martz & Associates. P.C.
Minot, North Dakota
LEGAL COUNSEL
Pringle & Herigstad, P.C.
Minot, North Dakota
Gray, Plant, Mooty, Mooty & Bennett, P.A.
Minneapolis, Minnesota
DISTRIBUTION REINVESTMENT PLAN
The Company has a distribution reinvestment plan for current and
future shareholders. Interested participants can obtain more
information by contacting the Company at 701-837-4738 or
info@iret.com.
FORM 10-K
A copy of the annual report on Form 10-K for the Company’s fiscal
year ended April 30, 2004, as filed with the Securities and Exchange
Commission, is available, without charge, by request to IRET,
Investor Relations, PO Box 1988, Minot, ND 58702-1988, by visiting
the Investor Relations section of the Company’s website at
www.iret.com, or by accessing the EDGAR database on the
Securities and Exchange Commission’s website at www.sec.gov.
TRANSFER AGENT
Questions about distribution payments, shareholder accounts,
replacement of lost share certificates, address or name changes
should be directed to: Transfer Agent, Investors Real Estate Trust,
PO Box 1988, Minot, ND 58702-1988.
COMPANY HEADQUARTERS
Investors Real Estate Trust
12 South Main Street
PO Box 1988
Minot, ND 58702-1988
Telephone: (701) 837-4738
Fax: (701) 838-7785
info@iret.com
www.iret.com
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 1
An Umbrella Partnership Real
Estate Investment Trust
Gene Johnson
IRET shareholder and UPREIT partner since 1997
"In 1997 IRET acquired the Park East Apartments, a 122-unit
apartment complex in Fargo, North Dakota, from a partnership of which I
was the general partner. This was IRET's first acquisition of property in
exchange for limited partnership ("UPREIT") units. We had other offers to
buy this property but chose IRET after meeting the management. We were
really impressed with the sincerity, honesty and openness of all of the IRET people we dealt with. I've been very pleased
with my association with IRET, and I have recommended IRET to others. It has been a good relationship all the way."
Gene is a North Dakota native now living in the Twin Cities area. Following three years of service in the U.S. Navy, he owned
and operated a refrigeration service business in Fargo until 1957. He was employed by Dunham Bush and Copeland
refrigeration in Omaha and Minneapolis until 1968, when he formed Thermo Dyne Inc., an air conditioning and refrigeration systems
company. Gene sold Thermo Dyne in 1997, but is involved in consulting for Thermo Dyne and several other companies. In 2003
Gene was honored as an outstanding alumnus of the College of Engineering and Architecture at North Dakota State University.
IRET values its association with Gene Johnson and other long-term shareholders and UPREIT partners.
IRET’s UPREIT Program
IRET is organized as an Umbrella Partnership Real Estate
Investment Trust ("UPREIT"). In 1997, IRET reorganized itself
into the UPREIT format by creating IRET Properties, a North
Dakota Limited Partnership, with IRET Inc. (a wholly-owned
subsidiary of IRET) as the sole general partner. IRET assets
were transferred to the Umbrella Partnership in exchange for the
general partnership interest, and owners of real estate were
offered the opportunity of becoming limited partners in the
Umbrella Partnership by conveying their real estate to the
partnership in exchange for partnership units. These units are
exchangeable for, and the financial equivalent of the IRET
publicly-traded common shares.
For owners of appreciated real estate, this UPREIT program
has been a popular alternative to a taxable sale, allowing the
owners to enjoy an IRET return on the full value of their real
estate undiminished by capital gains tax until such time as they
choose to liquidate their investment. On April 30, 2004, a total of
11,819,350 UPREIT units with a book value of $92.6 million were
outstanding.
Park East Apartments • Fargo, North Dakota
1
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 2
PRESIDENT’S LETTER
To Our Fellow Shareholders
On April 30, 2004, IRET completed its 34th year.
portfolio prompted us to reorganize our asset management
Organized on July 31, 1970, IRET started business with a
group, effective July 2004, in order to permit greater
$120,000 real estate portfolio, the largest property being a
management specialization by property type. Beginning with
4-unit apartment building. Today, IRET has a real estate
our first quarterly report of the current fiscal year, we plan to
portfolio of over 200 separate properties and total assets
reflect our diverse portfolio by reporting our results in five
exceeding the $1 billion mark. The business principles which
different property categories:
IRET adopted in 1970 have been rigorously followed over our
34 year history: carefully selecting the properties we acquire,
Property Type
keeping
those properties
in good condition, dealing
professionally with our tenants and vendors, and maintaining
a strong balance sheet. These principles have allowed IRET
to grow and produce superior returns to its shareholders
Multi-Family Residential
Office
Medical (including assisted living)
Retail
Industrial (including vacant land and any
miscellaneous commercial properties)
through good and bad times in the real estate industry.
TOTAL
(in thousands)
Investment
$ 446,172
301,402
171,176
123,111
Percentage
40.4%
27.3%
15.5%
11.2%
61,567
5.6%
$1,103,428
100.0%
A $1 BILLION COMPANY
IRET's total assets at April 30, 2004, were $1.1 billion.
This compares to the year earlier figure of $885.7 million, an
increase of $190.6 million, or 21.5%. We will continue to
pursue a strategy of disciplined growth, primarily through
acquisitions, but also through selected expansion and
development projects. In the year ahead, we will continue
to use conservative, long-term underwriting standards
while working diligently to identify attractive acquisition
opportunities in our target markets.
A MORE DIVERSIFIED PORTFOLIO - AN INCREASE IN
MEDICAL AND RETAIL PROPERTIES
During fiscal year 2004, IRET acquired $170.3 million of
real estate. Of these new additions to our portfolio, 76% were
commercial properties, primarily medical, office and retail,
and only 24% were apartments. As a result, we have a more
diversified portfolio of real estate properties than formerly,
when apartments predominated. At April 30, 2004,
approximately 40% of our portfolio consisted of apartment
properties and the balance consisted of commercial
properties. Our growth and the increased diversity of our
2
Golden Hills Office Center • Golden Valley, Minnesota
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 3
THIRTY-FOUR YEARS OF INCREASED CASH
DISTRIBUTIONS TO SHAREHOLDERS
exchange for the contribution of real estate to the Operating
Partnership increased by $12.2 million, and the minority
IRET again increased its cash distributions paid on our
interest in other partnerships controlled by IRET increased by
common shares of beneficial interest and on the operating
$2.2 million, for a total increase in equity capital of the
partnership units during each quarter of fiscal year 2004.
Operating Partnership of $78.3 million.
Distributions increased to 63.7¢ per share and unit,
compared to 62.5¢ paid in the prior fiscal year, an increase of
A STRONG BALANCE SHEET
1.92%. IRET has paid quarterly cash distributions to its
shareholders since July 1, 1971, and annual distributions
have increased every year and, since 1988, every calendar
quarter. On July 1, 2004, the cash distribution was increased
to 16.05¢ per share and unit, and was the 133rd consecutive
quarterly cash distribution paid by IRET.
At the end of our fiscal year on April 30, 2004, IRET had
cash on hand of $31.7 million, compared to the year
earlier figure of $17.9 million and, in addition, has available
approximately another $20 million of cash from mortgage
loans closed after year end. This cash will be used to
purchase additional real estate properties.
INCREASE IN EQUITY CAPITAL
During the past fiscal year, IRET sold additional common
FINANCIAL RESULTS
shares and preferred shares resulting in shareholder equity
IRET's Funds from Operations (net income, less capital
increasing to $278.6 million on April 30, 2004, compared to
gains, increased by depreciation and amortization) increased
the year-earlier figure of $214.8 million, an increase of $63.9
to $36.6 million from the year earlier figure of $34.2
million. In addition, operating partnership units issued in
million. However, on a per share basis, FFO declined to 73¢
Thank You!
John F. (Jack) Decker and Steve Hoyt are retiring from
the Board of Trustees. We thank them both for their years
of service to IRET and their valuable contributions to our
Company.
Both Jack and Steve are affiliated with companies that
do business with IRET and, because of those business
relationships, have chosen to retire from the IRET Board in
order to allow their companies to better work with IRET.
JOHN F. DECKER
STEVEN B. HOYT
Jack has served on the IRET Board since 1998 and is a Financial Advisor/Senior Vice President of D.A. Davidson & Co., an
investment banking firm based in Great Falls, Montana, that has provided investment banking services to IRET. Steve is the
President of Hoyt Properties, Inc., a leading property management and development firm based in Minneapolis, Minnesota,
providing property management services for IRET.
3
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 4
Price Index stood at 39.2 and, in April of 2004, it had risen to
181.5 (Midwest urban, all items), an increase of 363%. IRET
common shares sold at $1 a share 34 years ago and have
enjoyed a ten-fold increase in addition to paying a cash
distribution that has averaged 6% on the growing share price.
The billion-dollar real estate portfolio owned by IRET will
grow in value as a consequence of inflation, but the mortgage
loans on these properties will be paid at the stated amount
without inflationary increases. This "leverage" has, and
hopefully will again, produce superior financial results for
IRET shareholders.
A GROWING COMPANY
We expect that IRET will continue to grow at a significant rate
in the years ahead. We have a large and diversified real
estate portfolio, a strong balance sheet, and an energetic and
talented staff.
Sincerely,
Thresher Square • Minneapolis, Minnesota
Thomas A. Wentz, Sr.
President & Chief Executive Officer
per share and unit from the 80¢ realized in the prior year. The
weak economy, over-building (particularly single family
homes as competition for our apartment communities), and
increased operating expenses due to price increases in
utilities, insurance and other costs, caused the decline - an
experience common to most real estate companies.
THE REAL ESTATE CYCLE - THE IMPACT OF
INFLATION
A lesson that we have learned over IRET's 34-year
history is that real estate is a cyclical business, moving in
predictable patterns - a period of above-average profitability
inevitably leading to over-building and a period of below
average returns until the over-capacity is absorbed. But just
as predictable is the return to solid and rewarding financial
results. Another factor for us to keep in mind is the impact
that inflation has had (and, in my opinion, will have) on our
Company. When IRET was organized in 1970, the Consumer
4
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 5
REAL ESTATE PORTFOLIO MIX
59.3% Commercial Property
40.4% Multi-Family Residential Property
0.3% Undeveloped Land
PROPERTY INVESTMENTS
percentage by state
55.7% Minnesota
15.2% North Dakota
4.2% Montana
3.7% Colorado
3.5% South Dakota
3.5% Texas
3.4% Nebraska
3.2% Kansas
1.9% Wisconsin
1.8% Washington
1.7% Idaho
1.6% Iowa
0.4% Georgia
0.2% Michigan
MAP LEGEND
Multi-Family Residential Property
Commercial Property
Undeveloped Land
INVESTMENT PORTFOLIO
COMMERCIAL PROPERTY
State
Georgia
Idaho
Iowa
Michigan
Minnesota
Montana
Nebraska
North Dakota
South Dakota
Wisconsin
Total Commercial Property
Sq. Ft.
29,408
130,629
604,711
16,080
4,964,293
114,345
129,568
1,008,230
75,815
299,302
7,372,381
MULTI-FAMILY RESIDENTIAL PROPERTY
State
Colorado
Idaho
Iowa
Kansas
Minnesota
Montana
Nebraska
North Dakota
South Dakota
Texas
Washington
Total Multi-Family Residential Property
UNDEVELOPED LAND
State
Minnesota
Montana
North Dakota
Wisconsin
Units
597
60
132
680
1,875
770
498
2,796
739
504
304
8,955
Sq. Ft.
652,364
583,810
158,400
80,958
Total Undeveloped Land
1,475,532
(in thousands)
Investment
Fiscal 2004
Occupancy
$
3,972
15,069
12,904
2,121
516,940
6,304
14,724
53,894
7,047
21,287
$
654,262
100.0%
96.4%
85.2%
100.0%
93.4%
100.0%
100.0%
95.2%
8.8%
95.6%
92.8%
(in thousands)
Investment
Fiscal 2004
Occupancy
92.3%
92.0%
86.6%
91.5%
82.7%
93.7%
85.2%
94.5%
86.6%
93.9%
90.0%
90.1%
$
40,834
3,924
4,852
35,222
96,379
38,882
22,418
113,727
31,731
38,436
19,767
$
446,172
(in thousands)
Investment
$
$
965
1,563
264
202
2,994
Total Real Estate Owned
$ 1,103,428
WA
MT
ID
ND
SD
NE
MN
IA
WI
MI
CO
KS
TX
GA
5
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 6
CREATING SHAREHOLDER VALUE
Interlachen Corporate Center • Eagan, Minnesota
Woodridge Apartments • Rochester, Minnesota
33 CALENDAR YEAR HISTORY OF INCREASING DISTRIBUTIONS
Since its first distribution paid July 1, 1971, IRET has never delayed, omitted
or reduced its quarterly distribution on its common shares. In each of the last 33
calendar years, the annual distribution has increased over the amount paid in the
preceding year.
Share Bid
Price History1
Distribution
History2
Total Return
Per Year3
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
$ 1.00
$ 1.10
$ 1.30
$ 1.40
$ 1.50
$ 1.70
$ 1.80
$ 2.00
$ 2.00
$ 1.80
$ 2.00
$ 2.20
$ 2.95
$ 3.15
$ 3.15
$ 3.85
$ 4.05
$ 4.35
$ 4.75
$ 4.50
$ 5.40
$ 5.70
$ 6.00
$ 6.40
$ 6.16
$ 6.44
$ 7.13
$ 7.44
$ 7.88
$ 7.88
$ 9.35
$ 10.05
$ 9.96
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2.75¢
6.20¢
6.55¢
7.10¢
8.00¢
8.70¢
9.50¢
10.50¢
11.25¢
13.25¢
14.00¢
14.75¢
18.50¢
22.13¢
24.25¢
26.18¢
27.65¢
28.16¢
29.10¢
29.90¢
30.70¢
31.50¢
32.30¢
33.65¢
35.25¢
37.38¢
40.18¢
43.70¢
49.25¢
52.55¢
57.50¢
61.20¢
63.25¢
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
5.5%
16.2%
24.1%
13.2%
12.9%
19.1%
11.5%
16.9%
5.6%
-3.4%
18.9%
17.4%
42.5%
14.3%
7.7%
30.5%
12.4%
14.4%
15.9%
1.0%
26.8%
11.4%
10.9%
12.3%
1.8%
10.6%
17.0%
10.5%
12.5%
6.7%
26.0%
14.0%
5.4%
End of calendar year bid price per common share of beneficial interest of IRET.
Total calendar year distributions paid.
(1)
(2)
(3) Distributions plus share price changes. (Calendar year distributions paid plus change
in share bid price divided by previous end of year share bid.)
Pavilion II - St. Lukes • Duluth, Minnesota
PRICE RANGE OF COMMON SHARES OF BENEFICIAL INTEREST
Fiscal Year 2004
Low
High
Fiscal Year 2003
High
Low
Fiscal Year 2002
High
Low
May 1 to Jul 31
Aug 1 to Oct 31
Nov 1 to Jan 31
Feb 1 to Apr 30
10.805
10.480
10.700
10.500
9.280
11.900
8.550
10.490
9.690
11.000
9.050
9.430
9.880
11.000
9.660
10.000
9.360
10.000
8.980
10.450
8.250
8.800
9.000
9.510
CALENDAR YEAR TAX STATUS OF DISTRIBUTION ON COMMON SHARES
2003
2002
2001
2000
1999
1998
Capital gain
3.88%
0.00%
0.00%
.72% 30.30%
6.30%
Ordinary income
58.45% 68.29% 65.98% 86.76% 69.70% 76.00%
Return of capital
37.67% 31.71% 34.02% 12.52% 0.00% 17.70%
West Village Center • Chanhassen, Minnesota
6
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 7
TOTAL SHAREHOLDER RETURNS
33 CALENDAR YEAR PERFORMANCE COMPARISON
$10,000 invested in IRET common shares on January 1, 1972, with distributions reinvested, would be worth $899,300 as of
December 31, 2003. This presentation excludes brokerage costs and income taxes.
$899,300
IRET
Peer Group
$487,100
72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
(1) The peer group consists of the real estate investment trusts included by the National Association of Real Estate Investment Trusts in its Equity
Total Return Index.
Sunset Trail • Rochester, Minnesota
Mendota Office Center II • Mendota Heights, Minnesota
Thomasbrook Apartments • Lincoln, Nebraska
7
908007ADP_Nar_R3 7/30/2004 2:52 PM Page 8
COMPANY PROFILE
Clearwater Apartments • Boise, Idaho
ORGANIZATIONAL STRUCTURE
Founded in 1970, IRET is a Real Estate Investment Trust through which
individual investors may benefit from the advantages of group investment in
a professionally managed and diversified portfolio of income-producing
real estate.
IRET is structured as an Umbrella Partnership Real Estate Investment
Trust (UPREIT) and conducts its business through an operating partnership
(IRET Properties, a North Dakota Limited Partnership) which has as its sole
General Partner a wholly owned corporate subsidiary of IRET (IRET, Inc., a
North Dakota Corporation). UPREIT status allows the owner of appreciated
real estate to contribute real estate to the operating partnership in exchange
for a limited partnership interest generally without the recognition of gain.
INVESTMENT STRATEGY
As of April 30, 2004, IRET owned 69 apartment communities containing
8,955 apartment units and 142 commercial properties with 7,372,381 square
feet of rentable space located primarily in Minnesota and North Dakota as
well as twelve other states.
IRET's investment strategy is to own real estate primarily in Minnesota,
North Dakota, South Dakota, Montana, and Nebraska and to diversify our
Pavilion I - St. Lukes • Duluth, Minnesota
investments among multi-family residential properties and a variety of
commercial properties.
From its inception in 1970, IRET has sought to:
Pay a cash distribution equal to or better than a bank one-year
certificate of deposit;
Increase distributions to shareholders at a rate in excess of the
inflation rate;
Increase the share price by a percentage equal to the distribution
rate for a total return to the shareholder at least twice the return of a
one-year certificate of deposit.
CASH DISTRIBUTION POLICY
It is our policy to distribute approximately 65% to 90% of our funds
from operations (FFO). We use the remaining FFO to make capital
improvements to existing properties and to acquire more properties. By
reinvesting a portion of FFO, we expect to enhance the income-producing
capability of our portfolio.
Crown Colony Apartments • Topeka, Kansas
Microsoft Great Plains Office Building • Fargo, North Dakota
8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended April 30, 2004
Commission File Number 000-14851
Investors Real Estate Trust
(Exact name of Registrant as specified in its charter)
North Dakota
(State or other jurisdiction of
incorporation or organization)
45-0311232
(IRS Employer Identification No.)
12 South Main Street
Minot, North Dakota 58701
(Address of principal executive offices)
701.837.4738
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares of Beneficial Interest (no par value)
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (no par value)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes H No h
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. h
Indicate by check mark whether the registrant
Rule 12b-2). Yes H No h
is an accelerated filer (as defined in Exchange Act
The aggregate market value of the registrant’s outstanding common shares of beneficial interest held by non-
affiliates was $365,193,386 based on the last reported sale price on the NASDAQ National Market on October 31, 2003.
The number of common shares of beneficial interest outstanding as of July 7, 2004, was 42,279,703.
References in this Annual Report on Form 10-K to the “Company,” “IRET,” “we,” “us,” or “our” include
consolidated subsidiaries, unless the context indicates otherwise.
Documents Incorporated by Reference: Portions of IRET’s definitive Proxy Statement for its 2004 Annual
Meeting of Shareholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) hereof.
INVESTORS REAL ESTATE TRUST
INDEX
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5
Market for Registrant’s Common Equity and Related Stockholder Matters . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10
Trustees and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
Security Ownership of Certain Beneficial Owners and Management
. . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15.
Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . .
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Reports of Independent Registered Public Accounting Firms and Financial Statements . . . . . . . . . . . . F-2 to F-52
Special Note Regarding Forward Looking Statements
Certain statements included in this Annual Report on Form 10-K and the documents incorporated into this
document by reference are “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Such forward-looking statements include statements about our belief that we have the
liquidity and capital resources necessary to meet our known obligations and to make additional real estate
acquisitions and capital improvements when appropriate to enhance long term growth; and other statements
preceded by, followed by or otherwise including words such as “believe,” “expect,” “intend,” “project,”
“anticipate,” “potential,” “may,” “will,” “designed,” “estimate,” “should,” “continue” and other similar expressions.
These statements indicate that we have used assumptions that are subject to a number of risks and uncertainties
that could cause our actual results or performance to differ materially from those projected.
Although we believe that the expectations reflected in such forward-looking statements are based on reasonable
assumptions, we can give no assurance that these expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:
• the economic health of the markets in which we own and operate multi-family and commercial properties,
in particular the states of Minnesota and North Dakota, or other markets in which we may invest in the future;
• the economic health of our commercial tenants;
• market rental conditions, including occupancy levels and rental rates, for multi-family residential and
commercial properties;
• our ability to identify and secure additional multi-family residential and commercial properties that meet
our criteria for investment;
• the level and volatility of prevailing market interest rates and the pricing of our shares of beneficial interest;
• financing risks, such as our inability to obtain debt or equity financing on favorable terms, or at all;
• our ability to timely complete and lease properties under construction;
• compliance with applicable laws, including those concerning the environment and access by persons with
disabilities; and
• the availability and cost of casualty insurance for losses caused by terrorist acts.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled
“Risk Factors” in Item 1 of this Annual Report on Form 10-K and the other documents we file from time to time
with the Securities and Exchange Commission.
In light of these uncertainties, the events anticipated by our forward-looking statements might not occur. We
undertake no obligation to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. The foregoing review of factors that could cause our actual results to differ materially
from those contemplated in any forward-looking statements included in this Annual Report on Form 10-K should
not be construed as exhaustive.
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PART I
Item 1. Business
Overview
Investors Real Estate Trust is a self-advised equity Real Estate Investment Trust (REIT) organized under the
laws of North Dakota. Since our formation in 1970, our business has consisted of owning and operating income-
producing real properties. We are structured as an Umbrella Partnership Real Estate Investment Trust or UPREIT
and we conduct our day-to-day business operations though our operating partnership, IRET Properties, a North
Dakota Limited Partnership (“IRET Properties” or the “Operating Partnership”). Our investments consist of multi-
family residential properties and commercial properties. These properties are located primarily in the upper Midwest
states of Minnesota and North Dakota. For the twelve months ended April 30, 2004, our real estate investments
in these two states accounted for 70.7% of our total gross revenue. Our principal executive offices are located in
Minot, North Dakota. We also have an office in Minneapolis, Minnesota.
We seek to diversify our investments between multi-family residential and commercial properties with further
diversification within our commercial property category. As of April 30, 2004, our real estate portfolio consisted of:
• 69 multi-family residential properties, containing 8,955 apartment units and having a total investment (less
accumulated depreciation) of $385 million; and
• 142 commercial properties, containing 7.4 million square feet of leasable space and having a total investment
(less accumulated depreciation) of $618 million.
Our multi-family residential properties include apartment buildings, complexes and communities. Our
commercial properties include office buildings, retail stores and centers, industrial facilities and health care
properties, such as clinics and assisted living centers.
Our residential leases are generally for a one-year term. Our commercial properties are typically leased to
tenants under long-term lease arrangements. As of April 30, 2004, no single tenant accounted for more than 4.9%
of our total annual commercial rental revenues.
Except for certain commercial properties managed by our Minneapolis office, we generally contract with locally-
based third-party professional management companies to handle the day-to-day management of our properties. These
management activities include the negotiation of potential leases, the preparation of proposed operating budgets, the
collection and remittance of lease or rental payments and the supervision of routine maintenance and capital
improvements that have been authorized by us. All decisions relating to the purchase or sale of property, insurance
coverage, capital improvements, approval of commercial leases, annual operating budgets and major renovations are
made exclusively by our employees and then implemented by the third-party management companies. Generally, all
of our management contracts provide for compensation ranging from 2.5% to 5.0% of gross rent collections and,
typically, we may terminate these contracts in 60 days or less, or upon the property manager’s failure to meet specified
financial performance goals. We believe that the use of locally-based management companies allows us to enjoy the
benefits of local knowledge of the applicable real estate market, while avoiding the cost and difficulty associated with
maintaining management personnel in every city in which we operate.
Structure
We were organized as a REIT under the laws of the State of North Dakota on July 31, 1970.
Since our formation, we have operated as a REIT under Sections 856-858 of the Internal Revenue Code, as
amended (the “Code”), and since February 1, 1997, we have been structured as an UPREIT. Since restructuring
as an UPREIT, we have conducted all of our daily business operations through IRET Properties. IRET Properties
is organized under the laws of the State of North Dakota pursuant to an Agreement of Limited Partnership dated
January 31, 1997. IRET Properties is principally engaged in acquiring, owning, operating and leasing multi-family
residential and commercial real estate. The sole general partner of IRET Properties is IRET, Inc., a North Dakota
corporation and our wholly-owned subsidiary. All of our assets (except for qualified REIT subsidiaries) and
1
liabilities were contributed to IRET Properties, through IRET, Inc., in exchange for the sole general partnership
interest in IRET Properties, which is held by IRET, Inc. As of April 30, 2004, IRET, Inc. owned a 78% interest
in IRET Properties. The remaining ownership of IRET Properties is held by individual limited partners.
Investment Strategy and Policies
Our business objective is to increase shareholder value by employing a disciplined investment strategy. This
strategy is focused on growing assets in desired geographical markets, achieving diversification by property type
and location, and adhering to targeted returns in acquiring properties. We have increased our cash distributions every
year since our inception 34 years ago and every quarter since 1988.
We generally use available cash or short-term floating rate debt to acquire real estate. We then replace such cash
or short-term floating rate debt with fixed-rate secured debt, typically in an amount equal to 65.0% to 75.0% of a
property’s appraised value. In appropriate circumstances, we also may acquire one or more properties in exchange
for our common shares of beneficial interest (“common shares”) or for limited partnership units of IRET Properties
(“limited partnership units” or “UPREIT Units”), which are convertible, after the expiration of a minimum holding
period of one year, into cash or, at our sole discretion, into our common shares on a one-to-one basis.
Our investment strategy is to invest in multi-family residential properties and office, industrial, retail and
medical commercial properties that are leased to single or multiple tenants, usually for five years or longer, and
are located throughout the upper Midwest. We operate mainly within the states of North Dakota and Minnesota,
although we also have real estate investments in South Dakota, Montana, Nebraska, Colorado, Georgia, Idaho, Iowa,
Kansas, Michigan, Washington, Texas and Wisconsin.
In order to implement our investment strategy we have certain investment policies. Our significant investment
policies are as follows:
Investments in the securities of, or interests in, entities primarily engaged in real estate activities and other
securities. While we are permitted to invest in the securities of other entities engaged in the ownership and
operation of real estate, as well as other securities, we currently have no plans to make any investments in
other securities.
Any policy, as it relates to investments in other securities, may be changed by a majority of the members of
our Board of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders.
Investments in real estate or interests in real estate. We currently own multi-family residential properties and/
or commercial properties in 14 states. We may invest in real estate, or interests in real estate, that is located
anywhere in the United States; however, we currently plan to focus our investments in those states in which
we already have property, with specific concentration in Minnesota, North Dakota, Nebraska, Montana, and
South Dakota. Similarly, we may invest in any type of real estate or interest in real estate including, but not
limited to, office buildings, apartment buildings, shopping centers, industrial and commercial properties,
special purpose buildings and undeveloped acreage. Under our Second Restated Trustees’ Regulations
(Bylaws), however, we may not invest more than 10.0% of our total assets in unimproved real estate, excluding
property being developed or property where development will be commenced within one year.
The operation of our real estate, as it pertains to the day-to-day management, is generally delegated to third-
party professional real estate management companies. All major operating decisions concerning the operation
of our real estate are, however, made by our Board of Trustees. The method of financing the purchase of real
estate investments is primarily from borrowed funds and from the sale of shares and the issuance of limited
partnership units.
There is no limitation on the number or amount of mortgages that may be placed on any one property, unless
we seek to borrow an amount in excess of 300% of our total net assets, in which case our Bylaws require
that such amount be approved by a majority of the independent members of our Board of Trustees and disclosed
to our shareholders in the next quarterly report, along with justification for such excess. In addition to the 300%
limitation on total indebtedness, it is generally our policy that we will not exceed a 65.0% to 75.0% debt level
on our real estate assets. As of April 30, 2004, our ratio of total real estate mortgages to total real estate assets
2
was 63% while our ratio of total indebtedness as compared to our net assets was 178%. This policy may be
changed at any time, or from time to time, without notice to, or approval of, our shareholders.
It is not our policy to acquire assets primarily for capital gain through sale in the short term. Rather, it is our
policy to acquire assets with an intention to hold such assets for at least a 10-year period. During the holding
period, it is our policy to seek current income and capital appreciation through an increase in value of our
real estate portfolio, as well as increased revenue as a result of higher rents.
Any policy as it relates to investments in real estate or interests in real estate may be changed by our Board
of Trustees at any time without notice to or a vote of our shareholders.
Investments in real estate mortgages. While not our primary business focus, from time to time we make loans
to others that are secured by mortgages, liens or deeds of trust covering real estate. Over the last three years,
we have made a number of mortgage loans. We have no restrictions on the type of property that may be used
as collateral for a mortgage loan; provided, however, that except for loans insured or guaranteed by a
government or a governmental agency, we may not invest in or make a mortgage loan unless an appraisal is
obtained concerning the value of the underlying property.
Unless otherwise approved by our Board of Trustees, it is our policy that we will not invest in mortgage loans
on any one property if in the aggregate the total indebtedness on the property, including our mortgage, exceeds
85% of the property’s appraised value.
We can invest in junior mortgages without notice to, or the approval of, our shareholders. As of April 30, 2004,
we had one junior mortgage with a principal balance net of allowance of $194,000. We do not currently plan
to invest in any other junior mortgages.
Our policies relating to mortgage loans, including second mortgages, may be changed by our Board of Trustees
at any time, or from time to time, without notice to, or a vote of, our shareholders.
Policies With Respect to Certain of Our Activities
Our current policies as they pertain to certain of our activities are described as follows:
Cash distributions to shareholders and holders of limited partnership units. We intend to continue our policy
of making cash distributions to our shareholders and the holders of limited partnership units of approximately 65.0%
to 90.0% of our funds from operations and to use the remaining funds for capital improvements or the purchase
of additional properties. This policy may be changed at any time by our Board of Trustees without notice to, or
approval of, our shareholders. We have increased our cash distributions every year since our inception 34 years
ago and every quarter since 1988.
Issuing senior securities. As of April 30, 2004, we have issued and outstanding $7,074,000 in investment
certificates, which were issued for a definite term and annual interest rate, and which will be redeemed as they
mature. In the event of our dissolution, the investment certificates would be paid in preference to our common shares.
IRET has discontinued the sale of investment certificates and outstanding certificates will be redeemed as they
mature. Additionally, on April 26, 2004, we issued 1,150,000 shares of 8.25% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest (the “Series A preferred shares”). Depending on future interest rate and
market conditions, we may issue additional preferred shares or other senior securities which would have dividend
and liquidation preference over our common shares.
Borrowing money. We rely on borrowed funds in pursuing our investment objectives and goals. It is our policy
to seek to borrow up to 65.0% to 75.0% of the appraised value of all new real estate acquired or developed. This
policy concerning borrowed funds is vested solely with our Board of Trustees and can be changed by our Board
of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders. Such policy is subject,
however, to the limitation in our Bylaws, which provides that unless approved by a majority of the independent
members of our Board of Trustees and disclosed to our shareholders in our next quarterly report along with
justification for such excess, we may not borrow in excess of 300% of our total net assets. Our Bylaws do not impose
any limitation on the amount that we may borrow against any one particular property.
3
Offering securities in exchange for property. Our organizational structure allows us to issue shares and to offer
limited partnership units of IRET Properties in exchange for real estate. The limited partnership units are convertible
into cash, or, at our option, common shares on a one-for-one basis after a minimum one-year holding period. All
limited partnership units receive the same cash distributions as those paid on common shares. Limited partners are
not entitled to vote on any matters affecting us until they convert their limited partnership units to common shares.
Our Articles of Amendment and Third Restated Declaration of Trust does not contain any restrictions on our
ability to offer limited partnership units of IRET Properties in exchange for property. As a result, any decision to
do so is vested solely in our Board of Trustees. This policy may be changed at any time, or from time to time,
without notice to, or a vote of, our shareholders. For the three most recent fiscal years ended April 30, we have
issued the following limited partnership units of IRET Properties in exchange for properties:
(in thousands)
2004
2003
2002
Limited partnership units issued . . . . . . . . . . . . . . . . . . . .
2,270
Dollar value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,851 $8,860 $19,793
2,006
894
Acquiring or repurchasing Shares. As a REIT, it is our intention to only invest in real estate assets. Our Articles
of Amendment and Third Restated Declaration of Trust does not prohibit the acquisition or repurchase of our
common or preferred shares or other securities so long as such activity does not prohibit us from operating as a
REIT under the Code. Any policy regarding the acquisition or repurchase of shares or other securities is vested
solely in our Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote
of, our shareholders.
During fiscal year 2004, we did not repurchase any of our outstanding common shares or limited partnership
units, except for the redemption of a nominal amount of fractional common shares held by shareholders, upon request.
To make loans to other persons. Our organizational structure allows us to make loans to other persons, subject
to certain conditions and subject to our election to be taxed as a REIT. All loans must be secured by real property
or limited partnership units of IRET Properties. Our mortgage loan receivables as of April 30, 2004, totaled
$4.9 million, and $1.2 million as of April 30, 2003.
To invest in the securities of other issuers for the purpose of exercising control. We have not, for the past three
years, engaged in, and we are not currently engaging in, investment in the securities of other issuers for the purpose
of exercising control. Our Articles of Amendment and Third Restated Declaration of Trust does not impose any
limitation on our ability to invest in the securities of other issuers for the purpose of exercising control. Any decision
to do so is vested solely in our Board of Trustees and may be changed at any time, or from time to time, without
notice to, or a vote of, our shareholders.
To provide summary reports to our shareholders. We also have a policy of mailing summary quarterly reports
to our shareholders in January, April, July, and October of each year. The quarterly reports do not contain financial
statements audited by an independent registered public accounting firm. This policy of providing a summary
quarterly report to our shareholders is not required by our organizational documents and may be changed by a
majority of our Board of Trustees at any time without notice to or a vote of our shareholders.
Information about Segments
We currently operate in two reportable segments: multi-family residential properties, and commercial
properties. For further information on these segments and other related information, see Note 13 of our consolidated
financial statements, and Management’s Discussion and Analysis in Item 7 of this Annual Report on Form 10-K.
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Our Executive Officers
Set forth below are the names, ages, titles and biographies of each of our executive officers as of July 1, 2004.
Name
Thomas A. Wentz, Sr.
Charles Wm. James
Timothy P. Mihalick
Thomas A. Wentz, Jr.
Diane K. Bryantt
Michael A. Bosh
Age
68
56
45
38
40
33
Title
President and Chief Executive Officer
Senior Vice President
Senior Vice President and Chief Operating Officer
Senior Vice President
Senior Vice President and Chief Financial Officer
Secretary and General Counsel
Thomas A. Wentz, Sr. is a graduate of Harvard College and Harvard Law School, and has been associated with
us since our formation on July 31, 1970. Mr. Wentz was a member of our Board of Trustees from 1970 to 1998,
Secretary from 1970 to 1987, Vice President from 1987 to July 2000, and has been President and Chief Executive
Officer since July 2000. Previously, from 1985 to 1991, Mr. Wentz was a Vice President of our former advisor, Odell-
Wentz & Associates, L.L.C., and, until August 1, 1998, was a partner in the law firm of Pringle & Herigstad, P.C.
Charles Wm. James was appointed as a Senior Vice President in February, 2003. Prior to becoming a Senior
Vice President, Mr. James served in several officer positions from 1976 to February 2003, including the office of
Vice President with the T.F. James Company, an Iowa corporation that was merged into IRET, Inc. in February
2003. Mr. James is currently a managing member of Thomas F. James Properties, L.L.C., an Arkansas commercial
development company; a partner of Peak Properties Development, a Montana commercial development partnership;
a partner of James Family Properties, a Minnesota commercial development partnership; and a limited partner of
Thomas F. James Realty Limited Partnership, L.L.L.P., a commercial property management company.
Timothy P. Mihalick joined us as a financial officer in May 1981, after graduating from Minot State University.
He has served in various capacities with us over the years and was named Vice President in 1992. Mr. Mihalick
has served as the Chief Operating Officer since 1997, as a Senior Vice President since 2002, and as a member of
our Board of Trustees since 1999.
Thomas A. Wentz, Jr. is a graduate of Harvard College and the University of North Dakota Law School, and
joined us as General Counsel and Vice President in January 2000. He has served as a Senior Vice President since
2002 and as a member of our Board of Trustees since 1996. Prior to 2000, Mr. Wentz was a shareholder in the
law firm of Pringle & Herigstad, P.C. from 1992 to 1999. Mr. Wentz is a member of the North Dakota Bar Association
and a Director of SRT Communications, Inc. Mr. Wentz is the son of Thomas A. Wentz, Sr.
Diane K. Bryantt joined us in June 1996 and served as our Controller and Corporate Secretary before being
appointed to the positions of Senior Vice President and Chief Financial Officer in 2002. Prior to joining us,
Ms. Bryantt was employed by First American Bank, Minot, North Dakota.
Michael A. Bosh joined us as Associate General Counsel and Secretary in September 2002, and was named
General Counsel in September 2003. Prior to 2002, Mr. Bosh was a shareholder in the law firm of Pringle &
Herigstad, P.C. Mr. Bosh graduated from Jamestown College in 1992 and from Washington & Lee University School
of Law in 1995. Mr. Bosh is a member of the American Bar Association and the North Dakota Bar Association.
Employees
As of April 30, 2004, we had 34 full time employees.
Environmental Matters and Government Regulation
Under various federal, state and local laws, ordinances and regulations relating to the protection of the
environment, a current or previous owner or operator of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances released at a property, and may be held liable to a governmental
entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred
in connection with any contamination. In addition, some environmental laws create a lien on a contaminated site
5
in favor of the government for damages and costs it incurs in connection with the contamination. These laws often
impose liability without regard to whether the current owner was responsible for, or even knew of, the presence
of such substances. It is our policy to obtain from independent environmental consultants a “Phase I” environmental
audit (which involves visual inspection but not soil or groundwater analysis) on all properties that we seek to acquire.
We do not believe that any of our properties are subject to any material environmental contamination. However,
no assurances can be given that:
• a prior owner, operator or occupant of the properties we own or the properties we intend to acquire did not
create a material environmental condition not known to us, which might have been revealed by more in-depth
study of the properties; and
• future uses or conditions (including, without limitation, changes in applicable environmental laws and
regulations) will not result in the imposition of environmental liability upon us.
In addition to laws and regulations relating to the protection of the environment, many other laws and
governmental regulations are applicable to our properties, and changes in the laws and regulations, or in their
interpretation by agencies and the courts, occur frequently. Under the Americans with Disabilities Act of 1990 (the
“ADA”), all places of public accommodation are required to meet certain federal requirements related to access
and use by disabled persons. In addition, the Fair Housing Amendments Act of 1988 (the “FHAA”) requires
apartment communities first occupied after March 13, 1990, to be accessible to the handicapped. Non-compliance
with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants. We
believe that those of our properties to which the ADA and/or FHAA apply are substantially in compliance with
present ADA and FHAA requirements.
Competition
Investing in and operating real estate is a very competitive business. We compete with other owners and
developers of multi-family and commercial properties to attract tenants to our properties. Ownership of competing
properties is diversified among other REITs, financial institutions, individuals and public and private companies who
are actively engaged in this business. Our multi-family properties compete directly with other rental apartments, as
well as with condominiums and single-family homes that are available for rent or purchase in the areas in which our
properties are located. Our commercial properties compete with other commercial properties for tenants. Additionally,
we compete with other real estate investors, including other REITs, pension and investment funds, partnerships and
investment companies, to acquire properties. This competition affects our ability to acquire properties we want to add
to our portfolio and the price we pay in acquisitions. During the past two years, we have witnessed an unprecedented
demand for quality investment real estate. This demand caused an escalation in price for all types of real estate. As
a result, we were unable to purchase properties that will generate rates of return similar to those generated by properties
we acquired in previous years. We expect that the levels of return to be achieved through our investment in existing
and stabilized real estate will remain lower than in previous periods as long as interest rates remain at historically
low levels. We do not believe we have a dominant position in any of the geographic markets in which we operate,
but some of our competitors are dominant in selected markets. Many of our competitors have greater financial and
management resources than we have. We believe, however, that the geographic diversity of our investments, the
experience and abilities of our management, the quality of our assets and the financial strength of many of our
commercial tenants affords us some competitive advantages that have in the past and will in the future allow us to
operate our business successfully despite the competitive nature of our business.
Corporate Governance Initiatives
During fiscal year 2004, the Company’s Board of Trustees adopted several new policies and initiatives to further
strengthen the Company’s corporate governance and increase the transparency of financial reporting. In response
to the requirements of the Sarbanes-Oxley Act of 2002 and revised NASDAQ listing standards, the Board of Trustees
took the following actions:
• adopted or revised Charters for the Board’s Audit, Compensation, Executive and Nominating Committees;
• adopted a Code of Conduct applicable to trustees, officers and employees, and a Code of Ethics for Senior
Financial Officers;
6
• established processes for shareholder communications with the Board of Trustees; and
• established regular meetings of the independent trustees in executive sessions at which only the independent
trustees are present.
Additionally, the Company’s Audit Committee established procedures for the receipt, retention and treatment
of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the
confidential, anonymous submission by Company employees of concerns regarding accounting or auditing matters.
The Audit Committee also adopted a policy requiring Audit Committee approval of all audit and non-audit services
provided to the Company by the Company’s independent registered public accounting firm.
The Company will disclose any amendment to its Code of Ethics for Senior Financial officers on its website.
In addition, in the event the Company waives compliance by any of the senior financial officers subject to the Code
of ethics, the Company will post on its website within five business days the nature of the waiver, in satisfaction
of its disclosure requirement under Item 10 of Form 8-K.
Website and Available Information
Our internet address is www.iret.com. We make available, free of charge, through the “SEC filings” tab under
the Investor Relations section of our internet website, our Annual Report on Form 10-K, our quarterly reports on
Form 10-Q, our current reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such forms are filed with or furnished
to the SEC. Current copies of our Code of Conduct, Code of Ethics for Senior Financial Officers, and Charters
for the Audit, Compensation, Executive and Nominating Committee of our Board of Trustees are also available
on our website under the heading “Corporate Governance” in the Investor Relations section of our website. Copies
of these documents are also available to shareholders upon request addressed to the Secretary at Investors Real
Estate Trust, P.O. Box 1988, Minot, North Dakota 58701. Information on our internet website does not constitute
part of this Annual Report on Form 10-K.
7
Risks Related to Our Properties and Business
RISK FACTORS
Our increasing ownership of commercial properties subjects us to different risks than our traditional base of
multi-family residential properties. Historically, the assets in our investment portfolio consisted predominantly of
multi-family residential properties. More recently, our investment activities have caused this balance to shift so that
the percentage of commercial properties held in our portfolio has increased significantly. Within the past 24 months,
approximately 86% of our property acquisitions, on a total asset value basis, have been commercial properties, due
to the greater availability of these properties on terms that meet our financial and strategic objectives. Based on
total asset value, commercial properties now comprise a majority of our real estate assets, with the majority of our
commercial properties being located in the Minneapolis, Minnesota area. Based on current market conditions, we
anticipate that the percentage of commercial properties that we may acquire will continue to significantly exceed
the number of multi-family residential properties that we may acquire during the next twelve months.
Our historical experience in acquiring and operating multi-family residential properties may not be directly
applicable to the acquisition and operation of commercial properties. Commercial properties involve different risks
than multi-family residential properties, including:
• direct exposure to business and economic downturns;
• exposure to tenant lease terminations or bankruptcies; and
• competition from real estate investors with greater experience in developing and owning commercial
properties.
Our earnings may be negatively affected if we are not successful in our acquisition and operation of commercial
properties.
Our geographic concentration in Minnesota and North Dakota may result in losses. For the fiscal year ended
April 30, 2004, we received approximately 80% of our commercial gross revenue from commercial properties in
Minnesota and approximately 9% of our commercial gross revenue from commercial properties in North Dakota.
For that same period, we received approximately 20% of our multi-family residential gross revenue from multi-
family residential properties in Minnesota and 29% of our multi-family gross revenue from multi-family properties
in North Dakota. As of April 30, 2004, Minnesota accounted for approximately 79% of our commercial real estate
portfolio and 22% of our multi-family residential real estate portfolio, as determined by total asset value, while
North Dakota accounted for approximately 8% of our commercial real estate portfolio and 26% of our multi-family
residential real estate portfolio.
As a result of this concentration, we are subject to substantially greater risk than if our investments were more
geographically dispersed. Specifically, we are more significantly exposed to the effects of economic and real estate
conditions in those particular markets, such as building by competitors, local vacancy and rental rates and general
levels of employment and economic activity.
The economic climate in Minnesota is highly dependent on the service, manufacturing and high technology
industries. The North Dakota economy is dependent on the agricultural, government, business and personal services and
wholesale and retail industries. Economic weakening, or lack of recovery from the recent weakness, in any of these
industries may adversely affect the performance of our real estate portfolio by decreasing demand for rental space.
Approximately 68% of our assets in North Dakota, based on total asset value, are multi-family residential
properties, which are dependent on a stable or growing population. During the past ten years, North Dakota’s
population and total personal income have grown at slower rates than surrounding states and the nation as a whole.
If this trend continues, we may experience difficulty in renting our properties at acceptable rates, which may result
in a decrease in our net income and adversely affect our ability to make distributions to the holders of our shares
of beneficial interest.
Increasing physical and economic vacancy rates and declining rental rates will negatively impact earnings.
In the twelve months subsequent to April 30, 2004, leases covering approximately 10% of our annualized base rents
8
will expire. At April 30, 2004, the economic occupancy of our commercial properties, on a stabilized property basis,
was approximately 93%. “Economic Occupancy” is defined 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. “Stabilized properties” are those
properties that we have owned for the entirety of the periods being compared, and include properties that were
redeveloped or expanded during the periods being compared. Properties purchased or sold during the periods being
compared are excluded from our stabilized property analysis. If we are unable to rent or sell those properties that
are vacant or affected by expiring leases, properties producing approximately 11% of our total commercial
annualized base rents will be vacant within the next 12 months. Even greater vacancies will be created to the extent
that a number of tenants, or any one significant tenant, file for bankruptcy protection and reject our leases. At
April 30, 2004, the economic occupancy of our multi-family residential properties, on a stabilized property basis,
was approximately 91%. Multi-family residential vacancies could increase from current levels due to general
economic conditions, local economic or competitive conditions, the trend toward home ownership facilitated by
low interest rates, unsatisfactory property management, the physical condition of our properties or other factors.
Increased vacancies in both our commercial and multi-family residential properties will negatively impact our
earnings, will cause a decline in the value of our real estate portfolio and may adversely affect our ability to make
distributions to the holders of our shares of beneficial interest.
Economic occupancy levels for our stabilized commercial and multi-family residential properties have
decreased over the past twelve months. Multi-family property economic occupancy rates (on a stabilized property
basis) decreased to 91% for the twelve months April 30, 2004, from 91% for the twelve months ended April 30,
2003. Commercial property economic occupancy rates (on a stabilized property basis) decreased to 93% for the
twelve months ended April 30, 2004 from 96% for the twelve months ended April 30, 2003. The decrease in
economic occupancy rates of our multi-family residential properties does not reflect the concessions, such as free
rent, that have been granted to attract new tenants to our multi-family residential properties. Concessions, on a multi-
family residential stabilized property basis, were $2.58 million and $1.37 million for the twelve months ended
April 30, 2004 and 2003, respectively, an increase of 88%.
Inability to manage our rapid growth effectively may adversely affect our operating results. Our total assets
have increased from $570.3 million at April 30, 2001, to $1.08 billion at April 30, 2004, principally through the
acquisition of additional real estate properties. Subject to our continued ability to raise equity capital and issue LP
units of IRET Properties and identify suitable investment properties, we intend to continue our acquisition of real
estate properties. Effective management of this level of growth will present challenges, including:
• the need to expand our management team and staff;
• the need to enhance internal operating systems and controls;
• increased reliance on outside advisors and property managers; and
• the ability to consistently achieve targeted returns.
If we are unable to effectively manage our growth, our operating results will be adversely affected.
Competition may negatively impact our earnings. We compete with many kinds of institutions, including other
REITs, private partnerships, individuals, pension funds and banks, for tenants and investment opportunities. Many
of these institutions are active in the markets in which we invest and have greater financial and other resources
that may be used to compete against us. With respect to tenants, this competition may affect our ability to lease
our properties, the price at which we are able to lease our properties and the cost of required renovations or build-
outs. With respect to acquisition and development investment opportunities, this competition may cause us to pay
higher prices for new properties than we otherwise would have paid, or may prevent us from purchasing a desired
property at all.
An inability to continue to make accretive property acquisitions may adversely affect our ability to increase
our operating income. From our fiscal year ended April 30, 2002, to our fiscal year ended April 30, 2004, our
operating income decreased from $13.0 million to $11.9 million. Our basic and diluted net income per common
share was $.24 as of April 30, 2004, compared to $.38 and $.42, respectively, as of April 30, 2003 and 2002. If
9
we are unable to continue to make real estate acquisitions on terms that meet our financial and strategic objectives,
whether due to market conditions, a changed competitive environment or unavailability of capital, our ability to
increase our operating income may be materially and adversely affected.
High leverage on our overall portfolio may result in losses. As of April 30, 2004, our ratio of total indebtedness
to total net assets was approximately 178%. As of April 30, 2003 and 2002, our percentage of total indebtedness
to total net assets was approximately 186% and 211%, respectively. Under our Second Restated Trustees’
Regulations (Bylaws) we may increase our total indebtedness up to 300% of net assets, or by an additional
approximately $475 million. There is no limitation on the increase that may be permitted if approved by a majority
of the independent members of our board of trustees and disclosed to the holders of our shares of beneficial interest
in the next quarterly report, along with justification for any excess.
This amount of leverage may expose us to cash flow problems if rental income decreases. Under those
circumstances, in order to pay our debt obligations we might be required to sell properties at a loss or be unable
to make distributions to the holders of our shares of beneficial interest. A failure to pay amounts due may result
in a default on our obligations and the loss of the property through foreclosure.
Our inability to renew, repay or refinance our debt may result in losses. We are subject to the normal risks
associated with debt financing, including the risk that:
• our cash flow will be insufficient to meet required payments of principal and interest;
• we will not be able to renew, refinance or repay our indebtedness when due; and
• the terms of any renewal or refinancing will be less favorable than the terms of our current indebtedness.
If we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose
of one or more of the properties on disadvantageous terms, which may result in losses to us. These losses could
have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest
and our ability to pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of
indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose upon the property,
appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent
loss of our revenues and asset value. Foreclosures could also create taxable income without accompanying cash
proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Internal Revenue Code.
The principal balance of our indebtedness in mortgage loans secured by individual commercial and residential
properties totaled $633 million as of April 30, 2004. Of the outstanding mortgages, both fixed and variable,
$15.1 million in principal amount came due during fiscal year 2004, $15.8 million in principal amount will come
due during fiscal year 2005 and the remaining balance will come due in later fiscal years.
The cost of our indebtedness may increase. We have incurred, and we expect to continue to incur, indebtedness
that bears interest at a variable rate. As of April 30, 2004, $42 million, or approximately 7%, of the principal amount
of our total mortgage indebtedness was subject to variable interest rate agreements. The interest rates on our variable
rate mortgages range from approximately 4% to approximately 8%. An increase of one percent in our variable
interest rate would collectively increase our interest payments by $419,000 annually. In addition, portions of our
fixed-rate indebtedness incurred for historical property acquisitions will come due on a periodic basis. For example,
in each of our fiscal years ended April 30, 2005, 2006 and 2007, approximately $14.0 to $17.0 million of our fixed-
rate debt will come due. Accordingly, increases in interest rates will increase our interest costs, which could have
a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest
and our ability to pay amounts due on our debt.
Our current or future insurance may not protect us against possible losses. We carry comprehensive liability,
fire, extended coverage and rental loss insurance with respect to our properties at levels that we believe to be
adequate. However, the coverage limits of our current or future policies may be insufficient to cover the full cost
of repair or replacement of all potential losses. Moreover, this level of coverage may not continue to be available
in the future or, if available, may be available only at unacceptable cost or with unacceptable terms.
Additionally, there may be certain extraordinary losses, such as those resulting from civil unrest, terrorism
or environmental contamination, that are not generally, or fully, insured against because they are either uninsurable
10
or not economically insurable. For example, we do not currently carry insurance against losses as a result of
environmental contamination. Should an uninsured or underinsured loss occur to a property, we could be required
to use our own funds for restoration or lose all or part of our investment in, and anticipated revenues from, the
property. In any event, we would continue to be obligated on any mortgage indebtedness on the property. Any loss
could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial
interest and our ability to pay amounts due on our debt.
We have significant investments in medical properties and adverse trends in healthcare provider operations
may negatively affect our lease revenues from these properties. We have acquired a significant number of specialty
medical properties (including assisted living facilities) and may acquire more in the future. As of April 30, 2004,
our real estate portfolio consisted of 28 medical properties, having a total asset value of $171 million, or
approximately 16% of the total asset value of our entire real estate portfolio based on the dollar amount of our
original investment plus capital improvements. The healthcare industry is currently experiencing changes in the
demand for, and methods of delivery of, healthcare services; changes in third-party reimbursement policies;
significant unused capacity in certain areas, which has created substantial competition for patients among healthcare
providers in those areas; continuing pressure by private and governmental payors to reduce payments to providers
of services; and increased scrutiny of billing, referral and other practices by federal and state authorities. Sources
of revenue for our medical property tenants may include the federal Medicare program, state Medicaid programs,
private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce
healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain
services provided by some of our tenants. These factors may adversely affect the economic performance of some
or all of our medical services tenants and, in turn, our lease revenues. In addition, if we or our tenants terminate
the leases for these properties, or our tenants lose their regulatory authority to operate such properties, we may not
be able to locate suitable replacement tenants to lease the properties for their specialized uses. Alternatively, we
may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues and/or
additional capital expenditures occurring as a result could hinder our ability to make distributions to the holders
of our shares of beneficial interest.
Adverse changes in applicable laws may affect our potential liabilities relating to our properties and
operations. Increases in real estate taxes and income, service and transfer taxes cannot always be passed through
to all tenants in the form of higher rents. As a result, any increase may adversely affect our cash available for
distribution, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay
amounts due on our debt. Similarly, changes in laws that increase the potential liability for environmental conditions
existing on properties, that increase the restrictions on discharges or other conditions or that affect development,
construction and safety requirements may result in significant unanticipated expenditures that could have a material
adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability
to pay amounts due on our debt. In addition, future enactment of rent control or rent stabilization laws or other laws
regulating multi-family residential properties may reduce rental revenues or increase operating costs.
Complying with laws benefiting disabled persons may affect our costs and investment strategies. Federal,
state and local laws and regulations designed to improve disabled person’s access to and use of buildings, including
the Americans with Disabilities Act, may require modifications to, or restrict renovations of, existing buildings.
Additionally, these laws and regulations may require that structural features be added to buildings under
construction. Any legislation or regulations that may be adopted in the future may impose further burdens or
restrictions on us with respect to improved access to, and use of these buildings by, disabled persons. The costs
of complying with these laws and regulations may be substantial and limits or restrictions on construction, or the
completion of required renovations, may limit the implementation of our investment strategy or reduce overall
returns on our investments. This could have an adverse effect on us, our ability to make distributions to the holders
of our shares of beneficial interest and our ability to pay amounts due on our debt.
We may be responsible for potential liabilities under environmental laws. Under various federal, state and local
laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs
of removal of, or remediation of, hazardous or toxic substances in, on, around or under that property. These laws
often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence
of the hazardous or toxic substances. The presence of these substances, or the failure to properly remediate any
11
property containing these substances, may adversely affect the owner’s or operator’s ability to sell or rent the affected
property or to borrow funds using the property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal of, or remediation of, these substances
at that disposal or treatment facility, whether or not the facility is owned or operated by that person. In connection
with our current or former ownership (direct or indirect), operation, management, development and/or control of
real properties, we may be potentially liable for removal or remediation costs with respect to hazardous or toxic
substances as those properties, as well as certain other costs, including governmental fines and claims for injuries
to persons and property. A finding of liability for an environmental condition as to any one or more properties could
have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest
and our ability to pay amounts due on our debt.
It is currently our policy to obtain a Phase I environmental study on each property that we seek to acquire.
If the Phase I indicates any possible environmental problems, it is our policy is to order a Phase II study, which
involves testing the soil and ground water for actual hazardous substances. However, Phase I and Phase II
environmental studies, or any other environmental studies undertaken with respect to any of our current or future
properties, may not reveal the full extent of potential environmental liabilities. We currently do not carry insurance
for environmental liabilities.
We may be unable to retain or attract qualified management. We are dependent upon our senior officers for
essentially all aspects of our business operations. Our senior officers have experience in the specialized business
segments in which we operate and the loss of them would likely have a material adverse effect on our operations.
We do not have employment contracts with any of our senior officers. As a result, any senior officer may terminate
his or her relationship with us at any time, without providing advance notice. The location of our corporate
headquarters in Minot, North Dakota, may make it more difficult and expensive to attract, relocate and retain current
and future officers and employees.
Risks Related to Our Structure and Organization
We may incur tax liabilities as a consequence of failing to qualify as a REIT. Although our management
believes that we are organized and have operated and are operating in such a manner to qualify as a “real estate
investment trust,” as that term is defined under the Internal Revenue Code, we may not in fact have operated, or
may not be able to continue to operate, in a manner to qualify or remain so qualified. Qualification as a REIT involves
the application of highly technical and complex Internal Revenue Code provisions for which there are only limited
judicial or administrative interpretations, and further involves the determination of factual matters and
circumstances not entirely within our control. For example, in order to qualify as a REIT, at least 95% of our gross
income in any year must be derived from qualifying sources, and we must make distributions to the holders of our
shares of beneficial interest aggregating annually at least 90% of our REIT taxable income (excluding net capital
gains). Thus, to the extent revenues from non-qualifying sources, such as income from third-party management,
represents more than five percent of our gross income in any taxable year, we will not satisfy the 95% income test
and may fail to qualify as a REIT, unless certain relief provisions contained in the Internal Revenue Code apply.
Even if relief provisions apply, however, a tax would be imposed with respect to excess net income. Additionally,
if IRET Properties, our operating partnership or one or more of our subsidiaries is determined to be taxable as a
corporation, we may fail to qualify as a REIT. Either our failure to qualify as a REIT, for any reason, or the imposition
of taxes on excess net income from non-qualifying sources, could have a material adverse effect on us, our ability
to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our
debt. Furthermore, new legislation, regulations, administrative interpretations or court decisions could change the
tax laws with respect to our qualification as a REIT or the federal income tax consequences of our qualification.
If we failed to qualify as a REIT, we would be subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at corporate rates, which would likely have a material adverse
effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to
pay amounts due on our debt. In addition, unless entitled to relief under applicable statutory provisions, we would
also be disqualified from treatment as a REIT for the four taxable years following the year during which we lost
our qualification. This treatment would reduce funds available for investment or distributions to the holders of our
shares of beneficial interest because of the additional tax liability to us for the year or years involved. In addition,
12
we would no longer be required to make distributions to holders of our common shares. To the extent that
distributions to the holders of our shares of beneficial interest would have been made in anticipation of qualifying
as a REIT, we might be required to borrow funds or to liquidate certain investments to pay the applicable tax.
Certain provisions of our Third Restated Declaration of Trust may limit a change in control and deter a
takeover. In order to maintain our qualification as a REIT, our Third Restated Declaration of Trust provides that
any transaction, other than a transaction entered into through the NASDAQ National Market or other similar
exchange, that would result in our disqualification as a REIT under Section 856 of the Internal Revenue Code,
including any transaction that would result in (i) a person owning in excess of the ownership limit, which as of
the date of this annual report is 9.8%, in number or value, of our outstanding shares of beneficial interest, (ii) less
than 100 people owning our shares of beneficial interest, (iii) our being “closely held” within the meaning of Section
856(h) of the Internal Revenue Code, or (iv) 50% or more of the fair market value of our shares of beneficial interest
being held by persons other than “United States persons,” as defined in Section 7701(a)(30) of the Internal Revenue
Code, will be void ab initio. If the transaction is not void ab initio, then the shares of beneficial interest in excess
of the ownership limit, that would cause us to be closely held, that would result in 50% or more of the fair market
value of our shares of beneficial interest to be held by persons other than United States persons or that otherwise
would result in our disqualification as a REIT, will automatically be exchanged for an equal number of excess shares,
and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable
beneficiaries named by our board of trustees. These limitations may have the effect of preventing a change in control
or takeover of us by a third party, even if the change in control or takeover would be in the best interests of the
holders of our shares of beneficial interest.
Our board of trustees may make changes to our major policies without approval of the holders of our shares
of beneficial interest. Our major policies, including policies relating to development, acquisitions, financing, growth,
debt capitalization and distributions, are determined by our board of trustees. Our board of trustees may amend
or revoke those policies, and other policies, without advance notice to, or the approval of, the holders of our shares
of beneficial interest.
Item 2. Properties
IRET is a qualified REIT under Section 856-858 of the Code, and is in the business of owning, leasing,
developing and acquiring real estate properties. Except for certain commercial properties managed by our
Minneapolis office, these real estate investments are generally managed by third-party professional real estate
management companies on our behalf.
Total Real Estate Rental Revenue
As of April 30, 2004, our real estate portfolio consisted of 69 multi-family residential properties and 142
commercial properties, comprising 40% and 60%, respectively, of our total real estate portfolio, based on the dollar
amount of our original investment plus capital improvements through April 30, 2004. Gross annual rental revenue
and percentages of total annual real estate rental revenue by property type for each of the three most recent fiscal
years ended April 30, are as follows:
(in thousands)
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Economic Occupancy Rates
Multi-Family
Residential
Gross Revenue
$62,964
$59,653
$58,347
%
45%
50%
65%
Commercial
Gross Revenue
$77,260
$58,878
$32,008
%
Total Revenue
55% $140,224
50% $118,531
35% $ 90,355
Economic occupancy rates are shown below for each property type in each of the three most recent fiscal years
ended April 30. 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. In the case of multi-family residential properties, lease
13
arrangements with individual tenants vary from month-to-month to one-year leases. Leases on commercial
properties vary from month-to-month to 20 years.
Multi-Family Residential Economic Occupancy . . . .
Commercial Economic Occupancy . . . . . . . . . . . . . . . . . .
90.1% 91.2% 94.4%
92.9% 95.4% 97.9%
2004
2003
2002
Certain Lending Requirements
In certain instances, in connection with the acquisition of investment properties, the lender financing such
properties may require, as a condition of the loan, that the properties be owned by a “single asset entity.”
Accordingly, we have organized eleven wholly-owned subsidiary corporations, and IRET Properties has organized
several limited partnerships, for the purpose of holding title in an entity that complies with such lending conditions.
All financial statements of these subsidiaries are consolidated into our financial statements.
Management of Our Real Estate Assets
The day-to-day management of our real estate assets is handled by third-party professional real estate
management companies. Day-to-day management activities include the negotiation of potential leases, the
preparation of proposed operating budgets, and the supervision of routine maintenance and capital improvements
that have been authorized by us. All activities relating to purchase, sale, insurance coverage, capital improvements,
approval of commercial leases, annual operating budgets and major renovations are made exclusively by our
employees and are then implemented by the third-party property management companies.
As of April 30, 2004, we had property management contracts with the following companies:
A & L Properties, Inc., Duluth, MN
Bayport Properties, Minneapolis, MN
Builder’s Management & Investment Co., Fargo, ND
Colliers Turley Martin Tucker, Inc., Minneapolis, MN and Jamestown, ND
Coast Management, Boise, ID, and Everett, WA
Coldwell Banker First Realty, Fargo, ND
ConAm, Plano, TX and Aurora, CO
Dakota Commercial, Grand Forks, ND
Ferguson Commercial Real Estate Services, Des Moines, IA
Frauenshuh Companies, Inc., St. Paul, MN
Hoyt Properties, Inc., Minnetonka, MN
Inland Companies, Milwaukee, MN
Investors Management & Marketing, Inc., Minot, ND
Illies Nohave Heinen Property Management, St. Cloud, MN
Kahler Property Management, Rapid City, SD
Northco, Inc., Minneapolis, MN
Opus Northwest Management, L.L.C., Minnetonka, MN and Minneapolis, MN
R.A. Morton & Associates, St. Cloud, MN and Sauk Rapids, MN
Remada Companies, Minnetonka, MN
Sundance Company, Boise, ID
United Properties, Minneapolis, MN
Weis Management, Rochester, MN
With the exception of Hoyt Properties, Inc., none of the companies engaged to provide property management
services is affiliated with us, our officers or members of our Board of Trustees. Hoyt Properties, Inc. is owned
100.0% by Steven B. Hoyt, a member of our Board of Trustees, and his wife. Hoyt Properties, Inc. manages, pursuant
to written management contracts, the commercial buildings that we acquired from Mr. Hoyt.
In July 2004, a former principal of Bayport Properties joined us as a Vice President, Asset Management, with
the management of certain of our commercial properties, primarily located in the
responsibility for
Minneapolis area.
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Generally, all of our management contracts provide for compensation ranging from 2.5% to 5.0% of gross
rent collections and, typically, we may terminate these contracts in 60 days or less or upon the property manager’s
failure to meet certain specified financial performance goals.
With respect to multi-tenant commercial properties, we rely almost exclusively on third-party brokers to locate
potential tenants. As compensation, brokers may receive a commission of up to 7.0% of the total rent to be paid over
the term of the lease. This commission rate is the industry standard, which we believe is commercially reasonable.
Summary of Real Estate Investment Portfolio
As of April 30, (in thousands)
2004
%
2003
%
Real Estate Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Accumulated Depreciation . . . . . . . . . . . . . . . . . .
Mortgage Loans Receivable . . . . . . . . . . . . . . . . . . . . . .
Total Real Estate Investments . . . . . . . . . . . . . . . . . . . .
$1,103,428
(100,250)
$1,003,178
4,893
$1,008,071
$919,781
(75,639)
99.5% $844,142
1,183
100% $845,325
.5%
99.9%
.1%
100%
Summary of Individual Properties Owned as of April 30, 2004
The following table presents information regarding our 211 properties owned as of April 30, 2004. We own
the following interests in real estate either through our wholly-owned subsidiaries or by ownership of a controlling
interest in an entity owning the real estate. We account for these interests on a consolidated basis. Occupancy rates
given are the average economic occupancy rates for the fiscal year ended April 30, 2004:
(N/A = Property held less than 12 months)
(* = Real estate not owned in fee; leased under a ground lease)
Property Name and Location
MULTI-FAMILY RESIDENTIAL
Units
(in thousands)
Investment
Fiscal 2004
Economic
Occupancy
408 1st Street SE – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applewood on the Green – Omaha, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beulah Condos – Beulah, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bison Properties – Carrington, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brookfield Village – Topeka, KS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Candlelight Apartments – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canyon Lake Apartments – Rapid City, SD . . . . . . . . . . . . . . . . . . . . . . . .
Castle Rock – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Century Apartments – Williston, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chateau Apartments – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clearwater – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Colton Heights – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Connelly Estates – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cottonwood Lake I – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cottonwood Lake II – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cottonwood Lake III – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Country Meadows Phase I – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . .
Country Meadows Phase II – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . .
Crestview Apts – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crown Colony – Topeka, KS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dakota Arms – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dakota Hill at Valley Ranch – Irving, TX . . . . . . . . . . . . . . . . . . . . . . . . . .
East Park Apartments – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . .
0
234
26
35
160
66
109
165
192
64
60
18
240
67
67
67
67
67
152
220
18
504
84
47
$
12,024
434
666
7,434
1,670
4,304
6,163
4,536
2,734
3,924
992
14,200
4,572
4,326
4,787
4,311
4,465
5,251
11,190
658
38,435
2,659
100.0%
76.9%
52.3%
72.1%
N/A
99.1%
88.7%
85.8%
94.0%
97.3%
92.0%
97.1%
N/A
86.3%
88.4%
90.7%
94.1%
93.2%
89.1%
92.5%
98.2%
93.9%
89.3%
15
Property Name and Location
Units
(in thousands)
Investment
Fiscal 2004
Economic
Occupancy
MULTI-FAMILY RESIDENTIAL, continued
Eastgate Properties – Moorhead, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forest Park Estates – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Heritage Manor – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ivy Club – Vancouver, WA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jenner Properties – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kirkwood Apartments – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lancaster Apartments – St. Cloud, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy Apartments I – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy Apartments II & III – Grand Forks, ND . . . . . . . . . . . . . . . . . . .
Legacy IV – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy V – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy VI – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy VII – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lonetree Apartments – Harvey, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Magic City Apartments – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meadows Phase I – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meadows Phase II – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meadows Phase III – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miramont – Fort Collins, CO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Monticello Apartments – Monticello, MN . . . . . . . . . . . . . . . . . . . . . . . . . .
Neighborhood Apartments – Co. Springs, CO . . . . . . . . . . . . . . . . . . . . . .
North Pointe – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oakmont Apartments – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Olympic Village – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oxbow – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Park East Apartments – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Park Meadows I – Waite Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Park Meadows II & III – Waite Park, MN . . . . . . . . . . . . . . . . . . . . . . . . .
Parkway Apartments – Beulah, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pebble Springs – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pine Cone Apartments – Fort Collins, CO . . . . . . . . . . . . . . . . . . . . . . . . . .
Pinehurst Apartments – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pointe West Apartments – Rapid City, SD . . . . . . . . . . . . . . . . . . . . . . . . . .
Prairie Winds Apartments – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . .
Prairiewood Meadows – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remada Court Apartments – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ridge Oaks Apartments – Sioux City, IA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rimrock Apartments – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Meadows 96 – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rosewood/Oakwood – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sherwood Apartments – Topeka, KS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Pointe – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southview Apartments – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southwind Apartments – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . .
Sunset Trail Phase I – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunset Trail Phase II – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sweetwater Properties – Devils Lake, ND . . . . . . . . . . . . . . . . . . . . . . . . . .
Sycamore Village Apartments – Sioux Falls, SD . . . . . . . . . . . . . . . . . . .
Thomasbrook – Lincoln, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valley Park Manor – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116
270
182
204
90
108
84
116
67
67
**
**
**
12
200
27
27
27
210
60
192
49
80
274
120
122
120
240
36
16
195
21
90
48
85
115
132
78
98
160
300
195
24
164
73
73
90
48
264
168
16
$ 2,732
8,146
8,061
13,430
2,015
3,914
3,407
7,312
3,894
6,743
351
230
230
260
4,916
1,841
1,930
2,201
14,881
4,265
12,148
2,413
5,317
12,314
5,215
5,357
6,040
6,919
215
789
13,805
775
4,616
2,099
3,068
6,758
4,852
4,026
6,829
6,013
16,597
10,486
771
6,340
7,103
7,593
1,774
1,508
10,393
5,428
92.4%
98.3%
80.3%
87.2%
97.8%
92.5%
73.4%
99.4%
99.5%
99.3%
N/A
N/A
N/A
64.1%
95.9%
99.7%
98.0%
99.6%
94.2%
N/A
91.1%
91.2%
76.7%
97.9%
89.8%
96.6%
75.0%
73.0%
49.9%
97.9%
91.1%
99.2%
96.3%
86.7%
89.1%
N/A
86.6%
97.5%
94.4%
82.6%
90.2%
96.0%
97.4%
98.2%
82.0%
78.5%
82.1%
78.5%
92.7%
97.4%
Property Name and Location
MULTI-FAMILY RESIDENTIAL, continued
Van Mall Woods – Vancouver, WA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Stonehill – St. Cloud, MN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Westwood Park – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winchester/Village Green – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . .
Woodridge Apartments – Rochester, MN. . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL MULTI-FAMILY RESIDENTIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Units
100
313
64
151
108
8,955
(in thousands)
Investment
Fiscal 2004
Economic
Occupancy
$ 6,336
13,218
2,433
9,067
7,016
$446,172
95.5%
90.3%
93.2%
N/A
93.4%
** Property not placed in service at April 30, 2004. Additional costs are still to be incurred.
Approximate
Net Rentable
Square Footage
OFFICE BUILDINGS
1st Avenue Building – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17 South Main – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401 South Main – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2030 Cliff Road – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ameritrade – Omaha, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benton Business Park – Sauk Rapids, MN . . . . . . . . . . . . . . . . . . . . . . . . .
Bloomington Business Plaza – Bloomington, MN . . . . . . . . . . . . . . . . . .
Brenwood – Minnetonka, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brown Deer Road – Milwaukee, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Burnsville Bluffs – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central Bank Office – Eden Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chiropractor Office Building – Greenwood, MN . . . . . . . . . . . . . . . . . . .
Cold Spring Center – St. Cloud, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conseco Building – Rapid City, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dewey Hill Business Center – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . .
Flying Cloud Drive – Eden Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Golden Hills Office Center – Golden Valley, MN . . . . . . . . . . . . . . . . . .
Great Plains Software – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interlachen Corp Center – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mendota Center I – Mendota Heights, MN . . . . . . . . . . . . . . . . . . . . . . . . .
Mendota Center II – Mendota Heights, MN . . . . . . . . . . . . . . . . . . . . . . . .
Mendota Center III – Mendota Heights, MN . . . . . . . . . . . . . . . . . . . . . . .
Mendota Center IV – Mendota Heights, MN . . . . . . . . . . . . . . . . . . . . . . .
Mendota Northland Ctr. – Mendota Hts., MN . . . . . . . . . . . . . . . . . . . . . .
Metris – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minnesota National Bank – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hospitality Associates – Minnetonka, MN . . . . . . . . . . . . . . . . . . . . . . . . . .
Nicollett VII – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Northgate II – Maple Grove, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pillsbury Business Center – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza VII – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plymouth IV & V – Plymouth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southeast Tech Center – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TCA Building – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three Paramount Plaza – Bloomington, MN . . . . . . . . . . . . . . . . . . . . . . .
Thresher Square East – Minneapolis, MN . . . . . . . . . . . . . . . . . . . . . . . . . .
Thresher Square West – Minneapolis, MN . . . . . . . . . . . . . . . . . . . . . . . . .
15,357
3,250
8,597
13,374
73,742
30,464
121,064
176,917
175,610
45,158
39,525
1,600
77,533
75,815
73,338
62,585
190,758
122,040
105,084
59,852
88,398
60,776
72,231
146,808
20,000
27,000
4,000
125,385
25,999
42,220
27,297
126,809
58,300
106,207
75,526
57,891
54,945
$
548
102
628
983
8,349
1,613
7,589
14,419
13,911
2,799
4,660
334
8,610
7,047
4,939
5,773
$27,588
15,376
16,724
7,040
11,556
6,750
8,705
17,660
2,951
2,107
401
7,382
2,365
1,842
3,400
14,888
6,117
12,552
7,869
6,565
4,562
40.6%
50.7%
49.8%
100.0%
100.0%
N/A
97.6%
82.8%
N/A
100.0%
92.8%
100.0%
97.8%
0.0%
94.4%
93.5%
N/A
100.0%
100.0%
87.8%
95.5%
99.7%
100.0%
N/A
N/A
100.0%
100.0%
100.0%
100.0%
73.2%
83.5%
100.0%
100.0%
N/A
83.6%
86.5%
58.7%
17
Property Name and Location
OFFICE BUILDINGS, continued
UHC Office – International Falls, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Viromed – Eden Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wayroad – Minnetonka, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West River Business Park – Waite Park, MN . . . . . . . . . . . . . . . . . . . . . . . . .
Westgate – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wirth Corp Center – Golden Valley, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL OFFICE BUILDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDUSTRIAL
API Building – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixon Avenue Industrial Park – Des Moines, IA . . . . . . . . . . . . . . . . . . .
Lexington Commerce Center – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . .
Lighthouse – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lindberg/Bodycote – Eden Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Metal Improvement Co. – New Brighton, MN . . . . . . . . . . . . . . . . . . . . .
Stone Container – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stone Container – Roseville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stone Container – Waconia, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wilson’s Leather – Brooklyn Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winsted/Sterner Lighting – Winsted, MN . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL INDUSTRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RETAIL
Anoka Strip Center – Anoka, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arrowhead Shopping Center – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . .
Barnes & Noble – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barnes & Noble – Omaha, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buffalo Mall – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carmike Theatre – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Champion Auto – Forest Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checkers Auto – Faribault, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checkers Auto – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denfeld Retail Center – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilly Lily – St. Louis Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagan PDQ – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagan Retail Center I – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagan Retail Center II – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Grand Station – East Grand Forks, MN . . . . . . . . . . . . . . . . . . . . . . .
Ernst Home Center – Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Evergreen Shopping Center – Pine City, MN . . . . . . . . . . . . . . . . . . . . . . .
Excelsior Retail Center – Excelsior, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Express Shopping Center – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate Bakery – Mounds View, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inver Grove Center – PDQ – I. Grove Hgts., MN . . . . . . . . . . . . . . . . . .
Jamestown Mall – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lakeville Retail Center – Lakeville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maplewood Square – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MedPark Mall – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minot Plaza – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Ladysmith, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Livingston, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ Center – Mound, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Approximate
Net Rentable
Square Footage
(in thousands)
Investment
Fiscal 2004
Economic
Occupancy
30,000
48,700
62,383
24,000
103,332
75,216
2,935,086
35,000
604,711
89,840
59,600
41,880
49,620
195,075
229,072
29,440
353,049
38,000
1,725,287
10,625
76,424
30,000
27,500
213,271
28,528
6,836
5,600
6,225
36,542
3,444
3,886
5,400
13,901
16,103
52,000
63,225
7,993
30,227
4,560
8,400
99,403
9,500
118,398
59,177
11,020
41,000
41,200
3,864
$
2,502
4,864
5,503
1,517
11,668
8,644
$301,402
$
2,002
12,904
5,831
2,117
2,152
2,449
7,141
8,250
1,667
13,053
1,007
$ 58,573
$
731
3,097
3,275
3,699
4,625
2,546
498
340
440
5,184
345
782
515
1,358
1,392
2,500
2,937
918
1,427
290
947
1,396
1,964
11,907
5,663
522
1,500
1,800
360
N/A
100.0%
100.0%
N/A
100.0%
100.0%
N/A
85.2%
85.8%
N/A
100.0%
100.0%
100.0%
100.0%
68.6%
100.0%
91.7%
100.0%
95.5%
100.0%
100.0%
N/A
100.0%
100.0%
100.0%
100.0%
N/A
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
95.6%
95.1%
100.0%
100.0%
100.0%
65.9%
49.8%
75.8%
96.8%
100.0%
100.0%
100.0%
100.0%
Property Name and Location
RETAIL, continued
Petco Warehouse – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza Shopping Center – Schofield, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ Center – Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior Lake Peak – Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sam Goody/Musicland – Willmar, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Pond Retail Center – Champlin, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strip Center I – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strip Center II – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomasville – Kentwood, MI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Andover, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Bethel, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Blaine, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Buffalo, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Centerville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Glencoe, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Ham Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Howard Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Lakeland, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Lindstrom, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Lino Lakes, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Long Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Monticello, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Mora, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Oakdale, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Paynesville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Pine City, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Shoreview, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Winsted, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tool Crib – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Lake Center – Forest Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Village Center – Chanhassen, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Westgate Shopping Center – St. Cloud, MN . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RETAIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MEDICAL
Abbott Northwest – Sartell, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airport Medical – Bloomington, MN* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denfeld Clinic – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Belgrade, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Columbus, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Phase III – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – East Grand Forks, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Fremont, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Grand Island, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Hastings, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Missoula, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Omaha, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Virginia, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Phase II – Virginia, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Approximate
Net Rentable
Square Footage
(in thousands)
Investment
Fiscal 2004
Economic
Occupancy
18,040
53,764
6,800
4,200
6,225
25,400
8,526
8,400
16,080
3,000
4,800
8,750
7,700
3,000
4,800
4,800
3,571
3,650
4,000
6,325
5,216
3,575
3,571
6,266
4,800
4,800
3,000
3,571
15,597
100,656
135,969
104,928
1,628,032
60,095
24,218
20,512
5,100
5,100
119,349
16,392
6,042
5,100
6,042
5,895
97,821
10,150
6,042
70,313
76,870
$
1,279
1,775
976
482
408
3,725
996
777
2,121
280
510
534
471
330
530
535
380
443
321
452
700
856
300
739
365
440
330
411
2,016
8,097
20,774
7,800
$123,111
$ 13,866
4,678
3,337
453
455
11,709
1,430
552
455
572
588
6,271
963
642
7,070
5,111
100.0%
80.9%
100.0%
100.0%
100.0%
N/A
89.2%
58.7%
100.0%
100.0%
100.0%
69.3%
100.0%
100.0%
91.7%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
50.0%
N/A
100.0%
96.3%
N/A
95.7%
100.0%
N/A
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
N/A
Property Name and Location
MEDICAL, continued
Fresenius – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gateway Clinic – Sandstone, MN* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Healtheast Med Ctr. – Woodbury & St. Johns, MN . . . . . . . . . . . . . . . . . . .
Mariner Clinic – Superior, WI* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Park Dental – Brooklyn, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pavilion II – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paul Larson Clinic – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southdale Expansion – Edina, MN* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southdale Medical Center – Edina, MN* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UH Medical – St. Paul, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wedgwood Sweetwater – Lithia Springs, GA . . . . . . . . . . . . . . . . . . . . . . . . .
Wells Clinic – Hibbing, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL MEDICAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNDEVELOPED LAND
Andover, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centerville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cottonwood Lake IV – Bismarck, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inver Grove, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Libby, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
River Falls, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL UNDEVELOPED LAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approximate
Net Rentable
Square Footage
(in thousands)
Investment
Fiscal 2004
Economic
Occupancy
N/A
N/A
100.0%
N/A
100.0%
N/A
46.6%
88.5%
83.0%
100.0%
100.0%
N/A
9,052
12,444
114,316
28,928
10,008
74,800
12,140
0
195,983
43,046
29,408
18,810
1,083,976
0
0
0
0
0
0
0
0
0
8,955
$
1,803
1,900
21,601
4,101
2,952
19,517
1,013
12,733
32,924
7,605
3,972
2,903
$ 171,176
$
$
150
102
264
563
1,412
151
150
202
2,994
TOTAL SQUARE FOOTAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,372,381
TOTAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,103,428
Mortgages Payable
As of April 30, 2004, individual first mortgage liens on the above properties totaled $633 million. Of the
$633 million of mortgage indebtedness on April 30, 2004, $42 million is represented by variable rate mortgages on
which the future interest rate will vary based on changes in the interest rate index for each respective loan. The balance
of fixed rate mortgages totaled $591 million. Principal payments due on our mortgage indebtedness are as follows:
Year Ended April 30, (in thousands)
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage
Principal
$ 15,789
17,098
19,194
44,829
42,744
493,470
$633,124
20
Future Minimum Lease Payments
The future minimum lease payments to be received under leases for commercial properties as of April 30,
2004, assuming that no options to renew or buy out the lease are exercised, are as follows:
Year Ended April 30, (in thousands)
Lease Payments
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 57,602
52,402
46,465
39,273
33,749
207,093
$436,584
Capital Expenditures
Each year we carefully review the physical condition of each property we own. In order for our properties
to remain competitive, attract new tenants, and retain existing tenants, we plan for a reasonable amount of capital
improvements. For the year ended April 30, 2004, we spent approximately $20.2 million on capital improvements.
Contracts or Options to Sell
As of April 30, 2004, we had signed an agreement for the sale of our Fargo, North Dakota, Petco and Barnes
& Noble store locations, for a total sales price of approximately $6.75 million. This sale closed on July 2, 2004.
We have, in addition, granted options to purchase certain of our properties to various third parties. In general, these
options grant the right to purchase certain IRET assets at the greater of such asset’s appraised value or an annual
compounded increase of 2.0% to 2.5% of the initial cost to us. In addition to options granted to third parties, we
have also granted an option to Charles Wm. James to purchase our Excelsior Retail Center. Mr. James is currently
an officer and member of our Board of Trustees. The option exercise price is equal to the price paid by us for the
property, plus an annual consumer price index increase. Our properties subject to purchase options, the cost, plus
improvements, of each such property and its gross rental revenue are as follows:
Property
East Grand Station – EGF, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Belgrade, MT . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Columbus, NE . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – EGF, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Fremont, NE . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Grand Island, NE . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Hastings, NE . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Missoula, MT . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Omaha, NE . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Virginia, MN . . . . . . . . . . . . . . . . . . . . . . . . . .
Excelsior Retail Center – Excelsior, MN . . . . . . . . . . . . . . . . . .
Great Plains Software – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . .
Healtheast – Woodbury & Maplwd, MN . . . . . . . . . . . . . . . . . .
Wedgwd Sweetwater – L. Springs, GA . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Property Cost
$ 1,392
453
456
11,709
1,430
552
456
572
588
6,271
963
641
12,182
917
15,375
21,601
3,972
$79,530
(in thousands)
Gross Rental Revenue
2004
$ 152
49
49
1,278
181
59
49
61
62
783
120
67
893
129
1,875
1,948
502
$8,257
2003
$ 152
49
49
1,246
155
59
49
61
62
762
120
67
759
22
1,875
1,917
475
$7,879
2002
$ 152
49
49
770
155
59
49
60
62
681
114
67
0
0
1,875
1,917
436
$6,495
21
Commercial and Multi-Family Residential Properties by State
The following table presents, as of April 30, 2004, an analysis by state of each of the two major categories
of properties owned by us — multi-family residential and commercial:
Total Real Estate Investment By Type and Location
State
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Dakota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Montana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Dakota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings
Multi-Family
Residential
$ 96,379
113,991
38,882
40,834
31,731
38,436
22,418
35,222
28,542
$446,435
(in thousands)
Commercial
Total
% of Total
$517,904
53,896
7,867
—
7,047
—
14,724
—
55,555
$656,993
$ 614,283
167,887
46,749
40,834
38,778
38,436
37,142
35,222
84,097
$1,103,428
55.7%
15.2%
4.2%
3.7%
3.5%
3.5%
3.4%
3.2%
7.6%
100.0%
In the ordinary course of our operations we become involved in litigation. At this time, we know of no material
pending or threatened legal proceedings or other proceedings contemplated by governmental authorities that would
have a material impact upon us.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to our shareholders during the fourth quarter of the fiscal year ended April 30, 2004.
22
PART II
Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters
Quarterly Share and Distribution Data
Since April 9, 2002, our common shares of beneficial interest (“Shares”) have traded on the NASDAQ National
Market under the symbol IRETS. Prior to April 9, 2002, and from October of 1997, our Shares traded on the
NASDAQ SmallCap Market. On July 7, 2004, the last reported sales price per share of our Shares on the NASDAQ
National Market was $10.05. The following table sets forth the quarterly high and low closing sales prices per share
of our Shares as reported on the NASDAQ National Market, and the distributions per share and limited partnership
unit declared with respect to each period.
Quarter Ended
2004
High
Low
April 30, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10.5
10.7
10.48
10.805
$9.36
9.88
9.69
9.28
Quarter Ended
2003
High
Low
April 30, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.00
11.00
11.00
11.90
$8.98
9.66
9.05
8.55
Distributions
Declared
(per share
and unit)
$0.1600
0.1595
0.1590
0.1585
Distributions
Declared
(per share
and unit)
$0.1580
0.1570
0.1560
0.1540
It is IRET’s policy to pay quarterly distributions to our common shareholders, at the discretion of our Board
of Trustees, based on our funds from operations, financial condition and capital requirements, annual distribution
requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board of
Trustees deems relevant. Since July 1, 1971, IRET has paid quarterly cash distributions in the months of January,
April, July and October.
Shareholders
As of July 7, 2004, the Company had approximately 4,743 shareholders of record, and 42,279,703 common
shares of beneficial interest (plus 12,251,159 limited partnership units convertible into 12,251,159 common shares)
were outstanding.
Unregistered Sales of Shares
Sales of Unregistered Securities. During the fiscal year ended April 30, 2004, we issued an aggregate of 357,478
common shares to holders of LP Units of IRET Properties upon redemption and conversion of an aggregate of
357,478 LP Units of IRET Properties on a one-for-one basis. All such issuances of our common shares were exempt
from registration as private placements under Section 4(2) of the Securities Act, including Regulation D
promulgated thereunder. We have registered the re-sale of such common shares under the Securities Act.
Issuer Purchases of Equity Securities. The Company did not repurchase any of its equity securities during
fiscal year 2004, except for repurchases of nominal amounts of fractional shares, at shareholder request.
23
Item 6. Selected Financial Data for Fiscal Years Ended April 30
Set forth below is selected financial data on a historical basis for the Company. This information should be
read in conjunction with the consolidated financial statements and notes appearing elsewhere in this Form 10-K.
Consolidated Income Statement Data
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before gain/loss on property and
minority interest
. . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of land, properties and other
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest portion of operating
partnership income . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet Data
(in thousands, except per share data)
2004
2003
2002
2001
2000
$ 140,505
$118,765
$ 90,570
$ 75,767
$ 55,445
$
$
$
$
12,253
$ 15,699
$ 14,108
$ 10,188
662
$ 1,595
$
547
$
602
$
$
8,549
1,754
(2,744)
9,440
$ (3,640)
$ 12,248
$ (3,675)
$ 10,600
$ (2,095)
8,694
$
$ (1,495)
8,808
$
Total real estate investments . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
$1,008,071
1,076,317
633,124
278,629
$845,325
885,681
539,397
214,761
$685,347
730,209
459,569
145,578
$548,580
570,322
368,957
118,945
$418,216
432,978
265,057
109,921
Consolidated Per Common Share Data
(basic and diluted)
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Calendar Year
Tax status of distribution
.24
.64
$
$
.38
.63
$
$
.42
.59
$
$
.38
.55
$
$
.42
.51
2003
2002
2001
2000
1999
Capital gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Return of capital
3.88%
58.45%
37.67%
0.00%
68.29%
31.71%
0.00%
65.98%
34.02%
.72%
86.76%
12.52%
30.30%
69.70%
0.00%
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information is provided in connection with, and should be read in conjunction with, the
consolidated financial statements included in this Annual Report on Form 10-K. We operate on a fiscal year ending
on April 30. The following discussion and analysis is for the fiscal year ended April 30, 2004.
Overview
We are a self-advised equity real estate investment trust engaged in owning and operating income-producing
real properties. Our investments include multi-family residential properties and commercial properties located
primarily in the upper Midwest states of Minnesota and North Dakota. Our properties are diversified in property
type and location. As of April 30, 2004, our real estate portfolio consisted of 69 multi-family residential properties
containing 8,955 apartment units and having a total carrying amount (net of accumulated depreciation) of
$385 million, and 142 commercial properties containing approximately 7.4 million square feet of leasable space
and having a total carrying amount (net of accumulated depreciation) of $618 million. Our primary source of income
and cash is rents associated with multi-family residential and commercial leases.
During fiscal year 2004, IRET continued to operate in a difficult economic environment. Unemployment rates
in our core markets, job growth at a pace slower than anticipated, continued low interest rates and an abundant
supply of housing and commercial property alternatives all contributed to increased vacancy levels at our multi-
family and commercial properties, lower rental income and increased costs for tenant concessions. In addition,
identifying potential acquisition properties that met our investment criteria continued to be a challenge during fiscal
year 2004. The slow economy, combined with a widespread demand for real estate from traditional and non-
traditional investors, resulted in a significant reduction in the investment returns from all types of real estate. In
24
response to these operating conditions, during fiscal year 2004 IRET was able to implement only modest rental
rate increases at certain of our multi-family and commercial properties, and relied on a greater use of rent and other
tenant concessions in order to improve occupancy rates.
During fiscal year 2004, vacancy levels in our stabilized multi-family residential and commercial properties
continued to increase, to 9.5% compared to 8.8% at the end of fiscal year 2003 in the case of our multi-family
portfolio, and to 6.7% from 3.6% at the end of fiscal year 2003 in the case of our commercial portfolio. Total revenues
of IRET Properties, our operating partnership, increased by $21.7 million to $140.5 million, compared to
$118.8 million in fiscal year 2003. This increase was primarily attributable to the addition of new real estate
properties. Operating income declined in fiscal year 2004, to $11.9 million from $14.9 million in fiscal year 2003.
Our cost for tenant concessions, such as free rent, offered to attract new tenants to our multi-family residential
properties, increased to $2.9 million for the twelve months ended April 30, 2004, compared to $1.4 million for
fiscal year 2003. Other expenses increased during fiscal year 2004 as well, with real estate taxes, maintenance, utility,
administrative and operating expense and insurance costs all increasing from year-earlier levels. While some of
this increase was due to the addition of new real estate to our portfolio, the majority was due to increased costs
at our existing real estate assets.
During fiscal year 2004, the Company added five multi-family residential properties with a total of 748
apartment units, and 22 commercial properties with a total of approximately 1.3 million rentable square feet, to
our investment portfolio, for an aggregate purchase price of $170.3 million. The Company disposed of seven
properties, for sale prices totaling $3.8 million.
Additional information and more detailed discussions of our fiscal year 2004 operating results are found in the
following sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Critical Accounting Policies
Set forth below is a summary of the accounting policies that management believes are critical to the preparation
of the consolidated financial statements included in this Annual Report on Form 10-K.
Real Estate. Real estate is carried at cost, net of accumulated depreciation, less an adjustment, if any, for
impairment. Depreciation requires an estimate by management of the useful life of each property as well as an
allocation of the costs associated with a property to its various components. If the Company does not allocate these
costs appropriately or incorrectly estimates the useful lives of its real estate, depreciation expense may be misstated.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The Company uses
a 20–40 year estimated life for buildings and improvements. Maintenance and repairs are charged to operations
as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized
over their estimated useful life, generally five to ten years.
Upon acquisitions of real estate, the Company assesses the fair value of acquired tangible assets (including
land, buildings and personal property), which is determined by valuing the property as if it were vacant, and
considers whether there were significant intangible assets acquired (for example, above-and below-market leases,
the value of acquired in-place leases, and tenant relationships, in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 141) and acquired liabilities, and allocates the purchase price based on these assessments.
The as-if-vacant value is allocated to land, buildings, and personal property based on management’s determination
of the relative fair value of these assets. The estimated fair value of the property is the amount that would be
recoverable upon the disposition of the property. Techniques used to estimate fair value include discounted cash
flow analysis, independent appraisals, and reference to recent sales of comparable properties. Estimates of future
cash flows are based on a number of factors including the historical operating results, known trends, and market/
economic conditions that may affect the property. Land value is assigned based on the purchase price if land is
acquired separately, or based on estimated market value if acquired in a merger or in a portfolio acquisition.
Above-market and below-market in-place lease values for acquired properties are recorded based on the present
value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between
(i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market
lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable
25
term of the lease. The Company performs this analysis on a lease-by-lease basis. The capitalized above-market and
below-market lease values are amortized and included in operating expenses as depreciation/ amortization related
to real estate investments and amortized over the remaining non-cancelable terms of the respective leases.
Other intangible assets acquired include amounts for in-place lease values that are based upon the Company’s
evaluation of the specific characteristics of the leases. Factors considered in these analyses include an estimate of
carrying costs during hypothetical expected lease-up periods, considering current market conditions, and costs to
execute similar leases. The Company also considers information about each property obtained during its pre-
acquisition due diligence and marketing and leasing activities in estimating the fair value of the tangible and
intangible assets acquired.
Property sales or dispositions are recorded when title transfers and sufficient consideration is received by the
Company. The Company’s properties are reviewed for impairment if events or circumstances change indicating
that the carrying amount of the assets may not be recoverable. If the Company incorrectly estimates the values at
acquisition or the undiscounted cash flows, initial allocations of purchase price and future impairment charges may
be different. The impact of the Company’s estimates in connection with acquisitions and future impairment analysis
could be material to the Company’s financial statements.
Allowance for Doubtful Accounts. The Company periodically evaluates the collectibility of amounts due from
tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants
to make required payments under their respective lease agreements. The Company also maintains an allowance
for receivables arising from the straight-lining of rents. This receivable arises from earnings recognized in excess
of amounts currently due under lease agreements. Management exercises judgment in establishing these allowances
and considers payment history and current credit status in developing these estimates. If estimates differ from actual
results this would impact reported results.
Mortgage Loans Receivable. The Company evaluates the collectibility of both interest and principal of each
of its mortgage loans receivable (which total $4.9 million as of April 30, 2004) if circumstances warrant to determine
whether it is impaired. However, if the Company fails to identify that a borrower is unable to perform, the Company’s
bad debt expense may be different than estimated.
Revenue Recognition — The Company has the following revenue sources and revenue recognitions policies:
• Base Rents — income arising from tenant leases. These rents are recognized over the non-cancelable term
of the related leases on a straight-line basis, which includes the effects of rent steps and free rent abatements
under the leases.
• Percentage Rents — income arising from retail tenant leases which are contingent upon the sales of the
tenant exceeding a defined threshold. These rents are recognized in accordance with SEC Staff Accounting
Bulletin 101, which states that this income is to be recognized only after the contingency has been removed
(i.e., sales thresholds have been achieved).
• Expense Reimbursement Income — income arising from tenant leases, which provide for the recovery of
all or a portion of the operating expenses and real estate taxes of the respective property. This income is
accrued in the same periods as the expenses are incurred.
Income Taxes. The Company operates in a manner intended to enable it to continue to qualify as a Real Estate
Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those
sections, a REIT which distributes at least 90% of its REIT taxable income as a distribution to its shareholders each
year and which meets certain other conditions will not be taxed on that portion of its taxable income which is
distributed to its shareholders. The Company intends to distribute to its shareholders 100% of its taxable income.
Therefore, no provision for Federal income taxes is required. If the Company fails to distribute the required amount
of income to its shareholders, it would fail to qualify as a REIT and substantial adverse tax consequences may result.
Recent Accounting Pronouncements
There are no accounting standards or interpretations that have been issued, but which have not yet been adopted,
that we believe will have a material impact on our financial statements.
26
RESULTS OF OPERATIONS
Revenues
Total revenues for fiscal year 2004 were $140.5 million, compared to $118.8 million in fiscal year 2003 and
$90.6 million in fiscal year 2002. Revenues during fiscal year 2004 were $21.7 million greater than revenues in
fiscal year 2003 and revenues during fiscal year 2003 were $28.2 million greater than in fiscal year 2002.
For fiscal 2004, the increase in revenue of $21.7 million resulted from:
Rent from 64 properties acquired in fiscal year 2003 in excess of that
received in 2003 from the same 64 properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent from 28 properties acquired in fiscal year 2004 . . . . . . . . . . . . . . . . . . . . . . .
Increase in rental income on existing properties, net of declining
occupancy levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in straight-line rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in discount and fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A decrease in rent from properties sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For fiscal 2003, the increase in revenue of $28.2 million resulted from:
Rent from 14 properties acquired in fiscal year 2002 in excess of that
received in 2002 from the same 14 properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent from 64 properties acquired in fiscal year 2003 . . . . . . . . . . . . . . . . . . . . . . .
Increase in rental income on existing properties, net of declining
occupancy levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in straight-line rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in discount and fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A decrease in rent from properties sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
$12,099
9,482
152
72
47
(112)
$21,740
(in thousands)
$16,427
10,636
1,699
87
19
(673)
$28,195
As illustrated above, the substantial majority of the increase in our gross revenue for fiscal 2004 and 2003
resulted from the addition of new real estate properties to the IRET Properties’ portfolio, rather than from rental
increases on existing properties. For the next 12 to 18 months, we expect acquisitions to continue to be the most
significant factor in any increases in our revenues and ultimately our net income. While acceptable real estate assets
are still available for purchase, the slow economy combined with a widespread demand for real estate from
traditional and non-traditional investors has resulted in a significant reduction in the investment returns from all
types of real estate. This reduction in the rates of return has been offset to some extent by the dramatic drop in
borrowing costs to historically low levels. While we were able to take advantage of those lower borrowing costs
for most of our recent acquisitions, the majority of our debt is fixed and not prepayable without significant
prepayment costs and fees.
27
Gain on Sale of Real Estate
The Company realized a gain on sale of real estate for fiscal 2004 of $.6 million. This compares to $1.6 million
of gain on sale of real estate recognized in fiscal 2003 and $.5 million recognized in fiscal 2002. A list of the
properties sold during fiscal year 2004, showing sales price, depreciated cost plus sales costs and net gain (loss)
is included below under the caption “Property Dispositions.” We anticipate that we will continue to sell our older
and smaller locations as opportunities arise.
Segment Expenses and Operating Profit
The following tables show the changes in revenues, operating expenses, interest and depreciation by reportable
operating segment for fiscal year 2004 compared to fiscal year 2003, and for fiscal year 2003 compared to fiscal
year 2002:
Fiscal year ended April 30, 2004, compared to fiscal year ended April 30, 2003.
COMMERCIAL
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Mortgage Interest
Depreciation/amortization related to
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Operating Profit
RESIDENTIAL
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Mortgage Interest
Depreciation/amortization related to real estate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
investments.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Operating Profit
(in thousands)
2004
2003
Change
%
$77,260
$58,878
$18,382
31.2
23,041
18,662
4,379
13,835
12,575
10,137
848
2,990
63,426
$13,834
9,224
8,249
6,789
616
2,302
45,842
$13,036
4,611
4,326
3,348
232
688
17,584
798
$
23.5
50.0
52.4
49.3
37.7
29.9
38.4
6.1
(in thousands)
2004
2003
Change
%
$62,964
$59,653
$ 3,311
18,588
17,292
1,296
10,982
13,236
7,022
2,099
6,745
58,672
$ 4,292
10,029
11,541
6,761
1,538
6,013
53,174
$ 6,479
953
1,695
261
561
732
5,498
$(2,187)
5.6
7.5
9.5
14.7
3.9
36.5
12.2
10.3
(33.8)
28
Fiscal year ended April 30, 2003, compared to fiscal year ended April 30, 2002.
COMMERCIAL
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Mortgage Interest
Depreciation/amortization related to real estate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Operating Profit
RESIDENTIAL
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Mortgage Interest
Depreciation/amortization related to real estate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Operating Profit
Changes in Expenses and Net Income
(in thousands)
2003
2002
Change
%
$58,878
$32,008
$26,870
83.9
18,662
12,000
6,662
55.5
9,224
8,249
6,789
616
2,302
45,842
$13,036
5,533
1,933
2,589
185
909
23,149
$ 8,859
3,691
6,316
4,200
431
1,393
22,693
$ 4,177
66.7
326.7
162.2
233.0
153.2
98.0
47.1
(in thousands)
2003
2002
Change
%
$59,653
$58,347
$ 1,306
17,292
16,640
652
10,029
11,541
6,761
1,538
6,013
53,174
$ 6,479
9,562
10,416
6,455
1,106
5,979
50,158
$ 8,189
467
1,125
306
432
34
3,016
$(1,710)
2.2
3.9
4.9
10.8
4.7
39.1
.6
6.0
(20.9)
Operating income for fiscal 2004 decreased to $11.9 million from $14.9 million in fiscal year 2003, and was
$13.0 million in fiscal 2002. Our net income for fiscal 2004 was $9.4 million, compared to $12.2 million in fiscal
year 2003 and $10.6 million in fiscal 2002. On a per common share basis, net income was $.24 per common share
in fiscal year 2004, compared to $.38 per common share in fiscal 2003 and $.42 in fiscal 2002.
29
These changes in operating income and net income result from the changes in revenues and expenses detailed below:
Changes in net income for fiscal year 2004 resulted from:
An increase in net rental income (rents, less utilities, maintenance, taxes,
insurance and management) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A decrease in non-operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in discount and fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in depreciation/amortization expense related to real estate investments . . . . . . . . . .
A decrease in minority interest of operating partnership income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in operating expenses, administrative, advisory & trustee services . . . . . . . . . . . . . . .
A decrease in minority interest of other partnerships’ income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A decrease in gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in loss on impairment of real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A decrease in discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total decrease in fiscal 2004 net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in net income for fiscal year 2003 resulted from:
An increase in net rental income (rents, less utilities,
maintenance, taxes, insurance and management) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A decrease in non-operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in discount and fee revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in depreciation/amortization expense related to real estate investments . . . . . . . . . .
A decrease in minority interest of operating partnership income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in operating expenses, administrative, advisory & trustee services . . . . . . . . . . . . . . .
An increase in minority interest of other partnerships’ income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A decrease in gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An increase in discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total increase in fiscal 2003 net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Factors Impacting Net Income During Fiscal 2004 as Compared to 2003
(in thousands)
$ 9,850
(457)
47
(6,125)
(5,635)
896
(759)
177
(305)
(157)
(62)
(278)
$(2,808)
(in thousands)
$13,939
(232)
19
(7,010)
(4,174)
35
(800)
(736)
(151)
(232)
990
$ 1,648
Compared to the prior two fiscal years, there were a number of factors that continued to limit the growth of
our total revenue and ultimately negatively impacted our net income. A discussion of the factors having the greatest
impact on our business compared to the prior two fiscal years is set forth below. In management’s opinion, most
of these negative influences show only slight signs of lessening in the next twelve months.
• Increased economic vacancy. During fiscal 2004, vacancy levels at our stabilized multi-family residential
properties continued to increase throughout our entire portfolio to 9.5% compared to 8.8% at the end of
fiscal year 2003, for economic occupancy levels of approximately 90.5% in fiscal year 2004 compared to
approximately 91% in fiscal year 2003. “Economic Occupancy” is defined 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.
“Stabilized properties” are those properties that we have owned for the entirety of the periods being
compared, and include properties that were redeveloped or expanded during the periods being compared.
Likewise, vacancy levels at our stabilized commercial properties increased to 6.7%, from 3.6% at the end
of fiscal year 2003, for economic occupancy levels of approximately 93% in fiscal year 2004 compared to
approximately 96% in fiscal year 2003. A majority of the markets in which we operate continue to experience
overall poor economic conditions, in respect to job creation. The poor economic climate has translated
directly into increased vacancy at many of our properties.
30
Our commercial vacancy is primarily due to our inability to either renew existing leases or to re-lease space
being vacated by tenants at the expiration of their lease. While not necessarily indicative of future business
cycles, in past economic downturns, a recovery in occupancy levels generally trails the pick up in economic
activity by twelve months or more. Despite some positive economic developments, we have yet to see a
significant increase in demand for multi-family residential or commercial space. We continue to expect that
demand in our markets for both apartments and commercial space will remain weak through the remainder
of our current fiscal year.
• Increased real estate taxes. Taxes imposed on our real estate properties increased by $3.6 million, or 26.6%
for the fiscal year ended April 30, 2004. Of the increased real estate taxes, $1.0 million or 27.8% is
attributable to the addition of new real estate acquired in fiscal 2004, while $2.6 million or 72.2% is due
to increased costs for real estate taxes on existing real estate assets. Most of our new property acquisitions
during the past year were in Minnesota, a jurisdiction with higher property taxes than North Dakota and
the other states in which we own property.
Under the terms of most of our commercial leases, the full cost of real estate tax is paid by the tenant as
additional rent. For our noncommercial real estate properties, any increase in our real estate tax costs must
be collected from tenants in the form of a general rent increase. While we have implemented selected rent
increases, the current economic conditions and increased vacancy levels have prevented us from raising rents
in the amount necessary to fully recover our increased real estate tax costs. To further compound the problem,
a number of states in which we operate continue to face state budget shortfalls. Our experience is that such
shortfalls translate into local governments raising property taxes.
• Increased maintenance expense. The maintenance expense category increased by $3.6 million or 30.5%
for the fiscal year ended April 30, 2004, as compared to the corresponding period of fiscal 2003. Of the
increased maintenance costs for the fiscal year ended April 30, 2004, $1.1 million or 30.5% is attributable
to the addition of new real estate acquired in fiscal 2004 and 2003, while $2.5 million or 69.5% is due to
increased costs for maintenance on existing real estate assets. Under the terms of most of our commercial
leases, the full cost of maintenance is paid by the tenant as additional rent. For our noncommercial real estate
properties, any increase in our maintenance costs must be collected from tenants in the form of a general
rent increase. While we have implemented selected rent increases, the current economic conditions and
increased vacancy levels have prevented us from raising rents in the amount necessary to fully recover our
increased maintenance costs.
• Increased utility expense. The utility expense category increased by $2.4 million or 30.4% for the fiscal
year ended April 30, 2004, as compared to fiscal 2003. Of the increased utility costs, $.8 million or 33.3%
is attributable to the addition of new real estate acquired in fiscal 2003 and 2004, while $1.6 million or 66.7%
is due to increased costs for utilities on existing real estate assets. Under the terms of most of our commercial
leases, the full cost of utilities is paid by the tenant as additional rent. For our other noncommercial real
estate properties, any increase in our utility costs must be collected from tenants in the form of a general
rent increase. While we have implemented selected rent increases, the current economic conditions and
increased vacancy levels have prevented us from raising rents in the amount necessary to fully recover our
increased utility costs. Since our real estate portfolio is primarily located in Minnesota and North Dakota,
the severity of winters has a large impact on our utility costs.
• Increased administrative and operating expense. Administrative and operating expenses increased by
$.8 million or 26.2% for the fiscal year ended April 30, 2004, as compared to fiscal 2003. Of this increase
in administrative and operating expense for the fiscal year ended April 30, 2004, $.7 million or 87.5% was
due to employee related costs. Over the past year, we have hired six new employees. The addition of these
new employees, together with increases in the wages and benefits paid to existing employees, account for
the increase in administrative and operating costs for the fiscal year ended April 30, 2004.
• Increased insurance premiums. Insurance expense increased by $.8 million or 36.8% for the fiscal year ended
April 30, 2004, compared to the prior fiscal year. Of the increased insurance costs, $.2 million or 25% is
attributable to the addition of new real estate during fiscal years 2003 and 2004, while $.6 million or 75%
is due to increased premium costs for coverage on existing real estate assets. Under the terms of most of our
31
commercial leases, the full cost of insurance is paid by the tenant as additional rent. For our other real estate
properties, any increase in our insurance costs must be collected from tenants in the form of a general rent
increase. While we have implemented selected rent increases, the current economic conditions and increased
vacancy levels have prevented us from raising rents in the amount necessary to fully recover our increased
insurance costs. We do not expect our insurance costs to decline during fiscal 2005.
• Increase in interest expense. Our mortgage debt increased $94 million or 17.4% for the fiscal year ended
April 30, 2004. Our mortgage interest expense increased by $5.7 million or 16% for the fiscal year ended
April 30, 2004, as compared to fiscal year 2003, due to the fact that interest rates on new mortgages incurred
during 2004 were lower than rates on mortgages in prior periods. Of the increased interest expense for the
fiscal year ended April 30, 2004, $2.3 million or 41.1% is attributable to the addition of new real estate,
while interest expenses on existing real estate assets increased by $3.3 million or 58.9%, due primarily to
increased borrowing on existing mortgages.
Factors Impacting Net Income During Fiscal 2003 as Compared to 2002
• Increased economic vacancy. During fiscal 2003, vacancy levels at our stabilized multi-family residential
properties increased throughout our entire portfolio, from 5.9% at the end of 2002 to 7.8% at the end of
fiscal 2003. Likewise, vacancy levels at our stabilized commercial properties increased from 0.9% at the
end of fiscal 2002 to 4.7% at the end of fiscal 2003. A majority of the markets in which we operate continued
to experience overall poor economic conditions, particularly in respect of job creation. The poor economic
climate translated directly into increased vacancy at many of our properties.
• Uninvested cash. The most significant reason for the decline in net income per common share during fiscal
2003, as compared to fiscal 2002, was our large balance of cash and marketable securities. While this money
was invested in short-term income-producing investments, we ordinarily seek to invest in income-producing
real estate. It was not until the second quarter of fiscal 2003 that we were able fully to invest the proceeds
from the equity raised during first quarter 2003 into income-producing real estate. This delay in investing such
proceeds resulted in a reduction in net income for the fiscal year ended April 30, 2003 as compared to 2002.
• Increased real estate taxes. Taxes imposed on our real estate properties increased by $4.5 million or 49.8%
for the fiscal year ended April 30, 2003, as compared to the corresponding period of fiscal 2002. Of the
increased real estate taxes, $3.4 million or 75.6% was attributable to the addition of new real estate acquired
in fiscal 2002 and 2003, while $1.1 million or 24.4% was due to increased costs for real estate taxes on
existing real estate assets. Most of our new property acquisitions during 2003 were in Minnesota, a
jurisdiction with higher property taxes than North Dakota and the other states in which we own property.
Under the terms of most of our commercial leases, the full cost of real estate tax is paid by the tenant as
additional rent. One commercial property, Southdale Medical Center, which is located in Edina, Minnesota,
accounted for $0.9 million or 20.0% of the increase in real estate tax costs for the fiscal year ended April 30,
2003. Due to increased vacancy at Southdale Medical Center during fiscal 2003 we were unable to fully
recover the real estate tax cost from the tenants. For our noncommercial real estate properties, any increase
in our real estate tax costs must be collected from tenants in the form of a general rent increase. While we
implemented portfolio wide rent increases, economic conditions and increased vacancy levels prevented
us from raising rents in the amount necessary to fully recover our increased real estate tax costs.
• Increased maintenance expense. The maintenance expense category increased by $4.7 million or 64.4% for
the fiscal year ended April 30, 2003, as compared to the corresponding period of fiscal 2002. Of the increased
maintenance costs for the fiscal year ended April 30, 2003, $3.5 million or 74.5% was attributable to the
addition of new real estate acquired in fiscal 2002 and 2003, while $1.2 million or 25.5% is due to increased
costs for maintenance on existing real estate assets. Under the terms of most of our commercial leases, the
full cost of maintenance is paid by the tenant as additional rent. Southdale Medical Center accounted for
$0.8 million or 17.0% of the increase in maintenance costs for the fiscal year ended April 30, 2003. Due to
increased vacancy at Southdale Medical Center during the fiscal year ended April 30, 2003, we were unable
to fully recover the maintenance cost from the tenants. For our noncommercial real estate properties, any
increase in our maintenance costs must be collected from tenants in the form of a general rent increase.
32
• Increased utility expense. The utility expense category increased by $2.8 million or 54.4% for the fiscal
year ended April 30, 2003, as compared to the corresponding period of fiscal 2002. Of the increased utility
costs, $1.8 million or 64.3% was attributable to the addition of new real estate acquired in fiscal 2002 and
2003, while $1.0 million or 35.7% was due to increased costs for utilities on existing real estate assets. Under
the terms of most of our commercial leases, the full cost of utilities is paid by the tenant as additional rent.
Southdale Medical Center accounted for $0.7 million or 25.0% of the increase in utility costs for the fiscal
year ended April 30, 2003. Due to increased vacancy at Southdale Medical Center during the fiscal year
ended April 30, 2003, we were unable to fully recover the utility cost from the tenants. For our other
noncommercial real estate properties, any increase in our utility costs must be collected from tenants in the
form of a general rent increase. Since our real estate portfolio is primarily located in Minnesota and North
Dakota, the severity of winters will have a large impact on our utility costs.
• Increased administrative and operating expense. Administrative and operating expenses increased by
$0.8 million or 37.5% for the fiscal year ended April 30, 2003, as compared to the corresponding period
of fiscal 2002. Of this increase in administrative and operating expense for the fiscal year ended April 30,
2003, $139,000 or 17.4% was due to professional fees and costs associated with our offering of common
shares in the first quarter of fiscal 2003. In prior years, the work associated with offerings of common shares
to the public was largely done by our employees. In addition, during fiscal year 2003 we hired ten new
employees. The addition of these new employees, together with increases in the wages and benefits paid
to existing employees, accounted for $428,044 or 53.5% of the increase in administrative and operating costs
for the fiscal year ended April 30, 2003.
• Increased insurance premiums. Insurance expense increased by $0.9 million or 66.8% for the fiscal year
ended April 30, 2003, compared to the prior fiscal year. Of the increased insurance costs, $0.6 million or
55.6% was attributable to the addition of new real estate, while $0.3 million or 33.4% was due to increased
premium costs for coverage on existing real estate assets. Under the terms of most of our commercial leases,
the full cost of insurance is paid by the tenant as additional rent. For our other real estate properties, any
increase in our insurance costs must be collected from tenants in the form of a general rent increase.
• Increase of interest expense. Our mortgage debt increased $79.8 million or 17.4% for the fiscal year ended
April 30, 2003. Our mortgage interest expense increased by $7.3 million or 25.4% for the fiscal year ended
April 30, 2003, as compared to fiscal 2002. Of the increased interest expense for the fiscal year ended
April 30, 2003, $8.0 million was attributable to the addition of new real estate, while interest expenses on
existing real estate assets declined by $0.7 million due primarily to the decline in interest rates on our
adjustable rate mortgages.
Comparison of Results from Commercial and Residential Properties
The following table presents an analysis of the relative investment in, and financial contribution of, our
commercial and multi-family residential properties over the past three fiscal years:
Fiscal Years Ended April 30
Real Estate Investments — net of accumulated depreciation
(in thousands)
2004
%
(in thousands)
2003
%
(in thousands)
2002
%
Commercial
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 618,354
384,824
62% $495,778
348,364
38%
59% $333,093
348,301
41%
49%
51%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,003,178
100% $844,142
100% $681,394
100%
Gross Real Estate Rental Revenues
Commercial
Residential
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
77,260
62,964
55% $ 58,878
59,653
45%
50% $ 32,008
58,347
50%
35%
65%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 140,224
100% $118,531
100% $ 90,355
100%
33
Commercial Properties — Analysis of Lease Expirations and Credit Risk
The following table shows the annual lease expiration percentages for commercial properties owned by us as
of April 30, 2004, for fiscal years 2005 through 2014 and the leases that will expire during fiscal year 2015 and beyond.
Year of Lease Expiration
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Square
Footage of
Expiring
Lease
Percentage of
Total Leased
Square
Footage
(in thousands)
Annualized Base
Rent of Expiring
Leases at
Expiration
1,602
604
853
685
551
252
629
138
159
236
1,663
7,372
21.72%
8.20%
11.57%
9.30%
7.48%
3.41%
8.53%
1.87%
2.17%
3.20%
22.55%
100.0%
$ 5,505
4,195
6,226
7,045
3,500
1,825
4,212
1,562
860
2,733
15,168
$52,831
% of Total
Commercial
Rent
10.42%
7.94%
11.78%
13.33%
6.63%
3.45%
7.97%
2.96%
1.63%
5.17%
28.72%
100.0%
The following table lists our top ten commercial tenants on April 30, 2004, for all commercial properties owned
by us as of April 30, 2004:
Lessee
(in thousands)
Monthly Rent
% of Total
Commercial
Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Living Communities, Inc.
St. Luke’s Hospital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Healtheast – Woodbury & Maplewood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Microsoft – Great Plain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Northland Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Smurfit – Stone Container Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allina Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wilson’s The Leather Experts Inc.
State of Idaho – Department of Health & Welfare . . . . . . . . . . . . . . . . . . . . . . . . . .
Alliant Techsystems, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Monthly Rent as of April 30, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 307
254
161
156
147
129
125
116
114
101
4,667
$6,277
4.89%
4.04%
2.57%
2.49%
2.34%
2.05%
1.99%
1.85%
1.82%
1.61%
74.35%
100.0%
Results on a “Stabilized Property” Basis
The following tables present results on a stabilized property basis for fiscal year 2004 compared to fiscal year
2003, and for fiscal year 2003 compared to fiscal year 2002. The fiscal year 2003 results presented in the first table
below are not identical to the fiscal year 2003 results presented in the second table, because the properties comprising
our stabilized property portfolio vary from year to year, due to our ongoing acquisition and disposition activity. The
Company analyzes and compares results of operations on properties that we have owned for the entirety of the periods
being compared (including properties that were redeveloped or expanded during the periods being compared, with
properties purchased or sold during the periods being compared excluded from this analysis). This comparison allows
the Company to evaluate the performance of existing properties and their contribution to net income.
Measuring performance on a stabilized property basis is useful to investors because it enables evaluation of
how the Company’s properties are performing year over year. Management uses this measure to assess whether
34
or not it has been successful in increasing net operating income, renewing the leases of existing tenants, controlling
operating costs and appropriately handling capital improvements.
Fiscal year 2004 compared to fiscal year 2003:
Fiscal Years Ended April 30
Multi-Family Residential
(in thousands)
2004
2003
% Change
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 58,511
$ 59,100
(1.0%)
Expenses
Utilities & Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairment of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Stabilized Segment Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial
12,299
6,208
6,643
1,958
17,490
62
44,660
13,851
11,380
5,951
6,697
1,527
17,276
0
42,831
16,269
8.1%
4.3%
(0.8%)
28.2%
1.2%
0%
4.1%
(14.5%)
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,961
48,356
1.3%
Expenses
Utilities & Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Stabilized Segment Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . .
Total Stabilized Segment Operating Profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reconciliation to Segment Operating Profit
Real Estate Revenue — Non-Stabilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses — Non-Stabilized
Utilities & Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Operating Profit
7,771
1,816
5,730
506
15,522
31,467
17,616
31,529
6,742
2,010
5,594
463
15,875
30,684
17,672
33,941
32,752
11,075
(5,741)
(1,711)
(4,786)
(483)
(24,817)
(8,617)
$ 18,064
(1,668)
(354)
(1,259)
(164)
(19,253)
(2,803)
$ 19,515
15.3%
(9.7%)
2.4%
9.3%
(2.2%)
2.2%
(0.3%)
(7.1%)
35
Fiscal year 2003 compared to fiscal year 2002:
Fiscal Years Ended April 30
Multi-Family Residential
(in thousands)
2003
2002
% Change
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$56,627
$57,166
(0.9)
Expenses
Utilities & Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Stabilized Segment Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial
10,731
5,961
6,412
1,391
16,226
40,721
15,906
10,125
6,783
6,380
1,017
16,127
40,432
16,734
6.0%
(12.1%)
0.5%
36.8%
0.6%
0.7%
(5.0%)
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,706
28,207
5.3%
Expenses
Utilities & Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Interest
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Stabilized Segment Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . .
Total Stabilized Segment Operating Profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reconciliation to Segment Operating Profit
Real Estate Revenue — Non-Stabilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses — Non-Stabilized
Utilities & Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Operating Profit
2,948
1,182
3,070
287
10,673
18,160
11,546
27,452
1,322
802
2,043
137
11,027
15,331
12,876
29,610
32,568
5,355
(6,142)
(1,177)
(4,086)
(481)
(9,130)
$39,004
(927)
692
(633)
(143)
(1,493)
$32,461
123.0%
47.4%
50.3%
109.5%
(3.2%)
18.5%
(10.3%)
(7.3%)
Property Acquisitions
IRET Properties added $170.3 million of real estate investments to its portfolio during fiscal 2004, compared
to $177.2 million added in fiscal 2003 and $143.3 million added in fiscal 2002. The fiscal 2004 and 2003 additions
are detailed below.
36
Fiscal 2004 (May 1, 2003 to April 30, 2004)
MULTI-FAMILY RESIDENTIAL
Connelly Estates – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remada Court Apartments – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winchester/Village Green Townhouses – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . .
Brookfield Village – Topeka, KS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Monticello Village Apartments – Monticello, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy V – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy VI – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy VII – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RESIDENTIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Purchase
Price
$13,850
6,600
8,900
7,250
4,200
214
93
93
$41,200
Units
240
115
151
160
60
N/A
N/A
N/A
726
N/A= Property not placed in service at April 30, 2004. Additional costs are still to be incurred.
COMMERCIAL
Benton Business Park – Sauk Rapids, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West River Business Park – Waite Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buffalo Mall – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Golden Hills Office Center – Golden Valley, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brown Deer Road – Milwaukee, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TCA Building – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista Phase II – Virginia, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Westgate Shopping Center – St Cloud, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
API Building – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denfeld Retail Center – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fresenius – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lighthouse – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Metris – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minnesota National Bank – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Pond Retail Center – Champlin, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tool Crib – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UHC Office – International Falls, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mariner Clinic – Superior, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denfeld Clinic – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wells Clinic – Hibbing, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pavilion II – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gateway Clinic – Sandstone, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL COMMERCIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL FISCAL 2004 PROPERTY ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2003 (May 1, 2002 to April 30, 2003)
MULTI-FAMILY RESIDENTIAL
East Park Apartments – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sycamore Village – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RESIDENTIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Square
Footage
30,464
24,000
213,271
190,758
175,610
106,207
76,870
104,928
35,000
36,542
9,052
59,600
20,000
27,000
25,400
15,597
30,000
28,928
20,512
18,810
74,800
12,444
1,335,793
Units
84
48
132
$
1,600
1,500
4,275
27,500
13,500
13,000
5,100
6,575
2,000
5,164
1,800
2,100
2,950
2,100
3,700
2,000
2,500
4,100
3,336
2,900
19,500
1,900
$129,100
$170,300
$2,520
1,418
$3,938
37
(in thousands)
Square
Footage
Purchase
Price
COMMERCIAL
Abbott Northwestern – Sartell, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airport Medical – Bloomington, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anoka Strip Center – Anoka, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brenwood Office Park – Minnetonka, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Burnsville Strip Center – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central Bank – Eden Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Champion Auto Center – Forest Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chanhassen Retail Center – Chanhassen, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checkers Auto – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checkers Auto – Faribault, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chiropractic Office Bldg – Greenwood, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilly Lily – St. Louis Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixon Industrial Park – Des Moines, IA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagan Strip Center I – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagan Strip Center II – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Hermantown, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Evergreen Center – Pine City, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excelsior Strip Center – Excelsior, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Express Center – Fargo, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forest Lake Retail Center – Forest Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas Plus More – Paynesville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate Bakery – St. Paul, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate Bakery – Mounds View, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inver Grove Center PDQ – Inver Grove, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jamestown Mall – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Livingston, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Ladysmith, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Park Dental – Brooklyn Center, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paul Larson Clinic – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Mound, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza VII – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior Lake Peak – Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sam Goody – Willmar, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schofield Plaza – Schofield, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southdale Expansion – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three Paramount Plaza – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Lakeville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Monticello, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Oakdale, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Long Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Ham Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Glencoe, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Blaine, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Bethel, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Buffalo, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Lakeland, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,095
24,218
10,625
176,917
8,400
39,525
6,836
135,969
6,225
5,600
1,600
3,444
604,711
5,400
13,901
44,365
63,225
7,993
30,227
100,656
4,800
6,225
4,560
8,400
99,403
52,000
41,200
41,000
10,008
12,140
8,526
6,800
3,886
3,864
27,297
4,200
6,225
53,764
75,526
9,500
3,575
6,266
5,216
4,800
4,800
8,750
4,800
7,700
3,650
$12,994
4,678
725
14,014
760
4,600
496
20,850
440
340
330
340
11,872
510
1,349
4,624
2,800
900
1,425
8,007
365
320
290
940
1,320
2,500
1,800
1,500
2,952
1,013
980
971
783
360
3,358
479
400
1,750
7,056
7,367
1,263
855
730
700
535
530
520
510
460
440
38
(in thousands)
Square
Footage
Purchase
Price
6,325
4,800
3,571
3,571
3,000
3,000
4,000
3,571
3,000
3,575
43,046
103,332
353,049
2,416,653
COMMERCIAL, continued
Tom Thumb – Lino Lakes, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Pine City, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Winsted, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Howard Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Centerville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Shoreview, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Lindstrom, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Mora, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Andover, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Sauk Rapids, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UH Medical – St. Paul, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Westgate Office Center North – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wilson’s Leather – Brooklyn Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL COMMERCIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNDEVELOPED LAND
Andover, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centerville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inver Grove, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Libby, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
River Falls, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL UNDEVELOPED LAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL FISCAL 2003 PROPERTY ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
440
440
410
380
330
330
320
300
280
250
7,408
11,509
13,011
$170,509
$
150
100
560
1,400
150
150
50
200
$ 2,760
$177,207
Property Dispositions
During fiscal year 2004, IRET Properties disposed of six properties and two undeveloped properties for an
aggregate sale price of $3.8 million, compared to six properties and one undeveloped property sold for $11.2 million
in total during fiscal year 2003. Real estate assets sold by IRET Properties during fiscal 2004 were as follows:
Property Sold
(in thousands)
Book Value Plus
Sales Costs
Gain/Loss
Sales Price
MCA Royal Suites – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate Bakery – St. Paul, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Sauk Rapids, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pioneer Seed – Moorhead, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunset Trail III – Rochester, MN (vacant land) . . . . . . . . . . . . . . . . . . . .
Prior Lake II – Prior Lake, MN (vacant land) . . . . . . . . . . . . . . . . . . . . . .
TOTAL FISCAL 2004 GAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 410
420
1,101
1,101
275
500
400
160
$4,367
$ 364
317
941
936
247
498
364
52
$3,719
$ 46
103
160
165
28
2
36
108
$648
39
Real estate assets sold by IRET Properties during fiscal 2003 were as follows:
Property Sold
Eastwood Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oak Manor Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . . . .
Jenner Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cottage Grove Strip Ctr. – C. Grove, MN . . . . . . . . . . . . . . . . . . . . . . . .
Creekside Office Building – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . .
America’s Best – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Century Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Land – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL FISCAL 2003 GAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales Price
$
620
420
275
1,275
1,950
3,350
3,250
102
$11,242
(in thousands)
Book Value Plus
Sales Costs
$ 438
342
272
1,222
1,796
3,656
1,819
102
$9,647
Gain/Loss
$ 182
78
3
53
154
(306)
1,431
0
$1,595
Funds From Operations
IRET considers Funds from Operations (“FFO”) a useful measure of performance for an equity REIT. IRET
uses the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”)
in 1991, as clarified in 1995, 1999 and 2002. NAREIT defines FFO to mean “net income (computed in accordance
with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.”
While IRET uses the NAREIT definition of FFO, the components of that definition in many cases require
interpretation, and IRET accordingly has made certain interpretations in applying the definition. In particular, in
calculating FFO per share, IRET “adds back” to net income computed in accordance with GAAP the allocations
made to limited partners, and divides this amount by the total number of IRET common shares of beneficial interest
and UPREIT Units outstanding.
Under the partnership agreement pursuant to which IRET’s UPREIT Units are issued, UPREIT Unitholders
effectively have the same claim on the earnings and assets of IRET as do IRET’s shares of beneficial interest
shareholders, and therefore IRET considers that the UPREIT Units also should be included with the shares of
beneficial interest in calculating FFO per share. IRET believes that, while this particular adjustment made by IRET
in calculating FFO is not specifically provided for in the NAREIT definition, it is consistent with the definition.
While FFO is widely used by REITs as a primary 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.
FFO should not be considered as an alternative to net income as determined in accordance with GAAP as a
measure of IRET’s performance, but rather should be considered as an additional, supplemental measure, and should
be viewed in conjunction with net income as presented in the consolidated financial statements included in this
report. Management believes that FFO is helpful to investors as a measure of our performance because it excludes
various items included in net income that do not relate to or are not indicative of our performance, such as gains
and losses on sales of real estate and real estate-related depreciation and amortization, which can make periodic
analyses of operating performance more difficult to compare. FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting principles, and is not necessarily indicative of sufficient
cash flow to fund all of IRET’s needs or its ability to service indebtedness or make distributions.
FFO applicable to common shares and Units for the fiscal year ended April 30, 2004, increased to $36.6 million,
compared to $34.2 million and $33.8 million for the fiscal years ended April 30, 2003 and 2002, respectively.
40
Reconciliation of Net Income Available to Common Shareholders to Funds From Operations
Fiscal Years Ended April 30,
(in thousands, except per share amounts)
2004
Weighted
Avg
Shares
and
Units (2)
Amount
Per
Share
and
Unit (4)
Amount
2003
Weighted
Avg
Shares
and
Units (2)
Per
Share
and
Unit (4)
Amount
2002
Weighted
Avg
Shares
and
Units (2)
Per
Share
and
Unit (4)
Net income available to
common shareholders . . . . . . .
$ 9,407
39,257
$.24
$12,248
32,574
$.38
$10,600
25,492
$.42
Adjustments:
Minority interest in earnings
of unitholders . . . . . . . . . . .
2,752
11,176
3,899
10,041
3,614
8,289
Depreciation and
Amortization (1) . . . . . . . . . . .
Gains on depreciable property
. . . . . . . . . . . . . . . . . .
sales
$25,079
(600)
$19,626
(1,595)
$15,476
(547)
Funds from operations
applicable to common shares
and Units
. . . . . . . . . . . . . . . .
$36,638
50,433
$.73
$34,178
42,615
$.80
$29,143
33,781
$.86
(1)
(2)
(3)
(4)
Depreciation on office equipment and other assets used by us is excluded. Amortization of leasing commissions and property-related
intangible assets is included, however, the amortization of financing and other expenses is excluded.
UPREIT Units of the Operating Partnership are exchangeable for common shares of beneficial interest on a one-for-one basis.
Cash distributions are paid equally on common shares of beneficial interest and UPREIT Units.
Net income is calculated on a per share basis. Funds From Operations is calculated on a per share and unit basis.
Cash Distributions
The following cash distributions were paid to our common shareholders and UPREIT unitholders during fiscal
years 2004, 2003, and 2002:
Date
July 1,
October 1,
January 15,
April 1,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004
$.1585
.1590
.1595
.1600
$.6370
2003
$.1540
.1560
.1570
.1580
$.6250
2002
$.1450
.1475
.1500
.1520
$.5945
The fiscal 2004 cash distributions increased 2% over the cash distributions paid during fiscal year 2003 and
7% over fiscal 2002 distributions.
Liquidity and Capital Resources
Overview
Management expects that the Company’s principal liquidity demands will continue to be distributions to holders
of the Company’s preferred and common shares of beneficial interest and UPREIT Units, capital improvements and
repairs and maintenance to the Company’s properties, acquisition of additional properties, redemption of outstanding
investment certificates, property development, debt repayments and tenant improvements.
The Company expects to meet its short-term liquidity requirements through net cash flows provided by its
operating activities, and through draws from time to time on its unsecured lines of credit. Management considers
the Company’s ability to generate cash to be adequate to meet all operating requirements and to make distributions
to its shareholders in accordance with the REIT provisions of the Internal Revenue Code. Budgeted expenditures
for ongoing maintenance and capital improvements and renovations to our real estate portfolio are expected to be
funded from cash flow generated from operations of current properties.
41
To the extent the Company does not satisfy its long-term liquidity requirements, which consist primarily of
maturities under the Company’s long-term debt, maturing investment certificates, construction and development
activities and potential acquisition opportunities, through net cash flows provided by operating activities and its
credit facilities, the Company intends to satisfy such requirements through a combination of funding sources which
the Company believes will be available to it, including the issuance of UPREIT Units, additional common or
preferred equity, proceeds from the sale of properties, and additional long-term secured or unsecured indebtedness.
Sources And Uses Of Cash
As of April 30, 2004, the Company had three unsecured lines of credit in the amounts of $10 million,
$10 million and $4.4 million, respectively, from (1) Bremer Bank, Minot, ND; (2) First Western Bank and Trust,
Minot, ND; and (3) First International Bank and Trust, Watford City, ND. The Company had no outstanding
borrowings on these lines as of April, 30, 2004. Borrowings under the lines of credit bear interest based on the
following for each of the lines of credit described above: (1) Bremer Financial Corporation Reference Rate, (2)
the highest New York Prime rate as published in the Wall Street Journal, and (3) the highest new York Prime rate
as published in the Wall Street Journal. Increases in interest rates will increase the Company’s interest expense on
any borrowings under its lines of credit and as a result will affect the Company’s results of operations and cash
flows. The lines of credit expire on September 15, 2004, September 1, 2004 and December 12, 2004, respectively.
The Company will seek to renew each of these three lines of credit prior to their expiration.
In addition to the above-described three unsecured lines of credit, the Company’s operating partnership, IRET
Properties, in April 2004 entered into a $25 million unsecured bridge loan in connection with the Company’s
acquisition of 15 commercial and medical properties located primarily in Duluth, Minnesota and the surrounding
area (“Duluth Portfolio”). The bridge loan from Wells Fargo Bank, National Association, as of July 1, 2004, bears
interest at a rate of 3.375% per annum. The Company plans to repay the bridge loan by July 22, 2004, the date
on which the interest rate applicable to the loan would otherwise increase. The bridge loan will be repaid with the
proceeds of mortgage loans, which have already been obtained in July, 2004, placed against the properties in the
Duluth Portfolio.
In September 2003, the Company completed the sale of 4,500,000 of its common shares of beneficial interest,
at a price of $10.00 per share, resulting in net proceeds to the Company of approximately $35.4 million.
In February 2004 the Company filed a shelf registration statement on Form S-3 to offer for sale from time to
time common shares and preferred shares. This registration statement was declared effective in April 2004. We may
sell any combination of common shares and preferred shares up to aggregate initial offering price of $150 million
during the period that the registration statement remains effective. During fiscal year 2004, the Company issued
preferred shares with an aggregate initial offering price of $28,750,000 under this registration statement. In a public
offering commenced in April 2004 and closed in May 2004, the Company issued common shares with an aggregate
initial offering price of $5,480,270, under this registration statement. As of July 1, 2004, the Company has available
securities under this registration statement in the aggregate amount of approximately $115.8 million.
On April 26, 2004, the Company issued 1.15 million shares of its 8.25% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest (“Series A preferred shares”), with a $25.00 liquidation preference per share.
This offering generated net proceeds to the Company of approximately $27.3 million to fund property acquisitions,
development, and improvements. The Series A preferred shares are redeemable by the Company at any time on
or after April 26, 2009 at a redemption price of $25.00 per share, plus any accumulated, accrued and unpaid
distributions. Each Series A preferred share will receive an annual distribution equivalent to 8.25% of the liquidation
preference per share (equivalent to a fixed annual amount of $2.06 per share).
In May 2004, the Company completed the sale of .5 million of its common shares of beneficial interest, at
a price of $10.10 per share, resulting in net proceeds to the Company of approximately $5.2 million.
The issuance of UPREIT Units for property acquisitions continues to be a source of capital for the Company.
Two million units were issued in connection with property acquisitions during fiscal year 2004, and .9 million units
were issued in connection with property acquisitions during fiscal year 2003.
As a result of the sales of common and preferred shares described above, shareholder equity increased during
fiscal 2004 by $63.9 million. Additionally, the equity capital of the Company was increased by $12.2 million as
42
a result of contributions of real estate in exchange for limited partnership units, as summarized above, and the
minority interest in other partnerships controlled by us increased by $2.2 million, resulting in a total increase in
equity capital for the Company of $78.2 million.
The Company has a Distribution Reinvestment Plan (“DRIP”). The DRIP provides shareholders of the
Company an opportunity to invest their cash distributions in common shares of the Company at a discount of 5%
from the market price. During fiscal year 2004, 1.067 million common shares were issued under this plan, with
an additional .971 million common shares issued during fiscal year 2003.
Cash and cash equivalents on April 30, 2004 totaled $31.7 million, compared to $18.0 million and $22.8 million
on the same date in 2003 and 2002, respectively. Net cash provided from operating activities decreased to
$28.7 million in fiscal year 2004 from $37.9 million in fiscal year 2003, due primarily to increased vacancies and
higher expenses at our properties. Net cash provided from operating activities in fiscal year 2002 was $26.9 million.
Net cash used in investing activities increased to $137.7 million in fiscal year 2004, from $66.7 million in
fiscal year 2003 and $65.4 million in fiscal year 2002. This increase resulted because more cash was needed to
acquire new investment properties. Net cash provided from financing activities also increased to $122.7 million
during fiscal year 2004, from $24.0 million during fiscal year 2003, due to a significant increase in our activity
in acquiring new properties using borrowed funds and the refinancing of mortgage payables. Net cash provided
from financing activities was $54.9 million during fiscal year 2002.
Financial Condition
Mortgage Loan Indebtedness. Mortgage loan indebtedness increased to $633 million on April 30, 2004, due
to the acquisition of new investment properties from $539 million on April 30, 2003. Ninety-three per cent of such
mortgage debt is at fixed rates of interest, with staggered maturities. This limits the Company’s exposure to changes
in interest rates, which minimizes the effect of interest rate fluctuations on the Company’s results of operations and
cash flows. As of April 30, 2004, the weighted average rate of interest on the Company’s mortgage debt was 7.17%,
compared to 7.4% on April 30, 2003.
Mortgage Loans Receivable. Mortgage loans receivable increased to $4.9 million at April 30, 2004, from
$1.2 million at April 30, 2003.
Real Estate Owned. Real estate owned increased to $1,103 million at April 30, 2004, from $920 million at
April 30, 2003. The increase resulted primarily from the acquisition of the additional investment properties net of
dispositions as described in the “Property Acquisitions” and “Property Dispositions” subsections of this
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Investment Certificates. We discontinued the issuance of investment certificates in April 2002. As of April 30,
2004, $7.074 million of such certificates was outstanding.
Cash and Cash Equivalents. Cash and cash equivalents on April 30, 2004 was $31.7 million, compared to
$18.0 million on April 30, 2003. The increase in cash on hand from April 30, 2004 as compared to April 30, 2003
was due primarily to the sale of preferred and common shares in April, 2004.
Marketable Securities. During fiscal year 2004, IRET increased its investment in marketable securities
classified as available-for-sale to $2.3 million on April 30, 2004 from $0 on April 30, 2003. Marketable securities
are held available for sale and, from time to time, the Company invests excess funds in such securities or uses the
funds so invested for operational purposes.
Operating Partnership Units. Outstanding limited partnership units in the Operating Partnership increased
to 11.8 million units on April 30, 2004, compared to 10.2 million units outstanding on April 30, 2003. The increase
in units outstanding at April 30, 2004 as compared to April 30, 2003 resulted primarily from the issuance of
additional limited partnership units to acquire interests in real estate, net of units converted to shares.
Common and Preferred Shares of Beneficial Interest. Common shares of beneficial interest outstanding on
April 30, 2004 totaled 41.7 million compared to 36.2 million common shares outstanding on April 30, 2003. This
increase in common shares outstanding from April 30, 2003 to April 30, 2004 was primarily due to the public
43
offerings of common shares completed during fiscal year 2004, and to the issuance of common shares pursuant
to our distribution reinvestment plan. Preferred shares of beneficial interest outstanding on April 30, 2004 totaled
1.15 million. The Company had no preferred shares outstanding on April 30, 2003.
Contractual Obligations and other Commitments
The primary contractual obligations of the Company relate to its borrowings under its three lines of credit and
mortgage notes payable. The Company’s lines of credit had no amounts outstanding at April 30, 2004. The Company
had $25 million outstanding as of April 30, 2004 under a bridge loan that the Company expects to repay in July
2004. The approximately $633 million in mortgage notes payable have varying maturities ranging from .7 to 19
years. The principal payments on the mortgage notes payable for the years subsequent to April 30, 2004 are included
in the table below as “long-term debt.” The other debt category consists of a mortgage note payable on our
Minneapolis, Minnesota office.
The Company has sold investment certificates to the public, with interest rates varying from 6% to 8% per
annum. The sales of these investment certificates has been discontinued and the outstanding certificates will be
redeemed at they mature. Amounts due in respect of these investment certificates are reflected in the “Investment
Certificates” category below.
As of April 30, 2004, the Company is a tenant under operating ground leases on four of its properties. The
Company pays a total of approximately $82,000 per year in rent under these ground leases, which have terms ranging
from 15 to 30 years, and expiration dates ranging from October 2005 to February 2031.
Purchase obligations of the Company represent those costs that the Company is contractually obligated to pay
in the future. The Company’s significant contractual obligations as of April 30, 2004 are summarized in the
following table. The significant components in this category are costs for construction and expansion projects and
capital improvements at the Company’s properties. Contractual obligations that are contingent upon the achievement
of certain milestones are not included in the table below, nor are service orders or contracts for the provision of
routine maintenance services at our properties, such as landscaping and grounds maintenance, since these
arrangements are generally based on current needs, are filled by our service providers within short time horizons,
and may be cancelled without penalty. The expected timing of payment of the obligations discussed below is
estimated based on current information.
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Certificates . . . . . . . . . . . . . . . . . . . . . . . .
Operating Lease Obligations . . . . . . . . . . . . . . . . . .
Purchase Obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Total
$633,124
25,000
586
7,074
1,410
11,000
Less Than
1 Year
$15,789
25,000
24
2,231
82
2,000
1–3 Years
3–5 Years
$36,292
—
53
4,701
163
8,000
$87,573
—
509
142
171
1,000
More than
5 Years
$493,470
—
—
—
994
—
As of April 30, 2004, the Company had signed a purchase agreement to acquire a commercial property in the
Minneapolis, Minnesota area for a purchase price of approximately $13.05 million. This pending acquisition is
subject to certain closing conditions and contingencies, and, accordingly, this potential acquisition is not included
in the above table of the Company’s contractual obligations. No assurance can be given that this transaction will
be consummated.
Off-Balance-Sheet Arrangements
As of April 30, 2004, we did not have any significant off-balance-sheet arrangements, as defined in Item
303(a)(4)(ii) of SEC Regulation S-K.
Recent Developments
Common and Preferred Share Distributions. On June 30, 2004, the Company paid a distribution of 37.24 cents
per share on the Company’s newly-issued Series A Cumulative Redeemable Preferred Shares to preferred
44
shareholders of record on June 15, 2004. The distribution was pro-rated from the date of initial issuance of the
preferred shares (65 days versus 90 days in a regular quarter). On July 1, 2004, the Company paid a distribution
of 16.05 cents per share on the Company’s common shares of beneficial interest, to common shareholders and
UPREIT unitholders of record on June 18, 2004. This distribution represented an increase of .05 cents or .3% over
the previous regular quarterly distribution of 16.00 cents per common share/unit paid April 1, 2004.
Duluth Acquisition. In the Company’s Quarterly Report on Form 10-Q for the third quarter of fiscal year 2004,
the Company announced that it had signed a purchase agreement to acquire a portfolio of 15 commercial and medical
properties located primarily in Duluth, Minnesota. The Company closed on the acquisition of 14 of these 15
properties in April 2004. The remaining property, a 61,094 square foot clinic property in Duluth, was acquired in
May 2004. The Company paid approximately $66,950,000 for this portfolio of 15 properties.
Tom Thumb Bankruptcy. On March 9, 2004, Tom Thumb Food Markets, Inc. filed a Chapter 7 bankruptcy
petition with the U.S. Bankruptcy Court in Minneapolis. At the time of the filing, the Company owned 18 properties
in Minnesota that were operated as Tom Thumb convenience stores.
As of July 2, 2004, leases for nine of these 18 stores have been assigned by the bankruptcy trustee to new
tenants. Monthly rents payable to the Company under the leases now in place in respect of these nine properties
total $17,281, and the lease terms range from one to ten years. The Company is engaged in discussions with the
bankruptcy trustee regarding cure amounts due to the Company in respect of delinquent rent and real estate taxes
for these nine properties. The amount claimed due by the Company is $143,830. In early July, the trustee paid
$107,953 of this amount and has requested additional documentation with respect to certain of the remaining
amounts claimed.
The bankruptcy trustee, on behalf of the bankruptcy estate, rejected the leases on five of the remaining nine
properties. Of these five properties, two are currently vacant, and three are being operated as convenience stores
by subtenants under the original leases with Tom Thumb. The Company is receiving monthly rents from these three
stores totaling $7,851. Cure amounts totaling $21,915 for delinquent rent and real estate taxes for these three stores
have been asserted by the Company as due from the bankruptcy estate.
The remaining four properties of the 18 are currently vacant, and the Company is engaged in discussions with
the trustee as to their assumption or rejection. The Company is in discussions with a potential tenant for one of
these four vacant properties, and is actively pursuing tenants for all remaining vacant locations.
Related Party Transaction. On June 30, 2004, IRET Properties purchased four commercial properties from
affiliates of Steven B. Hoyt, a member of IRET’s Board of Trustees. IRET Properties acquired three office buildings,
each containing 26,186 square feet of rentable area, and one office building containing 79,287 square feet of rentable
area, in this transaction, for a total purchase price for the four properties of $14 million. Three of the properties
are located in Plymouth, Minnesota, and the fourth is located in Maple Grove, Minnesota.
Additional Acquisitions and Dispositions.
In addition to the acquisitions described in the paragraphs above, the Company closed on the following
acquisitions and dispositions subsequent to its fiscal year ended April 30, 2004:
Acquisitions
Nebraska Orthopaedic Hospital Expansion Project. The Company purchased a 99% interest in a limited
liability company that owns expansion premises constructed at the Company’s Nebraska Orthopaedic Hospital
facility in Omaha, Nebraska. The Company paid approximately $4.6 million for this interest. The acquisition closed
May 1, 2004.
Sleep Inn. The Company paid approximately $3.6 million to purchase a “Sleep Inn” hotel in Brooklyn Park,
MN, and a warehouse building located near the hotel. This acquisition closed in June 2004. The hotel tenant
subsequently exercised an option to purchase the warehouse building for $450,000.
Dispositions
Barnes & Noble and Petco Stores. In July 2004 the Company sold its Barnes & Noble and Petco store locations
in Fargo, ND for approximately $6.75 million.
45
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk is limited primarily to fluctuations in the general level of interest rates on our
current and future fixed and variable rate debt obligations, and secondarily to our deposits with and investments
in certain products issued by various financial institutions.
Variable interest rates. Even though our goal is to maintain a fairly low exposure to interest rate fluctuation
risk, we are still vulnerable to significant fluctuations in interest rates on variable rate debt, on any future repricing
or refinancing of our fixed rate debt and on future debt. We primarily use long-term (more than nine years) and
medium term (five to seven years) debt as a source of capital. We do not currently use derivative securities, interest-
rate swaps or any other type of hedging activity to manage our interest rate risk. As of April 30, 2004, we had the
following amount of future principal payments due on mortgages secured by our real estate.
Long Term Debt
2005
2006
2007
2008
2009
Thereafter
Total
(in thousands)
Fixed Rate . . . . . . . . . . . . . . . . . . . . . .
Variable Rate . . . . . . . . . . . . . . . . . . . .
$14,277
1,512
$15,412
1,686
$16,691
2,503
$43,045
1,784
$40,650
2,094
$461,101
32,369
$591,176
41,948
$633,124
Average Interest Rate (%) . . . . . . . . .
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
The weighted average interest rate on our debt as of April 30, 2004, was 7.17%. Any fluctuations in variable interest
rates could increase or decrease our interest expenses. For example, an increase of one percent per annum on our $41.9
million of variable rate indebtedness would increase our annual interest expense by $419,000.
Marketable Securities. IRET’s investments in securities are classified as “available-for-sale.” The securities
classified as “available-for-sale” represent investments in debt and equity securities which the Company intends
to hold for an indefinite period of time. As of April 30, 2004, IRET had approximately $2.3 million of marketable
securities classified as “available-for-sale,” consisting of securities of various issuers, primarily U.S. Government,
U.S. agency and corporate bonds and bank certificates of deposit, held in IRET Properties’ security deposit account
with Merrill Lynch. IRET had no securities classified as “available-for-sale” as of April 30, 2003. The values of
these securities will fluctuate with changes in market interest rates.
Investments with Certain Financial Institutions. IRET has entered into a cash management arrangement with
First Western Bank with respect to deposit accounts with First Western Bank that exceed FDIC Insurance coverage.
On a daily basis, account balances are invested in U.S. Government securities sold to IRET by First Western Bank.
IRET can require First Western Bank to repurchase such securities at any time, at a purchase price equal to what
IRET paid for the securities, plus interest. First Western Bank automatically repurchases obligations when collected
amounts on deposit in IRET’s deposit accounts fall below the maximum insurance amount, with the proceeds of
such repurchases being transferred to IRET’s deposit accounts to bring the amount on deposit back up to the
threshold amount. The amounts invested by IRET pursuant to the repurchase agreement are not insured by FDIC.
IRET has entered into a cash management arrangement with US Bank with respect to IRET depository accounts
at multiple US Bank locations. Account balances are swept daily to an IRET master account. Amounts in the master
account in excess of $4 million are invested overnight in short-term U.S. Government securities and repurchase
agreements secured by U.S. Government securities. Amounts invested were $7.5 million as of April 30, 2004 and
$3.5 million as of April 30, 2003.
Deposits exceeding FDIC insurance. The Company is potentially exposed to off-balance-sheet risk in respect
of cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured
limits. The Company has not experienced any losses in such accounts.
Item 8. Financial Statements and Supplementary Data
Financial statements required by this item appear with an Index to Financial Statements and Schedules, starting
on page F-1 of this report.
46
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure Matters
Subsequent to the end of fiscal 2003, on July 23, 2003, our Board of Trustees, upon recommendation of our
Audit Committee, terminated the engagement of Brady, Martz & Associates, P.C. (“Brady Martz”) as our
independent public accountants and engaged Deloitte & Touche LLP to serve as our independent public accountants
for our fiscal year ended April 30, 2004. This termination was not related to the quality of services provided by
Brady Martz. We have retained Brady Martz in fiscal 2004 for tax and other advising issues, and we expect that
we will, in the future, continue to engage Brady Martz for tax and other professional advice. Other than this change
in accountants, which was previously reported in a Form 8-K, filed with the SEC on July 26, 2003, there were no
changes in or disagreements with accountants on accounting and financial disclosure during the fiscal year ended
April 30, 2004.
Item 9A. Controls and Procedures
As of April 30, 2004, the end of the period covered by this Annual Report on Form 10-K, our management
carried out an evaluation, under the supervision and with the participation of the President, the Chief Operating
Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14 and 15d-14. Based upon that evaluation, the President, Chief
Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective
in timely alerting them to material information required to be included in our periodic SEC filings.
There have been no significant changes in our internal controls over financial reporting or identified in
connection with the above-referenced evaluation that has materially affected, or is likely to materially affect, our
internal controls over financial reporting.
47
Item 10. Trustees and Executive Officers of the Registrant
PART III
Information regarding executive officers required by this Item is set forth in Part I, Item 1 of this Annual Report
on Form 10-K pursuant to Instruction 3 to Item 401(b) of Regulation S-K. Other information required by this Item
will be included in our definitive Proxy Statement for our 2004 Annual Meeting of Shareholders and such
information is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item will be contained in our definitive Proxy Statement for our 2004 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item will be contained in our definitive Proxy Statement for our 2004 Annual
Meeting of Shareholders and such information is incorporated herein by reference. We do not have any equity
compensation plans and, as such, are not required to include the disclosure required by Item 201(d) of Regulation S-K.
Item 13. Certain Relationships and Related Transactions
The information required by this Item will be contained in our definitive Proxy Statement for our 2004 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this Item will be contained in our definitive Proxy Statement for our 2004 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)
The following documents are filed as part of this report:
1. Financial Statements
The response to this portion of Item 15 is submitted as a separate section of this report. See the table of
contents to Financial Statements and Supplemental Data.
2. Financial Statement Schedules
The response to this portion of Item 15 is submitted as a separate section of this report. The following
financial statement schedules should be read in conjunction with the financial statements referenced in Part
II, Item 8 of this Annual Report on Form 10-K:
III Real Estate Owned and Accumulated Depreciation
IV Investments in Mortgage Loans on Real Estate
3. Exhibits
See the list of exhibits set forth in part (c) below.
(b)
Reports on Form 8-K: The following reports on Form 8-K were filed during the last quarter of the period
covered by this report:
Amendment No. 1 to Current Report on Form 8-K filed March 8, 2004 to provide, under Item 7,
the financial statements and pro forma financial information required in respect of our acquisition
48
of property which in the aggregate constituted a significant amount of assets; this filing amended
our previously-filed Current Report on Form 8-K filed on January 7, 2004.
Current Report on Form 8-K filed April 14, 2004 to report, under Item 5, the issuance of a press
release announcing an underwritten public offering of Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, and the offering of common shares of beneficial interest of the
Company in a separate best efforts offering.
Current Report on Form 8-K filed April 22, 2004 to file, under Items 5 and 7, the Underwriting
Agreement and a legal opinion in respect of our public offering of Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, and to file a press release announcing the pricing of the shares.
(c)
3.1
3.2
3.3
3.4
The following is a list of Exhibits to this Annual Report on Form 10-K. We will furnish a copy of any
exhibit listed below to any security holder who requests it upon payment of a fee of 15 cents per page.
All Exhibits are either contained in this Annual Report on Form 10-K or are incorporated by reference
as indicated below.
Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, dated
September 23, 2003 and incorporated herein by reference to Exhibit A to the Company’s Definitive Proxy
Statement on Schedule 14A for the 2003 Annual Meeting of Shareholders, filed with the SEC on
August 13, 2003.
Second Restated Trustees’ Regulations (Bylaws), dated September 24, 2003 and incorporated herein
by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 31,
2003, filed with the SEC on December 15, 2003.
Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership, dated
January 31, 1997, filed as Exhibit 3(ii) to the Registration Statement on Form S-11, effective March 14,
1997 (SEC File No. 333-21945) filed for the Registrant on February 18, 1997 (File No. 0-14851) and
incorporated herein by reference.
Articles Supplementary classifying and designating 8.25% Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, filed as Exhibit 3.2 to the Company’s Form 8-A filed on April 22, 2004 and
incorporated herein by reference.
10.1 Member Control and Operating Agreement dated September 30, 2002 filed as Exhibit 10 to the
Company’s Form 8-K filed October 15, 2003 and incorporated herein by reference.
Letter Agreement dated January 31, 2003 filed as Exhibit 10(i) to the Company’s Form 8-K filed
February 27, 2003 and incorporated herein by reference.
Option Agreement dated January 31, 2003 filed as Exhibit 10(ii) to the Company’s Form 8-K filed
February 27, 2003 and incorporated herein by reference.
Financial Statements of T.F. James Company filed as Exhibit 10 to the Company’s Form 8-K filed
January 31, 2003 and incorporated herein by reference.
Agreement for Purchase and Sale of Property dated February 13, 2004, by and between IRET Properties
and the Sellers specified therein, filed herewith.
Subsidiaries of Investors Real Estate Trust, filed herewith.
Consent of Deloitte & Touche LLP, filed herewith.
Section 302 Certification of President and Chief Executive Officer, filed herewith.
Section 302 Certification of Senior Vice President and Chief Financial Officer, filed herewith.
Section 906 Certification of the President and Chief Executive Officer, filed herewith.
Section 906 Certification of the Senior Vice President and Chief Financial Officer, filed herewith.
10.2
10.3
10.4
10.5
21.1
23
31.1
31.2
32.1
32.2
49
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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
TABLE OF CONTENTS
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS . . . . . . . . . . .
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDITIONAL INFORMATION
Reports of Independent Registered Public Accounting Firms on Additional Information . . .
Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PAGE
F-2
F-4
F-6
F-7
F-8
F-10
F-35
F-36
F-52
Schedules other than those listed above are omitted since they are not required or are not applicable, or the required
information is shown in the consolidated financial statements or notes thereon.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Investors Real Estate Trust
Minot, North Dakota
We have audited the accompanying consolidated balance sheet of Investors Real Estate Trust and subsidiaries (the
“Company”) as of April 30, 2004, and the related consolidated statements of operations, shareholders’ equity, and
cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of April 30, 2004, and the results of its operations and its cash flows for the year then ended,
in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
July 16, 2004
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trustees
Investors Real Estate Trust
and Subsidiaries
Minot, North Dakota
We have audited the accompanying consolidated balance sheet of Investors Real Estate Trust and Subsidiaries as of
April 30, 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the
years ended April 30, 2003 and 2002. These consolidated financial statements are the responsibility of the Trust’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Investors Real Estate Trust and Subsidiaries as of April 30, 2003, and the
consolidated results of its operations and cash flows for the years ended April 30, 2003, and 2002, in conformity
with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements, taken as a whole.
The additional information contained in Note 20, which is marked “unaudited”, has not been subjected to the
auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no
opinion on it.
/s/ Brady, Martz & Associates, P.C.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota, USA
May 22, 2003
F-3
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 2004 and 2003
ASSETS
Real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation/amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans receivable, net of allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable arising from straight-lining of rents, net of allowance . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax, insurance, and other escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Deferred charges and leasing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
2004
2003
$1,103,428
(100,250)
1,003,178
4,893
1,008,071
31,704
2,336
5,976
2,155
1,567
3,044
11,301
2,292
1,441
6,430
$1,076,317
$919,781
(75,639)
844,142
1,183
845,325
17,964
0
4,604
789
354
298
8,112
2,088
1,441
4,706
$885,681
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
April 30, 2004 and 2003
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Accounts payable, accrued expenses and other liabilities . . . . . . . . . . . . . . . . .
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment certificates issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMMITMENTS AND CONTINGENCIES (NOTE 17)
MINORITY INTEREST IN PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MINORITY INTEREST OF UNIT HOLDERS IN OPERATING
PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,819,350 units on April 30, 2004 and 10,206,036
units on April 30, 2003)
SHAREHOLDERS’ EQUITY
Preferred Shares of Beneficial Interest (Cumulative redeemable
preferred shares, no par value, 1,150,000 shares issued and
outstanding at April 30, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Shares of Beneficial Interest (Unlimited authorization,
no par value, 41,693,256 shares at April 30, 2004, and
36,166,351 shares outstanding at April 30, 2003) . . . . . . . . . . . . . . . . . . . . . .
Accumulated distributions in excess of net income . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . .
(in thousands)
2004
2003
$
22,896
25,000
633,124
7,074
586
688,680
$ 16,638
10,570
539,397
9,035
678
576,318
16,386
14,225
92,622
80,377
27,343
0
292,400
(41,083)
(31)
278,629
$1,076,317
240,645
(25,884)
0
214,761
$885,681
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended April 30, 2004, 2003, and 2002
(in thousands, except per share data)
2004
2003
2002
REVENUE
Real estate rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tenant reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discounts and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPERATING EXPENSE
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation/amortization related to real estate investments . . . . . . . .
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property management expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property management related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisory and trustee services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of related party costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairment of real estate investment . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL OPERATING EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before gain/loss on properties and minority interest
. . . . . . . . . .
Gain on sale of land and other investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest portion of other partnerships’ income . . . . . . . . . . . . . . .
Minority interest portion of operating partnership income . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends to preferred shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS . . . .
$118,695
21,529
281
140,505
43,117
24,980
10,239
15,572
17,159
2,947
8,992
743
2,747
104
957
935
71
62
128,625
11,880
373
12,253
158
(757)
(2,744)
8,910
530
9,440
(33)
9,407
$
Earnings per common share from continuing operations . . . . . . . . . . . . . .
Earnings per share common from discontinued operations . . . . . . . . . . . .
NET INCOME PER COMMON SHARE — BASIC & DILUTED . . .
$
$
.23
.01
.24
$103,433
15,098
234
118,765
36,992
19,345
7,855
11,935
13,550
2,154
7,811
504
2,051
113
885
663
38
0
103,896
14,869
830
15,699
315
(934)
(3,640)
11,440
808
12,248
(0)
$ 12,248
$
$
.35
.03
.38
$85,687
4,668
215
90,570
29,982
15,171
5,088
7,261
9,044
1,291
6,567
321
1,570
113
566
543
7
0
77,524
13,046
1,062
14,108
547
(198)
(3,675)
10,782
(182)
10,600
(0)
$10,600
$
$
.42
.00
.42
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
BALANCE MAY 1, 2001 . . . . . . . .
Comprehensive Income
Net income . . . . . . . . . . . . . . . . . . .
Unrealized gain on securities
available-for-sale . . . . . . . . . . . .
Total comprehensive income . . . . . .
Distributions . . . . . . . . . . . . . . . . . . . .
Distribution reinvestment plan . . . .
Sale of shares . . . . . . . . . . . . . . . . . . .
Redemption of units for
common shares . . . . . . . . . . . . . . . .
Fractional shares repurchased . . . . .
BALANCE APRIL 30, 2002 . . . . . .
Comprehensive Income
Net income . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . .
Distributions . . . . . . . . . . . . . . . . . . . .
Distribution reinvestment plan . . . .
Sale of shares . . . . . . . . . . . . . . . . . . .
Redemption of units for
common shares . . . . . . . . . . . . . . . .
Fractional shares repurchased . . . . .
Comprehensive Income
Net income . . . . . . . . . . . . . . . . . . .
Unrealized loss on securities
available-for-sale . . . . . . . . . . . .
Total comprehensive income . . . . . .
Distributions . . . . . . . . . . . . . . . . . . . .
Distribution reinvestment plan . . . .
Sale of shares . . . . . . . . . . . . . . . . . . .
Redemption of units for
common shares . . . . . . . . . . . . . . . .
Fractional shares repurchased . . . . .
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
for the years ended April 30, 2004, 2003, and 2002
(in thousands)
Number of
Preferred
Shares
Preferred
Shares
Number of
Common
Shares
Common
Shares
Accumulated
Other
Compre-
hensive
Income
(Loss)
Total
Share-
holders’
Equity
Distributions
in Excess
of Net
Income
0
$
0
24,068
$132,148
$(13,073)
$(130)
$118,945
0
0
0
0
10,600
0
0
130
0
833
2,789
0
7,298
22,611
(15,325)
0
0
159
(2)
1,339
(19)
0
0
0
27,847
163,377
(17,798)
0
0
12,248
0
971
7,027
0
9,463
65,245
(20,334)
0
0
324
(3)
2,589
(29)
0
10,600
130
10,730
(15,325)
7,298
22,611
1,339
(19)
145,579
12,248
$ 12,248
(20,334)
9,463
65,245
2,589
(29)
214,761
9,440
0
0
0
0
0
0
0
0
0
0
0
0
BALANCE APRIL 30, 2003 . . . . . .
0
0
36,166
240,645
(25,884)
0
0
0
0
9,440
0
(31)
(31)
1,150
27,343
0
1,067
4,068
0
10,157
38,307
(24,639)
0
0
393
(1)
3,303
(12)
0
$
9,409
(24,639)
10,157
65,650
3,303
(12)
0
0
0
0
BALANCE APRIL 30, 2004 . . . . . .
1,150
$27,343
41,693
$292,400
$(41,083)
$ (31)
$278,629
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended April 30, 2004, 2003, and 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest portion of income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of real estate, land and other investments . . . . . . . . . . . . . . . . . . .
Interest reinvested in investment certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairment of real estate investment
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in other assets and liabilities:
(Increase)decrease in real estate deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable arising from straight-lining of rents . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase)decrease in prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in tax, insurance and other escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in deferred charges and leasing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in related party capitalized leasing commissions . . . . . . . . . . . . . . . .
Increase in accounts payable, accrued expenses and other liabilities . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities — available-for-sale . . . . . . . . . . .
Principal payments on mortgage loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in mortgage loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of marketable securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisitions and improvement of properties . . . . . . . . . . . . . . . . . .
Proceeds from notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common shares, net of issue costs . . . . . . . . . . . . . . . . . . .
Proceeds from sale of preferred shares, net of issue costs . . . . . . . . . . . . . . . . . . .
Proceeds from investment certificates issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of minority interest units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of shares and minority interest units . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions paid to shareholders, net of reinvestment
. . . . . . . . . . . . . . . . . . . . .
Distributions paid to unitholders of operating partnership . . . . . . . . . . . . . . . . . . .
Distributions paid to other minority partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of investment certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . .
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . .
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . . .
(in thousands)
2004
2003
2002
$
9,440
$ 12,248
$ 10,600
26,034
3,509
(662)
303
62
360
(2,604)
(1,731)
(1,183)
(2,746)
(3,098)
(2,334)
(92)
3,469
28,727
2,500
3,232
(6,625)
(4,867)
3,743
(135,658)
0
0
(137,675)
38,307
27,343
0
130,191
49,988
0
(12)
(15,206)
(6,330)
(1,555)
(2,264)
(62,125)
(35,649)
122,688
13,740
17,964
$ 31,704
20,307
4,833
(1,595)
375
0
215
85
(1,560)
1,967
(1,208)
(1,698)
(1,729)
(180)
3,386
37,862
0
5,889
(2,969)
0
10,527
(82,664)
3,500
0
(66,717)
31,913
0
0
43,925
14,100
0
(29)
(11,663)
(5,461)
(1,015)
(16,527)
(25,354)
(6,903)
23,986
(4,869)
22,833
$ 17,964
16,064
3,813
(547)
486
0
30
1,063
(1,338)
(2,319)
(532)
(1,887)
(847)
(27)
2,359
26,918
3,085
5,591
(8,507)
0
1,126
(63,157)
0
(3,500)
(65,362)
13,521
0
24,109
43,093
0
346
(30)
(8,363)
(4,477)
(150)
(2,195)
(10,933)
0
54,921
16,477
6,356
$ 22,833
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-8
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended April 30, 2004, 2003, and 2002
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Distribution reinvestment plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property acquired through issue of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate investment acquired through assumption of mortgage loans
payable and accrual of costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate investment acquired through assumption of notes payable . . . . . .
Mortgage loan receivable transferred to other assets . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loan receivable from sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loan receivable acquired through assumption of mortgage loans
payable and accrual of costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets acquired through the issuance of minority interest units in the
operating partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority partner interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment certificates transferred to shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating partnership units converted to shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest on mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on investment certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on margin account and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
2004
2003
2002
$10,157
0
$ 9,463
33,333
$ 7,298
0
25,660
0
158
475
61,258
4,051
0
0
59,650
0
0
0
0
175
0
19,851
2,701
0
3,303
8,860
1,486
0
2,589
19,793
9,483
9,090
1,339
$41,197
376
991
$42,564
$35,950
989
104
$37,043
$27,319
664
1
$27,984
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-9
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002
NOTE 1 • ORGANIZATION
Investors Real Estate Trust (“IRET”) is a self-advised real estate investment trust engaged in acquiring, owning
and leasing multi-family and commercial real estate. IRET has elected to be taxed as a Real Estate Investment Trust
(“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. REITs are subject to a number
of organizational and operational requirements, including a requirement to distribute 90% of ordinary taxable
income to shareholders, and, generally, are not subject to federal income tax on net income. IRET’s multi-family
residential properties and commercial properties are located mainly in the states of North Dakota and Minnesota,
but also in the states of Colorado, Idaho, Iowa, Georgia, Kansas, Montana, Nebraska, South Dakota, Texas,
Michigan, Washington and Wisconsin. As of April 30, 2004, IRET owned 69 multi-family residential properties
with 8,955 apartment units and 142 commercial properties totaling 7.4 million net rentable square feet. IRET
conducts a majority of its business activities through its consolidated operating partnership, IRET Properties, a North
Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other subsidiary entities.
All references to IRET or the Company refer to Investors Real Estate Trust and its consolidated subsidiaries.
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of IRET and all subsidiaries in which
it maintains a controlling interest. All significant intercompany balances and transactions are eliminated in
consolidation. The Company’s fiscal year ends April 30th.
The accompanying consolidated financial statements include the accounts of IRET and its general partnership
interest in the Operating Partnership. The Company’s interest in the Operating Partnership was 78% as of April 30,
2004, which includes 100% of the general partnership interest. The limited partners have a redemption option that
they may exercise. IRET has the option of redeeming the limited partners’ interests (“Units”) for IRET common
shares of beneficial interest, on a one-for-one basis, or for cash payment to the unitholder. The redemption generally
may be exercised by the limited partners at any time after the first anniversary of the date of the acquisition of the
Units (provided, however, that not more than two redemptions by a limited partner may occur during each calendar
year, and each limited partner may not exercise the redemption for less than 1,000 Units, or, if such limited partner
holds less than 1,000 Units, for all of the Units held by such limited partner). Some limited partners have
contractually agreed to a holding period of greater than one year.
The consolidated financial statements also reflect the ownership by the Operating Partnership of certain joint
venture entities in which the Operating Partnership has a general partner or controlling interest. These entities are
consolidated into IRET’s other operations with minority interests reflecting the minority partners’ share of
ownership and income and expenses.
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board (“FASB”) issued FIN No. 46, “Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51”. FIN No. 46 explains how
to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide
whether to consolidate that entity. This Interpretation requires existing unconsolidated variable interest entities to
be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved.
FIN No. 46 was scheduled to be effective for variable interest entities created after January 31, 2003. On
December 24, 2003, the FASB published a revision to FIN No. 46 (“FIN No. 46(R)”). FIN No. 46(R) clarifies certain
provisions of FIN No. 46 and exempts certain entities from its requirements. For interests in variable interest entities
acquired prior to January 31, 2003, the provisions of FIN No. 46(R) were applied in April 2004. The adoption of
FIN No. 46 and FIN No. 46(R) did not have a significant impact on the Company’s consolidated financial statements.
F-10
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial
Instruments With Characteristics of Both Liabilities and Equity,” establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both liabilities and equity. The Company adopted
SFAS No. 150 on August 1, 2003, and the adoption did not have a significant impact on the Company’s consolidated
financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REAL ESTATE ASSETS AND DEPRECIATION OF INVESTMENT IN REAL ESTATE
Real estate is recorded at cost less accumulated depreciation less an adjustment, if any, for impairment. Asset
acquisitions are recorded based upon preliminary allocations of the purchase price which are subject to adjustment
as additional information is obtained, but in no case more than one year after the date of acquisition. The Company
allocates the purchase price to the fair value of the tangible assets of an acquired property (which includes the land,
building, and personal property) which are determined by valuing the property as if it were vacant and to fair value
of the intangible assets (which include in-place leases.) The as-if-vacant value is allocated to land, buildings, and
personal property based on management’s determination of the relative fair values of these assets. The estimated
fair value of the property is the amount that would be recoverable upon the disposition of the property. Techniques
used to estimate fair value include discounted cash flow analysis, independent appraisals, and reference to recent
sales of comparables. A land value is assigned based on the purchase price if land is acquired separately or based
on estimated market value if acquired in a merger or in a single or portfolio acquisition.
Above-market and below-market in-place lease values for acquired properties are recorded based on the present
value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between
(i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market
lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable
term of the lease. The capitalized above-market and below-market lease values are amoritized over the remaining
non-cancelable terms of the respective leases as depreciation/amortization related to real estate investments.
Other intangible assets acquired include amounts for in-place lease values that are based upon the Company’s
evaluation of the specific characteristics of the leases. Factors considered in these analyses include an estimate of
carrying costs during hypothetical expected lease-up periods, considering current market conditions, and costs to
execute similar leases. The Company also considers information about each property obtained during its pre-
acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible
assets acquired.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The Company
uses a 20–40 year estimated life for buildings and improvements and a 5–12 year estimated life for furniture, fixtures
and equipment.
Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Renovations and
improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life,
generally five to ten years. Property sales or dispositions are recorded when title transfers and sufficient
consideration has been received by the Company. The Company periodically evaluates its long-lived assets,
including its investments in real estate, for impairment indicators. The judgments regarding the existence of
impairment indicators are based on factors such as operational performance, market conditions, expected holding
F-11
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
period of each asset and legal and environmental concerns. Future events could occur which would cause the
Company to conclude that impairment indicators exist and an impairment loss is warranted. If indicators exist, the
Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount
of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset.
REAL ESTATE HELD FOR SALE
Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs.
Depreciation is not recorded on assets classified as held for sale.
In the normal course of business IRET will receive offers to purchase its properties, either solicited or
unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period
before completion of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection
of the offer during this process. As a result, real estate is not classified as “held-for-sale” until it is probable, in
the opinion of management, that a property will be disposed of in the near term, even if sale negotiations for such
property are currently under way.
The Company reports, in discontinued operations, the results of operations of a property that has either been
disposed of or is classified as held for sale and the related gains or losses.
GOODWILL
Goodwill of $1,645,000 was recorded by the Company in July 2000 from the purchase of the Company’s former
advisor, Odell-Wentz & Associates LLC. Prior to its adoption of SFAS No. 142, the Company elected to amortize
the goodwill over a fifteen-year period. Following adoption of SFAS No. 142 on May 1, 2002, the Company ceased
amortization and annually reviews the fair market value of the asset for impairment. The annual reviews for years
ended April 30, 2004 and 2003 indicated no impairment.
PROPERTY AND EQUIPMENT
Property and equipment consists of the administrative office buildings and equipment contained at IRET’s
headquarters in Minot, North Dakota and the office location in Minneapolis, Minnesota. The balance sheet reflects these
assets at cost, net of accumulated depreciation. As of April 30, 2004 and 2003, the cost was $2.9 million and $2.5 million,
respectively. Accumulated depreciation was $.6 million and $.4 million as of April 30, 2004 and 2003, respectively.
MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable is stated at the outstanding principal balance. Interest income is accrued and
reflected in the balance. Non-performing loans are recognized as impaired in conformity with SFAS No. 114,
Accounting by Creditors for Impairment of a Loan. The Company evaluates the collectibility of both interest and
principal of each of its loans, if circumstances warrant, to determine whether the loan is impaired. A loan is
considered to be impaired when, based on current information and events, it is probable that the Company will
be unable to collect all amounts due according to the existing contractual terms. An allowance is recorded to reduce
impaired loans to their estimated fair value. Interest on impaired loans is recognized on a cash basis.
The average balance of impaired loans for fiscal years ended April 30, 2004, 2003, and 2002, was not
significant. Additional interest income that would have been earned on loans if they had not been non-performing
was not significant in fiscal 2004, 2003, or 2002. There was no interest income on non-performing loans recognized
on a cash basis for fiscal 2004, 2003, and 2002.
F-12
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three
months or less. Cash and cash equivalents consist of the Company’s bank deposits and short-term investment
certificates acquired subject to repurchase agreements, and the Company’s deposits in a money market mutual fund.
MARKETABLE SECURITIES
IRET’s investments in securities are classified as “available-for-sale.” The securities classified as “available-
for-sale” represent investments in debt and equity securities which the Company intends to hold for an indefinite
period of time. These securities are valued at current market value with the resulting unrealized gains and losses
excluded from earnings and reported as a separate component of shareholders’ equity until realized. Gains or losses
on these securities are computed based on the amortized cost of the specific securities when sold.
All securities with unrealized losses are subjected to the Company’s process for identifying other-than-
temporary impairments. The Company writes down to fair value securities that it deems to be other-than-temporarily
impaired in the period the securities are deemed to be other-than-temporarily impaired. The assessment of whether
such impairment has occurred is based on management’s case-by-case evaluation of the underlying reasons for the
decline in fair value. Management considers a wide range of factors in making this assessment. Those factors
include, but are not limited to, the length and severity of the decline in value and changes in the credit quality of
the issuer or underlying assets. The Company does not engage in trading activities.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Management evaluates the appropriate amount of the allowance for doubtful accounts by assessing the
recoverability of individual real estate mortgage loans and rent receivables, through a comparison of their carrying
amount with their estimated realizable value. Management considers tenant financial condition, credit history and
current economic conditions in establishing these allowances. Receivable balances are written off when deemed
uncollectible. Recoveries of receivables previously written off, if any, are recorded when received. A summary of
the changes in the allowance for doubtful accounts for fiscal years ended April 30, 2004 and 2003 is as follows:
Balance at beginning of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for straight-line rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for mortgage loan receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at close of year
(in thousands)
2003
$ 141
215
25
(241)
$ 115
2002
$120
30
0
(9)
$141
2004
$115
360
0
0
$475
TAX, INSURANCE, AND OTHER ESCROW
Tax, insurance, and other escrow includes funds deposited with a lender for payment of real estate tax and
insurance, and reserves for funds to be used for replacement of structural elements and mechanical equipment of
certain projects. The funds are under the control of the lender. Disbursements are made after supplying written
documentation to the lender.
REAL ESTATE DEPOSITS
Real estate deposits include funds held by escrow agents to be applied toward the purchase of real estate or
the payment of loan costs associated with loan placement or refinancing.
F-13
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
DEFERRED LEASING AND LOAN ACQUISITION COSTS
Costs and commissions incurred in obtaining tenant leases are amortized on the straight-line method over the
terms of the related leases. Costs incurred in obtaining long-term financing are amortized over the life of the loan
and charged to amortization expense over the terms of the related debt agreements.
MINORITY INTERESTS
Interests in the Operating Partnership held by limited partners are represented by operating partnership Units.
The Operating Partnership’s income is allocated to holders of Units based upon the ratio of their holdings to the
total Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated
to minority interests in accordance with the terms of the Operating Partnership agreement.
IRET reflects minority interests in Minnesota Medical Investors LLC, Mendota Properties LLC, IRET-BD
LLC, IRET-Candlelight LLC, IRET-Golden Jack LLC, and IRET-1715 YDR LLC on the balance sheet for the
portion of properties consolidated by IRET that are not wholly owned by IRET. The earnings or losses from these
properties attributable to the minority interests are reflected as minority interest portion of other partnerships’income
in the consolidated statements of operations.
INCOME TAXES
IRET intends to continue to qualify as a REIT and, as a result, IRET generally will not be taxed on the portion
of the income that is distributed to the shareholders, provided at least 90% of its real estate investment trust taxable
income is distributed and other requirements are met. IRET intends to distribute all of its taxable income and realized
capital gains from property dispositions within the prescribed time limits and, accordingly, there is no provision
or liability for income taxes shown on the accompanying consolidated financial statements.
IRET conducts all of its business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”)
through its Operating Partnership. UPREIT status allows IRET to accept the contribution of real estate in exchange
for Operating Partnership limited partnership units. Generally, such a contribution to a limited partnership allows
for the non-recognition of gain by an owner of appreciated real estate.
REVENUE RECOGNITION
Residential rental properties are leased under operating leases with terms generally of one year or less.
Commercial properties are leased under operating leases to tenants for various terms exceeding one year. Lease
terms often include renewal options. Rental revenue is recognized on the straight-line basis, which averages
minimum required rents over the terms of the leases. Rents recognized in advance of collection are reflected as
receivable arising from straight-lining of rents, net of allowance for doubtful accounts.
Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized
as revenue in the period the applicable expenditures are incurred. IRET receives payments for these reimbursements
from substantially all of its multi-tenant commercial tenants throughout the year.
A number of the commercial leases provide for a base rent plus a percentage rent based on gross sales in excess
of a stipulated amount. These percentage rents are recorded once the required sales level is achieved and are included
in rental income at that time.
Interest on mortgage loans receivable is recognized in income as it accrues during the period the loan is
outstanding. In the case of non-performing loans, income is recognized as discussed in above in the Mortgage Loans
Receivable section of this Note 2.
NET INCOME PER SHARE
Basic net income per share is computed as net income available to common shareholders divided by the
weighted average number of common shares outstanding for the period. The potential exchange of Units for
F-14
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
common shares will have no effect on diluted net income per share as Unitholders and common shareholders
effectively share equally in the net income of the Operating Partnership.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform with the current financial statement
presentation.
NOTE 3 • CREDIT RISK
The Company is potentially exposed to credit risk in respect of cash deposited with FDIC-insured financial
institutions in accounts which, at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts.
IRET has entered into a cash management arrangement with First Western Bank with respect to deposit
accounts that exceed FDIC Insurance coverage. On a daily basis account balances are invested in United States
government securities sold to IRET by First Western Bank. IRET can require First Western Bank to repurchase
such securities at any time, at a purchase price equal to what IRET paid for the securities plus interest. First Western
Bank automatically repurchases securities when collected amounts on deposit in IRET’s deposit accounts fall below
the maximum insurance amount, with the proceeds of such repurchases being transferred to IRET’s deposit accounts
to bring the amount on deposit back up to the threshold amount. The amounts invested by IRET pursuant to the
repurchase agreement are not insured by FDIC.
IRET has entered into a cash management arrangement with US Bank with respect to IRET depository accounts
at multiple US Bank locations. Account balances are swept daily to an IRET master account. Amounts in the master
account in excess of $4 million are invested overnight in short term U.S. Government securities and repurchase
agreements secured by U.S. Government securities. Amounts invested were $7.5 million as of April 30, 2004 and
$3.5 million as of April 30, 2003.
NOTE 4 • PROPERTY OWNED
Property, consisting principally of real estate, is stated at cost less accumulated depreciation and is summarized
as follows:
Multi-family residential(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . .
Commercial(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . .
Property owned, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 30,
(in thousands)
2004
2003
$ 446,435
(61,611)
384,824
656,993
(38,639)
618,354
$1,003,178
$398,917
(50,553)
348,364
520,864
(25,086)
495,778
$844,142
(1)
(2)
Includes undeveloped land stated at cost in the amount of $264,000 classified as mutli-family residential.
Includes undeveloped land stated at cost in the amount of $2,730,000 classified as commercial.
In addition, as of April 30, 2004, the Company had signed a purchase agreement to acquire a commercial
property in the Minneapolis, Minnesota area for a purchase price of approximately $13.05 million. This pending
F-15
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 4 • PROPERTY OWNED (Continued)
acquisition is subject to certain closing conditions and contingencies; therefore, no assurance can be given that this
transaction will be consummated.
Construction period interest of $148,922, $90,939 and $99,668, has been capitalized for the years ended
April 30, 2004, 2003, and 2002, respectively.
The future minimum lease payments to be received under leases for commercial properties as of April 30,
2004, assuming that no options to renew or buy out the lease are exercised, are as follows:
Year Ended April 30,
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
$ 57,602
52,402
46,465
39,273
33,749
207,093
$436,584
During fiscal 2004, the Company incurred a loss of $62,000 due to impairment on one property. For the years
ended April 30, 2003, and 2002, the Company did not record any losses due to impairment.
NOTE 5 • MORTGAGE LOANS RECEIVABLE — NET
Mortgage loans receivable consists of three separate loans that are collateralized by real estate. Contract terms
vary in regard to payment of principal and interest. Interest rates range from 7% to 11%. Future principal payments
due under these mortgage loans as of April 30, 2004, are as follows:
Year Ended April 30,
(in thousands)
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for doubtful accounts . . . . . . . . . . . . . . .
$4,274
27
28
202
25
362
4,918
(25)
$4,893
There were no non-performing mortgage loans receivable as of April 30, 2004, or 2003.
F-16
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 6 • MARKETABLE SECURITIES
The amortized cost and fair value (estimated market values) of marketable securities available-for-sale at
April 30, 2004 are as follows. These marketable securities are securities of various issuers, primarily U.S.
government, U.S. agency and corporate bonds, held in IRET Properties’security deposit account with Merrill Lynch:
2004
US Government & Agency Debt Securities . . . . . .
Corporate Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank Certificates of Deposit . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$1,173
292
852
$
50
$2,367
$—
—
—
$—
$ 0
$26
5
—
$—
$31
Fair
Value
$1,147
287
852
$
50
$2,336
The Company had no available-for-sale securities at April 30, 2003. There were no realized losses on sales
of securities available-for-sale for the fiscal years ended April 30, 2004, 2003 and 2002. None of the securities with
an unrealized loss at April 30, 2004 have been in such a position for more than one year, and are not considered
to be other-than-temporarily impaired.
NOTE 7 • NOTES PAYABLE AND OTHER DEBT
IRET has lines of credit with three financial institutions, and one unsecured bridge loan outstanding with a
fourth financial institution, as of April 30, 2004. Interest payments on outstanding borrowings are due monthly.
These credit facilities and bridge loan are summarized in the following table:
Financial Institution
Lines of Credit
First Western Bank & Trust . . . . .
First Int’l Bank & Trust . . . . . . . .
Bremer Bank . . . . . . . . . . . . . . . . .
Unsecured Bridge Loan
Wells Fargo Bank . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
Available
$10,000
4,400
10,000
25,000
$49,400
(in thousands)
Amount
Outstanding
as of
April 30, 2004
Amount
Outstanding
as of
April 30, 2003
$
0
0
0
25,000
$25,000
$ 4,700
2,700
3,170
0
$10,570
Applicable
Interest
Rate as of
April 30,
2004
4.00%
4.00%
4.00%
Maturity
Date
09/01/04
12/12/04
09/15/04
Weighted
Average
Int. Rate on
Borrowings
during fiscal
year 2004
4.02%
4.13%
4.05%
3.125%
07/22/04
3.125%
The three lines of credit bear interest at a variable interest rate tied to the prime lending rate as published in
the Wall Street Journal (in the case of the First Western Bank & Trust and First International Bank & Trust credit
facilities) and the Bremer Financial Corporation Reference Rate (in respect of the Bremer Bank credit facility).
The promissory note in respect of the Wells Fargo bridge loan bears interest based upon the thirty-day LIBOR rate
plus two percent.
F-17
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 7 • NOTES PAYABLE AND OTHER DEBT (Continued)
The other debt balance of $586,000 at April 30, 2004, relates to a mortgage note with Main Street Bank
collateralized by the IRET Minneapolis office. The interest rate is fixed at 6.450% and the maturity date is
February 1, 2009. Future minimum payments are as follows:
Year Ended April 30,
(in thousands)
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 24
26
27
29
480
$586
NOTE 8 • MORTGAGES PAYABLE
The Company’s mortgages payable are collateralized by substantially all of its properties owned. Interest rates
on mortgages payable range from 3.45% to 8.61%, and the mortgages have varying maturity dates from December 1,
2004, through August 1, 2036.
Of the mortgages payable, the balances of fixed rate mortgages totaled $591,176,000 and $516,218,000, and the
balances of variable rate mortgages totaled $41,948,000 and $23,180,000 as of April 30, 2004, and 2003, respectively.
Most of the fixed rate mortgages have substantial pre-payment penalties. As of April 30, 2004, the weighted average
rate of interest on the Company’s mortgage debt was 7.17%, compared to 7.4% on April 30, 2003. The aggregate
amount of required future principal payments on mortgages payable as of April 30, 2004, is as follows:
Year Ended April 30,
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
$ 15,789
17,098
19,194
44,829
42,744
493,470
$633,124
NOTE 9 • GOODWILL
As of May 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets. Accordingly, goodwill is no longer amortized, but is tested on at least an annual basis
for impairment. No impairment was present on April 30, 2004, or April 30, 2003. The following reflects net income
and earnings per share for the fiscal year ended April 30, 2002 as if SFAS 142 had been applied to that period.
(in thousands, except per share data)
Reported net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add back goodwill amortization . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reported earnings per share . . . . . . . . . . . . . . . . . . . . . . . .
Add back goodwill amortization per share . . . . . . .
Adjusted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
2002
$10,600
109
$10,709
.42
$
.00
.42
$
F-18
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 10 • INVESTMENT CERTIFICATES ISSUED
IRET has sold unsecured investment certificates to the public. The fixed interest rates vary from 6% to 8%
per annum, depending on the term of the security. Interest is paid annually, semiannually, or quarterly on the
anniversary date of issuance. IRET has discontinued the sale of investment certificates and the outstanding
certificates will be redeemed at maturity as follows:
Year Ended April 30,
(in thousands)
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,231
2,174
2,527
142
$7,074
NOTE 11 • TRANSACTIONS WITH RELATED PARTIES
PROPERTY MANAGEMENT SERVICES
Hoyt Properties, Inc., (“Hoyt Properties”), a provider of property management services to the Company, is
owned by Steven B. Hoyt, currently a member of the Company’s Board of Trustees. During the fiscal year ended
April 30, 2004, Hoyt Properties managed ten office properties or complexes for the Company pursuant to written
management contracts.
As compensation for its services, Hoyt Properties receives a monthly fee of 5% percent of the gross rental
income, provided that such management fee is reimbursable by the building’s tenants pursuant to the tenant’s lease
agreement. In the event that the Company is not reimbursed for such fee by a tenant and must pay such fee from
rent proceeds, the annual fee is 3.5% of the gross rental proceeds. In addition to such management fee, Hoyt
Properties is paid a separate fee for leasing space to tenants at each location. Any leasing commissions earned by
Hoyt Properties are not reimbursed by the building’s tenants. The leasing commission rates are set forth in a written
contract between the Company and Hoyt Properties.
All of the Company’s management contracts with Hoyt Properties may be terminated by either party on 30
days written notice for any reason and without penalty. In Fiscal 2004, the Company paid management fees to Hoyt
Properties in the amount of $743 ,000, a portion of which was reimbursed by the tenants. Additionally, during that
same period, the Company paid leasing commissions to Hoyt Properties in the amount of $93,000.
In Fiscal 2003 and 2002, the Company paid management fees to Hoyt Properties in the amount of $503,976
and $321,348, respectively, a portion of which was reimbursed by tenants. Additionally, during that same period,
the Company paid leasing commissions to Hoyt Properties in the amount of $179,553 and $27,324, respectively.
PROPERTY ACQUISITIONS
Brenwood Office Complex. During fiscal year 2003, the Company acquired four commercial buildings from
affiliates of Steven B. Hoyt. On October 1, 2002, the Company acquired a 51% ownership interest in IRET-BD,
LLC, a Minnesota limited liability company, for $13,107,000. The Brenwood Office project consists of the four
office buildings contributed as well as three industrial/warehouse buildings purchased by IRET-BD, LLC on
October 1, 2002, for $11,800,000.
Thresher Square East and West. On January 2, 2002, IRET acquired a seven-story office building containing
113,736 square feet located at 700 and 708 South Third Street, Minneapolis, Minnesota. The property was purchased
for an agreed value of $10,943,414, which was paid by the assumption by IRET of existing debt. The seller is an
affiliate of Steven B. Hoyt.
Wirth Corporate Center. On April 1, 2002, IRET acquired Wirth Corporate Center, an 89,384 square foot, four-
story office building from Mr. Hoyt. The purchase price was approximately $8.6 million.
F-19
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 11 • TRANSACTIONS WITH RELATED PARTIES (Continued)
Independent appraisals were obtained by the Company for each of the above three property acquisitions, and
the purchase prices were based on the results of these appraisals.
SECURITY SALE SERVICES
D.A. Davidson & Co. is an investment banking firm that has participated in offerings of the Company’s shares
of beneficial interest, and may in the future continue to participate in sales of the Company’s shares and provide
investment banking services to the Company. John F. Decker, currently a member of the Company’s Board of
Trustees, is an employee of D.A. Davidson. In the first of the Company’s two offerings of common shares of
beneficial interest during fiscal year 2004, conducted in September 2003, D.A. Davidson participated, on a best-
efforts basis, as a member of the selling syndicate, and sold 250,000 shares. In connection with this offering, the
Company authorized and paid D.A. Davidson commissions in the amount of $150,000. D.A. Davidson did not
participate in the Company’s second offering of common shares of beneficial interest in April 2004.
D.A. Davidson served as book-running manager and representative of the underwriters for the Company’s April
2004 offering of Series A cumulative redeemable preferred shares of beneficial interest. In connection with this
offering, the Company paid D.A. Davidson a fee of $1,078,125 and reimbursed D.A. Davidson for legal and other
expenses in the amount of $100,000.
In October 2003 and April 2004, the Company paid D.A. Davidson fees of $19,500 and $77,849, respectively,
for the services of Mr. Decker’s son as a broker-dealer in representing certain clients who contributed real property
in exchange for Units.
In connection with two offerings of the Company’s common shares in fiscal year 2002, the Company authorized
and paid D. A. Davidson commissions in the amount of $490,000. The Company did not pay any commissions
or expenses to D. A. Davidson during the fiscal year ended April 30, 2003.
PURCHASE OPTIONS
On February 1, 2003, the Company entered into a merger agreement with the T. F. James Company. As part
of the merger agreement, two affiliated entities of the T. F. James Company, Thomas F. James Realty Limited
Partnership, L.L.L.P. and Thomas F. James Properties, LLC, were granted the right to purchase certain real property
acquired by the Company as a result of the merger. Charles Wm. James, a member of the Company’s Board of
Trustees, has an ownership interest in each of Thomas F. James Realty Limited Partnership, L.L.L.P., and Thomas F.
James Properties, LLC, of less than ten percent.
Under the terms of the Purchase Option Agreement, the Thomas F. James Realty Limited Partnership, L.L.L.P.
purchased a parcel of property located in Ripley, Tennessee for $250,000. Under the terms of the agreement, Thomas F.
James Properties, LLC has the option, but not the obligation, to purchase a commercial strip mall located in Excelsior,
Minnesota, for the sum of $900,000, plus an annual Consumer Price Index increase from February 2003 until the
date the option is exercised. The option purchase price is equal to the price the Company paid to acquire the property
at closing on February 1, 2003, and is equal to the value set by an independent appraisal. Until such time as the option
is exercised, the Company will continue to operate the property and collect all rents from the tenants.
TRUSTEE AND OFFICER LOANS
In July 2000, the Company assumed a note receivable from Timothy Mihalick, currently a member of the
Company’s Board of Trustees and the Company’s Chief Operating Officer, in the amount of $101,002. Proceeds
of the note were used to purchase common shares of the Company. The note bore interest at New York Prime less
1% and was payable on demand. The note was paid in full by Mr. Mihalick on October 4, 2002, including principal
and interest in the amount of $92,769.
On January 16, 2002, the Board authorized an UPREIT unit loan program that was available to persons holding
$1.0 million or more of Units. Under such loan program, the Company could lend up to 50% of the value of the
F-20
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 11 • TRANSACTIONS WITH RELATED PARTIES (Continued)
borrower’s Units, with such value to be based on the closing price of the Shares on the NASDAQ National Market
on the date of the loan. Such loans were to be for terms of two years or less, collateralized by the borrower’s Units
and at a variable interest rate of 1.5% over the interest rate charged to the Company by a participating lender. On
January 30, 2002, a loan in the amount of $3.5 million was made to Steven B. Hoyt. On October 1, 2002, Mr. Hoyt
repaid the loan in full in the amount of $3,500,000 plus accrued interest in the amount of $55,137.
UPREIT CONTRIBUTION
In April 2002, Edgeview Estates I, Ltd., (“Edgeview”), contributed the proceeds from the sale of real estate
to IRET Properties. The total amount contributed to IRET Properties by Edgeview in exchange for Units was
$386,168. A total of 38,909 Units were allocated to the partnership at a price of $9.925 per Unit. Edgeview was
owned by several officers and current and past trustees of IRET.
NOTE 12 • ACQUISITIONS AND DISPOSITIONS IN FISCAL YEARS 2004 AND 2003
PROPERTY ACQUISITIONS
IRET Properties added $170.3 million of real estate investments to its portfolio during fiscal 2004, compared
to $177.2 million added in fiscal 2003. The fiscal 2004 and 2003 additions are detailed below.
Fiscal 2004 (May 1, 2003 to April 30, 2004)
(in thousands)
Purchase
Price
Units
MULTI-FAMILY RESIDENTIAL
Connelly Estates – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remada Court Apartments – Eagan, MN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winchester/Village Green Townhouses – Rochester, MN. . . . . . . . . . . . . . . . . . . . . . . .
Brookfield Village – Topeka, KS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Monticello Village Apartments – Monticello, MN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy V – Grand Forks, ND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy VI – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legacy VII – Grand Forks, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RESIDENTIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
240
115
151
160
60
**
**
**
726
**
Property not placed in service at April 30, 2004. Additional costs are still to be incurred.
COMMERCIAL
Benton Business Park – Sauk Rapids, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West River Business Park – Waite Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buffalo Mall – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Golden Hills Office Center – Golden Valley, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brown Deer Road – Milwaukee, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TCA Building – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista Phase II – Virginia, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Westgate Shopping Center – St Cloud, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
API Building – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denfeld Retail Center – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-21
Square
Footage
30,464
24,000
213,271
190,758
175,610
106,207
76,870
104,928
35,000
36,542
$13,850
6,600
8,900
7,250
4,200
214
93
93
41,200
$ 1,600
1,500
4,275
27,500
13,500
13,000
5,100
6,575
2,000
5,164
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 12 • ACQUISITIONS AND DISPOSITIONS IN FISCAL YEARS 2004 AND 2003 (Continued)
(in thousands)
Square
Footage
Purchase
Price
COMMERCIAL – continued
Fresenius – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lighthouse – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Metris – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minnesota National Bank – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Pond Retail Center – Champlin, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tool Crib – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UHC Office – International Falls, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mariner Clinic – Superior, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denfeld Clinic – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wells Clinic – Hibbing, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pavilion II – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gateway Clinic – Sandstone, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL COMMERCIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL FISCAL 2004 PROPERTY ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,052
59,600
20,000
27,000
25,400
15,597
30,000
28,928
20,512
18,810
74,800
12,444
1,335,793
Fiscal 2003 (May 1, 2002 to April 30, 2003)
MULTI-FAMILY RESIDENTIAL
East Park Apartments – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sycamore Village – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RESIDENTIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMMERCIAL
Abbott Northwestern – Sartell, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airport Medical – Bloomington, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anoka Strip Center – Anoka, MN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brenwood Office Park – Minnetonka, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Burnsville Strip Center – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central Bank – Eden Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Champion Auto Center – Forest Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chanhassen Retail Center – Chanhassen, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checkers Auto – Rochester, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checkers Auto – Faribault, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chiropractic Office Building – Greenwood, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilly Lily – St. Louis Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dixon Industrial Park – Des Moines, IA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagan Strip Center I – Eagan, MN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagan Strip Center II – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Hermantown, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Evergreen Center – Pine City, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excelsior Strip Center – Excelsior, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Units
84
48
132
Square
Footage
60,095
24,218
10,625
176,917
8,400
39,525
6,836
135,969
6,225
5,600
1,600
3,444
604,711
5,400
13,901
44,365
63,225
7,993
$
1,800
2,100
2,950
2,100
3,700
2,000
2,500
4,100
3,336
2,900
19,500
1,900
129,100
$170,300
$ 2,520
1,418
$ 3,938
$12,994
4,678
725
14,014
760
4,600
496
20,850
440
340
330
340
11,872
510
1,349
4,624
2,800
900
F-22
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 12 • ACQUISITIONS AND DISPOSITIONS IN FISCAL YEARS 2004 AND 2003 (Continued)
(in thousands)
Square
Footage
Purchase
Price
COMMERCIAL – continued
Express Center – Fargo, ND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forest Lake Retail Center – Forest Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas Plus More – Paynesville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate Bakery – St. Paul, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate Bakery – Mounds View, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inver Grove Center PDQ – Inver Grove, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jamestown Mall – Jamestown, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Livingston, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pamida – Ladysmith, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Park Dental – Brooklyn Center, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paul Larson Clinic – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Burnsville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Eagan, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PDQ – Mound, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza VII – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior Lake Peak – Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sam Goody – Willmar, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schofield Plaza – Schofield, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southdale Expansion – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three Paramount Plaza – Edina, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Lakeville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Monticello, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Oakdale, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Long Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Ham Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Glencoe, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Blaine, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Bethel, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Buffalo, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Lakeland, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Lino Lakes, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Pine City, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Winsted, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Howard Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Centerville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Shoreview, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Lindstrom, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Mora, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Andover, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Sauk Rapids, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UH Medical – St. Paul, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Westgate Office Center North – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wilson’s Leather – Brooklyn Park, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL COMMERCIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-23
30,227
100,656
4,800
6,225
4,560
8,400
99,403
52,000
41,200
41,000
10,008
12,140
8,526
6,800
3,886
3,864
27,297
4,200
6,225
53,764
75,526
9,500
3,575
6,266
5,216
4,800
4,800
8,750
4,800
7,700
3,650
6,325
4,800
3,571
3,571
3,000
3,000
4,000
3,571
3,000
3,575
43,046
103,332
353,049
2,416,653
$
1,425
8,007
365
320
290
940
1,320
2,500
1,800
1,500
2,952
1,013
980
971
783
360
3,358
479
400
1,750
7,056
7,367
1,263
855
730
700
535
530
520
510
460
440
440
440
410
380
330
330
320
300
280
250
7,408
11,509
13,011
$170,509
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 12 • ACQUISITIONS AND DISPOSITIONS IN FISCAL YEARS 2004 AND 2003 (Continued)
UNDEVELOPED LAND
Andover, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centerville, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inver Grove, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kalispell, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Libby, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long Prairie, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior Lake, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
River Falls, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL UNDEVELOPED LAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL FISCAL 2003 PROPERTY ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Purchase
Price
$
150
100
560
1,400
150
150
50
200
2,760
$177,207
PROPERTY DISPOSITIONS
During fiscal year 2004, the Company disposed of six properties and two undeveloped properties for an
aggregate sale price of $4.4 million, compared to six properties and one undeveloped property sold for $11.2 million
in total during fiscal year 2003. Real estate assets sold by the Company during fiscal 2004 and 2003 were as follows:
Fiscal 2004 Property Sold
(in thousands)
Book Value and
Sales Costs
Gain/Loss
Sales Price
MCA Royal Suites – Minot, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate Bakery – St. Paul, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Billings, MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Sioux Falls, SD . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tom Thumb – Sauk Rapids, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pioneer Seed – Moorhead, MN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunset Trail III – Rochester, MN (vacant land) . . . . . . . . . . . . . . . . .
Prior Lake II – Prior Lake, MN (vacant land) . . . . . . . . . . . . . . . . . .
TOTAL FISCAL 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 410
420
1.101
1.101
275
500
400
160
$4,367
$ 364
317
941
936
247
498
364
52
$3,719
Fiscal 2003 Property Sold
(in thousands)
Book Value and
Sales Costs
Sales Price
620
Eastwood Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . . . . $
420
Oak Manor Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . .
275
Jenner Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,275
Cottage Grove Strip Ctr. – C. Grove, MN . . . . . . . . . . . . . . . . . . . . . .
1,950
Creekside Office Building – Billings, MT . . . . . . . . . . . . . . . . . . . . . .
3,350
America’s Best – Boise, ID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,250
Century Apartments – Dickinson, ND . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Land – Duluth, MN . . . . . . . . . . . . . . . . . . . . . . . . .
102
TOTAL FISCAL 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,242
$ 438
342
272
1,222
1,796
3,656
1,819
102
$9,647
$ 46
103
160
165
28
2
36
108
$648
Gain/Loss
$ 182
78
3
53
154
(306)
1,431
0
$1,595
F-24
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 13 • OPERATING SEGMENTS
Each of IRET’s multi-family residential and commercial properties is considered a separate operating segment.
Each segment on a stand-alone basis is less than 10% of the revenues, profit or loss and assets of the combined
reported operating segments, and meets the majority of the aggregation criteria under SFAS No. 131. IRET’s
operating segments are aggregated and classified as multi-family residential and commercial properties for purposes
of producing reportable segments. The revenues, profit (loss) and assets for these reportable segments are
summarized as follows, along with reconciliations to the consolidated financial statements:
Year Ended April 30, 2004
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Loss on impairment of real estate investment
Total Segment Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Operating Profit
Reconciliation to Consolidated Operations:
Discounts and Fee Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation — Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . .
Administrative, Advisory and Trustee Fees . . . . . . . . . . . . . . . . . . .
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Multi-Family
Residential
Total
Commercial
$77,260
$62,964
$140,224
23,041
13,835
12,575
10,137
848
2,990
0
63,426
$13,834
18,588
10,982
13,236
7,022
2,099
6,745
62
58,734
$ 4,230
41,629
24,817
25,811
17,159
2,947
9,735
62
122,160
18,064
281
(1,488)
(163)
(2,851)
(957)
(1,006)
$ 11,880
(in thousands)
Multi-Family
Residential
Total
Commercial
Segment Assets
Property Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $656,993
(38,639)
Less Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Property Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $618,354
(61,611)
$446,435 $1,103,428
(100,250)
$384,824 $1,003,178
F-25
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 13 • OPERATING SEGMENTS (Continued)
Year Ended April 30, 2003
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Operating Profit
Reconciliation to Consolidated Operations:
Discounts and Fee Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation — Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . .
Administrative, Advisory and Trustee Fees . . . . . . . . . . . . . . . . . . .
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Multi-Family
Residential
Total
Commercial
$58,878
$59,653
$118,531
18,662
9,224
8,249
6,789
616
2,302
45,842
$13,036
17,292
10,029
11,541
6,761
1,538
6,013
53,174
$ 6,479
35,954
19,253
19,790
13,550
2,154
8,315
99,016
19,515
234
(1,038)
(92)
(2,164)
(885)
(701)
$ 14,869
Segment Assets
Property Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $520,864
(25,086)
Less Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Property Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $495,778
$398,917
(50,553)
$348,364
$919,781
(75,639)
$844,142
(in thousands)
Multi-Family
Residential
Total
Commercial
F-26
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 13 • OPERATING SEGMENTS (Continued)
Year Ended April 30, 2002
Real Estate Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Mortgage Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Segment Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Operating Profit
Reconciliation to Consolidated Operations:
Discounts and Fee Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation — Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . .
Administrative, Advisory and Trustee Fees . . . . . . . . . . . . . . . . . . .
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Multi-Family
Residential
Total
Commercial
$32,008
$58,347
$90,355
12,000
5,533
1,933
2,589
185
909
23,149
$ 8,859
16,640
9,562
10,416
6,455
1,106
5,979
50,158
$ 8,189
28,640
15,095
12,349
9,044
1,291
6,888
73,307
17,048
$
215
(1,342)
(76)
(1,683)
(566)
(550)
$13,046
F-27
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 14 • DISCONTINUED OPERATIONS
SFAS No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets,” requires the Company
to report in discontinued operations the results of operations of a property that has either been disposed of or is
classified as held for sale. It also requires that any gains or losses from the sale of a property be reported in
discontinued operations. There were no properties held for sale as of April 30, 2004 or 2003. The following
information shows the effect on net income, net of minority interest, and the gains or losses from the sale of
properties classified as discontinued operations for the fiscal years ended April 30, 2004, 2003 and 2002.
REVENUE
Real Estate Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tenant Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discounts and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPERATING EXPENSE
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation/Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Management Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income(Loss) from Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain(Loss) on Sale of Discontinued Operations . . . . . . . . . . . . . . . . . . . . . .
Discontinued Operations, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment Data
Residential
Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Sale Data
Sales Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cost of Property Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
2004
2003
2002
$ 183
0
0
183
47
48
28
20
3
3
149
34
(8)
26
504
$ 530
$
55
475
$ 530
$3,807
3,303
$ 504
$1,167
5
0
1,172
584
261
293
143
32
71
1,384
(212)
(259)
(471)
1,279
$ 808
$1,154
(346)
$ 808
$8,550
7,271
$1,279
$1,383
0
0
1,383
623
344
360
140
62
97
1,626
(243)
61
(182)
0
$ (182)
$ 135
(317)
$ (182)
$ N/A
N/A
$ N/A
F-28
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 15 • EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding during the period. The Company has no outstanding warrants,
convertible stock or other contractual obligations requiring issuance of additional common shares that would result
in a dilution of earnings. While Units can be exchanged for shares on a one-for-one basis after a minimum holding
period of one year, the exchange of Units for common shares has no effect on diluted earnings per share, as Unitholders
and common shareholders effectively share equally in the net income of the Operating Partnership. The following
table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share
reported in the consolidated financial statements for the fiscal years ended April 30, 2004, 2003, and 2002:
NUMERATOR
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends to preferred shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Numerator for basic earnings per share — net income available to
common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest portion of operating partnership income . . . . . . . . . . . .
Numerator for diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DENOMINATOR
Denominator for basic earnings per share weighted average shares . . .
Effect of dilutive securities Convertible operating partnership units . . .
Denominator for diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share from continuing operations — basic
and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share from discontinued operations — basic
and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCOME PER COMMON SHARE — BASIC & DILUTED . . .
NOTE 16 • RETIREMENT PLANS
For Years Ended April 30,
(in thousands, except per share data)
2004
2003
2002
$ 8,910
530
9,440
(33)
9,407
2,752
$12,159
$39,257
11,176
$50,433
$
$
.23
.01
.24
$11,440
808
12,248
0
12,248
3,899
$16,147
$32,574
10,041
$42,615
$
$
.35
.03
.38
$10,782
(182)
10,600
0
10,600
3,614
$14,214
$25,492
8,289
$33,781
$
$
.42
.00
.42
IRET sponsors a defined contribution profit sharing retirement plan and a defined contribution 401K plan.
IRET’s defined contribution profit sharing retirement plan is available to employees over the age of 21 who have
completed one year of service. Contributions to the profit sharing plan are at the discretion of the Company’s
management. All employees over the age of 21 are immediately eligible to participate in IRET’s defined contribution
401K plan and may contribute up to maximum levels established by the I.R.S. IRET matches up to 3% of
participating employees’ wages. Plan expenses to IRET for the years ended April 30, 2004, 2003, and 2002, were
$133,800, $46,875, and $90,455, respectively.
NOTE 17 • COMMITMENTS AND CONTINGENCIES
Ground Leases. As of April 30, 2004, the Company was a tenant under operating ground leases on four of
its properties. The Company pays a total of approximately $81,585 per year in rent under these ground leases, which
have terms ranging from 15 to 30 years, and expiration dates ranging from October 2005 to February 2031. The
Company has renewal options for three of the four ground leases.
F-29
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 17 • COMMITMENTS AND CONTINGENCIES (Continued)
Legal Proceedings. IRET is involved in various lawsuits arising in the normal course of business. Management
believes that such matters will not have a material effect on the Company’s financial statements.
Purchase Options. The Company has granted options to purchase certain IRET properties to various parties.
In general, the options grant the parties the right to purchase these properties at the greater of their appraised value
or an annual compounded increase of 2% to 2.5% of the initial cost of the property to IRET. In addition to options
granted to third parties, we have also granted an option to Charles Wm. James to purchase our Excelsior Retail
Center. Mr. James is an officer and member of our Board of Trustees. The option exercise price is equal to the price
paid by us for the property, plus an annual consumer price index increase. The property cost and gross rental revenue
of these properties are as follows:
Property
East Grand Station – EGF, MN . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Belgrade, MT . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Columbus, NE . . . . . . . . . . . . . . . . . .
Edgewood Vista – Duluth, MN . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – EGF, MN . . . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Fremont, NE . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Grand Island, NE . . . . . . . . . . . . . . . .
Edgewood Vista – Hastings, NE . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Kalispell, MT . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Minot, ND . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Missoula, MT . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Omaha, NE . . . . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Virginia, MN . . . . . . . . . . . . . . . . . . . .
Excelsior Retail Center – Excelsior, MN . . . . . . . . . . . .
Great Plains Software – Fargo, ND . . . . . . . . . . . . . . . . .
Healtheast – Woodbury & Maplwd, MN . . . . . . . . . . . .
Wedgwd Sweetwater – L. Springs, GA . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
Property Cost
(in thousands)
Gross Rental Revenue
2004
2003
2002
$ 1,392
453
456
11,709
1,430
552
456
572
588
6,271
963
641
12,182
917
15,375
21,601
3,972
$79,530
$ 152
49
49
1,278
181
59
49
61
62
783
120
67
893
129
1,875
1,948
502
$8,257
$ 152
49
49
1,246
155
59
49
61
62
762
120
67
759
22
1,875
1,917
475
$7,879
$ 152
49
49
770
155
59
49
60
62
681
114
67
0
0
1,875
1,917
436
$6,495
Real Estate Expansion and Development. The Company has certain funding commitments under contracts for
property development and expansion projects. As of April 30, 2004, the Company had the following contractual
obligations:
• Grand Forks Apartment Construction — The Company is obligated under a construction contract and an
excavating contract in respect of the construction of a multi-family residential property in Grand Forks, ND.
The Company is obligated to pay approximately $7.5 million, subject to additions and deductions as
provided in the contract, under the construction contract, and approximately $300,000 under the excavating
contract, for this development project.
• Lithia Springs, Georgia Expansion Project — The Company is obligated to pay up to $500,000 to construct
expansion premises at its Lithia Springs, Georgia assisted living facility.
Pending Acquisition. As of April 30, 2004, the Company had signed a purchase agreement to acquire a
commercial property in the Minneapolis, Minnesota area for a purchase price of approximately $13.05 million. This
pending acquisition is subject to certain closing conditions and contingencies, and no assurances can be given that
this transaction will be consummated.
F-30
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 18 • FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments.
Mortgage Loans Receivable. Fair values are based on the discounted value of future cash flows expected to be
received for a loan using current rates at which similar loans would be made to borrowers with similar credit risk
and the same remaining maturities. Terms are short term in nature and carrying value approximates the estimated
market value.
Cash and Cash Equivalents. The carrying amount approximates fair value because of the short maturity.
Marketable Securities. The fair values of these instruments are estimated based on quoted market prices for
the security.
Notes Payable. The carrying amount approximates fair value because of the short maturity of such notes.
Other Debt. The fair value of other debt is estimated based on the discounted cash flows of the loan using
current market rates.
Mortgages payable. For variable rate loans that re-price frequently, fair values are based on carrying values. The
fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using current market rates.
Investment Certificates Issued. The fair value is estimated using a discounted cash flow calculation that applies
interest rates currently being offered on deposits at financial institutions with similar remaining maturities.
The estimated fair values of the Company’s financial instruments as of April 30, 2004 and 2003 are as follows:
(in thousands)
2004
2003
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
FINANCIAL ASSETS
Mortgage loans receivable . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities — available-for-sale . . . . . . . .
$ 4,893
31,704
2,336
$
4,893
31,704
2,336
$
1,183
17,964
0
$
1,183
17,964
0
FINANCIAL LIABILITIES
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment certificates issued . . . . . . . . . . . . . . . . . . . . .
$ 25,000
586
633,124
7,074
$ 25,000
604
643,673
7,021
$ 10,570
0
539,397
9,035
$ 10,570
0
567,146
9,035
NOTE 19 • COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST AND
SHAREHOLDERS’ EQUITY
During fiscal year 2004, IRET issued 1.1 million common shares pursuant to its distribution reinvestment plan,
at a total value at issuance of $10.2 million. In addition, .4 million Units were converted to common shares during
fiscal year 2004, with a total value of $3.3 million included in shareholders’ equity. IRET’s distribution reinvestment
plan is available to common shareholders of IRET and all limited partners of IRET Properties. Under the distribution
reinvestment plan, shareholders or limited partners may elect to have all or a portion of their distributions used
to purchase additional IRET common shares.
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest. On April 26, 2004, the Company
issued 1,150,000 shares of 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest for total
proceeds of $27.3 million, net of selling costs. Holders of the Company’s Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest are entitled to receive dividends at an annual rate of 8.25% of the liquidation preference
of $25 per share, or $2.0625 per share per annum. These dividends are cumulative and payable quarterly in arrears.
F-31
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 19 • COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST AND
SHAREHOLDERS’ EQUITY (Continued)
The shares are not convertible into or exchangeable for any other property or any other securities of the Company
at the election of the holders. However, on or after April 26, 2009 (or sooner, under limited circumstances), the
Company, at its option, may redeem the shares at a redemption price of $25.00 per share, plus any accrued and
unpaid distributions through the date of redemption. The shares have no maturity date and will remain outstanding
indefinitely unless redeemed by the Company.
NOTE 20 • QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)
(in thousands, except per share data)
QUARTER ENDED
July 31,
2003
October 31,
2003
January 31,
2004
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income available to common shareholders . . . . .
Net Income per common share — basic & diluted . .
$32,992
$ 2,920
.08
$
$33,983
$ 2,615
.07
$
$35,600
$ 2,489
.06
$
QUARTER ENDED
July 31,
2002
October 31,
2002
January 31,
2003
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income available to common shareholders . . . . .
Net Income per common share — basic & diluted . .
$27,599
$ 2,928
.10
$
$29,279
$ 3,068
.10
$
$30,026
$ 2,451
.08
$
QUARTER ENDED
July 31,
2001
October 31,
2001
January 31,
2002
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income available to common shareholders . . . . .
Net Income per common share — basic & diluted . .
$21,780
$ 2,776
.11
$
$23,175
$ 2,946
.12
$
$23,606
$ 2,240
.09
$
April 30,
2004
$37,930
$ 1,383
.03
$
April 30,
2003
$31,861
$ 3,801
.10
$
April 30,
2002
$22,009
$ 2,638
.10
$
The above financial information is unaudited. In the opinion of management, all adjustments (which are of
a normal recurring nature) have been included for a fair presentation.
NOTE 21 • SUBSEQUENT EVENTS
Common Share Offering. In May 2004 the Company completed the sale of .5 million of its common shares of
beneficial interest, at a price of $10.10 per share, resulting in net proceeds to the Company of approximately $5.2 million.
Common and Preferred Share Distributions. On June 30, 2004, the Company paid a distribution of 37.24 cents
per share on the Company’s newly-issued Series A Cumulative Redeemable Preferred Shares to preferred
shareholders of record on June 15, 2004. The distribution was pro-rated from the date of initial issuance of the
preferred shares (65 days versus 90 days in a regular quarter). On July 1, 2004, the Company paid a distribution
of 16.05 cents per share on the Company’s common shares, to common shareholders and Unitholders of record
on June 18, 2004. This distribution represented an increase of .05 cents or .3% over the previous regular quarterly
distribution of 16.00 cents per common share/unit paid April 1, 2004.
Duluth Acquisition. In the Company’s Quarterly Report on Form 10-Q for the third quarter of fiscal year 2004,
the Company announced that it had signed a purchase agreement to acquire a portfolio of 15 commercial properties
located primarily in Duluth, Minnesota. The Company closed on the acquisition of 14 of these 15 properties in
April 2004. The remaining property, a 60,194 square foot clinic property in Duluth, was acquired in May 2004.
The Company paid approximately $67 million for this portfolio of 15 properties.
Related Party Transaction. On June 30, 2004, IRET Properties purchased four commercial properties from
affiliates of Steven B. Hoyt. IRET Properties acquired three office buildings, each containing 26,186 square feet
of rentable area, and one office building containing 79,287 square feet of rentable area, in this transaction, for a
F-32
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2004, 2003, and 2002 (Continued)
NOTE 21 • SUBSEQUENT EVENTS (Continued)
total purchase price of $14 million. Three of the properties are located in Plymouth, Minnesota, and the fourth is
located in Maple Grove, Minnesota.
Additional Acquisitions and Dispositions. In addition to the acquisitions described in the paragraphs above, the
Company closed on the following acquisitions and dispositions subsequent to its fiscal year ended April 30, 2004:
Acquisitions
Nebraska Orthopaedic Hospital Expansion Project. The Company purchased a 99% interest in a limited liability
company that owns expansion premises constructed at the Company’s Nebraska Orthopaedic Hospital facility
in Omaha, Nebraska. The Company paid approximately $4.6 million for this interest. The acquisition closed
May 1, 2004.
Sleep Inn. The Company paid approximately $3.6 million to purchase a “Sleep Inn” hotel in Brooklyn Park, MN,
and a warehouse building located near the hotel. This acquisition closed in June 2004. The hotel tenant
subsequently exercised an option to purchase the warehouse building for $450,000.
Dispositions
Barnes & Noble and Petco Stores. In July 2004, the Company sold its Barnes & Noble and Petco store locations
in Fargo, ND for approximately $6.75 million. The carrying amount of these properties was approximately
$3.67 million.
F-33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL
STATEMENT SCHEDULES
To the Board of Trustees and Shareholders of
Investors Real Estate Trust
Minot, North Dakota
We have audited the consolidated financial statements of Investors Real Estate Trust and subsidiaries as of April 30,
2004 and for the year then ended and have issued our report thereon dated July 16, 2004; such report is included elsewhere
in this Form 10-K. Our audit also included the information included in the consolidated financial statement schedules
as of and for the year ended April 30, 2004 listed in the table of contents to the consolidated financial statements. These
financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an
opinion based on our audit. In our opinion, the information included in such financial statement schedules as of and for
the year ended April 30, 2004, when considered in relation to the basic 2004 consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
July 16, 2004
F-34
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ON ADDITIONAL INFORMATION
Board of Trustees
Investors Real Estate Trust
and Subsidiaries
Minot, North Dakota
Our report on our audit of the consolidated balance sheet of Investors Real Estate Trust and Subsidiaries as of
April 30, 2003, and the related consolidated statements of operations, shareholders equity, and cash flows for the
years ended April 30, 2003 and 2002, appears on page F-2. Those audits were made for the purpose of forming
an opinion on such consolidated financial statements taken as a whole. The information as listed in the table of
contents related to the consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30,
2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years ended
April 30, 2003 and 2002 is presented for purposes of additional analysis and is not a required part of the basic
consolidated financial statements. Such information has been subjected to the auditing procedures applied in the
audits of the basic consolidated financial statements, and, in our opinion, the information is fairly stated in all
material respects in relation to the consolidated balance sheet of Investors Real Estate Trust and Subsidiaries as
of April 30, 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for
the years ended April 30, 2003 and 2002, taken as a whole.
/s/ Brady, Martz & Associates, P.C.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota, USA
May 22, 2003
F-35
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INITIAL COST TO COMPANY
ENCUMBRANCES
$
0
LAND
10
$
MULTI-FAMILY
RESIDENTIAL
408 1st Street SE – Minot, ND . . .
Applewood On The Green –
Omaha, NE . . . . . . . . . . . . . . . . .
Beulah Condos – Beulah, ND . . . .
Bison Properties –
Carrington, ND . . . . . . . . . . . . .
Brookfield Village – Topeka, KS .
Candlelight Apartments –
Fargo, ND . . . . . . . . . . . . . . . . . .
Canyon Lake Apartments – Rapid
City, SD . . . . . . . . . . . . . . . . . . .
Castle Rock – Billings, MT . . . . . .
Century Apartments –
Williston, ND . . . . . . . . . . . . . . .
Chateau Apartments – Minot, ND
Clearwater – Boise, ID . . . . . . . . .
Colton Heights – Minot, ND . . . . .
Connelly Estates –
Burnsville, MN . . . . . . . . . . . . .
Cottonwood Lake I –
Bismarck, ND . . . . . . . . . . . . . .
Cottonwood Lake II –
Bismarck, ND . . . . . . . . . . . . . .
Cottonwood Lake III –
Bismarck, ND . . . . . . . . . . . . . .
Country Meadows Phase I –
Billings, MT . . . . . . . . . . . . . . . .
Country Meadows Phase II –
Billings, MT . . . . . . . . . . . . . . . .
Crestview Apartments –
Bismarck, ND . . . . . . . . . . . . . .
Crown Colony – Topeka, KS . . . .
Dakota Arms – Minot, ND . . . . . .
Dakota Hill At Valley Ranch –
Irving, TX . . . . . . . . . . . . . . . . . .
East Park Apartments – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . .
Eastgate Properties –
Moorhead, MN . . . . . . . . . . . . . .
Forest Park Estates – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Heritage Manor – Rochester, MN .
Ivy Club – Vancouver, WA . . . . . .
Jenner Properties – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Kirkwood Apartments –
Bismarck, ND . . . . . . . . . . . . . .
Lancaster Apartments –
St. Cloud, MN . . . . . . . . . . . . . .
Legacy Apartments I – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Legacy Apts II & III – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Legacy IV – Grand Forks, ND . . .
Legacy V – Grand Forks, ND . . . .
Legacy VI – Grand Forks, ND . . .
Legacy VII – Grand Forks, ND . .
7,442
0
219
5,286
1,548
2,917
3,700
3,227
1,942
2,479
639
9,810
2,613
2,719
2,544
2,367
2,377
3,539
7,012
459
24,514
1,716
1,544
7,015
4,279
7,847
1,793
2,164
1,547
3,451
2,304
2,743
0
0
0
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
CARRYING
COSTS
0
$
IMPROVEMENTS
$
0
195
(56)
7
130
588
7
73
112
93
30
10
284
37
13
13
15
14
(46)
82
10
338
58
125
273
73
139
22
68
120
57
10
99
0
0
0
95
0
0
0
0
73
0
0
0
0
0
0
38
37
40
39
81
0
0
0
0
0
0
0
0
0
0
0
0
112
112
0
0
0
0
BUILDINGS &
IMPROVEMENTS
$
37
11,028
484
559
6,680
1,002
3,919
5,354
4,224
2,519
3,309
902
706
6
100
624
80
305
736
200
122
585
80
2,401
11,515
4,233
4,012
4,470
4,011
4,124
5,062
10,488
598
34,447
2,486
2,583
7,063
7,585
12,017
1,792
3,397
2,998
6,235
3,318
6,392
214
93
93
264
264
264
246
246
235
620
50
3,650
115
24
810
403
1,274
201
449
289
908
454
252
137
137
137
F-36
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
MULTI-FAMILY
RESIDENTIAL – continued
Lonetree Apartments –
INITIAL COST TO COMPANY
ENCUMBRANCES
LAND
BUILDINGS &
IMPROVEMENTS
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
CARRYING
COSTS
IMPROVEMENTS
Harvey, ND . . . . . . . . . . . . . . . .
$
111
$
14
$
245
$
1
$
Magic City Apartments –
Minot, ND . . . . . . . . . . . . . . . . .
3,156
Meadows Phase I –
Jamestown, ND . . . . . . . . . . . . .
Meadows Phase II –
Jamestown, ND . . . . . . . . . . . . .
Meadows Phase III –
Jamestown, ND . . . . . . . . . . . . .
Miramont – Fort Collins, CO . . . .
Monticello Apartments –
Monticello, MN . . . . . . . . . . . . .
Neighborhood Apts. – Co.
Springs, CO . . . . . . . . . . . . . . . .
North Pointe – Bismarck, ND . . . .
Oakmont Apartments – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . .
Olympic Village – Billings, MT . .
Oxbow – Sioux Falls, SD . . . . . . .
Park East Apartments –
Fargo, ND . . . . . . . . . . . . . . . . . .
Park Meadows I – Waite
Park, MN . . . . . . . . . . . . . . . . . .
Park Meadows II & III – Waite
Park, MN . . . . . . . . . . . . . . . . . .
Parkway Apartments –
Beulah, ND . . . . . . . . . . . . . . . .
Pebble Springs – Bismarck, ND . .
Pine Cone Apartments – Fort
Collins, CO . . . . . . . . . . . . . . . .
Pinehurst Apartments –
Billings, MT . . . . . . . . . . . . . . . .
Pointe West Apartments – Rapid
City, SD . . . . . . . . . . . . . . . . . . .
Prairie Winds Apartments – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . .
Prairiewood Meadows –
Fargo, ND . . . . . . . . . . . . . . . . . .
Remada Court Apartments –
Eagan, MN . . . . . . . . . . . . . . . . .
Ridge Oaks Apartments – Sioux
City, IA . . . . . . . . . . . . . . . . . . . .
Rimrock Apartments –
Billings, MT . . . . . . . . . . . . . . . .
Rocky Meadows 96–Billings, MT
Rosewood/Oakwood – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . .
Sherwood Apartments –
Topeka, KS . . . . . . . . . . . . . . . . .
South Pointe – Minot, ND . . . . . .
Southview Apartments –
Minot, ND . . . . . . . . . . . . . . . . .
Southwind Apartments – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Sunset Trail Phase I –
Rochester, MN . . . . . . . . . . . . . .
960
960
1,109
11,197
3,397
6,594
1,572
3,997
8,158
4,111
3,938
2,868
7,655
0
416
10,064
466
2,146
1,252
1,907
4,905
2,809
2,468
3,508
3,773
10,517
7,006
0
3,791
4,223
4,383
1,781
3
2,143
13,092
3,755
10,665
2,192
4,991
10,927
4,777
5,193
5,286
6,028
193
798
12,593
690
4,325
1,910
2,736
5,571
4,587
3,674
6,024
5,363
15,268
9,466
567
5,833
6,930
412
57
55
56
1,470
490
1,034
144
423
1,164
404
83
572
572
7
7
905
72
240
144
280
1,067
178
330
656
543
1,150
550
185
400
168
F-37
121
3
1,872
2
319
20
449
(47)
(124)
223
34
81
182
319
15
(16)
307
7
51
45
52
120
87
22
46
107
179
67
19
107
5
0
0
0
0
0
0
0
0
124
27
0
0
0
0
0
0
0
0
6
0
0
0
0
0
0
103
0
0
403
0
0
0
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
MULTI-FAMILY
RESIDENTIAL – continued
Sunset Trail Phase II –
INITIAL COST TO COMPANY
ENCUMBRANCES
LAND
BUILDINGS &
IMPROVEMENTS
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
CARRYING
COSTS
IMPROVEMENTS
Rochester, MN . . . . . . . . . . . . . .
$ 4,154
$
168
$ 7,357
$
Sweetwater Properties –
Carrington & Cooperstown, ND
Sycamore Village Apts. – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . .
Thomasbrook – Lincoln, NE . . . . .
Valley Park Manor – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Van Mall Woods –
Vancouver, WA . . . . . . . . . . . . . .
West Stonehill – St. Cloud, MN . .
Westwood Park – Bismarck, ND .
Winchester/Village Green –
Rochester, MN . . . . . . . . . . . . . .
Woodridge Apartments –
Rochester, MN . . . . . . . . . . . . . .
TOTAL MULTI-FAMILY
851
965
5,764
3,807
3,542
7,078
1,128
6,475
3,508
90
100
600
293
600
938
161
982
370
1,657
1,355
9,703
5,000
5,674
11,888
2,208
7,918
6,611
68
27
53
90
135
62
392
64
167
35
$
0
0
0
0
0
0
0
0
0
0
RESIDENTIAL . . . . . . . . . . . . .
$280,062
$ 35,518
$400,603
$ 8,761
$1,290
OFFICE BUILDINGS
1st Avenue Building –
Minot, ND . . . . . . . . . . . . . . . . .
17 South Main – Minot, ND . . . . .
401 South Main – Minot, ND . . . .
2030 Cliff Road – Eagan, MN . . .
Ameritrade – Omaha, NE . . . . . . .
Benton Business Park – Sauk
Rapids, MN . . . . . . . . . . . . . . . .
Bloomington Bus. Plaza –
Bloomington, MN . . . . . . . . . . .
Brenwood – Minnetonka, MN . . .
Brown Deer Road –
Milwaukee, WI . . . . . . . . . . . . . .
Burnsville Bluffs –
Burnsville, MN . . . . . . . . . . . . .
Central Bank Office – Eden
Prairie, MN . . . . . . . . . . . . . . . .
Chiropractor Office Bldg. –
Greenwood, MN . . . . . . . . . . . .
Cold Spring Center –
St. Cloud, MN . . . . . . . . . . . . . .
Conseco Bldg. – Rapid City, SD .
Dewey Hill Business Center –
Edina, MN . . . . . . . . . . . . . . . . .
Flying Cloud Dr – Eden
Prairie, MN . . . . . . . . . . . . . . . .
Golden Hills Off. Ctr. – Golden
Valley, MN . . . . . . . . . . . . . . . . .
Great Plains Software –
Fargo, ND . . . . . . . . . . . . . . . . . .
Interlachen Corp Center –
Eagan, MN . . . . . . . . . . . . . . . . .
Mendota Center I – Mendota
Heights, MN . . . . . . . . . . . . . . . .
$
0
0
0
602
5,325
0
4,814
8,550
6,304
1,529
2,408
230
4,930
4,093
2,978
3,731
15,000
9,500
11,090
4,361
$
510
76
552
837
8,022
1,421
6,248
12,444
11,942
2,154
4,069
141
7,906
6,762
3,905
4,689
24,534
15,250
14,850
5,434
$
30
15
71
146
327
188
1,300
1,762
1,455
300
531
189
588
285
985
1,062
3,018
126
1,650
1,570
F-38
$
8
11
5
0
0
4
2
213
514
345
60
4
116
0
49
22
36
0
33
36
$
0
0
0
0
0
0
39
0
0
0
0
0
0
0
0
0
0
0
191
0
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
OFFICE
BUILDINGS – continued
Mendota Center II – Mendota
INITIAL COST TO COMPANY
ENCUMBRANCES
LAND
BUILDINGS &
IMPROVEMENTS
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
CARRYING
COSTS
IMPROVEMENTS
Heights, MN . . . . . . . . . . . . . . . .
$ 6,983
$
1,074
$ 10,465
$
Mendota Center III – Mendota
Heights, MN . . . . . . . . . . . . . . . .
Mendota Center IV – Mendota
Heights, MN . . . . . . . . . . . . . . . .
Mendota Northland Ctr. –
Mendota Hts., MN . . . . . . . . . . .
Metris – Duluth, MN . . . . . . . . . . .
Minnesota National Bank –
Duluth, MN . . . . . . . . . . . . . . . .
Hospitality Associates –
Minnetonka, MN . . . . . . . . . . . .
Nicollett VII – Burnsville, MN . . .
Northgate II – Maple Grove, MN .
Pillsbury Business Center –
Edina, MN . . . . . . . . . . . . . . . . .
Plaza VII – Boise, ID . . . . . . . . . .
Plymouth IV & V –
Plymouth, MN . . . . . . . . . . . . . .
Southeast Tech Center –
Eagan, MN . . . . . . . . . . . . . . . . .
TCA Building – Eagan, MN . . . . .
Three Paramount Plaza –
Bloomington, MN . . . . . . . . . . .
Thresher Square East –
Minneapolis, MN . . . . . . . . . . . .
Thresher Square West –
Minneapolis, MN . . . . . . . . . . . .
UHC Office – International
Falls, MN . . . . . . . . . . . . . . . . . .
Viromed – Eden Prairie, MN . . . .
Wayroad – Minnetonka, MN . . . . .
West River Business Pk. – Waite
Park, MN . . . . . . . . . . . . . . . . . .
Westgate – Boise, ID . . . . . . . . . . .
Wirth Corp Center – Golden
Valley, MN . . . . . . . . . . . . . . . . .
TOTAL OFFICE BUILDINGS . . .
INDUSTRIAL
API Building – Duluth, MN . . . . .
Dixon Ave. Industrial Park – Des
Moines, IA . . . . . . . . . . . . . . . . .
Lexington Commerce Center –
Eagan, MN . . . . . . . . . . . . . . . . .
Lighthouse – Duluth, MN . . . . . . .
Lindberg/Bodycote – Eden
Prairie, MN . . . . . . . . . . . . . . . .
Metal Improvement Co. – N.
Brighton, MN . . . . . . . . . . . . . . .
Stone Container – Fargo, ND . . . .
Stone Container – Roseville, MN .
3,948
5,126
10,997
0
0
0
4,571
1,480
1,167
0
8,877
4,005
10,400
4,943
3,316
2,136
0
2,414
3,433
0
7,888
5,230
$172,359
1,501
1,385
1,331
336
287
40
429
358
284
300
641
560
627
1,261
646
449
119
666
530
5,203
7,320
16,329
2,614
1,819
361
6,951
2,000
1,558
3,093
13,707
5,556
11,589
6,619
5,913
4,108
2,382
4,198
4,895
234
1,000
970
$ 30,626
1,279
10,648
7,644
$267,997
17
46
0
0
1
1
0
2
7
0
7
540
1
336
(11)
1
1
1
0
58
4
20
$
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5
4
0
0
20
0
0
1
$ 2,491
29
$ 288
1
3
7
1
0
0
36
0
$
0
0
0
0
0
4
89
165
$
0
$
115
$ 1,886
$
8,791
3,221
0
1,574
1,446
4,683
5,017
1,439
11,462
5,371
2,026
1,954
2,205
6,576
7,275
453
90
198
240
440
810
F-39
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INDUSTRIAL – continued
Stone Container – Waconia, MN .
Wilson’s Leather – Brooklyn
Park, MN . . . . . . . . . . . . . . . . . .
Winsted/Sterner Lighting –
Winsted, MN . . . . . . . . . . . . . . .
TOTAL INDUSTRIAL . . . . . . . . .
RETAIL
Anoka Strip Center – Anoka, MN
Arrowhead Shopping Center –
Minot, ND . . . . . . . . . . . . . . . . .
Barnes & Noble – Fargo, ND . . . .
Barnes & Noble – Omaha, NE . . .
Buffalo Mall – Jamestown, ND . .
Carmike Theatre – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Champion Auto – Forest
Lake, MN . . . . . . . . . . . . . . . . . .
Checkers Auto – Faribault, MN . .
Checkers Auto – Rochester, MN . .
Denfeld Retail Center –
Duluth, MN . . . . . . . . . . . . . . . .
Dilly Lily – St. Louis Park, MN . .
Eagan PDQ – Eagan, MN . . . . . . .
Eagan Retail Center I –
Eagan, MN . . . . . . . . . . . . . . . . .
Eagan Retail Center II –
Eagan, MN . . . . . . . . . . . . . . . . .
East Grand Station – E. Grand
Forks, MN . . . . . . . . . . . . . . . . .
Ernst Home Center –
Kalispell, MT . . . . . . . . . . . . . . .
Evergreen Shopping Ctr. – Pine
City, MN . . . . . . . . . . . . . . . . . . .
Excelsior Retail Center –
Excelsior, MN . . . . . . . . . . . . . .
Express Shopping Center –
Fargo, ND . . . . . . . . . . . . . . . . . .
Interstate Bakery – Mounds
View, MN . . . . . . . . . . . . . . . . . .
Inver Grove Ctr. – PDQ – I.
Grove Hts., MN . . . . . . . . . . . . .
Jamestown Mall –
Jamestown, ND . . . . . . . . . . . . .
Lakeville Retail Center –
Lakeview, MN . . . . . . . . . . . . . .
Maplewood Square –
Rochester, MN . . . . . . . . . . . . . .
MedPark Mall – Grand
Forks, ND . . . . . . . . . . . . . . . . . .
Minot Plaza – Minot, ND . . . . . . .
Pamida – Ladysmith, WI . . . . . . . .
Pamida – Livingston, MT . . . . . . .
PDQ Center – Mound, MN . . . . . .
Petco Warehouse – Fargo, ND . . .
ENCUMBRANCES
$
0
8,748
0
$ 33,480
$
492
1,192
1,376
1,491
0
1,663
0
224
290
0
231
0
1,711
0
733
0
2,313
0
1,043
0
653
920
0
6,063
3,239
0
1,231
1,462
0
619
INITIAL COST TO COMPANY
LAND
165
$
BUILDINGS &
IMPROVEMENTS
$ 1,502
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
CARRYING
COSTS
0
$
IMPROVEMENTS
0
$
11,685
901
$ 52,843
$
602
$
$
2,954
2,735
3,099
3,886
2,295
446
257
364
4,908
172
568
314
1,057
1,242
2,250
2,648
626
1,120
243
719
1,024
1,240
8,631
4,968
471
1,411
1,573
260
928
0
6
54
6
43
0
0
164
0
2
0
0
0
5
0
5
10
0
0
135
17
2
0
7
75
603
1
14
1
0
0
0
0
0
0
$ 258
$
0
0
0
0
0
67
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
27
$
$
1,368
100
5,418
123
100
540
600
575
184
50
83
76
276
168
214
196
291
150
250
154
275
305
47
221
297
121
3,275
681
50
89
227
100
324
F-40
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INITIAL COST TO COMPANY
ENCUMBRANCES
LAND
BUILDINGS &
IMPROVEMENTS
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
CARRYING
COSTS
IMPROVEMENTS
$
0
925
$
$ 1,575
769
$
RETAIL – continued
Plaza Shopping Center –
Schofield, WI . . . . . . . . . . . . . . .
PDQ Center – Prior Lake, MN . . .
Prior Lake Peak – Prior
Lake, MN . . . . . . . . . . . . . . . . . .
Sam Goody/Musicland –
Willmar, MN . . . . . . . . . . . . . . .
South Pond Retail Center –
Champlin, MN . . . . . . . . . . . . . .
Strip Center I – Burnsville, MN . .
Strip Center II – Burnsville, MN .
Thomasville – Kentwood, MI . . . .
Former Tom Thumb –
Andover, MN . . . . . . . . . . . . . . .
Former Tom Thumb –
Bethel, MN . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Blaine, MN . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Buffalo, MN . . . . . . . . . . . . . . . .
Former Tom Thumb –
Centerville, MN . . . . . . . . . . . . .
Former Tom Thumb –
Glencoe, MN . . . . . . . . . . . . . . .
Former Tom Thumb – Ham
Lake, MN . . . . . . . . . . . . . . . . . .
Former Tom Thumb – Howard
Lake, MN . . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Lakeland, MN . . . . . . . . . . . . . .
Former Tom Thumb –
Lindstrom, MN . . . . . . . . . . . . .
Former Tom Thumb – Lino
Lakes, MN . . . . . . . . . . . . . . . . .
Former Tom Thumb – Long
Prairie, MN . . . . . . . . . . . . . . . .
Former Tom Thumb –
Monticello, MN . . . . . . . . . . . . .
Former Tom Thumb – Mora, MN .
Former Tom Thumb –
Oakdale, MN . . . . . . . . . . . . . . .
Former Tom Thumb –
Paynesville, MN . . . . . . . . . . . . .
Former Tom Thumb – Pine
City, MN . . . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Shoreview, MN . . . . . . . . . . . . .
Former Tom Thumb –
Winsted, MN . . . . . . . . . . . . . . .
Tool Crib – Duluth, MN . . . . . . . .
West Lake Center – Forest
Lake, MN . . . . . . . . . . . . . . . . . .
West Village Center –
Chanhassen, MN . . . . . . . . . . . .
Westgate Shopping Center –
St. Cloud, MN . . . . . . . . . . . . . .
TOTAL RETAIL . . . . . . . . . . . . . .
0
0
0
665
529
1,154
199
363
382
315
228
0
0
250
307
222
297
0
0
0
498
0
377
0
271
0
5,472
15,575
4,318
$ 59,293
175
202
48
170
842
208
291
225
104
32
121
131
78
52
143
22
86
67
121
39
86
55
351
31
83
63
35
130
2,397
5,035
431
230
2,883
776
469
1,896
176
478
399
329
252
478
392
358
354
254
319
661
770
245
380
334
357
267
375
1,886
5,611
15,833
1,232
$ 22,697
6,490
$ 99,038
F-41
25
5
3
8
0
12
17
0
0
0
14
11
0
0
0
0
3
0
12
0
0
0
8
0
0
0
1
0
89
(94)
78
$ 1,282
$
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
94
$
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
COST CAPITALIZATION
SUBSEQUENT TO ACQUISITION
CARRYING
COSTS
0
$
IMPROVEMENTS
229
$
0
0
0
0
4
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,841
0
5,509
(172)
198
0
0
$ 7,609
$
0
2
0
3
12
1
0
2
$
20
$20,217
0
0
0
0
0
0
0
0
0
0
0
0
0
58
0
0
0
0
0
0
0
0
0
0
0
0
0
58
0
0
$
$
0
0
0
0
0
0
$
0
$1,988
MEDICAL
Abbott Northwest – Sartell, MN . .
Airport Medical –
Bloomington, MN . . . . . . . . . . .
Denfeld Clinic – Duluth, MN . . . .
Edgewood Vista – Belgrade, MT .
Edgewood Vista – Columbus, NE .
Edgewood Vista – Duluth, MN . . .
Edgewood Vista – East Grand
Forks, MN . . . . . . . . . . . . . . . . .
Edgewood Vista – Fremont, NE . .
Edgewood Vista – Grand
Island, NE . . . . . . . . . . . . . . . . .
Edgewood Vista – Hastings, NE . .
Edgewood Vista – Kalispell, MT .
Edgewood Vista – Minot, ND . . . .
Edgewood Vista – Missoula, MT .
Edgewood Vista – Omaha, NE . . .
Edgewood Vista – Virginia, MN . .
Edgewood Vista – Phase II –
Virginia, MN . . . . . . . . . . . . . . .
Fresenius – Duluth, MN . . . . . . . .
Gateway Clinic – Sandstone, MN .
Healtheast Medical Center –
Woodbury & St. Johns, MN . . .
Mariner Clinic – Superior, WI
. . .
Park Dental – Brooklyn, MN . . . .
Pavilion II – Duluth, MN . . . . . . .
Paul Larson Clinic – Edina, MN .
Southdale Expansion –
Edina, MN . . . . . . . . . . . . . . . . .
Southdale Medical Center –
Edina, MN . . . . . . . . . . . . . . . . .
UH Medical – St. Paul, MN . . . . .
Wedgwood – Sweetwater, GA . . . .
Wells Clinic – Hibbing, MN . . . . .
TOTAL MEDICAL . . . . . . . . . . . .
UNDEVELOPED LAND
Andover, MN . . . . . . . . . . . . . . . . .
Centerville, MN . . . . . . . . . . . . . . .
Cottonwood Lake IV –
Bismarck, ND . . . . . . . . . . . . . .
Inver Grove, MN . . . . . . . . . . . . . .
Kalispell, MT . . . . . . . . . . . . . . . . .
Libby, MT . . . . . . . . . . . . . . . . . . .
Long Prairie, MN . . . . . . . . . . . . . .
River Falls, WI . . . . . . . . . . . . . . . .
TOTAL UNDEVELOPED LAND
TOTAL . . . . . . . . . . . . . . . . . . . . . .
INITIAL COST TO COMPANY
ENCUMBRANCES
$ 8,271
LAND
0
$
BUILDINGS &
IMPROVEMENTS
$ 13,637
4,678
2,796
439
441
11,315
1,405
496
441
558
518
6,011
854
553
6,766
5,111
1,753
1,829
18,363
3,704
2,767
14,941
662
7,224
29,596
7,407
3,638
2,726
$150,629
$
0
0
0
0
0
0
0
0
$
0
$971,110
3,024
0
226
249
4,130
867
324
249
335
339
3,018
481
387
4,836
3,502
0
0
18,066
0
1,734
0
0
8,577
23,366
4,611
1,273
0
$ 87,865
$
0
0
0
65
0
0
0
0
$
65
$633,124
0
541
14
14
390
25
56
14
14
70
260
109
89
246
0
50
71
3,238
397
185
2,735
351
0
3,500
0
334
177
$ 12,880
$
150
100
264
560
1,400
150
150
200
$ 2,974
$110,113
F-42
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
MULTI-FAMILY RESIDENTIAL
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
408 1st Street SE – Minot, ND . . . . $
Applewood On The Green –
Omaha, NE . . . . . . . . . . . . . . . . . .
Beulah Condos – Beulah, ND . . . . .
Bison Properties – Carrington, ND .
Brookfield Village – Topeka, KS . . .
Candlelight Apartments –
Fargo, ND . . . . . . . . . . . . . . . . . . .
Canyon Lake Apartments – Rapid
City, SD . . . . . . . . . . . . . . . . . . . .
Castle Rock – Billings, MT . . . . . . .
Century Apartments –
Williston, ND . . . . . . . . . . . . . . . .
Chateau Apartments – Minot, ND . .
Clearwater – Boise, ID . . . . . . . . . .
Colton Heights – Minot, ND . . . . . .
Connelly Estates – Burnsville, MN .
Cottonwood Lake I –
Bismarck, ND . . . . . . . . . . . . . . . .
Cottonwood Lake II –
Bismarck, ND . . . . . . . . . . . . . . . .
Cottonwood Lake III –
Bismarck, ND . . . . . . . . . . . . . . . .
Country Meadows Phase I –
Billings, MT . . . . . . . . . . . . . . . . .
Country Meadows Phase II –
Billings, MT . . . . . . . . . . . . . . . . .
Crestview Apartments –
Bismarck, ND . . . . . . . . . . . . . . . .
Crown Colony – Topeka, KS . . . . .
Dakota Arms – Minot, ND . . . . . . .
Dakota Hill At Valley Ranch –
10
706
6
100
624
80
305
736
200
122
585
80
2,401
264
264
264
246
246
235
620
50
Irving, TX . . . . . . . . . . . . . . . . . . .
3,650
East Park Apartments – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . . .
Eastgate Properties –
Moorhead, MN . . . . . . . . . . . . . . .
Forest Park Estates – Grand
Forks, ND . . . . . . . . . . . . . . . . . . .
Heritage Manor – Rochester, MN . .
Ivy Club – Vancouver, WA . . . . . . .
Jenner Properties – Grand
Forks, ND . . . . . . . . . . . . . . . . . . .
Kirkwood Apartments –
Bismarck, ND . . . . . . . . . . . . . . . .
Lancaster Apartments –
St. Cloud, MN . . . . . . . . . . . . . . .
Legacy Apartments I – Grand
Forks, ND . . . . . . . . . . . . . . . . . . .
Legacy Apts II & III – Grand
Forks, ND . . . . . . . . . . . . . . . . . . .
115
24
810
403
1,274
201
449
289
908
454
$
37
$
47
$
33
690
342
404
93
412
266
756
1,883
405
484
496
231
669
626
432
648
463
1,267
1,239
132
3,698
118
1,811
1,993
1,145
1,530
323
628
333
1,293
557
12,024
434
666
7,434
1,670
4,304
6,163
4,536
2,734
3,924
992
14,200
4,572
4,326
4,787
4,311
4,465
5,251
11,190
658
38,435
2,659
2,732
8,146
8,061
13,430
2,015
3,914
3,407
7,312
3,894
11,318
428
566
6,810
1,590
3,999
5,427
4,336
2,612
3,339
912
11,799
4,308
4,062
4,523
4,065
4,219
5,016
10,570
608
34,785
2,544
2,708
7,336
7,658
12,156
1,814
3,465
3,118
6,404
3,440
F-43
2001
2001
1983
1972
2003
1993
2001
1999
1986
1997
1999
1996
2003
1999
1999
1999
1984
1997
1994
2000
1996
2000
2002
1970
1993
1999
1999
1996
1997
2000
1996
1996
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
40 years
40 years
15–40 years
25–40 years
40 years
24–40 years
40 years
40 years
35–40 years
12–40 years
40 years
40 years
40 years
40 years
40 years
40 years
33–40 years
40 years
24–40 years
40 years
24–40 years
40 years
40 years
33–40 years
24–40 years
40 years
40 years
40 years
12–40 years
40 years
24–40 years
24–40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
MULTI-FAMILY
RESIDENTIAL – continued
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
Legacy IV – Grand Forks, ND . . . . . $
Legacy V – Grand Forks, ND . . . . .
Legacy VI – Grand Forks, ND . . . . .
Legacy VII – Grand Forks, ND . . . .
Lonetree Apartments –
Harvey, ND . . . . . . . . . . . . . . . . . .
Magic City Apartments –
Minot, ND . . . . . . . . . . . . . . . . . . .
Meadows Phase I –
Jamestown, ND . . . . . . . . . . . . . . .
Meadows Phase II –
Jamestown, ND . . . . . . . . . . . . . .
Meadows Phase III –
Jamestown, ND . . . . . . . . . . . . . .
Miramont – Fort Collins, CO . . . . .
Monticello Apartments –
252
137
137
137
14
412
57
55
56
1,470
Monticello, MN . . . . . . . . . . . . . .
490
Neighborhood Apts. – Co.
Springs, CO . . . . . . . . . . . . . . . . .
North Pointe – Bismarck, ND . . . . .
Oakmont Apartments – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . . .
Olympic Village – Billings, MT . . .
Oxbow – Sioux Falls, SD . . . . . . . .
Park East Apartments – Fargo, ND .
Park Meadows I – Waite
Park, MN . . . . . . . . . . . . . . . . . . .
Park Meadows II & III – Waite
Park, MN . . . . . . . . . . . . . . . . . . .
Parkway Apartments – Beulah, ND
Pebble Springs – Bismarck, ND . . .
Pine Cone Apartments – Fort
Collins, CO . . . . . . . . . . . . . . . . . .
Pinehurst Apartments –
Billings, MT . . . . . . . . . . . . . . . . .
Pointe West Apartments – Rapid
City, SD . . . . . . . . . . . . . . . . . . . .
Prairie Winds Apartments – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . . .
Prairiewood Meadows –
Fargo, ND . . . . . . . . . . . . . . . . . . .
Remada Court Apartments –
1,034
144
423
1,164
404
83
572
572
7
7
905
72
240
144
280
Eagan, MN . . . . . . . . . . . . . . . . . .
1,067
Ridge Oaks Apartments – Sioux
City, IA . . . . . . . . . . . . . . . . . . . . .
Rimrock Apartments –
Billings, MT . . . . . . . . . . . . . . . . .
Rocky Meadows 96 –
Billings, MT . . . . . . . . . . . . . . . . .
Rosewood/Oakwood – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . . .
178
330
656
543
$
711
0
0
0
72
785
211
200
130
2,512
20
2,128
486
256
1,065
1,130
803
1,148
1,320
50
93
2,860
39
1,095
552
275
111
497
452
1,188
1,369
$
$ 6,491
214
93
93
246
4,504
1,784
1,875
2,145
13,411
3,975
11,114
2,269
4,894
11,150
4,811
5,274
5,468
6,347
208
782
6,743
351
230
230
260
4,916
1,841
1,930
2,201
14,881
4,265
12,148
2,413
5,317
12,314
5,215
5,357
6,040
6,919
215
789
12,900
13,805
775
4,616
2,099
3,068
6,758
4,852
4,026
6,829
6,013
703
4,376
1,955
2,788
5,691
4,674
3,696
6,173
5,470
F-44
2000
2000
2000
2000
1991
1997
2000
2000
2002
1996
2004
1996
1995
2002
2001
1994
1997
1997
1997
1988
2000
1994
2002
1994
1993
2001
2003
2001
2000
1996
1996
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
40 years
40 years
40 years
40 years
24–40 years
12–40 years
40 years
40 years
40 years
40 years
40 years
40 years
24–40 years
40 years
40 years
24–40 years
12–40 years
40 years
40 years
5–40 years
40 years
40 years
40 years
24–40 years
24–40 years
40 years
40 years
40 years
40 years
40 years
40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
MULTI-FAMILY
RESIDENTIAL – continued
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
Sherwood Apartments –
Topeka, KS . . . . . . . . . . . . . . . . . . $ 1,150
550
South Pointe – Minot, ND . . . . . . . .
Southview Apartments –
$ 15,447
9,936
$
16,597
10,486
$ 1,814
1,992
Minot, ND . . . . . . . . . . . . . . . . . .
Southwind Apartments – Grand
Forks, ND . . . . . . . . . . . . . . . . . . .
Sunset Trail Phase I –
Rochester, MN . . . . . . . . . . . . . . .
Sunset Trail Phase II –
Rochester, MN . . . . . . . . . . . . . . .
Sweetwater Properties – Carrington
& Cooperstown, ND . . . . . . . . . .
Sycamore Village Apts. – Sioux
Falls, SD . . . . . . . . . . . . . . . . . . . .
Thomasbrook – Lincoln, NE . . . . . .
Valley Park Manor – Grand
Forks, ND . . . . . . . . . . . . . . . . . . .
Van Mall Woods – Vancouver, WA .
West Stonehill – St. Cloud, MN . . .
Westwood Park – Bismarck, ND . . .
Winchester/Village Green –
Rochester, MN . . . . . . . . . . . . . . .
Woodridge Apartments –
Rochester, MN . . . . . . . . . . . . . . .
TOTAL MULTI-FAMILY
185
400
168
168
90
100
600
293
600
938
161
982
370
586
5,940
6,935
7,425
1,684
1,408
9,793
5,135
5,736
12,280
2,272
8,085
6,646
771
6,340
7,103
7,593
1,774
1,508
10,393
5,428
6,336
13,218
2,433
9,067
7,016
147
1,247
627
501
1,076
65
1,325
666
809
2,570
359
159
1,295
RESIDENTIAL . . . . . . . . . . . . . . $ 35,518
$410,654
$ 446,172
$ 61,610
OFFICE BUILDINGS
1st Avenue Building – Minot, ND . $
17 South Main – Minot, ND . . . . . .
401 South Main – Minot, ND . . . . .
2030 Cliff Road – Eagan, MN . . . .
Ameritrade – Omaha, NE . . . . . . . .
Benton Business Park – Sauk
Rapids, MN . . . . . . . . . . . . . . . . .
Bloomington Bus. Plaza –
Bloomington, MN . . . . . . . . . . . .
Brenwood – Minnetonka, MN . . . . .
Brown Deer Road –
30
15
71
146
327
188
1,300
1,762
Milwaukee, WI . . . . . . . . . . . . . . .
1,455
Burnsville Bluffs –
Burnsville, MN . . . . . . . . . . . . . . .
Central Bank Office – Eden
Prairie, MN . . . . . . . . . . . . . . . . . .
Chiropractor Office Bldg. –
Greenwood, MN . . . . . . . . . . . . . .
Cold Spring Center –
St. Cloud, MN . . . . . . . . . . . . . . .
Conseco Bldg – Rapid City, SD . . .
300
531
189
588
285
$
518
87
557
837
8,022
1,425
6,289
12,657
12,456
2,499
4,129
145
8,022
6,762
$
548
102
628
983
8,349
1,613
7,589
14,419
13,911
2,799
4,660
334
8,610
7,047
$
456
7
212
64
1,008
50
409
526
432
172
124
4
617
641
F-45
2000
1995
1994
1996
2001
2002
1972
2002
2000
2000
1999
1995
1999
2003
1996
1981
2001
1987
1986
1999
2003
2001
2002
2003
2001
2003
2003
2001
2001
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
40 years
24–40 years
24–40 years
24–40 years
40 years
40 years
5–40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
33–40 years
40 years
24–40 years
19–40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
OFFICE
BUILDINGS – continued
Dewey Hill Business Center –
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
Edina, MN . . . . . . . . . . . . . . . . . . $
985
$ 3,954
$
4,939
$
331
Flying Cloud Drive – Eden
Prairie, MN . . . . . . . . . . . . . . . . . .
1,062
Golden Hills Office Ctr. – Golden
Valley, MN . . . . . . . . . . . . . . . . . .
Great Plains Software – Fargo, ND
Interlachen Corp Center –
3,018
126
Eagan, MN . . . . . . . . . . . . . . . . . .
1,650
Mendota Center I – Mendota
Heights, MN . . . . . . . . . . . . . . . . .
1,570
Mendota Center II – Mendota
4,711
24,570
15,250
15,074
5,470
Heights, MN . . . . . . . . . . . . . . . . .
1,074
10,482
Mendota Center III – Mendota
Heights, MN . . . . . . . . . . . . . . . . .
1,501
Mendota Center IV – Mendota
Heights, MN . . . . . . . . . . . . . . . . .
1,385
Mendota Northland Ctr. – Mendota
Hts., MN . . . . . . . . . . . . . . . . . . . .
Metris – Duluth, MN . . . . . . . . . . . .
Minnesota National Bank –
Duluth, MN . . . . . . . . . . . . . . . . .
Hospitality Associates –
Minnetonka, MN . . . . . . . . . . . . .
Nicollett VII – Burnsville, MN . . . .
Northgate II – Maple Grove, MN . .
Pillsbury Business Center –
Edina, MN . . . . . . . . . . . . . . . . . .
Plaza VII – Boise, ID . . . . . . . . . . .
Plymouth IV & V –
Plymouth, MN . . . . . . . . . . . . . . .
Southeast Tech Center–
Eagan, MN . . . . . . . . . . . . . . . . . .
TCA Building– Eagan, MN . . . . . . .
Three Paramount Plaza –
1,331
336
287
40
429
358
284
300
641
560
627
Bloomington, MN . . . . . . . . . . . .
1,261
Thresher Square East –
Minneapolis, MN . . . . . . . . . . . . .
Thresher Square West –
Minneapolis, MN . . . . . . . . . . . . .
UHC Office – International
Falls, MN . . . . . . . . . . . . . . . . . . .
Viromed – Eden Prairie, MN . . . . . .
Wayroad – Minnetonka, MN . . . . . .
West River Business Pk. – Waite
Park, MN . . . . . . . . . . . . . . . . . . .
Westgate – Boise, ID . . . . . . . . . . . .
Wirth Corp Center – Golden
646
449
119
666
530
234
1,000
Valley, MN . . . . . . . . . . . . . . . . . .
970
5,249
7,320
16,329
2,615
1,820
361
6,953
2,007
1,558
3,100
14,247
5,557
11,925
6,608
5,919
4,113
2,383
4,198
4,973
1,283
10,668
7,674
5,773
27,588
15,376
16,724
7,040
11,556
6,750
8,705
17,660
2,951
2,107
401
7,382
2,365
1,842
3,400
14,888
6,117
12,552
7,869
6,565
4,562
2,502
4,864
5,503
1,517
11,668
8,644
527
993
1,795
1,036
326
621
297
392
860
9
4
62
530
217
118
101
1,024
610
181
339
339
236
4
546
258
53
367
406
TOTAL OFFICE BUILDINGS . . . . $ 30,626
$270,776
$ 301,402
$ 17,304
F-46
2001
2000
2003
2000
2001
2002
2002
2002
2002
2002
2004
2004
2001
2001
2000
2001
2003
2001
2000
2003
2002
2002
2002
2004
1999
2002
2003
2003
2002
1981
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
33–40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INDUSTRIAL
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
API Building –Duluth, MN . . . . . . . $
Dixon Ave. Industrial Park – Des
115
$ 1,887
$
2,002
$
4
Moines, IA . . . . . . . . . . . . . . . . . .
1,439
11,465
12,904
Lexington Commerce Center –
Eagan, MN . . . . . . . . . . . . . . . . . .
Lighthouse – Duluth, MN . . . . . . . .
Lindberg/Bodycote – Eden
Prairie, MN . . . . . . . . . . . . . . . . . .
Metal Improvement Co. – N.
Brighton, MN . . . . . . . . . . . . . . . .
Stone Container – Fargo, ND . . . . .
Stone Container – Roseville, MN . .
Stone Container – Waconia, MN . . .
Wilson’s Leather – Brooklyn
453
90
198
240
440
810
165
5,378
2,027
1,954
2,209
6,701
7,440
1,502
Park, MN . . . . . . . . . . . . . . . . . . .
1,368
11,685
Winsted/Sterner Lighting –
Winsted, MN . . . . . . . . . . . . . . . .
100
907
5,831
2,117
2,152
2,449
7,141
8,250
1,667
13,053
1,007
449
560
8
418
113
1,100
442
139
547
81
TOTAL INDUSTRIAL . . . . . . . . . . $ 5,418
$ 53,155
$
58,573
$ 3,861
RETAIL
Anoka Strip Center – Anoka, MN . . $
Arrowhead Shopping Center –
Minot, ND . . . . . . . . . . . . . . . . . .
Barnes & Noble – Fargo, ND . . . . .
Barnes & Noble – Omaha, NE . . . .
Buffalo Mall – Jamestown, ND . . . .
Carmike Theatre – Grand
Forks, ND . . . . . . . . . . . . . . . . . . .
Champion Auto – Forest
Lake, MN . . . . . . . . . . . . . . . . . . .
Checkers Auto – Faribault, MN . . .
Checkers Auto – Rochester, MN . . .
Denfeld Retail Center –
Duluth, MN . . . . . . . . . . . . . . . . .
Dilly Lily – St. Louis Park, MN . . .
Eagan PDQ – Eagan, MN . . . . . . . .
Eagan Retail Center I –
Eagan, MN . . . . . . . . . . . . . . . . . .
Eagan Retail Center II –
Eagan, MN . . . . . . . . . . . . . . . . . .
East Grand Station – E. Grand
Forks, MN . . . . . . . . . . . . . . . . . .
Ernst Home Center –
Kalispell, MT . . . . . . . . . . . . . . . .
Evergreen Shopping Ctr. – Pine
City, MN . . . . . . . . . . . . . . . . . . . .
Excelsior Retail Center –
Excelsior, MN . . . . . . . . . . . . . . .
Express Shopping Center –
Fargo, ND . . . . . . . . . . . . . . . . . . .
123
100
540
600
575
184
50
83
76
276
168
214
196
291
150
250
154
275
305
$
608
$
731
$
18
2,331
655
659
139
561
11
8
11
9
5
17
9
31
138
68
82
19
34
3,097
3,275
3,699
4,625
2,546
498
340
440
5,184
345
782
515
1,358
1,392
2,500
2,937
918
1,427
2,997
2,735
3,099
4,050
2,362
448
257
364
4,908
177
568
319
1,067
1,242
2,250
2,783
643
1,122
F-47
2004
2002
2000
2004
1992
2002
1995
2001
2001
2002
2001
2004
2003
1973
1994
1995
2003
1994
2003
2003
2003
2004
2003
2003
2003
2003
2000
2003
2003
2003
2003
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
15 1/2–40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
RETAIL – continued
Interstate Bakery – Mounds
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
View, MN . . . . . . . . . . . . . . . . . . . $
47
$
243
$
290
$
Inver Grove Ctr. – PDQ – I. Grove
Hts., MN . . . . . . . . . . . . . . . . . . . .
Jamestown Mall – Jamestown, ND .
Lakeville Retail Center –
Lakeview, MN . . . . . . . . . . . . . . .
Maplewood Square –
Rochester, MN . . . . . . . . . . . . . . .
MedPark Mall – Grand Forks, ND .
Minot Plaza – Minot, ND . . . . . . . .
Pamida – Ladysmith, WI . . . . . . . . .
Pamida – Livingston, MT . . . . . . . .
PDQ Center – Mound, MN . . . . . . .
Petco Warehouse – Fargo, ND . . . .
Plaza Shopping Center –
Schofield, WI . . . . . . . . . . . . . . . .
PDQ Center – Prior Lake, MN . . . .
Prior Lake Peak – Prior Lake, MN .
Sam Goody/Musicland –
Willmar, MN . . . . . . . . . . . . . . . .
South Pond Retail Center –
Champlin, MN . . . . . . . . . . . . . . .
Strip Center I – Burnsville, MN . . .
Strip Center II – Burnsville, MN . .
Thomasville – Kentwood, MI . . . . .
Former Tom Thumb –
Andover, MN . . . . . . . . . . . . . . . .
Former Tom Thumb – Bethel, MN .
Former Tom Thumb – Blaine, MN .
Former Tom Thumb –
Buffalo, MN . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Centerville, MN . . . . . . . . . . . . . .
Former Tom Thumb –
Glencoe, MN . . . . . . . . . . . . . . . .
Former Tom Thumb – Ham
221
297
121
3,275
681
50
89
227
100
324
175
202
48
170
842
208
291
225
104
32
121
131
78
52
Lake, MN . . . . . . . . . . . . . . . . . . .
143
Former Tom Thumb – Howard
Lake, MN . . . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Lakeland, MN . . . . . . . . . . . . . . . .
Former Tom Thumb –
Lindstrom, MN . . . . . . . . . . . . . . .
Former Tom Thumb – Lino
22
86
67
Lakes, MN . . . . . . . . . . . . . . . . . .
121
Former Tom Thumb – Long
Prairie, MN . . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Monticello, MN . . . . . . . . . . . . . .
39
86
947
1,396
1,964
11,907
5,663
522
1,500
1,800
360
1,279
1,775
976
482
408
3,725
996
777
2,121
280
510
534
471
330
530
535
380
443
321
452
700
856
726
1,099
1,843
8,632
4,982
472
1,411
1,573
260
955
1,600
774
434
238
2,883
788
486
1,896
176
478
413
340
252
478
392
358
357
254
331
661
770
F-48
7
22
32
50
1,038
535
135
43
48
8
226
48
24
10
7
6
24
14
355
5
14
13
10
8
14
12
11
11
8
10
20
23
2003
2003
2003
2003
2000
2000
1993
2003
2003
2003
1994
2003
2003
2003
2003
2004
2003
2003
1996
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
RETAIL – continued
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
Former Tom Thumb – Mora, MN . . $
Former Tom Thumb –
Oakdale, MN . . . . . . . . . . . . . . . .
Former Tom Thumb –
Paynesville, MN . . . . . . . . . . . . . .
Former Tom Thumb – Pine
City, MN . . . . . . . . . . . . . . . . . . . .
Former Tom Thumb –
Shoreview, MN . . . . . . . . . . . . . . .
Former Tom Thumb –
Winsted, MN . . . . . . . . . . . . . . . .
Tool Crib – Duluth, MN . . . . . . . . .
West Lake Center – Forest
55
351
31
83
63
35
130
Lake, MN . . . . . . . . . . . . . . . . . . .
2,397
West Village Center –
$
245
$
388
334
357
267
376
1,886
5,700
Chanhassen, MN . . . . . . . . . . . . .
5,035
15,739
Westgate Shopping Center –
St. Cloud, MN . . . . . . . . . . . . . . .
1,232
6,568
300
739
365
440
330
411
2,016
8,097
20,774
7,800
$
7
12
10
11
8
11
4
168
475
41
TOTAL RETAIL . . . . . . . . . . . . . . . . $ 22,697
$100,414
$ 123,111
$ 8,343
MEDICAL
Abbott Northwest – Sartell, MN . . . $
Airport Medical –
Bloomington, MN . . . . . . . . . . . .
Denfeld Clinic – Duluth, MN . . . . .
Edgewood Vista – Belgrade, MT . .
Edgewood Vista – Columbus, NE . .
Edgewood Vista – Duluth, MN . . . .
Edgewood Vista – East Grand
Forks, MN . . . . . . . . . . . . . . . . . .
Edgewood Vista – Fremont, NE . . .
Edgewood Vista – Grand
Island, NE . . . . . . . . . . . . . . . . . . .
Edgewood Vista – Hastings, NE . . .
Edgewood Vista – Kalispell, MT . .
Edgewood Vista – Minot, ND . . . . .
Edgewood Vista – Missoula, MT . .
Edgewood Vista – Omaha, NE . . . .
Edgewood Vista – Virginia, MN . . .
Edgewood Vista – Phase II –
Virginia, MN . . . . . . . . . . . . . . . .
Fresenius – Duluth, MN . . . . . . . . .
Gateway Clinic – Sandstone, MN . .
Healtheast Med. Center –Woodbury
& St. Johns, MN . . . . . . . . . . . . .
Mariner Clinic – Superior, WI . . . . .
Park Dental – Brooklyn, MN . . . . .
Pavilion II – Duluth, MN . . . . . . . .
Paul Larson Clinic – Edina, MN . . .
Southdale Expansion – Edina, MN .
0
$ 13,866
$
13,866
$
552
0
541
14
14
390
25
56
14
14
70
260
109
89
246
0
50
71
3,238
397
185
2,735
351
0
4,678
2,796
439
441
11,319
1,405
496
441
558
518
6,011
854
553
6,824
5,111
1,753
1,829
18,363
3,704
2,767
16,782
662
12,733
4,678
3,337
453
455
11,709
1,430
552
455
572
588
6,271
963
642
7,070
5,111
1,803
1,900
21,601
4,101
2,952
19,517
1,013
12,733
190
5
52
52
740
191
42
52
45
41
979
160
43
348
27
2
2
1,817
5
112
22
26
200
F-49
2003
2003
2003
2003
2003
2003
2004
2003
2003
2004
2003
2002
2002
2004
2000
2000
2000
1997
2001
2000
2001
2001
1997
1997
2001
2002
2004
2004
2004
2001
2004
2002
2004
2002
2003
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
MEDICAL – continued
Southdale Medical Center –
LAND
BUILDING &
IMPROVEMENTS
TOTAL
ACCUMULATED
DEPRECIATION
DATE
ACQUIRED
Edina, MN . . . . . . . . . . . . . . . . . . $ 3,500
0
334
177
UH Medical – St. Paul, MN . . . . . .
Wedgwood – Sweetwater, GA . . . . .
Wells Clinic – Hibbing, MN . . . . . .
TOTAL MEDICAL . . . . . . . . . . . . . $ 12,880
$ 29,424
7,605
3,638
2,726
$158,296
$
32,924
7,605
3,972
2,903
$ 171,176
$ 2,456
314
654
3
$ 9,132
$
UNDEVELOPED LAND
Andover, MN . . . . . . . . . . . . . . . . . . $
Centerville, MN . . . . . . . . . . . . . . . .
Cottonwood Lake IV –
Bismarck, ND . . . . . . . . . . . . . . . .
Inver Grove, MN . . . . . . . . . . . . . . .
Kalispell, MT . . . . . . . . . . . . . . . . . .
Libby, MT . . . . . . . . . . . . . . . . . . . . .
Long Prairie, MN . . . . . . . . . . . . . . .
River Falls, WI . . . . . . . . . . . . . . . . .
150
100
264
560
1,400
150
150
200
TOTAL UNDEVELOPED LAND . . $ 2,974
$
0
2
0
3
12
1
0
2
20
$
$
150
102
264
563
1,412
151
150
202
2,994
$
$
0
0
0
0
0
0
0
0
0
TOTAL . . . . . . . . . . . . . . . . . . . . . . . $110,113
$993,315
$1,103,428 (1)
$100,250
2001
2002
1996
2004
2003
1999
2003
2003
2003
2003
2003
LIFE ON
WHICH
LATEST
INCOME
STATEMENT
IS COMPUTED
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
(1) The aggregate cost of land, building and improvements for federal income tax purposes is approximately $925
million.
F-50
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Reconciliations of total real estate carrying value for the three years ended April 30, 2004, 2003, and 2002
are as follows:
(in thousands)
2004
2003
2002
Balance at beginning of year
Additions during year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 919,781
$740,319
$591,637
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undeveloped Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129,100
41,200
0
17,384
$1,107,465
170,509
3,938
2,760
14,574
$932,100
119,329
23,951
0
8,708
$743,625
Deductions during year
Cost of Real Estate Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at close of year
(3,975)
0
(62)
$1,103,428
(11,908)
(411)
0
$919,781
(3,306)
0
0
$740,319
Reconciliations of accumulated depreciation/amortization for the three years ended April 30, 2004, 2003, and
2002, are as follows:
Balance at beginning of year
Additions during year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 75,639
$58,926
$44,093
Provisions for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,088
19,606
15,515
Deductions during year
Accumulated depreciation/amortization on real estate sold . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at close of year
(477)
$100,250
(2,893)
$75,639
(682)
$58,926
(in thousands)
2004
2003
2002
F-51
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2004
Schedule IV
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE
(in thousands)
Interest
Rate
Final
Maturity
Date
Payment
Terms
Prior
Liens
Face
Amt. of
Mortgages
Carrying
Amt. of
Mortgages
First Mortgage
Martin Property — Pioneer Seed
Nebraska Orthopaedic . . . . . . . . .
6.00% 05/01/09 Monthly/Balloon
4.75% 09/30/04 Monthly/Balloon
—
—
Junior Mortgage
C. Grueber — Cottage Grove . . .
7.50% 10/04/07 Monthly/Balloon
—
Less:
Unearned Discounts . . . . . . . . . . .
Deferred Gain from Property
Dispositions . . . . . . . . . . . . . . .
Allowance for Loan Losses . . . . .
$ 475
4,249
$4,724
$ 200
$4,924
$ 475
4,249
$4,724
$ 194
$4,918
$
0
0
(25)
$4,893
Prin. Amt
of Loans
Subject
to Delinquent
Prin. or Int.
—
—
—
MORTGAGE LOANS RECEIVABLE, BEGINNING OF YEAR . . . . .
New participations in and advances on mortgage loans . . . . . . . . . . . .
Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transferred to other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MORTGAGE LOANS RECEIVABLE, END OF YEAR . . . . . . . . . . . . . .
2004
$ 1,183
7,100
$ 8,283
(3,232)
(158)
$ 4,893
(in thousands)
2003
$ 3,953
1,024
$ 4,977
(3,794)
0
$ 1,183
2002
$1,037
3,200
$4,237
(284)
0
$3,953
F-52
Certifications
Exhibit 31.1
I, Thomas A. Wentz, Sr., certify that:
1. I have reviewed this Annual Report on Form 10-K of Investors Real Estate Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board
of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: July 12, 2004
By: /s/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr., President & CEO
Exhibit 31.2
I, Diane K. Bryantt, certify that:
1. I have reviewed this Annual Report on Form 10-K of Investors Real Estate Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board
of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: July 12, 2004
By: /s/ Diane K. Bryantt
Diane K. Bryantt, Senior Vice President & CFO
908007ADP_CVR_R3 7/30/2004 3:08 PM Page 2
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data as of and for each of the fiscal years ended April 30, 2000 through
2004. The table illustrates the significant growth in revenue and real estate investment IRET experienced over the period
reported. Most of this growth was attributable to our addition of properties through acquisitions. These historical results are
not necessarily indicative of the results to be expected in the future. This information is only a summary, and you should refer
to our Consolidated Financial Statements and notes thereto, and the section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for additional information.
Years Ended April 30,
2004
2003
2002
2001
2000
Consolidated Income Statement Data
Revenue
Income before Gain/Loss on
$ 140,505
$ 118,765
Properties and Minority Interest
$
12,253
$
15,699
$
$
90,570
14,108
$
$
75,767
10,188
$
$
55,445
8,549
(in thousands, except per share data)
Gain on Repossession/Sale
of Properties
Minority Interest Portion of
662
1,595
547
602
1,754
Operating Partnership Income
(2,744)
(3,640)
(3,675)
(2,095)
(1,495)
Net Income*
$
9,440
$
12,248
$
10,600
$
8,694
$
8,808
Consolidated Balance Sheet Data
Total Real Estate Investments
$ 1,008,071
$ 845,325
$ 685,347
$ 548,580
$ 418,216
Total Assets
Mortgages Payable
Shareholders’ Equity
$ 1,076,317
$ 885,681
$ 730,209
$ 570,322
$ 432,978
$ 633,124
$ 539,397
$ 459,569
$ 368,957
$ 265,057
$ 278,629
$ 214,761
$ 145,578
$ 118,945
$ 109,921
Consolidated Per Common Share Data
(basic and diluted)
Net Income
Distributions
Funds From Operations**
$
$
$
.24
.64
36,638
$
$
$
.38
.63
34,178
$
$
$
.42
.59
29,143
$
$
$
.38
.55
22,440
$
$
$
.42
.51
18,328
*
Includes both continuing operations and discontinued operations (real estate that we sold) for the indicated fiscal years.
** For the definition of Funds from Operations and a reconciliation of this measure to measures under generally accepted accounting principles, you
should refer to the section entitled “Funds from Operations” within the section entitled “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations” in our Annual Report on Form 10-K.
REVENUE
in millions of dollars
FUNDS FROM OPERATIONS
in millions of dollars
DISTRIBUTIONS
per share
140.5
118.8
36.6
34.2
29.1
.63
.64
.59
.55
.51
90.6
75.8
55.4
22.4
18.3
TOTAL ASSETS
in millions of dollars
1,076.3
885.7
730.2
570.3
433.0
00
01 02 03 04
00
01 02 03 04
00
01 02 03 04
00
01 02 03 04
TRUSTEES
John F. Decker
Senior Vice President
D.A. Davidson & Co.
(investment banking firm)
Daniel L. Feist (2) (6) (8)
President
Feist Construction & Realty
(construction and real estate development company)
Steven B. Hoyt
Chief Executive Officer
Hoyt Properties, Inc.
(property management company)
Charles Wm. James
Senior Vice President
Investors Real Estate Trust
Patrick G. Jones (4) (6) (8)
Private Investor
Jeffrey L. Miller (1) (4) (5) (7)
President
M&S Concessions, Inc.
(food service and facility management company)
Timothy P. Mihalick
Senior Vice President & Chief Operating Officer
Investors Real Estate Trust
Stephen L. Stenehjem (3) (6) (8)
President and Chief Executive Officer
Watford City BancShares, Inc.
(bank holding company)
Thomas A. Wentz, Jr.
Senior Vice President
Investors Real Estate Trust
EXECUTIVE OFFICERS
Thomas A. Wentz, Sr.
President & Chief Executive Officer
Timothy P. Mihalick
Senior Vice President & Chief Operating Officer
Diane K. Bryantt
Senior Vice President & Chief Financial Officer
Charles Wm. James
Senior Vice President
Thomas A. Wentz, Jr.
Senior Vice President
Michael A. Bosh
General Counsel & Corporate Secretary
(1) Chairman, Board of Trustees
(2) Vice Chairman, Board of Trustees
(3) Chairman, Audit Committee
(4) Member, Audit Committee
(5) Chairman, Compensation Committee
(6) Member, Compensation Committee
(7) Chairman, Nominating Committee
(8) Member, Nominating Committee
SHAREHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders of the Company will be held at
7:00 p.m. on September 21, 2004, at the International Inn, 1505
North Broadway, Minot, North Dakota.
SHARES LISTED
The Company’s common shares of beneficial interest are listed on
the Nasdaq Stock Market under the symbol “IRETS.”
The Company’s series A cumulative redeemable preferred shares of
beneficial interest are listed on the Nasdaq Stock Market under the
symbol “IRETP.”
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
Minneapolis, Minnesota
INTERNAL AUDITORS
Brady, Martz & Associates. P.C.
Minot, North Dakota
LEGAL COUNSEL
Pringle & Herigstad, P.C.
Minot, North Dakota
Gray, Plant, Mooty, Mooty & Bennett, P.A.
Minneapolis, Minnesota
DISTRIBUTION REINVESTMENT PLAN
The Company has a distribution reinvestment plan for current and
future shareholders. Interested participants can obtain more
information by contacting the Company at 701-837-4738 or
info@iret.com.
FORM 10-K
A copy of the annual report on Form 10-K for the Company’s fiscal
year ended April 30, 2004, as filed with the Securities and Exchange
Commission, is available, without charge, by request to IRET,
Investor Relations, PO Box 1988, Minot, ND 58702-1988, by visiting
the Investor Relations section of the Company’s website at
www.iret.com, or by accessing the EDGAR database on the
Securities and Exchange Commission’s website at www.sec.gov.
TRANSFER AGENT
Questions about distribution payments, shareholder accounts,
replacement of lost share certificates, address or name changes
should be directed to: Transfer Agent, Investors Real Estate Trust,
PO Box 1988, Minot, ND 58702-1988.
COMPANY HEADQUARTERS
Investors Real Estate Trust
12 South Main Street
PO Box 1988
Minot, ND 58702-1988
Telephone: (701) 837-4738
Fax: (701) 838-7785
info@iret.com
www.iret.com
908007ADP_CVR_R3 7/30/2004 3:08 PM Page 1
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INVESTORS REAL ESTATE TRUST
2004 Annual Report
Creating shareholder value
with a diversified real estate portfolio
Multi-Family Residential
Office
Retail
Medical
Industrial