Investors Real Estate Trust
2007 Annual Report
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data as of and for each of the fiscal years ended April 30, 2003
through 2007. The table illustrates the significant growth in revenue and real estate investment IRET experienced
over the period reported, most of which 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,
Consolidated Income Statement Data
Revenue
Income before minority interest and discontinued
operations and gain on sale of other investments
Gain on sale of real estate, land, and other investments
Minority interest portion of operating partnership income
Income from continuing operations
Income from discontinued operations
Net income*
Consolidated Balance Sheet Data
Total real estate investments
Total assets
Mortgages payable
Shareholders’ equity
Consolidated Per Common Share Data
(basic and diluted)
Income from continuing operations
Income from discontinued operations
Net income
Distributions
Funds From Operations**
Funds From Operations per share and unit**
(in thousands, except per share data)
2007
2006
2005
2004
2003
$
$
$
$
$
$
$
197,817
14,300
4,602
(3,229)
11,059
3,051
14,110
$
$
$
$
$
$
$
170,448
11,138
3,293
(1,896)
8,781
2,786
11,567
$
$
$
$
$
$
$
152,937
9,920
8,605
$
$
$
130,458
$ 109,780
10,190
$ 13,655
662
$
1,595
(1,738) $
(2,173) $
(3,190)
7,806
7,270
15,076
$
$
$
$
7,418
2,022
$
$
9,841
2,407
9,440
$ 12,248
991,923
$ 845,325
$ 1,316,534
$ 1,126,400
$ 1,067,345
$ 1,435,389
$ 1,207,315
$ 1,151,158
$ 1,076,317
$ 885,681
$
$
$
$
$
$
$
$
951,139
284,969
.18
.06
.24
.66
57,003
.88
$
$
$
$
$
$
$
$
765,890
289,560
.14
.06
.20
.65
46,711
.79
$
$
$
$
$
$
$
$
708,558
295,172
.13
.17
.30
.65
42,314
.76
$
$
$
$
$
$
$
$
633,124
$ 539,397
278,629
$ 214,761
.19
.05
.24
.64
$
$
$
$
.31
.07
.38
.63
36,638
$ 34,178
.73
$
.80
*
**
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
cents per share
TOTAL ASSETS
in millions of dollars
197.8
170.4
152.9
130.5
109.8
57.0
46.7
42.3
36.6
34.2
.661
.653
.645
.637
.625
1,435.4
1,207.3
1,151.2
1,076.3
885.7
03 04 05 06
07
03 04 05 06
07
03 04 05 06
07
03 04 05 06
07
P R E S I D E N T ’ S L E T T E R
“We will continue our efforts to expand our diversified portfolio and to focus on
our core markets in the north central and midwest states in which we have the
majority of our properties.”
Thomas A. Wentz, Sr. - President & CEO
Fellow Shareholders,
I am pleased to report very positive results for IRET’s 37th year:
•
•
Funds From Operations increased 22% (to $57 million from $46.7 million) and, on a per
share basis, by 11.4% (from 79 cents to 88 cents per share).
Cash distributions to our shareholders and unitholders were increased for the 37th consecutive year (from 65.3 cents to
66.1 cents per share).
• We acquired $220.7 million of real estate properties - $140.8 million of which consisted of the Magnum Resources
15-office building portfolio – and, in addition, one office building, two medical office buildings, two industrial properties,
two retail properties, six parcels of unimproved land for development and five apartment communities.
Our stock price recovered to a more reasonable level.
•
FISCAL 2007 FINANCIAL RESULTS
Important financial indicators for IRET’s 37th year which ended April 30, 2007, are:
(in thousands, except per share amounts)
% Change
Fiscal Year
+17.3%
Real Estate Owned (before depreciation)
+16.1%
Revenue
+15.2%
Interest Expense
+20.4%
Depreciation/Amortization of Real Estate Portfolio
+14.8%
Utilities, Maintenance and Real Estate Tax Expense
+13.3%
Administrative Expense
+12.8%
Other Operating Expenses*
+22.0%
Net Income
+22.0%
Funds From Operations
+11.4%
Funds From Operations per share and unit
+1.2%
Cash Distributions per share and unit
* Includes insurance, property management expenses, advisory and trustee services, other operating expenses, and amortization related to non-real
2006
1,269,423
170,448
50,727
36,953
52,491
3,673
16,706
11,567
46,711
.79
.653
2007
1,489,287
197,817
58,450
44,481
60,242
4,162
18,847
14,110
57,003
.88
.661
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
estate investments.
$220 MILLION OF PROPERTY ACQUIRED IN FISCAL 2007
At fiscal year end, IRET’s real estate portfolio consisted of:
•
•
•
•
•
•
69 apartment communities containing 9,397 apartment units.
64 office properties with approximately 4.8 million square feet of leasable space.
34 medical properties (including senior housing/assisted living facilities) with approximately 1.7 million square feet of
leasable space.
13 industrial properties with approximately 2.0 million square feet of leasable space.
37 retail properties with approximately 1.5 million square feet of leasable space.
10 parcels of unimproved land for development purposes.
During the past fiscal year, IRET acquired:
5 apartment communities with 927 units
10 office buildings with approximately 1 million square feet of leasable space
2 medical properties with approximately 37,000 square feet of leasable space
2 industrial properties with approximately 273,000 square feet of leasable space
2 retail properties with approximately 31,700 square feet of leasable space
6 parcels of unimproved land for future development
Total Fiscal 2007 Acquisitions
(in thousands)
38,140
153,050
5,787
17,050
2,769
3,880
220,676
$
$
$
$
$
$
$
We sold 14 properties and two parcels of unimproved land in Fiscal 2007 for $22.5 million, realizing a gain of $4.6 million.
1
INVESTMENT AND PERFORMANCE BY SEGMENT
We divide our real estate portfolio into five property types. Our investment (before depreciation/amortization) in, and the Fiscal 2007
net operating income from, each property type was:
(in thousands)
Segment
Multi-Family Residential
Office
Medical/Assisted Living
Industrial
Retail
Total Segments
Investment
$
489,644
536,431
274,779
75,257
113,176
$ 1,489,287
32.9%
36.0%
18.4%
5.1%
7.6%
100.0%
Fiscal 2007
Net Operating Income
$
35,639
43,140
26,108
6,838
9,614
$ 121,339
29.4%
35.6%
21.5%
5.6%
7.9%
100.0%
We measure the performance of our segments based on net operating income, which we define as total revenues less property
operating expenses and real estate taxes. We believe that net operating income is an important supplemental measure of our
operating performance because it provides a measure of core operations that is unaffected by depreciation, amortization, financing
and general and administrative expense. For a reconciliation of net operating income of reportable segments to operating income
as reported under generally accepted accounting principles, see our Consolidated Financial Statements and the notes thereto in our
Annual Report on Form 10-K.
RECOVERY IN APARTMENT PERFORMANCE
Our apartments did much better in Fiscal 2007. Rent concessions declined by 18.2% and we were able to achieve modest rent
increases in some markets. Our goal is to improve occupancy rates to 95% or better, eliminate most rent concessions and move
rental rates to the level required to produce a fair return to our shareholders.
37 YEARS OF INCREASED CASH DISTRIBUTIONS TO SHAREHOLDERS AND UNITHOLDERS
IRET again increased its cash distributions to its shareholders and unitholders during each quarter of Fiscal 2007, paying out 66.1
cents per share, an increase of 1.2% over the 65.3 cents paid last fiscal year. IRET has increased its annual distribution every year
since paying its first distribution on July 1, 1971, and, since 1988, every calendar quarter. The July 2007 distribution of 16.65 cents
per share and unit was our 145th consecutive quarterly distribution.
INCOME TAX BENEFITS FOR IRET SHAREHOLDERS
When comparing IRET common shares with other investments, it is important to note that the cash distributions paid to IRET
shareholders and unitholders are partially tax-deferred. For the 2006 calendar year, 56.8% of IRET’s shareholder and unitholder
distributions were classified as “return of capital” and, thus, not included in current taxable income. The percentage of distributions
so sheltered from current-year taxation in calendar year 2005 was 42.47% and in calendar year 2004 was 55.35%. Compared to
income that is fully taxable, the “after tax return” on IRET’s cash distribution is enhanced by this income tax treatment.
CONTINUED CONSERVATIVE FINANCIAL MANAGEMENT
At the end of Fiscal 2007, IRET held cash and marketable securities totaling $46.6 million. Of the $951.1 million of mortgages
payable at year-end, only $21.7 million were variable rate mortgages and only $30.8 million will come due during the next year. The
weighted average rate of interest on April 30, 2007, was 6.43%.
FISCAL 2008 GOALS
We anticipate a continued improvement in real estate fundamentals for Fiscal 2008. Construction of new properties to compete with
IRET’s portfolio is modest and, because of higher construction costs, we believe that the rents required for newly-constructed
buildings will make our properties attractive alternatives.
We will continue our efforts to expand our diversified portfolio and to focus on our core markets in the north central and midwest
states in which we have the majority of our properties.
Specific goals are to:
continue our policy of regular increases in our quarterly cash distributions to our shareholders and unitholders;
•
• maintain our conservative financial management practices of adequate cash reserves, lines of credit, fixed-rate debt and
an overall indebtedness ratio of 60% or less of the current fair market value of our portfolio;
add $150 million or more to our real estate portfolio;
develop some of the unimproved land parcels that we own with apartments and commercial buildings;
continue our investment in additional employees, office space and technology to handle our continued growth;
•
•
•
and, of course, do our very best to improve our earnings.
Sincerely,
Thomas A. Wentz, Sr. - President and Chief Executive Officer
2
TO TA L S H A R E H O L D E R R E T U R N S
36 Calendar Year Performance Comparison
$10,000 invested in IRET common shares at the close of trading on December 31, 1971, with distributions reinvested, would be
worth $1,001,413 as of December 31, 2006. This presentation excludes brokerage costs and income taxes.
IRET
Peer Group(1)
S&P 500(2)
$1,100,000
$900,000
$700,000
$500,000
$300,000
$100,000
$0
$ 1,001,413
$ 970,931
$ 429,805
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 04 05 06
(1) The peer group consists of the real estate investment trusts included by the National Association of Real Estate Investment Trusts
in its NAREIT Equity REIT Index.
(2) Standard and Poor's ("S&P") 500 Stock Index
Source: Research Data Group, Inc.
C O M PA N Y P R O F I L E
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.
In 1997, IRET reorganized itself as an Umbrella Partnership Real Estate Investment Trust ("UPREIT"). The company 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). IRET assets were transferred to
the Umbrella Partnership in exchange for the general partnership interest. Owners of real estate are 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, IRET’s publicly-traded common shares.
For owners of appreciated real estate, the UPREIT program has been a popular alternative to a taxable sale. Owners 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, 2007, a total of 19,981,259 UPREIT units with a book value of approximately $156.5 million
were outstanding.
3
1970
IRET BOARD OF TRUSTEES
left to right -
J. Norman Ellison, Jr.,
Magner J. Muus,
Thomas A. Wentz, Sr.,
Ralph A. Christensen,
Roger R. Odell,
Mike F. Dolan, John D. Decker
2007
IRET BOARD OF TRUSTEES
left to right -
Patrick G. Jones, Edward T. Schafer,
C.W. “Chip” Morgan, John D. Stewart,
Timothy P. Mihalick, W. David Scott,
Jeffrey L. Miller
not pictured -
Stephen L. Stenehjem and
Thomas A. Wentz, Jr.
1981
IRET BOARD OF TRUSTEES
left to right (back) -
Thomas A. Wentz, Sr.,
J. Norman Ellison, Jr.,
Patrick G. Jones, Daniel L. Feist,
C. Morris Anderson, John D. Decker
left to right (front) -
Mike F. Dolan, Ralph A. Christensen,
Jeffrey L. Miller, Roger R. Odell
4
Roger R. Odell
1926-2007
IRET Co-Founder and Trustee
IRET dedicates this year’s Annual Report to Roger Odell,
co-founder of IRET and trusted advisor.
IRET lost a valued former colleague this year with the death
of Roger Odell, co-founder and former President and trustee
of IRET. Roger passed away in February 2007 at the age of
80. Roger, along with IRET's current President and Chief
Executive Officer, Thomas A. Wentz, Sr., founded IRET in
1970. Roger served for 30 years as an IRET trustee and
President and principal of Odell-Wentz & Associates LLC,
IRET's former advisor. At the time of its founding, IRET had
a beginning real estate portfolio valued at $120,000. At the time of Roger's retirement as President of the
Company on July 1st, 2000, IRET had total assets in excess of $430 million, a diversified real estate portfolio
of 98 properties, and was listed on the NASDAQ Stock Exchange.
Roger was born on a farm near Ruso, North Dakota, on May 12, 1926. He joined the U.S. Navy following his
high school graduation in 1943, and subsequently earned a Bachelor of Business Administration degree from
the University of Texas in 1947. He moved to Minot in 1947 and worked in the banking business until called to
active duty in the Navy from 1950-1952. He left active service with the rank of Lieutenant, Jr. Grade, and served
in the Navy Reserves until 1958. Roger married Delores Oster in 1953, and they had four children.
Following his active duty Navy service, Roger began working in real estate, joining Watne Realty Company in
Minot and then founding Odell and Associates. He founded and co-founded several companies, including
Odell-Wentz & Associates, Inland National Securities, Investors Management and Marketing, and IRET.
Roger shared the fruits of his professional success with his community, making generous charitable donations
to various Minot, North Dakota civic institutions, among them Minot State University, and also serving on many
local boards and councils. He received numerous awards, including the Greater North Dakota Association
Industrial Development Award, the Minot Association of Builders Citizen of the Year award, and the Boy Scouts
of America Silver Beaver Award.
“The entire IRET family was saddened by Roger’s death earlier this year. He was instrumental not
only in founding the Company in 1970, but also in establishing the sound business practices that still
guide IRET today. Roger was an inspiration and meant a great deal not only to me personally, but
to all of the employees of IRET.”
Tim Mihalick - Trustee, Senior Vice President and Chief Operating Officer
5
In Fiscal 2007, IRET completed the
largest acquisition in our history, with
our purchase from subsidiaries of
Omaha-based Magnum Resources,
Inc. of a portfolio of nine office
complexes, consisting of 15 buildings
totaling
936,568
approximately
leasable square feet. As of the closing
date of the acquisition, this portfolio of
properties was approximately 94%
leased
tenants. The
acquisition increased the leasable
space of IRET’s office portfolio by
approximately 25%. Pictured on this
page, and on the cover and pages 7,
12, 14, 15 and 16 of this Annual
Report, are several of the buildings we
acquired from Magnum Resources in
this transaction.
to multiple
6
Flagship
138,825 leasable square foot four-story office
building located in Eden Prairie, Minnesota
Property Located in Thirteen States
Corporate headquarters in Minot, North Dakota
Asset Management and Property Management offices in Minneapolis, Minnesota
and Omaha, Nebraska
Property Management offices in Kansas City, Kansas and St. Louis, Missouri
Gateway Corporate Center
59,827 leasable square foot two-story office
building located in Woodbury, Minnesota
7
R E N O VAT I O N S & R E D E V E L O P M E N T S
IRET’s development and redevelopment pipeline
continues to be a source of growth for the Company. In
Fiscal 2007 we made good progress on a number of
projects that demonstrate our ability to collaborate with
our tenants and the communities we serve to
create properties reflecting their wants and needs. We
completed or initiated renovation, development and
redevelopment projects in each of our property types:
multi-family residential, office, medical, industrial and
retail.
Pictured on this page is an example of one of our retail
redevelopment projects,
the renovation of our
Arrowhead Shopping Center in Minot, North Dakota.
This project involved exterior re-siding of the property,
roof improvements including increased energy efficient
insulation and improved drainage, installation of
programmable exterior signage, expansion and
improvement of exterior parking areas, construction of
handicapped-accessible entrances, and
interior
remodeling including the installation of new flooring,
increased common area
lighting, updated wall
treatments and improved interior signage. Since our
renovation work began, several new tenants have been
attracted to this property, which is currently 95%
occupied. Other existing tenants increased their rental
area and remodeled their space. This project reflects
the business objective of our development and
redevelopment initiatives: to create value for our
shareholders
in
our properties.
through continual reinvestment
Minot Arrowhead Shopping Center
76,133 leasable square foot retail shopping
center located in Minot, North Dakota
8
R E N O VAT I O N S & R E D E V E L O P M E N T S
Success in real estate can be achieved in many ways. As IRET enters its 38th year of operations, we continue to
aggressively focus on increasing shareholder value by growing and effectively managing our diverse portfolio of
quality, income-producing real estate. An important part of our successful growth is the development of new properties
and the renovation or redevelopment of existing properties. What sets IRET apart as a company and
landlord is our focus on properly identifying, and then exceeding, the needs and expectations of our customers.
Throughout IRET’s history, one of the keys to successfully meeting the needs of our existing and future tenants has
been determining the real estate requirements of the communities we serve and listening to the customers located in
those communities. Our unequaled real estate experience in our core markets has given us the opportunity to grow our
portfolio by purchasing existing real estate properties, but, just as important, it has also given us the opportunity to
design and develop projects from start to finish that meet the needs and expectations of our customers. By focusing
on the real estate needs of the customer, IRET becomes more than just a landlord renting space: we become a
partner in the success of our customer’s business, or the provider of a safe living environment for our customers in our
apartment communities. Over the past fiscal year, IRET has successfully developed new projects for existing customers
such as Allina Hospitals and Clinics in St Michael, Minnesota and Holiday Stores in Monticello, Minnesota, as well as
Tom Wentz, Jr. - Senior Vice President - Asset Management & Finance
“Throughout IRET’s history, one of the keys to successfully meeting the
needs of our existing and future tenants has been determining the real
estate requirements of the communities we serve and listening to the
customers located in those communities.”
redeveloping existing real estate such as Arrowhead Shopping Center in Minot,
North Dakota. Going forward, IRET is partnering with new customers to provide new
medical office space in Minneapolis. We have also undertaken projects to meet housing needs in communities such as
Bismarck, North Dakota with the construction of a new 67-unit apartment complex, as well as the
redevelopment of a 120-unit apartment complex in Sioux City, Iowa. By meeting and exceeding the needs of our
customers through development of new real estate options, IRET continues to increase shareholder value.
Allina Hospitals & Clinics
10,796 leasable square foot medical office
facility located in St Michael, Minnesota
9
I N V E S T M E N T P O R T F O L I O
Multi-Family Residential Property
State
Colorado
Iowa
Kansas
Minnesota
Montana
Nebraska
North Dakota
South Dakota
Texas
Total Multi-Family Residential Property
Commercial Office Property
State
Colorado
Idaho
Kansas
Minnesota
Missouri
Nebraska
North Dakota
South Dakota
Wisconsin
Total Commercial Office Property
Commercial Medical Property
State
Minnesota
Montana
Nebraska
North Dakota
South Dakota
Wisconsin
Total Commercial Medical$ Property
Commercial Industrial Property
State
Iowa
Minnesota
North Dakota
Total Commercial Industrial Property
Commercial Retail Property
State
Michigan
Minnesota
Montana
Nebraska
North Dakota
Wisconsin
Total Commercial Retail Property
Total Units - Residential Segment
Total Square Footage - Commercial Segments
Total Real Estate Owned
10
Units
597
252
734
2,632
770
690
2,479
739
504
9,397
Sq. Ft.
152,603
132,336
90,315
3,165,559
183,509
655,705
145,926
75,815
175,610
4,777,378
Sq. Ft.
1,392,003
16,045
79,884
74,112
60,161
103,214
1,725,419
Sq. Ft.
657,142
1,202,058
195,075
2,054,275
Sq. Ft.
16,080
694,691
93,200
27,500
541,758
81,464
1,454,693
9,397
10,011,765
$
(in thousands)
Investment
42,421
8,354
42,196
137,294
40,192
31,154
115,752
33,020
39,261
489,644
$
$
(in thousands)
Investment
22,149
15,766
14,676
343,694
26,316
78,992
16,708
7,088
11,042
$ 536,431
(in thousands)
Investment
$ 215,317
1,551
22,277
9,705
6,121
19,809
274,780
$
(in thousands)
Investment
$ 13,143
54,973
7,140
$ 75,256
(in thousands)
Investment
$ 2,122
71,890
5,270
3,699
24,558
5,637
$ 113,176
$1,489,287
Fiscal 2007
Occupancy
95.1%
88.4%
94.0%
91.2%
93.3%
90.8%
95.8%
92.6%
92.3%
93.2%
Fiscal 2007
Occupancy
100.0%
94.6%
98.6%
89.3%
94.3%
96.3%
97.3%
100.0%
100.0%
91.9%
Fiscal 2007
Occupancy
96.0%
100.0%
100.0%
100.0%
100.0%
100.0%
96.7%
Fiscal 2007
Occupancy
93.3%
94.9%
100.0%
95.1%
Fiscal 2007
Occupancy
100.0%
85.3%
100.0%
100.0%
93.6%
100.0%
89.6%
O U R A C Q U I S I T I O N S T R AT E G Y
The core of IRET’s business is based on the acquisitions that we have made and will continue to make in upcoming
years. We continue to base our acquisition strategy on a number of factors. As a diversified REIT, we look for
properties that fit into our five asset classes (residential, office, medical office, retail and industrial). We strive to find
properties that are well located in stable, growing communities located primarily in north central and midwest states.
Tim Mihalick - Senior Vice President & Chief Operating Officer
“We... look for properties where we believe our management skills and
strategies can create significant value through the improved financial
performance of the asset.”
IRET is an opportunistic investor with a focus on new properties that we believe can
deliver the return necessary to support the distributions our shareholders have
grown accustomed to. We also look for properties where we believe our
management skills and strategies can create significant value through the improved financial performance
of the asset.
Fiscal 2007 was a banner year for acquisitions for IRET as we completed our largest transaction in our 37 year
history. This transaction was monumental in many ways, as, among other things, it allowed IRET to expand into new
geographical locations (Kansas City, Kansas and St. Louis, Missouri). Additionally, IRET also added a satellite office
in Omaha, Nebraska, and property management offices in Kansas City and St. Louis.
We will continue to work hard in Fiscal 2008 to acquire properties that fulfill our return requirements. As
capitalization rates continue on a downward trend the pressure to find acquisitions that fit our requirements
increases. IRET will continue to follow a disciplined acquisition strategy, and concentrate on the fundamentals that
we have focused on in our past. Although challenges are ahead, we feel confident that the experience gained in
years past will serve us well as we move into Fiscal 2008.
Real Estate Portfolio Mix
(percentage by segment, by investment amount,
net of accumulated depreciation)
Property Investments
(percentage by state, by investment amount,
net of accumulated depreciation)
Multi-Family Residential
Office
Medical
Industrial
Retail
Unimproved Land
30.4%
37.4%
19.0%
5.1%
7.5%
0.6%
Minnesota
North Dakota
Nebraska
Colorado
Kansas
Montana
South Dakota
56.2%
10.6%
9.6%
4.0%
3.8%
3.1%
2.8%
Wisconsin
Texas
Missouri
Iowa
Idaho
Michigan
2.7%
2.5%
2.0%
1.5%
1.1%
0.1%
11
S T R E N G T H E N I N G O U R I N V E S TO R R E L AT I O N S A N D C A P I TA L
M A R K E T S E F F O R T S
Providing investors and the capital markets with accurate, timely and complete information is a key factor in the
success of any public company. In Fiscal 2007, the IRET management team took a critical look at our Company’s
investor relations and capital markets efforts, relative to the REIT industry, and concluded that we would be well
served to strengthen our commitment of resources to these areas.
Company management decided to create a senior management position that would be tasked specifically with
developing and implementing a strategy to increase investor awareness of IRET, while maintaining the Company’s
focus on serving its existing shareholder base. An investor relations and capital markets strategy was developed,
Kelly Walters - Vice President - Capital Markets & New Business Development
“We firmly believe our shareholders will experience discernable long-term
rewards from management’s plan to strengthen the perception and
understanding of our company in the minds of investors who are active in
the REIT space.”
discussed and put forth in the Company’s Fiscal 2008 business plan. The
strategy centers on increasing the information about IRET available in the
marketplace in order to enhance and inform the decision-making process of investors and potential investors.
Toward that end, we have become a member of the National Association of Real Estate Investment Trusts
(NAREIT), which allows us to be included in NAREIT’s widely-used database. Additionally, by working with
professionals in the investment community, we hope to obtain increased market feedback and help investors better
understand and interpret our business model as a diversified REIT concentrating on property investments in the north
central and midwest regions of the United States.
Our investor relations and capital markets efforts are not a substitute for solid business results and good
management, but we believe that they can provide us with an improved forum for communication with investors and
the marketplace. IRET remains committed to our historic business objective, which is creating value for
our shareholders.
12
Corporate Center West
141,724 leasable square foot office
complex consisting of three two-story
buildings located in Omaha, Nebraska
C R E AT I N G S H A R E H O L D E R VA L U E
36 Calendar Year History
Since the first distribution paid July 1, 1971, IRET has never delayed, omitted or reduced the quarterly distribution
on our common shares. In each of the last 36 calendar years, the annual distribution has increased over the amount
paid in the preceding year.
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
2004
2005
2006
Share Bid
Price History1
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
$
10.49
$
9.30
$
10.23
$
Distribution
History2
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¢
64.10¢
64.90¢
66.10¢
Total Return
Per Year3
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%
25.3%
14.6%
5.4%
11.8%
-6.5%
18.9%
(1) End of calendar year bid price per common share of beneficial interest of IRET. See page 14 for a graph illustrating this data.
(2) Total calendar year distributions paid. See page 15 for a graph illustrating this data.
(3) Distributions plus share price changes. (Calendar year distributions paid plus change in share bid price divided by previous end of year share bid price.)
13
C R E AT I N G S H A R E H O L D E R VA L U E
36 Calendar Year Share Bid Price History1
$11
$10
$9
$8
$7
$6
$5
$4
$3
$2
$1
1971
1976
1981
1986
1991
1996
2001
2006
(1) End of calendar year bid price per common share of beneficial interest of IRET. Chart data is given on page 13.
Miracle Hills One
84,475 leasable square foot
five-story office building located
in Omaha, Nebraska
14
Pacific Hills
143,061 leasable square foot office complex
consisting of three multi-story and two single-story
buildings located in Omaha, Nebraska
C R E AT I N G S H A R E H O L D E R VA L U E
36 Calendar Year Distribution History1
$0.70
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
1971
1976
1981
1986
1991
1996
2001
2006
(1) Total calendar year distributions paid. Chart data is given on page 13.
15
PRICE RANGE OF IRET COMMON SHARES OF BENEFICIAL INTEREST
May 1 to July 31
August 1 to October 31
November 1 to January 31
February 1 to April 30
Fiscal 2007
Fiscal 2006
High
9.50
10.15
10.68
11.00
Low
8.85
9.22
9.65
9.66
High
10.24
10.16
9.79
9.67
Low
9.04
8.85
9.20
9.11
Fiscal 2005
High
10.47
10.30
10.72
10.26
Low
9.39
9.51
9.78
8.90
CALENDAR YEAR TAX STATUS OF DISTRIBUTIONS ON COMMON SHARES
Capital Gain
Ordinary Income
Return of Capital
2006
1.22%
42.01%
56.77%
2005
16.05%
41.48%
42.47%
2004
0.00%
44.65%
55.35%
2003
3.88%
2002
0.00%
58.45% 68.29%
37.67% 31.71%
Farnam Executive Center
94,832 leasable square foot five-story office
building located in Omaha, Nebraska
16
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, 2007
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 Main Street South
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:
Common Shares of Beneficial Interest (no par value) - NASDAQ Global Select Market
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (no par value) -
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
________________________________
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. (cid:134) Yes (cid:59) No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. (cid:134) Yes (cid:59) No
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.
(cid:59) Yes (cid:134) No
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. (cid:59)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).
(cid:134) Large accelerated filer
(cid:59) Accelerated filer
(cid:134) Non-accelerated filer
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
(cid:134) Yes (cid:59) No
2007 Annual Report
The aggregate market value of the Registrant’s outstanding common shares of beneficial interest held by non-
affiliates (i.e., by persons other than officers and trustees of the Registrant as reflected in the table in Item 12 of this
Form 10-K, incorporated by reference from the Registrant’s definitive Proxy Statement for its 2007 Annual Meeting
of Shareholders) was $463,628,772 based on the last reported sale price on the NASDAQ Global Select Market on
October 31, 2006.
The number of common shares of beneficial interest outstanding as of June 29, 2007, was 48,581,306.
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 2007 Annual Meeting
of Shareholders to be held on September 18, 2007 are incorporated by reference into Part III (Items 10, 11, 12, 13
and 14) hereof.
2007 Annual Report 2
INVESTORS REAL ESTATE TRUST
INDEX
PART I
Item 1. Business ...................................................................................................................................
Item 1A. Risk Factors .............................................................................................................................
Item 1B. Unresolved Staff Comments ....................................................................................................
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, Related Stockholder Matters and Issuer Purchases
of Equity Securities .................................................................................................................
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 ..
Item 9A. Controls and Procedures ..........................................................................................................
Item 9B. Other Information.....................................................................................................................
PART III
Item 10. Trustees, Executive Officers and Corporate Governance ........................................................
Item 11. Executive Compensation .........................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.............................................................................................................................
Item 13. Certain Relationships and Related Transactions, and Trustee Independence ..........................
Item 14. Principal Accountant Fees and Services ..................................................................................
PART IV
PAGE
5
11
20
20
30
30
30
32
32
52
53
53
53
56
56
56
56
56
56
Item 15. Exhibits, Financial Statement Schedules .................................................................................
Exhibit Index...........................................................................................................................................
Signatures................................................................................................................................................
Report of Independent Registered Public Accounting Firm and Financial Statements .......................... F-1 to F-41
57
57
59
2007 Annual Report 3
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,” “plan,” “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 common shares of beneficial
interest;
•
financing risks, such as our inability to obtain debt or equity financing on favorable terms, or at all; and
• compliance with applicable laws, including those concerning the environment and access by persons with
disabilities.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk
Factors” in Item 1A of this Annual Report on Form 10-K and the other documents we file from time to time with the
Securities and Exchange Commission (“SEC”).
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.
2007 Annual Report 4
Item 1. Business
Overview
PART I
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 estate 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 office, medical, industrial and retail properties. These properties
are located primarily in the upper Midwest states of Minnesota and North Dakota. For the twelve months ended
April 30, 2007, our real estate investments in these two states accounted for 69.8% of our total gross revenue. Our
principal executive offices are located in Minot, North Dakota. We also have offices in Minneapolis, Minnesota and
Omaha, Nebraska, and property management offices in Kansas City, Kansas and St. Louis, Missouri.
We seek to diversify our investments among multi-family residential and office, medical, industrial and retail
properties. As of April 30, 2007, our real estate portfolio consisted of:
• 69 multi-family residential properties, containing 9,397 apartment units and having a total real estate
investment amount net of accumulated depreciation of $400.1 million;
• 64 office properties containing approximately 4.8 million square feet of leasable space and having a total real
estate investment amount net of accumulated depreciation of $492.2 million;
• 34 medical properties (including senior housing/assisted living facilities) containing approximately 1.7
million square feet of leasable space and having a total real estate investment amount net of accumulated
depreciation of $250.0 million;
• 13 industrial properties (including miscellaneous commercial properties) containing approximately 2.0
million square feet of leasable space and having a total real estate investment amount net of accumulated
depreciation of $67.0 million; and
• 37 retail properties containing approximately 1.5 million square feet of leasable space and having a total real
estate investment amount net of accumulated depreciation of $99.4 million.
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, 2007, no single tenant accounted for more than 10% of our total
rental revenues.
2007 Annual Report 5
Structure
We were organized as a REIT under the laws 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 of 1986, 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 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 liabilities were
contributed to IRET Properties, through IRET, Inc., in exchange for the sole general partnership interest in IRET
Properties. As of April 30, 2007, IRET, Inc. owned a 70.9% 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 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, medical, industrial and retail
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, Idaho, Iowa, Kansas, Michigan,
Missouri, 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 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 13 states. We may invest in real estate, or interests in real estate, 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, Iowa,
Colorado, Montana, South Dakota, and Kansas. 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 Third
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.
2007 Annual Report 6
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. 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 85.0% 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, 2007, we had no junior mortgages
outstanding. We had one contract for deed outstanding as of April 30, 2007, with a balance of $411,000
due to us.
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 common 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 37
years ago and every quarter since 1988.
Issuing senior securities. 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 generally 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 300.0% of our total Net Assets (as such term is used in
our Bylaws, which usage is not in accordance with GAAP, “Net Assets” means our total assets at cost before
deducting depreciation or other non-cash reserves, less total liabilities). Our Bylaws do not impose any limitation on
the amount that we may borrow against any one particular property. As of April 30, 2007, our ratio of total real
estate mortgages to total real estate assets was 72.2% while our ratio of total indebtedness as compared to our Net
Assets (computed in accordance with our Bylaws) was 149.6%.
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.
2007 Annual Report 7
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:
Limited partnership units issued
Value at issuance
2007
6,705
$ 51,365
(in thousands)
2006
1,072
2005
1,996
$ 10,964 $ 20,071
Acquiring or repurchasing shares. As a REIT, it is our intention to invest only 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 2007, we did not repurchase any of our outstanding common shares, preferred 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, net of reserves, totaled $399,000 as of
April 30, 2007, and $409,000 as of April 30, 2006.
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 five reportable real estate segments: multi-family residential, office, medical (including
senior housing/assisted living facilities), industrial (including miscellaneous properties) and retail. For further
information on these segments and other related information, see Note 11 of our consolidated financial statements,
and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this
Annual Report on Form 10-K.
2007 Annual Report 8
Our Executive Officers
Set forth below are the names, ages, titles and biographies of each of our executive officers as of July 1, 2007.
Name
Thomas A. Wentz, Sr.
Timothy P. Mihalick
Thomas A. Wentz, Jr.
Diane K. Bryantt
Michael A. Bosh
Kelly A. Walters
Age
71
48
41
43
36
46
Title
President and Chief Executive Officer
Senior Vice President and Chief Operating Officer
Senior Vice President
Senior Vice President and Chief Financial Officer
Secretary and General Counsel
Vice President
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.
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 School of Law, and
joined us as General Counsel and Vice President in January 2000. He has served as a Senior Vice President of Asset
Management and Finance 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 American Bar Association and the North Dakota Bar Association, and he is a Director of SRT Communications,
Inc. Mr. Wentz is the son of Thomas A. Wentz, Sr.
Diane K. Bryantt is a graduate of Minot State University, 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.
Kelly A. Walters joined IRET in October of 2006 as Vice President of Capital Markets and New Business
Development. Prior to joining IRET, Mr. Walters spent ten years as Senior Vice President of Magnum Resources,
Inc., a privately held real estate investment and operating firm, based in Omaha, NE, and from 1993 through 1996,
he was a senior portfolio manager with Brown Brothers Harriman & Co. in Chicago, IL. Prior to 1993, Mr. Walters
spent five years as the Investment Manager at Peter Kiewit and Sons, Inc. in Omaha, NE. Mr. Walters earned his
undergraduate degree in finance at the University of Nebraska at Omaha, and received his MBA from the University
of Nebraska.
Employees
As of April 30, 2007, we had 59 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
2007 Annual Report 9
any contamination. In addition, some environmental laws create a lien on a contaminated site 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 generally 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 year, the demand for quality real estate of
all types has continued to increase. This demand caused continued high prices 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 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
The Company’s Board of Trustees has adopted various policies and initiatives to strengthen the Company’s
corporate governance and increase the transparency of financial reporting. Each of the committees of the
Company’s Board of Trustees operates under written charters, and the Company’s independent trustees meet
regularly in executive sessions at which only the independent trustees are present. The Board of Trustees has also
adopted a Code of Conduct applicable to trustees, officers and employees, and a Code of Ethics for Senior Financial
Officers, and has established processes for shareholder communications with the Board of Trustees.
Additionally, the Company’s Audit Committee has 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.
2007 Annual Report 10
The Audit Committee also maintains 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 the
event the Company waives compliance by any of its trustees or officers subject to the Code of Ethics or Code of
Conduct, the Company will disclose such waiver in a Form 8-K filed within four business days.
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 Committees 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.
Item 1A. Risk Factors
Risks Related to Our Properties and Business
Our performance and share value are subject to risks associated with the real estate industry. Our results of
operations and financial condition, the value of our real estate assets, and the value of an investment in us are subject
to the risks normally associated with the ownership and operation of real estate properties. These risks include, but
are not limited to, the following factors which, among others, may adversely affect the income generated by our
properties:
• downturns in national, regional and local economic conditions (particularly increases in unemployment);
• competition from other commercial and multi-family residential properties;
•
local real estate market conditions, such as oversupply or reduction in demand for commercial and multi-
family residential space;
• changes in interest rates and availability of attractive financing;
• declines in the economic health and financial condition of our tenants and our ability to collect rents from
our tenants;
• vacancies, changes in market rental rates and the need periodically to repair, renovate and re-lease space;
•
•
increased operating costs, including real estate taxes, state and local taxes, insurance expense, utilities,
and security costs;
significant expenditures associated with each investment, such as debt service payments, real estate taxes
and insurance and maintenance costs, which are generally not reduced when circumstances cause a
reduction in revenues from a property;
• weather conditions, civil disturbances, natural disasters, or terrorist acts or acts of war which may result
in uninsured or underinsured losses; and
• decreases in the underlying value of our real estate.
2007 Annual Report 11
Our property acquisition activities subject us to various risks which could adversely affect our operating results. We
have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties,
including large portfolios that could increase our size and result in alterations to our capital structure. Our
acquisition activities and their success are subject to numerous risks, including, but not limited to:
• even if we enter into an acquisition agreement for a property, it is subject to customary closing conditions,
including completion of due diligence investigations, and we may be unable to complete that acquisition after
making a non-refundable deposit and incurring other acquisition-related costs;
• we may be unable to obtain financing for acquisitions on favorable terms or at all;
• acquired properties may fail to perform as expected;
•
the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates; and
• we may be unable quickly and efficiently to integrate new acquisitions into our existing operations.
These risks could have an adverse effect on our results of operations and financial condition.
Acquired properties may subject us to unknown liabilities which could adversely affect our operating results. We
may acquire properties subject to liabilities and without any recourse, or with only limited recourse against prior
owners or other third parties, with respect to unknown liabilities. As a result, if liability were asserted against us
based upon ownership of these properties, we might have to pay substantial sums to settle or contest it, which could
adversely affect our results of operations and cash flows. Unknown liabilities with respect to acquired properties
might include liabilities for clean-up of undisclosed environmental contamination; claims by tenants, vendors or
other persons against the former owners of the properties; liabilities incurred in the ordinary course of business; and
claims for indemnification by general partners, directors, officers and others indemnified by the former owners of
the properties.
Our geographic concentration in Minnesota and North Dakota may result in losses due to our significant exposure
to the effects of economic and real estate conditions in those markets. For the fiscal year ended April 30, 2007, we
received approximately 69.8% of our gross revenue from properties in Minnesota and North Dakota. 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. To the extent that weak economic or real estate conditions affect Minnesota
and/or North Dakota more severely than other areas of the country, our financial performance could be negatively
impacted.
If we are not able to renew leases or enter into new leases on favorable terms or at all as our existing leases expire,
our revenue, operating results and cash flows will be reduced. We may be unable to renew leases with our existing
tenants or enter into new leases with new tenants due to economic and other factors as our existing leases expire or
are terminated prior to the expiration of their current terms. As a result, we could lose a significant source of
revenue while remaining responsible for the payment of our obligations. In addition, even if we were able to renew
existing leases or enter into new leases in a timely manner, the terms of those leases may be less favorable to us than
the terms of expiring leases, because the rental rates of the renewal or new leases may be significantly lower than
those of the expiring leases, or tenant installation costs, including the cost of required renovations or concessions to
tenants, may be significant. If we are unable to enter into lease renewals or new leases on favorable terms or in a
timely manner for all or a substantial portion of space that is subject to expiring leases, our revenue, operating
results and cash flows will be adversely affected. As a result, our ability to make distributions to the holders of our
shares of beneficial interest may be adversely affected. As of April 30, 2007, approximately 722,000 square feet, or
7.2% of our total commercial property square footage, was vacant. Approximately 741 of our 9,397 apartment units,
or 7.9%, were vacant. As of April 30, 2007, leases covering approximately 10.5% of our total commercial segments
net rentable square footage will expire in fiscal year 2008, 9.1% in fiscal year 2009, 14.0% in fiscal year 2010,
14.4% in fiscal year 2011, and 14.2% in fiscal year 2012.
2007 Annual Report 12
We face potential adverse effects from commercial tenant bankruptcies or insolvencies. The bankruptcy or
insolvency of our commercial tenants may adversely affect the income produced by our properties. If a tenant
defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord. If a tenant files
for bankruptcy, we cannot evict the tenant solely because of such bankruptcy. A court, however, may authorize the
tenant to reject and terminate its lease with us. In such a case, our claim against the tenant for unpaid future rent
would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the
lease, and it is unlikely that a bankrupt tenant would pay in full amounts it owes us under a lease. This shortfall
could adversely affect our cash flow and results of operations. If a tenant experiences a downturn in its business or
other types of financial distress, it may be unable to make timely rental payments. Under some circumstances, we
may agree to partially or wholly terminate the lease in advance of the termination date in consideration for a lease
termination fee that is less than the agreed rental amount. Additionally, without regard to the manner in which a
lease termination occurs, we are likely to incur additional costs in the form of tenant improvements and leasing
commissions in our efforts to lease the space to a new tenant, as well as possibly lower rental rates reflective of
declines in market rents.
Because real estate investments are generally illiquid, and various factors limit our ability to dispose of assets, we
may not be able to sell properties when appropriate. Real estate investments are relatively illiquid and, therefore,
we have limited ability to vary our portfolio quickly in response to changes in economic or other conditions. In
addition, the prohibitions under the federal income tax laws on REITs holding property for sale and related
regulations may affect our ability to sell properties. Our ability to dispose of assets may also be limited by
constraints on our ability to utilize disposition proceeds to make acquisitions on financially attractive terms, and the
requirement that we take additional impairment charges on certain assets. More specifically, we are required to
distribute or pay tax on all capital gains generated from the sale of assets, and, in addition, a significant number of
our properties were acquired using limited partnership units of IRET Properties, our operating partnership, and are
subject to certain agreements which restrict our ability to sell such properties in transactions that would create
current taxable income to the former owners. As a result, we are motivated to structure the sale of these assets as
tax-free exchanges. To accomplish this we must identify attractive re-investment opportunities. Recently, while
capital market conditions have been favorable for dispositions, investment yields on acquisitions have been less
attractive due to the abundant capital inflows into the real estate sector. These considerations impact our decisions
on whether or not to dispose of certain of our assets.
Inability to manage our rapid growth effectively may adversely affect our operating results. We have experienced
significant growth in recent years, increasing our total assets from approximately $1,151.2 million at April 30, 2005,
to $1,435.4 million at April 30, 2007, principally through the acquisition of additional real estate properties. Subject
to our continued ability to raise equity capital and issue limited partnership 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 presents 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 on individual properties.
We may not be able to maintain similar rates of growth in the future, or manage our growth effectively. Our failure
to do so may have a material adverse effect on our financial condition and results of operations and ability to make
distributions to the holders of our shares of beneficial interest.
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 tenant
improvements. With respect to acquisition and development investment opportunities, this competition may cause us
2007 Annual Report 13
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 make accretive property acquisitions may adversely affect our ability to increase our operating
income. From our fiscal year ended April 30, 2005, to our fiscal year ended April 30, 2007, our operating income
increased from $9.9 million to $11.6 million. The acquisition of additional real estate properties is critical to our
ability to increase our operating income. If 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, 2007, our ratio of total indebtedness to
total Net Assets (as that term is used in our Bylaws, which usage is not in accordance with GAAP, “Net Assets”
means our total assets at cost before deducting depreciation or other non-cash reserves, less total liabilities) was
approximately 149.6%. As of April 30, 2006 and 2005, our percentage of total indebtedness to total Net Assets was
approximately 138.0% and 133.9%, respectively. Under our Bylaws we may increase our total indebtedness up to
300.0% of our Net Assets, or by an additional approximately $956 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. Additionally, our degree of leverage
could adversely affect our ability to obtain additional financing and may have an adverse effect on the market price
of our common shares.
Our inability to renew, repay or refinance our debt may result in losses. We incur a significant amount of debt in the
ordinary course of our business and in connection with acquisitions of real properties. In addition, because we are
unable to retain earnings as a result of the REIT distribution requirements, we will generally be required to refinance
debt that matures with additional debt or equity. 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.
We anticipate that only a small portion of the principal of our debt will be repaid prior to maturity. Therefore, we
are likely to need to refinance at least a portion of our outstanding debt as it matures. We cannot guarantee that any
refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us. If we cannot
refinance, extend or pay principal payments due at maturity with the proceeds of other capital transactions, such as
new equity capital, our cash flows may not be sufficient in all years to repay debt as it matures. Additionally, 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 our 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 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, 2007, $21.7 million, or approximately 2.3%, of the principal amount
of our total mortgage indebtedness was subject to variable interest rate agreements. If short-term interest rates rise,
our debt service payments on adjustable rate debt would increase, which would lower our net income and could
decrease our distributions to the holders of our shares of beneficial interest. In addition, portions of our fixed-rate
2007 Annual Report 14
indebtedness incurred for past property acquisitions come due on a periodic basis. Rising interest rates could limit
our ability to refinance this existing debt when it matures, and would 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.
We depend on distributions and other payments from our subsidiaries that they may be prohibited from making to
us, which could impair our ability to make distributions to holders of our shares of beneficial interest. Substantially
all of our assets are held through IRET Properties, our operating partnership, and other of our subsidiaries. As a
result, we depend on distributions and other payments from our subsidiaries in order to satisfy our financial
obligations and make distributions to the holders of our shares of beneficial interest. The ability of our subsidiaries
to make such distributions and other payments depends on their earnings, and may be subject to statutory or
contractual limitations. As an equity investor in our subsidiaries, our right to receive assets upon their liquidation or
reorganization effectively will be subordinated to the claims of their creditors. To the extent that we are recognized
as a creditor of such subsidiaries, our claims may still be subordinate to any security interest in or other lien on their
assets and to any of their debt or other obligations that are senior to our claims.
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
and comparable to coverage customarily obtained by owners of similar properties. 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 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. In addition, in
most cases we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage,
exposing us to the volatility of the insurance markets, including the possibility of rate increases. Any material
increase in insurance rates or decrease in available coverage in the future could adversely affect our business and
financial condition and results of operations, which could cause a decline in the market value of our securities.
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 senior housing/assisted living facilities) and may acquire more in the future. As of
April 30, 2007, our real estate portfolio consisted of 34 medical properties, with a total real estate investment
amount, net of accumulated depreciation, of $250.0 million, or approximately 19.1% of the total real estate
investment amount, net of accumulated depreciation, of our entire real estate portfolio. 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
2007 Annual Report 15
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 or other safety regulations and requirements may affect our costs
and investment strategies. Federal, state and local laws and regulations designed to improve disabled persons’ access
to and use of buildings, including the Americans with Disabilities Act of 1990, 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. 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. Noncompliance could result in the imposition of fines by government authorities or the award of
damages to private litigants. 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. Our properties are also subject to various other federal, state and local regulatory requirements, such as state
and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or
private damage awards. Additionally, in the event that existing requirements change, compliance with future
requirements may require significant unanticipated expenditures that may adversely affect our cash flow and results
of operations.
We may be responsible for potential liabilities under environmental laws. Under various federal, state and local
laws, ordinances and regulations, we, as 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 may impose liability without regard to whether we knew of, or were responsible for, the presence of the
hazardous or toxic substances. The presence of these substances, or the failure to properly remediate any property
containing these substances, may adversely affect our ability to sell or rent the affected property or to borrow funds
using the property as collateral. In arranging for the disposal or treatment of hazardous or toxic substances, we may
also be liable for the costs of removal of, or remediation of, these substances at that disposal or treatment facility,
whether or not we own or operate the facility. 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 at 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.
Environmental laws also govern the presence, maintenance and removal of asbestos, and require that owners or
operators of buildings containing asbestos properly manage and maintain the asbestos; notify and train those who
may come into contact with asbestos; and undertake special precautions if asbestos would be disturbed during
renovation or demolition of a building. Indoor air quality issues may also necessitate special investigation and
remediation. These air quality issues can result from inadequate ventilation, chemical contaminants from indoor or
outdoor sources, or biological contaminants such as molds, pollen, viruses and bacteria. Such asbestos or air quality
remediation programs could be costly, necessitate the temporary relocation of some or all of the property’s tenants
or require rehabilitation of an affected property.
It is generally our policy to obtain a Phase I environmental study on each property that we seek to acquire. A Phase
I environmental study generally includes a visual inspection of the property and the surrounding areas, an
examination of current and historical uses of the property and the surrounding areas and a review of relevant state
and federal documents, but does not involve invasive techniques such as soil and ground water sampling. If the
Phase I indicates any possible environmental problems, 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
2007 Annual Report 16
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,
and could adversely impact our relationships with lenders, industry personnel and potential tenants. 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. If we fail to manage effectively a transition to
new personnel, or if we fail to attract and retain qualified and experienced personnel on acceptable terms, our
business and prospects could be harmed. The location of our company headquarters in Minot, North Dakota, may
make it more difficult and expensive to attract, relocate and retain current and future officers and employees.
Failure to comply with changing regulation of corporate governance and public disclosure could have a material
adverse effect on our business, operating results and stock price, and continuing compliance will result in additional
expenses. The Sarbanes-Oxley Act of 2002, as well as new rules and standards subsequently implemented by the
Securities and Exchange Commission and NASDAQ, have required changes in some of our corporate governance
and accounting practices, and are creating uncertainty for us and many other public companies, due to varying
interpretations of the rules and their evolving application in practice. We expect these laws, rules and regulations to
increase our legal and financial compliance costs, and to subject us to additional risks. In particular, if we fail to
maintain the adequacy of our internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, as
such standards may be modified, supplemented or amended from time to time, a material misstatement could go
undetected, and we may not be able to ensure that we can conclude on an ongoing basis that we have effective
internal controls over financial reporting. Failure to maintain an effective internal control environment could have a
material adverse effect on our business, operating results, and stock price. Additionally, our efforts to comply with
Section 404 of the Sarbanes-Oxley Act and the related regulations have required, and we believe will continue to
require, the commitment of significant financial and managerial resources.
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. Even a technical or inadvertent mistake could endanger our REIT status.
The determination that we qualify as a REIT requires an ongoing analysis of various factual matters and
circumstances, some of which may not be within our control. For example, in order to qualify as a REIT, at least
95% of our gross income in any year must come from qualifying sources that are itemized in the REIT tax laws, and
we are prohibited from owning specified amounts of debt or equity securities of some issuers. Thus, to the extent
revenues from non-qualifying sources, such as income from third-party management services, represent 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. We are also required to make
distributions to the holders of our shares of beneficial interest of at least 90% of our REIT taxable income, excluding
net capital gains. The fact that we hold substantially all of our assets (except for qualified REIT subsidiaries)
through IRET Properties, our operating partnership, and its subsidiaries, and our ongoing reliance on factual
determinations, such as determinations related to the valuation of our assets, further complicates the application of
the REIT requirements for us. 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.
2007 Annual Report 17
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, we could be subject to increased state and local taxes, and, 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, we would no longer be able to deduct, and would not 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 had 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.
Failure of our operating partnership to qualify as a partnership would have a material adverse effect on us. We
believe that IRET Properties, our operating partnership, qualifies as a partnership for federal income tax purposes.
No assurance can be given, however, that the Internal Revenue Service will not challenge its status as a partnership
for federal income tax purposes, or that a court would not sustain such a challenge. If the Internal Revenue Service
were to be successful in treating IRET Properties as an entity that is taxable as a corporation, we would cease to
qualify as a REIT because the value of our ownership interest in IRET Properties would exceed 5% of our assets,
and because we would be considered to hold more than 10% of the voting securities of another corporation. Also,
the imposition of a corporate tax on IRET Properties would reduce significantly the amount of cash available for
distribution by it.
Certain provisions of our Articles of Amendment and 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,
(recently renamed the NASDAQ Global 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 of 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.
In order to maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions. In
order to maintain our REIT status, we may need to borrow funds on a short-term basis to meet the REIT distribution
requirements, even if the then-prevailing market conditions are not favorable for these borrowings. To qualify as a
REIT, we generally must distribute to our shareholders at least 90% of our net taxable income each year, excluding
net capital gains. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions made by us with respect to the calendar year are less than the sum of 85% of our ordinary
income, 95% of our capital gain net income for that year, and any undistributed taxable income from prior periods.
We intend to make distributions to our shareholders to comply with the 90% distribution requirement and to avoid
the nondeductible excise tax and will rely for this purpose on distributions from our operating partnership.
However, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to
fund required distributions as a result of differences in timing between the actual receipt of income and the
recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the
creation of reserves or required debt or amortization payments. The inability of our cash flows to cover our
distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity
securities in order to fund distributions required to maintain our REIT status.
2007 Annual Report 18
Our board of trustees may make changes to our major policies without approval of the holders of our shares of
beneficial interest. Our operating and financial policies, including policies relating to development and acquisition
of real estate, financing, growth, operations, indebtedness, capitalization and distributions, are exclusively
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. Accordingly, our
shareholders do not control these policies, and policy changes could adversely affect our financial condition and
results of operations.
Risks Related to the Purchase of our Shares of Beneficial Interest
Our future growth depends, in part, on our ability to raise additional equity capital, which will have the effect of
diluting the interests of the holders of our common shares. Our future growth depends upon, among other things, our
ability to raise equity capital and issue limited partnership units of IRET Properties. The issuance of additional
common shares, and of limited partnership units for which we subsequently issue common shares upon the
redemption of the limited partnership units, will dilute the interests of the current holders of our common shares.
Additionally, sales of substantial amounts of our common shares or preferred shares in the public market, or
issuances of our common shares upon redemption of limited partnership units in our operating partnership, or the
perception that such sales or issuances might occur, could adversely affect the market price of our common shares.
We may issue additional classes or series of our shares of beneficial interest with rights and preferences that are
superior to the rights and preferences of our common shares. Without the approval of the holders of our common
shares, our board of trustees may establish additional classes or series of our shares of beneficial interest, and such
classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences or other rights and preferences that are superior to the rights of the holders of our common
shares.
Payment of distributions on our shares of beneficial interest is not guaranteed. Our board of trustees must approve
our payment of distributions and may elect at any time, or from time to time, and for an indefinite duration, to
reduce the distributions payable on our shares of beneficial interest or to not pay distributions on our shares of
beneficial interest. Our board of trustees may reduce distributions for a variety of reasons, including, but not limited
to, the following:
•
•
•
operating and financial results below expectations that cannot support the current distribution payment;
unanticipated costs or cash requirements; or
a conclusion that the payment of distributions would cause us to breach the terms of certain agreements or
contracts, such as financial ratio covenants.
Our distributions are not eligible for the lower tax rate on dividends except in limited situations. The tax rate
applicable to qualifying corporate dividends received by individuals prior to 2009 has been reduced to a maximum
rate of 15%. This special tax rate is generally not applicable to distributions paid by a REIT, unless such
distributions represent earnings on which the REIT itself had been taxed. As a result, distributions (other than capital
gain distributions) paid by us to individual investors will generally be subject to the tax rates that are otherwise
applicable to ordinary income which, currently, are as high as 35%. This law change may make an investment in
our common shares comparatively less attractive relative to an investment in the shares of other entities which pay
dividends but are not formed as REITs.
Changes in market conditions could adversely affect the price of our shares of beneficial interest. As is the case with
any publicly-traded securities, certain factors outside of our control could influence the value of our common shares,
Series A preferred shares and any other classes or series of preferred shares of beneficial interest to be issued in the
future. These conditions include, but are not limited to:
2007 Annual Report 19
• market perception of REITs in general;
• market perception of REITs relative to other investment opportunities;
• market perception of our financial condition, performance, distributions and growth potential;
•
•
•
•
prevailing interest rates;
general economic and business conditions;
government action or regulation, including changes in the tax laws; and
relatively low trading volumes in securities of REITS.
Higher market interest rates may adversely affect the market price of our common shares, and low trading volume
on the NASDAQ Global Select Market may prevent the timely resale of our common shares. One of the factors that
investors may consider important in deciding whether to buy or sell shares of a REIT is the distribution with respect
to such REIT’s shares as a percentage of the price of those shares, relative to market interest rates. If market interest
rates go up, prospective purchasers of REIT shares may expect a higher distribution rate in order to maintain their
investment. Higher market interest rates would likely increase our borrowing costs and might decrease funds
available for distribution. Thus, higher market interest rates could cause the market price of our common shares to
decline. In addition, although our common shares of beneficial interest are listed on the NASDAQ Global Select
Market, the daily trading volume of our shares may be lower than the trading volume for other companies and
industries. The average daily trading volume for the period of May 1, 2006, through April 30, 2007, was 93,365
shares and the average monthly trading volume for the period of May 1, 2006 through April 30, 2007 was 2,111,026
shares. As a result of this trading volume, an owner of our common shares may encounter difficulty in selling our
shares in a timely manner and may incur a substantial loss.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
IRET is organized as a 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, Omaha and Minot offices, these real estate investments are generally managed by third-party
professional real estate management companies on our behalf.
Certain financial information from fiscal 2006 and 2005 was adjusted to reflect the effects of discontinued
operations. See the Property Dispositions section in Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, and the discussion in Note 12 to our Consolidated Financial Statements.
Total Real Estate Rental Revenue
As of April 30, 2007, our real estate portfolio consisted of 69 multi-family residential properties and 148
commercial properties, consisting of office, medical, industrial and retail properties, comprising 30.6%, 37.6%,
19.1%, 5.1%, and 7.6%, respectively, of our total real estate portfolio, based on the dollar amount of our original
investment plus capital improvements, net of accumulated depreciation, through April 30, 2007. 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:
2007 Annual Report 20
Fiscal Year
Ended April
30,
(in thousands)
2007
2006
2005
Multi-
Family
Residential
Gross
Revenue
Commercial
Office
Gross
Revenue
%
Commercial
Medical
Gross
Revenue
%
%
Commercial
Industrial
Gross
Revenue
$ 67,214 34.0% $ 73,640 37.2% $ 34,783 17.6% $
$ 61,906 36.3% $ 57,523 33.8% $ 31,670 18.6% $
$ 58,702 38.4% $ 48,604 31.8% $ 25,424 16.6% $
Commercial
Retail Gross
Revenue
%
8,091 4.1% $ 14,089
6,372 3.7% $ 12,977
6,459 4.2% $ 13,748
%
Total
Revenue
7.1% $ 197,817
7.6% $ 170,448
9.0% $ 152,937
Economic Occupancy Rates
Economic occupancy rates are shown below for each property type in each of the three most recent fiscal years
ended April 30. Economic occupancy represents actual rental revenues recognized for the period indicated as a
percentage of scheduled rental revenues for the period. Percentage rents, tenant concessions, straightline
adjustments and expense reimbursements are not considered in computing either actual revenues or scheduled rent
revenues. Scheduled rent 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 arrangements
with individual tenants vary from month-to-month to one-year leases. Leases on commercial properties generally
vary from month-to-month to 20 years.
Multi-Family Residential
Commercial - Office
Commercial - Medical
Commercial - Industrial
Commercial - Retail
Certain Lending Requirements
Fiscal Year Ended April 30,
2007
2005
2006
93.2% 91.6% 89.9%
91.9% 92.6% 90.8%
96.7% 96.1% 92.6%
95.1% 87.2% 86.8%
89.6% 89.2% 90.3%
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 a number of 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 and Leasing of Our Real Estate Assets
The day-to-day management and leasing of our real estate assets has, with the exception of certain properties
managed by our Minneapolis, Omaha and Minot offices, generally been handled by locally-based third-party
professional real estate management companies. Day-to-day management activities include the negotiation of
leases, the preparation of proposed operating budgets, and the supervision of routine maintenance and capital
improvements that have been authorized by us. All decisions 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 then implemented by the third-party management companies.
In adopting this model of third-party management of our real estate assets, we considered that under most
circumstances the use of locally-based management companies would allow us to benefit from 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 own properties. However, following our September 2006 acquisition from
Magnum Resources, Inc. of a portfolio of office properties, we opened an office in Omaha, Nebraska, and property
management offices in St. Louis and Kansas City, and hired property management personnel previously with
Magnum Resources to continue managing these properties for us, as our employees. During fiscal year 2007, we
have added additional property management personnel in our Minneapolis office, and have brought in-house the
management of certain of our properties that we considered suitable for internal management. As of April 30, 2007,
we have under internal management 74 properties. We believe that in certain of the locations in which we own
properties, economies of scale and our own knowledge of the applicable market may make internal management
more efficient and cost effective than retaining third-party management companies, and accordingly we plan to
2007 Annual Report 21
continue evaluating our portfolio to identify other properties that may be candidates for management by our own
employees.
As of April 30, 2007, we had property management contracts and/or leasing agreements with the following
companies:
Residential Management
Commercial Management and Leasing
• Builder’s Management & Investment Co., Inc.
• ConAm Management Corporation
• Investors Management & Marketing, Inc.
• Illies Nohava Heinen Property Management, Inc.
• Kahler Property Management
• Paramark Corp.
• A & L Management Services, LLC
• AJB, Inc. dba Points West Realty Management
• Bayport Properties US, Inc.
• CB Richard Ellis
• Colliers Turley Martin Tucker Company
• Dakota Commercial and Development Co.
• Frauenshuh Companies
• Ferguson Property Management Services, L.C.
• Illies Nohava Heinen Property Management, Inc.
• Inland Companies, Inc.
• Mega Corporation, dba CB Richard Ellis/Mega
• Nath Management, Inc.
• Northco Real Estate Services, LLC
• Paramount Real Estate Corporation
• Results Unlimited, Inc.
• The Remada Company
• Thornton Oliver Keller, Commercial, LLC
• United Properties, LLC
• Vector Property Services, LLC
Generally, 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 that is generally calculated as a percentage of
the net rent to be paid over the term of the lease. We believe that the broker commissions paid by us conform to
market and industry standards, and accordingly are commercially reasonable.
Summary of Real Estate Investment Portfolio
As of April 30, (in thousands)
Real Estate Investments
Real Estate Owned
Less Accumulated
Depreciation
2007
%
2006
%
2005
%
$
1,489,287
$ 1,269,423
$ 1,179,856
$
Unimproved Land
Mortgage Loans Receivable
Total Real Estate Investments $
(180,544)
1,308,743
7,392
399
1,316,534
(148,607)
99.4% $ 1,120,816
5,175
0.6%
409
0.0%
100.0% $ 1,126,400
(118,512)
99.5% $ 1,061,344
5,382
0.5%
619
0.0%
100.0% $ 1,067,345
99.4%
0.5%
0.1%
100.0%
Summary of Individual Properties Owned as of April 30, 2007
The following table presents information regarding our 217 properties owned as of April 30, 2007. 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, 2007:
2007 Annual Report 22
(* = Real estate not owned in fee; all or a portion is leased under a ground lease)
(** = Primarily Parking Lot Rental)
Property Name and Location
MULTI-FAMILY RESIDENTIAL
17 South Main Apartments - Minot, ND
405 Grant Avenue (Lonetree) - Harvey, ND
408 1st Street SE - Minot, ND
Applewood On The Green - Omaha, NE
Arbors Apartments - S. Sioux City, NE
Boulder Court - Eagan, MN
Brookfield Village Apartments - Topeka, KS
Candlelight Apartments - Fargo, ND
Canyon Lake Apartments - Rapid City, SD
Castle Rock - Billings, MT
Chateau Apartments - Minot, ND
Colonial Villa - Burnsville, MN
Colton Heights Properties - Minot, ND
Cottonwood Lake I - Bismarck, ND
Cottonwood Lake II - Bismarck, ND
Cottonwood Lake III - Bismarck, ND
Country Meadows I - Billings, MT
Country Meadows II - Billings, MT
Crestview Apartments - Bismarck, ND
Crown Colony Apartments - Topeka, KS
Dakota Hill At Valley Ranch - Irving, TX
East Park Apartments - Sioux Falls, SD
Forest Park Estates - Grand Forks, ND
Heritage Manor - Rochester, MN
Indian Hills Apartments - Sioux City, IA
Jenner Properties - Grand Forks, ND
Kirkwood Manor - Bismarck, ND
Lancaster Place - St. Cloud, MN
Legacy Buildings I & II - Grand Forks, ND
Legacy Building III - Grand Forks, ND
Legacy Building IV- Grand Forks, ND
Legacy Building V - Grand Forks, ND
Legacy Building VI - Grand Forks, ND
Legacy Building VII - Grand Forks, ND
Magic City Apartments - Minot, ND
Meadows Phase I - Jamestown, ND
Meadows Phase II - Jamestown, ND
Meadows Phase III - Jamestown, ND
Miramont Apartments - Fort Collins, CO
Monticello Apartments - Monticello, MN
Neighborhood Apartments - Colorado Springs, CO
North Pointe - Bismarck, ND
Oakmont Apartments - Sioux Falls, SD
Oakwood - Sioux Falls, SD
Olympic Village - Billings, MT
Olympik Village Apartments - Rochester, MN
Oxbow - Sioux Falls, SD
Park Meadows I - Waite Park, MN
Park Meadows II & III - Waite Park, MN
(in thousands)
Investment
(initial cost plus
improvements)
Fiscal 2007
Economic
Occupancy
Units
4 $
12
**
234
192
115
160
66
109
165
64
240
18
67
67
67
67
67
152
220
504
84
270
182
120
90
108
84
116
67
67
36
36
36
200
27
27
27
210
60
192
49
80
160
274
140
120
120
240
216
273
48
12,584
7,316
7,175
7,804
1,796
4,371
6,579
3,117
15,456
1,042
4,652
4,407
4,841
4,360
4,502
5,174
11,546
39,261
2,804
9,248
8,352
3,232
2,161
4,118
3,724
7,521
4,001
6,879
2,878
3,020
2,897
5,597
1,875
1,957
2,216
15,245
4,425
12,993
2,492
5,373
6,412
12,802
7,426
5,471
4,645
9,184
94.8%
90.2%
100.0%
90.0%
92.5%
93.3%
95.0%
95.4%
87.1%
82.1%
99.3%
85.1%
100.0%
98.3%
98.4%
98.9%
91.1%
92.5%
98.9%
93.5%
92.3%
97.5%
91.9%
97.3%
92.6%
92.3%
98.2%
87.3%
92.8%
95.9%
94.2%
92.0%
90.6%
90.0%
97.7%
99.3%
100.0%
99.7%
97.4%
95.2%
91.3%
99.3%
94.4%
91.9%
98.3%
93.4%
94.5%
90.0%
89.6%
2007 Annual Report 23
Property Name and Location
MULTI-FAMILY RESIDENTIAL - continued
Pebble Springs - Bismarck, ND
Pinecone Apartments - Fort Collins, CO
Pinehurst Apartments - Billings, MT
Pointe West - Rapid City, SD
Prairie Winds Apartments - Sioux Falls, SD
Prairiewood Meadows - Fargo, ND
Quarry Ridge Apartments - Rochester, MN
Ridge Oaks - Sioux City, IA
Rimrock Apartments - Billings, MT
Rocky Meadows - Billings, MT
Rum River Apartments - Isanti, MN
St. Cloud Student Housing - St. Cloud, MN
Sherwood Apartments - Topeka, KS
Southbrook & Mariposa - 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 & Grafton, ND
Sycamore Village Apartments - Sioux Falls, SD
Terrace On The Green - Moorhead, MN
Thomasbrook Apartments - Lincoln, NE
Valley Park Manor - Grand Forks, ND
Village Green - Rochester, MN
West Stonehill - Waite Park, MN
Westwood Park - Bismarck, ND
Winchester - Rochester, MN
Woodridge Apartments - Rochester, MN
TOTAL MULTI-FAMILY RESIDENTIAL
Property Name and Location
OFFICE
1st Avenue Building - Minot, ND
401 South Main - Minot, ND
2030 Cliff Road - Eagan, MN
7800 W Brown Deer Road - Milwaukee, WI
American Corporate Center - Mendota Heights, MN
Ameritrade - Omaha, NE
Benton Business Park - Sauk Rapids, MN
Bloomington Business Plaza - Bloomington, MN
Brenwood - Minnetonka, MN
Brook Valley I - La Vista, NE
Burnsville Bluffs II - Burnsville, MN
Cold Spring Center - St. Cloud, MN
Corporate Center West - Omaha, NE
Crosstown Centre - Eden Prairie, MN
Dewey Hill Business Center - Edina, MN
Farnam Executive Center - Omaha, NE
(in thousands)
Investment
(initial cost plus
improvements)
Fiscal 2007
Economic
Occupancy
Units
16 $
195
21
90
48
85
154
132
78
98
72
389
300
54
195
24
164
73
73
90
48
116
264
168
36
313
64
115
110
9,397 $
821
14,183
812
4,723
2,232
3,498
14,688
5,122
4,136
7,001
5,666
7,859
17,206
5,640
10,879
844
6,818
7,166
7,650
1,884
1,634
3,003
11,254
5,910
2,608
13,993
2,672
6,938
7,336
489,644
99.5%
95.8%
98.1%
91.8%
93.7%
96.6%
96.2%
87.9%
97.4%
97.2%
100.0%
87.9%
93.9%
94.3%
99.6%
96.9%
95.0%
89.0%
90.8%
79.4%
91.8%
87.3%
90.6%
94.0%
94.1%
92.4%
97.9%
93.3%
89.8%
93.2%
Approximate
Net Rentable
Square Footage
(in thousands)
Investment
(initial cost plus
improvements)
Fiscal 2007
Economic
Occupancy
15,443 $
8,443
13,374
175,610
137,180
73,742
30,464
121,064
176,587
30,000
45,158
75,745
141,724
185,000
73,338
94,832
690
643
982
11,042
20,264
8,348
1,479
8,041
16,104
2,045
3,213
8,861
21,389
17,933
5,335
13,592
84.4%
41.0%
100.0%
100.0%
93.3%
100.0%
100.0%
77.5%
55.2%
100.0%
75.5%
93.4%
100.0%
100.0%
61.8%
100.0%
2007 Annual Report 24
Property Name and Location
OFFICE - continued
Flagship - Eden Prairie, MN
Gateway Corporate Center - Woodbury, MN
Golden Hills Office Center - Golden Valley, MN
Great Plains - Fargo, ND
Highlands Ranch I - Highlands Ranch, CO
Highlands Ranch II - Highlands Ranch, CO
Interlachen Corporate Center - Eagan, MN
Mendota Office Center I - Mendota Heights, MN
Mendota Office Center II - Mendota Heights, MN
Mendota Office Center III - Mendota Heights, MN
Mendota Office Center IV - Mendota Heights, MN
Minnesota National Bank - Duluth, MN
Minnetonka Office Building - Minnetonka, MN
Miracle Hills One - Omaha, NE
Nicollett VII - Burnsville, MN
Northgate I - Maple Grove, MN
Northgate II - Maple Grove, MN
Northpark Corporate Center - Arden Hills, MN
Pacific Hills - Omaha, NE
Pillsbury Business Center - Bloomington, MN
Plaza VII - Boise, ID
Plymouth I - Plymouth, MN
Plymouth II - Plymouth, MN
Plymouth III - Plymouth, MN
Plymouth IV - Plymouth, MN
Plymouth V - Plymouth, MN
Prairie Oak Business Center - Eden Prairie, MN
Rapid City, SD - 900 Concourse Drive - Rapid City, SD
Riverport - Maryland Heights, MO
Southeast Tech Center - Eagan, MN
Spring Valley IV - Omaha, NE
Spring Valley V - Omaha, NE
Spring Valley X - Omaha, NE
Spring Valley XI - Omaha, NE
Superior Office Building - Duluth, MN
TCA Building - Eagan, MN
Three Paramount Plaza - Bloomington, MN
Thresher Square - Minneapolis, MN
Timberlands – Leawood, KS
UHC Office - International Falls, MN
US Bank Financial Center - Bloomington, MN
Viromed - Eden Prairie, MN
Wayroad Corporate - Minnetonka, MN
Wells Fargo Center - St Cloud, MN
West River Business Park - Waite Park, MN
Westgate - Boise, ID
Wirth Corporate Center - Golden Valley, MN
Woodlands Plaza IV - Maryland Heights, MO
TOTAL OFFICE
Approximate
Net Rentable
Square Footage
(in thousands)
Investment
(initial cost plus
improvements)
Fiscal 2007
Economic
Occupancy
138,825 $
59,827
190,758
122,040
71,430
81,173
105,084
59,852
88,398
60,776
72,231
16,937
4,000
84,475
120,752
79,297
26,000
146,087
143,061
42,220
28,994
26,186
26,186
26,186
53,298
73,632
36,481
75,815
122,567
58,300
15,700
24,171
24,000
24,000
20,000
103,640
75,526
117,144
90,315
30,000
153,947
48,700
62,383
86,428
24,000
103,342
74,568
60,942
23,571
9,419
23,482
15,375
10,629
11,520
16,726
7,203
11,738
6,788
8,705
1,745
411
12,347
7,387
7,789
2,445
17,352
16,276
1,904
3,536
1,672
1,643
2,012
6,386
8,503
5,756
7,088
20,873
6,338
1,138
1,364
1,228
1,265
2,539
9,903
8,044
12,074
14,676
2,505
16,689
4,864
5,631
9,791
1,476
12,231
8,991
5,442
4,777,378 $ 536,431
94.8%
100.0%
89.9%
100.0%
100.0%
100.0%
96.3%
77.4%
90.8%
97.9%
100.0%
62.3%
70.7%
86.2%
93.2%
100.0%
100.0%
95.4%
97.0%
94.5%
76.9%
100.0%
65.6%
100.0%
100.0%
94.5%
72.3%
100.0%
100.0%
100.0%
100.0%
61.6%
91.0%
100.0%
95.5%
85.9%
92.4%
57.8%
98.6%
100.0%
96.4%
100.0%
61.1%
96.6%
69.2%
100.0%
97.5%
83.4%
91.9%
2007 Annual Report 25
Property Name and Location
MEDICAL
2800 Medical Building - Minneapolis, MN
6517 Drew Avenue South - Edina, MN
Abbott Northwest - Sartell, MN*
Airport Medical - Bloomington, MN*
Denfeld Clinic - Duluth, MN
Edgewood Vista - Bismarck, ND
Edgewood Vista - Brainerd, MN
Edgewood Vista - Duluth, MN
Edgewood Vista - Fremont, NE
Edgewood Vista - Hastings, NE
Edgewood Vista - Hermantown, MN
Edgewood Vista - Kalispell, MT
Edgewood Vista - Missoula, MT
Edgewood Vista - Omaha, NE
Edgewood Vista - Spearfish, SD
Edgewood Vista - Virginia, MN
Edgewood Vista Phase II - Virginia, MN
Fresenius - Duluth, MN
Fox River Cottages - Grand Chute, WI
Garden View - St. Paul, MN*
Gateway Clinic - Sandstone, MN*
Health East St John & Woodwinds - Maplewood & Woodbury, MN
High Pointe Health Campus - Lake Elmo, MN
Mariner Clinic - Superior, WI*
Nebraska Orthopaedic Hospital - Omaha, NE*
Park Dental - Brooklyn Center, MN
Pavilion I - Duluth, MN*
Pavilion II - Duluth, MN
Ritchie Medical Plaza - St Paul, MN
St. Michael Clinic - St. Michael, MN
Southdale FM - Edina, MN
Southdale SMB - Edina, MN*
Stevens Point - Stevens Point, WI
Wells Clinic - Hibbing, MN
TOTAL MEDICAL
INDUSTRIAL
API Building - Duluth, MN
Bloomington 2000 - Bloomington, MN
Bodycote Industrial Building - Eden Prairie, MN
Dixon Avenue Industrial Park - Des Moines, IA
Lexington Commerce Center - Eagan, MN
Lighthouse - Duluth, MN
Metal Improvement Company - New Brighton, MN
Roseville 2929 - Roseville, MN
Stone Container - Fargo, ND
Stone Container - Roseville, MN
Waconia Industrial Building - Waconia, MN
Wilson’s Leather - Brooklyn Park, MN
Winsted Industrial Building - Winsted, MN
TOTAL INDUSTRIAL
Approximate
Net Rentable
Square Footage
(in thousands)
Investment
(initial cost plus
improvements)
Fiscal 2007
Economic
Occupancy
54,490
12,140
60,095
24,218
20,512
74,112
82,535
119,349
6,042
6,042
160,485
5,895
10,150
6,042
60,161
70,313
76,870
9,052
26,336
43,404
12,444
114,316
60,294
28,928
61,758
9,998
45,081
73,000
50,409
10,796
67,409
195,983
47,950
18,810
1,725,419
$
8,751
1,515
12,653
4,678
3,099
9,704
9,586
11,709
552
572
11,235
589
962
641
6,121
7,070
5,111
1,572
3,712
7,588
1,765
21,601
12,038
3,788
20,512
2,952
10,144
19,325
9,547
2,587
13,999
34,131
12,309
2,661
$ 274,779
35,000 $
100,850
41,880
657,142
90,260
59,145
49,620
172,057
195,075
229,072
29,440
353,049
41,685
2,054,275
$
1,723
6,229
2,152
13,143
6,175
1,884
2,507
9,237
7,141
8,250
2,004
13,805
1,007
75,257
81.6%
75.0%
96.8%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
91.8%
100.0%
92.2%
86.6%
100.0%
100.0%
96.7%
100.0%
100.0%
100.0%
93.3%
90.7%
19.6%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
95.1%
2007 Annual Report 26
Property Name and Location
RETAIL
17 South Main - Minot, ND
Anoka Strip Center - Anoka, MN
Burnsville 1 Strip Center - Burnsville, MN
Burnsville 2 Strip Center - Burnsville, MN
Champlin South Pond - Champlin, MN
Chan West Village - Chanhassen, MN
Dakota West Plaza - Minot, ND
Duluth Denfeld Retail - Duluth, MN
Duluth NAPA - Duluth, MN
Eagan 1 Retail Center - Eagan, MN
Eagan 2 Retail Center - Eagan, MN
Eagan 3 C Store - Eagan, MN
East Grand Station - East Grand Forks, MN
Fargo Express Center - Fargo, ND
Fargo Express SC Pad 1 - Fargo, ND
Forest Lake Auto - Forest Lake, MN
Forest Lake Westlake Center - Forest Lake, MN
Grand Forks Carmike - Grand Forks, ND
Grand Forks Medpark Mall - Grand Forks, ND
Jamestown Buffalo Mall - Jamestown, ND
Jamestown Business Center - Jamestown, ND
Kalispell Retail Center - Kalispell, MT
Kentwood Thomasville Furniture - Kentwood, MI
Ladysmith Pamida - Ladysmith, WI
Lakeville Strip Center - Lakeville, MN
Livingston Pamida - Livingston, MT
Minot Arrowhead SC - Minot, ND
Minot Plaza - Minot, ND
Monticello C Store - Monticello, MN
Omaha Barnes & Noble - Omaha, NE
Pine City C Store - Pine City, MN
Pine City Evergreen Square - Pine City, MN
Rochester Maplewood Square - Rochester, MN
St. Cloud Westgate SC - St. Cloud, MN
Weston Retail - Weston, WI
Weston Walgreens - Weston, WI
TOTAL RETAIL
SUBTOTAL
Approximate
Net Rentable
Square Footage
(in thousands)
Investment
(initial cost plus
improvements)
Fiscal 2007
Economic
Occupancy
2,454
10,625
8,526
8,400
26,315
137,572
16,921
36,546
15,597
5,400
13,901
3,886
16,103
30,227
4,000
6,836
100,570
28,528
59,117
212,671
100,864
52,000
16,080
41,000
9,488
41,200
76,133
10,843
3,575
27,500
4,800
63,225
118,398
104,928
25,644
14,820
1,454,693
$
279
733
1,001
804
3,635
20,899
602
4,985
1,933
518
1,371
784
1,392
1,441
368
501
8,187
2,546
5,697
5,009
1,935
3,470
2,122
1,501
1,971
1,800
6,086
595
889
3,699
442
3,028
11,976
6,841
1,681
2,455
$ 113,176
$ 1,489,287
86.1%
63.9%
90.8%
85.9%
76.8%
97.9%
91.1%
94.2%
86.6%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99.8%
84.6%
89.2%
100.0%
100.0%
100.0%
75.1%
100.0%
94.4%
100.0%
76.7%
100.0%
100.0%
100.0%
62.6%
64.8%
100.0%
100.0%
89.6%
2007 Annual Report 27
Property Name and Location
UNIMPROVED LAND
2828 Chicago Avenue - Minneapolis, MN
Cottonwood Lake IV - Bismarck, ND
Eagan Unimproved Land - Eagan, MN
Kalispell Unimproved Land - Kalispell, MT
Minot Unimproved Land - Minot, ND
Monticello Unimproved Land - Monticello, MN
Quarry Ridge Unimproved Land - Rochester, MN
River Falls Unimproved Land - River Falls, WI
St. Michael Unimproved Property - St. Michael, MN
Weston Unimproved Land - Weston, WI
TOTAL UNIMPROVED LAND
(in thousands)
Investment
(initial cost plus
improvements)
$
$
254
1,366
423
1,424
1,767
89
942
205
111
811
7,392
TOTAL UNITS – RESIDENTIAL SEGMENT
TOTAL SQUARE FOOTAGE – COMMERCIAL SEGMENTS
TOTAL INVESTMENTS
9,397
10,011,765
$1,496,679
Mortgages Payable
As of April 30, 2007, individual first mortgage loans on the above properties totaled $951.1 million. Of the $951.1
million of mortgage indebtedness on April 30, 2007, $21.7 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 $929.4 million. Principal payments due on our mortgage indebtedness are as
follows:
Year Ended April 30,
2008
2009
2010
2011
2012
Later Years
Total
Mortgage Principal
(in thousands)
$
30,831
47,701
127,747
101,282
85,713
557,865
951,139
$
Future Minimum Lease Payments
The future minimum lease payments to be received under leases for commercial properties in place as of April 30,
2007, assuming that no options to renew or buy out the leases are exercised, are as follows:
Year Ended April 30,
2008
2009
2010
2011
2012
Later Years
Total
Lease Payments
(in thousands)
91,368
82,328
74,402
61,703
47,268
241,836
598,905
$
$
2007 Annual Report 28
Capital Expenditures
Each year we 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, 2007, we spent approximately $30.9 million on capital improvements.
Contracts or Options to Sell
We have granted options to purchase certain of our properties to tenants in these properties, under lease agreements
with the tenant. In general, these options grant the tenant the right to purchase the property at the greater of such
property’s appraised value or an annual compounded increase of 2.0% to 2.5% of the initial cost to us. As of April
30, 2007, our properties subject to purchase options, the cost, plus improvements, of each such property and its gross
rental revenue are as follows:
Property
Edgewood Vista - Bismarck, ND
Edgewood Vista - Brainerd, MN
Edgewood Vista - Duluth, MN
Edgewood Vista - Fremont, NE
Edgewood Vista - Hastings, NE
Edgewood Vista - Hermantown, MN
Edgewood Vista - Kalispell, MT
Edgewood Vista - Missoula, MT
Edgewood Vista - Omaha, NE
Edgewood Vista - Spearfish, SD
Edgewood Vista - Virginia, MN
Fox River Cottage - Grand Chute, WI
Great Plains Software - Fargo, ND
Healtheast - Woodbury & Maplewood, MN
Minnesota National Bank - Duluth, MN
St. Michael Clinic - St. Michael, MN
Stevens Point - Stevens Point, WI
Total
Properties by State
(in thousands)
Gross Rental Revenue
Property Cost
10,868
$
10,634
11,709
552
572
12,325
588
962
641
6,757
12,182
3,860
15,375
21,601
2,104
2,587
12,504
125,821
$
$
$
2007
980
968
1,472
68
68
1,124
72
132
76
608
1,320
260
1,876
2,032
135
35
630
11,856
$
$
2006
653
645
1,472
62
63
749
62
120
70
406
1,320
0
1,876
2,032
100
0
102
9,732
$
$
2005
0
0
1,406
59
61
0
62
120
67
0
1,320
0
1,876
2,032
189
0
0
7,192
The following table presents, as of April 30, 2007, an analysis by state of each of the five major segments of
properties owned by us - multi-family residential, office, medical, industrial and retail:
(in thousands)
State
Minnesota
North Dakota
Nebraska
Colorado
Kansas
Montana
South Dakota
Texas
Wisconsin
All Other States
Total
Multi-Family
Residential
Commercial
Medical
Commercial
Office
137,294 $ 343,694 $ 215,317 $
16,708
115,752
78,992
31,154
22,149
42,421
14,676
42,196
0
40,192
7,088
33,020
39,261
0
11,042
0
42,082
8,354
489,644 $ 536,431 $ 274,779 $
9,704
22,277
0
0
1,551
6,121
0
19,809
0
$
$
Commercial
Industrial
Commercial
Retail
71,890 $ 823,168
54,973 $
173,863
24,558
7,141
136,122
3,699
0
64,570
0
0
56,872
0
0
47,013
5,270
0
46,229
0
0
39,261
0
0
36,488
5,637
0
13,143
65,701
2,122
75,257 $ 113,176 $ 1,489,287
Total % of Total
55.3%
11.7%
9.1%
4.3%
3.8%
3.2%
3.1%
2.6%
2.5%
4.4%
100.0%
2007 Annual Report 29
Item 3. Legal Proceedings
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, 2007.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Quarterly Share and Distribution Data
Our common shares of beneficial interest trade on the NASDAQ Global Select Market under the symbol IRETS. On
June 29, 2007, the last reported sales price per share of our common shares on the NASDAQ National Market was
$10.33. The following table sets forth the quarterly high and low closing sales prices per share of our common
shares as reported on the NASDAQ Global Select Market, and the distributions per common share and limited
partnership unit declared with respect to each period.
Quarter Ended
Fiscal Year 2007
April 30, 2007
January 31, 2007
October 31, 2006
July 31, 2006
Quarter Ended
Fiscal Year 2006
April 30, 2006
January 31, 2006
October 31, 2005
July 31, 2005
High
$ 11.00 $
10.68
10.15
9.50
High
$
9.67 $
9.79
10.16
10.24
Low
9.66
9.65
9.22
8.85
Low
9.11
9.20
8.85
9.04
Distributions Declared
(per share and unit)
$
0.1660
0.1655
0.1650
0.1645
Distributions Declared
(per share and unit)
$
0.1640
0.1635
0.1630
0.1625
It is IRET’s policy to pay quarterly distributions to our common shareholders and unitholders, 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 June 29, 2007, the Company had approximately 4,196 common shareholders of record, and 48,581,306
common shares of beneficial interest (plus 20,388,754 limited partnership units potentially convertible into
20,388,754 common shares) were outstanding.
Unregistered Sales of Shares
Sales of Unregistered Securities. During the fiscal years ended April 30, 2007, 2006 and 2005, respectively, we
issued an aggregate of 219,587, 342,242 and 595,810 unregistered common shares to holders of limited partnership
units of IRET Properties upon redemption and conversion of an aggregate of 219,587, 342,242 and 595,810 limited
partnership 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.
2007 Annual Report 30
Issuer Purchases of Equity Securities. The Company did not repurchase any of its equity securities during fiscal year
2007, except for repurchases of nominal amounts of fractional shares, at shareholder request.
Comparative Stock Performance
The information contained in this Comparative Stock Performance Graph section shall not be deemed to be
“soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the
liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate
it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Set forth below is a graph that compares, for the five fiscal years commencing May 1, 2002, and ending April 30,
2007, the cumulative total returns for the Company’s common shares with the comparable cumulative total return of
two indexes, the Standard & Poor’s 500 Index (“S&P 500”), and the NAREIT Equity Index, which is an index
prepared by the National Association of Real Estate Investment Trusts, which includes all tax-qualified equity
REITs listed on the New York Stock Exchange, the American Stock Exchange and the NASDAQ Market.
The performance graph assumes that at the close of trading on April 30, 2002, the last trading day of fiscal year
2002, $100 was invested in the Company’s common shares and in each of the indexes. The comparison assumes the
reinvestment of all distributions. Cumulative total shareholder returns for the Company’s common shares, the S&P
500 and the NAREIT Equity Index are based on the Company’s fiscal year ending April 30.
$300
$250
$200
$150
$100
$50
$0
4/02
4/03
4/04
4/05
4/06
4/07
Investors Real Estate Trust
S&P 500
NAREIT Equity
Investors Real Estate Trust
NAREIT Equity
S&P 500
Source: Research Data Group, Inc.
FY02
100.00
100.00
100.00
FY03
103.92
99.94
86.69
FY04
108.41
124.78
106.52
FY05
109.07
167.97
113.28
FY06
120.14
212.62
130.74
FY07
143.08
268.88
150.66
2007 Annual Report 31
Item 6. Selected Financial Data
Set forth below is selected financial data on a historical basis for the Company for the five most recent fiscal years
ended April 30. This information should be read in conjunction with the consolidated financial statements and notes
appearing elsewhere in this Annual Report on Form 10-K.
Consolidated Income Statement Data
Revenue
Income before minority interest and
discontinued operations and gain on
sale of other investments
Gain on sale of real estate, land, and
other investments
Minority interest portion of operating
partnership income
Income from continuing operations
Income from discontinued operations
Net income
Consolidated Balance Sheet Data
Total real estate investments
Total assets
Mortgages payable
Shareholders’ equity
Consolidated Per Common Share Data
(basic and diluted)
Income from continuing operations
Income from discontinued operations
Net income
Distributions
CALENDAR YEAR
Tax status of distributions
Capital gain
Ordinary income
Return of capital
(in thousands, except per share data)
2007
2006
2005
2004
2003
$ 197,817
$ 170,448
$ 152,937
$ 130,458 $ 109,780
$
$
$
$
$
$
14,300
4,602
$
$
11,138
3,293
$
$
9,920
8,605
$
$
10,190 $
13,655
662 $
1,595
(3,229) $
11,059
$
3,051
$
14,110
$
(1,896) $
$
8,781
$
2,786
$
11,567
(1,738) $
$
7,806
$
7,270
$
15,076
(2,173) $
7,418 $
2,022 $
9,440 $
(3,190)
9,841
2,407
12,248
$ 1,316,534
$ 1,435,389
$ 951,139
$ 284,969
$ 1,126,400
$ 1,207,315
$ 765,890
$ 289,560
$ 1,067,345
$ 1,151,158
$ 708,558
$ 295,172
$ 991,923 $ 845,325
$ 1,076,317 $ 885,681
$ 633,124 $ 539,397
$ 278,629 $ 214,761
$
$
$
$
.18
.06
.24
.66
$
$
$
$
.14
.06
.20
.65
$
$
$
$
.13
.17
.30
.65
$
$
$
$
.19 $
.05 $
.24 $
.64 $
.31
.07
.38
.63
2006
2005
2004
2003
2002
1.22% 16.05%
0.00%
0.00%
42.01% 41.48% 44.65% 58.45% 68.29%
56.77% 42.47% 55.35% 37.67% 31.71%
3.88%
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, 2007.
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, 2007, our real estate portfolio consisted of 69 multi-family residential properties containing
9,397 apartment units and having a total real estate investment amount net of accumulated depreciation of $400.1
million, and 148 commercial properties containing approximately 10.0 million square feet of leasable space and
having a total real estate investment amount net of accumulated depreciation of $908.6 million. Our commercial
properties consist of:
•
64 office properties containing approximately 4.8 million square feet of leasable space and having a total
real estate investment amount net of accumulated depreciation of $492.2 million;
2007 Annual Report 32
•
•
•
34 medical properties (including senior housing/assisted living facilities) containing approximately 1.7
million square feet of leasable space and having a total real estate investment amount net of accumulated
depreciation of $250.0 million;
13 industrial properties (including miscellaneous commercial properties) containing approximately 2.0
million square feet of leasable space and having a total real estate investment amount net of accumulated
depreciation of $67.0 million; and
37 retail properties containing approximately 1.5 million square feet of leasable space and having a total
real estate investment amount net of accumulated depreciation of $99.4 million.
Our primary source of income and cash is rents associated with multi-family residential and commercial leases. 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.
During fiscal year 2007, IRET continued to operate in a challenging acquisition environment. Liquidity levels in the
Company’s markets remained high, and much of the abundant investment capital available continued to seek
commercial real estate. Accordingly, identifying potential acquisition properties that met IRET’s investment criteria
remained difficult during fiscal year 2007, although deal flow continued to be robust. Despite these challenges,
during fiscal year 2007 the Company closed on the largest acquisition in its history, when it purchased from
subsidiaries of Omaha-based Magnum Resources, Inc. a portfolio of nine office complexes, consisting of 15
buildings totaling approximately 936,568 rentable square feet, for aggregate consideration of approximately $140.8
million (the “Magnum Portfolio). As of the closing date of the acquisition, the Magnum Portfolio was approximately
94% leased to multiple tenants. The acquisition increased the leasable space of IRET’s office portfolio by
approximately 25%.
In addition to the Magnum Portfolio, the Company during fiscal year 2007 added five apartment properties, one
office property, two medical properties (excluding the acquisition of the remaining ownership interest in a medical
office building previously partially owned by the Company), two industrial properties, two retail properties
(including the construction of a retail drug store property to replace an existing older retail property owned by the
Company) and six parcels of unimproved land to its investment portfolio, for an aggregate purchase price and
construction cost (including the Magnum properties) of approximately $220.7 million. During fiscal year 2007, the
Company disposed of two apartment complexes, one office property, one medical (assisted living) property, 11
small retail properties and two parcels of unimproved land, for sale prices totaling approximately $22.5 million.
Total revenues of IRET Properties, our operating partnership, increased by $27.4 million to $197.8 million in fiscal
year 2007, compared to $170.4 million in fiscal year 2006. This increase was primarily attributable to the addition
of new real estate properties. Operating income increased in fiscal year 2007, to $11.6 million from $9.9 million in
fiscal year 2006. We estimate that rent concessions offered to tenants during the twelve months ended April 30,
2007 lowered our operating revenues by approximately $5.0 million, compared to $5.2 million for fiscal year 2006.
Expenses increased during fiscal year 2007 as well, with real estate taxes, maintenance, utilities and property
management expense all increasing from year-earlier levels. While some of this increase was due to existing real
estate, the majority was due to the addition of new real estate properties to our portfolio.
Economic occupancy levels in our total commercial property segments increased slightly to 93.2% in fiscal year
2007 from 92.8% in fiscal year 2006. Economic occupancy rates in our commercial medical, industrial and retail
segments increased; the economic occupancy rate in our commercial office segment decreased. Economic
occupancy in our multi-family residential segment increased to 93.2% in fiscal year 2007, from 91.6% in fiscal year
2006.
Additional information and more detailed discussions of our fiscal year 2007 operating results are found in the
following sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
2007 Annual Report 33
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 for impairment, if any.
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 and a 5-12 year estimated life for furniture, fixtures and
equipment. 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 estimated based on the present
value 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 Company performs this analysis on a lease-by-lease basis.
The capitalized above-market or below-market intangible is amortized to rental income 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 and the Company has no significant continuing involvement with the property sold. 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 ($238,000 as of April 30, 2007) 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 ($660,000 as of April
30, 2007) and from mortgage loans ($12,500 as of April 30, 2007). The straight-lining of rents receivable arises
from earnings recognized in excess of amounts currently due under lease agreements. Management exercises
2007 Annual Report 34
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.
Revenue Recognition - The Company has the following revenue sources and revenue recognition 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 increases and abated rent under
the leases. Certain leases provide for tenant occupancy during periods for which no rent is due or where
minimum rent payments increase during the term of the lease. Rental revenue is recorded for the full term of
each lease on a straight-line basis. Accordingly, the Company records a receivable from tenants for rents that
it expects to collect over the remaining lease term as deferred rents receivable. When the Company acquires a
property, the term of the existing leases is considered to commence as of the acquisition date for the purposes
of this calculation. Revenue recognition is considered to be critical because the evaluation of the reliability of
such deferred rents receivable involves management's assumptions relating to such tenant's viability.
• 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
104: Revenue Recognition, 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 – revenue 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 revenue 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 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.
The Company’s taxable income is affected by a number of factors, including, but not limited to, the following: that
the Company’s tenants perform their obligations under their leases with the Company; that the Company’s tax and
accounting positions do not change; and that the number of issued and outstanding shares of the Company’s
common stock remain relatively unchanged. These factors, which impact the Company’s taxable income, are
subject to change, and many are outside the control of the Company. If actual results vary, the Company’s taxable
income may change.
Recent Accounting Pronouncements
For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our
operations, please refer to Note 2 to our Consolidated Financial Statements.
RESULTS OF OPERATIONS
Revenues
Total revenues for fiscal year 2007 were $197.8 million, compared to $170.4 million in fiscal year 2006 and $152.9
million in fiscal year 2005. Revenues during fiscal year 2007 were $27.4 million greater than revenues in fiscal year
2006 and revenues during fiscal year 2006 were $17.5 million greater than in fiscal year 2005.
2007 Annual Report 35
For fiscal 2007, the increase in revenue of $27.4 million resulted from:
Rent from 15 properties acquired in fiscal year 2006 in excess of that received in 2006
from the same 15 properties
Rent from 21 properties acquired in fiscal year 2007
Increase in rental income on existing properties
Decrease in lease termination fees
For fiscal 2006, the increase in revenue of $17.5 million resulted from:
Rent from 16 properties acquired in fiscal year 2005 in excess of that received in 2005
from the same 16 properties
Rent from 15 properties acquired in fiscal year 2006
Increase in rental income on existing properties
An increase in straight-line rents
A decrease in rent from properties sold in fiscal year 2007
(in thousands)
$
5,443
16,948
5,609
(631)
$ 27,369
(in thousands)
$
9,816
6,704
860
203
(72)
$ 17,511
As illustrated above, the substantial majority (81.8% in fiscal year 2007 and 94.3% in fiscal year 2006) of the
increase in our gross revenue for fiscal years 2007 and 2006 resulted from the addition of new real estate properties
to the IRET Properties’ portfolio, with 20.5% and 1.2%, respectively, resulting from rental increases on existing
properties.. For the next 12 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, continued widespread demand for real estate from traditional and non-traditional investors has resulted in
a reduction in the investment returns from all types of real estate. This reduction in rates of return will be further
exacerbated to the extent that rises in interest rates increase borrowing costs. While we were able to take advantage
of lower borrowing costs for most of our recent acquisitions, our borrowing costs are rising. The majority of our
debt is fixed and not prepayable without significant prepayment costs and fees.
Gain on Sale of Real Estate
The Company realized a gain on sale of real estate, land and other investments for fiscal year 2007 of $4.6 million.
This compares to $3.3 million of gain on sale of real estate recognized in fiscal 2006 and $8.6 million recognized in
fiscal 2005. A list of the properties sold during fiscal year 2007, showing sales price, depreciated cost plus sales
costs and net gain is included in this Item 7 under the caption “Property Dispositions.”
Net Operating Income
The following tables report segment financial information. We measure the performance of our segments based on
net operating income (“NOI”), which we define as total revenues less property operating expenses and real estate
taxes. We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating
real estate because it provides a measure of core operations that is unaffected by depreciation, amortization,
financing and general and administrative expense. NOI does not represent cash generated by operating activities in
accordance with GAAP and should not be considered an alternative to net income, net income available for common
shareholders or cash flow from operating activities as a measure of financial performance.
The following tables show revenues, operating expenses and NOI by reportable operating segment for fiscal years
2007, 2006 and 2005. For a reconciliation of net operating income of reportable segments to operating income as
reported, see Note 11 of the Notes to Consolidated Financial Statements in this report.
The tables also show net operating income by reportable operating segment on a stabilized property and non-
stabilized property basis. Stabilized properties are properties owned and in operation 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 the stabilized property category).
This comparison allows the Company to evaluate the performance of existing properties and their contribution to net
income. Management believes that 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
2007 Annual Report 36
this measure to assess whether 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.
Year Ended April 30, 2007
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
Real estate revenue
Real estate expenses
Utilities
Maintenance
Real estate taxes
Insurance
Property management
Total expenses
Net operating income
Stabilized net operating income
Non-stabilized net operating income
Total net operating income
$
67,214 $
73,640 $
34,783 $
8,091 $
14,089 $ 197,817
6,711
8,640
7,322
1,094
7,808
31,575 $
35,639 $
6,290
9,245
10,844
773
3,348
$
30,500
43,140 $
1,771
2,611
2,322
274
1,697
$
8,675
26,108 $
34,245
1,394
35,639 $
32,428
10,712
43,140 $
19,795
6,313
26,108 $
57
218
755
75
148
1,253
6,838
6,317
521
6,838
$
$
$
15,206
377
21,714
1,000
23,322
2,079
2,382
166
13,854
853
76,478
4,475 $
9,614 $ 121,339
9,229
385
102,014
19,325
9,614 $ 121,339
$
$
$
Year Ended April 30, 2006
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
Real estate revenue
Real estate expenses
Utilities
Maintenance
Real estate taxes
Insurance
Property management
Total expenses
Net operating income
Stabilized net operating income
Non-stabilized net operating income
Total net operating income
$
61,906 $
57,523 $
31,670 $
6,372 $
12,977 $ 170,448
6,587
7,872
6,982
1,399
7,010
29,850 $
$
32,056
4,805
7,582
8,022
705
2,488
23,602 $
33,921 $
1,600
2,471
2,283
298
1,662
8,314 $
23,356 $
31,948
108
32,056 $
33,451
470
33,921 $
19,101
4,255
23,356 $
91
201
771
81
108
1,252 $
5,120 $
5,120
0
5,120 $
$
$
$
13,473
390
19,233
1,107
19,785
1,727
2,662
179
11,809
541
3,944 $
66,962
9,033 $ 103,486
9,033
0
98,653
4,833
9,033 $ 103,486
Year Ended April 30, 2005
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
Real estate revenue
Real estate expenses
Utilities
Maintenance
Real estate taxes
Insurance
Property management
Total expenses
Net operating income
Stabilized net operating income
Non-stabilized net operating income
Total net operating income
$
58,702 $
48,604 $
25,424 $
6,459 $
13,748 $ 152,937
5,663
6,755
6,903
1,490
6,638
27,449 $
$
31,253
3,386
6,312
7,147
536
2,100
19,481 $
29,123 $
1,142
1,870
1,616
277
1,273
6,178 $
19,246 $
60
185
797
78
104
1,224 $
5,235 $
372
953
1,728
182
286
3,521 $
10,227 $
30,948
305
31,253 $
25,845
3,278
29,123 $
15,427
3,819
19,246 $
5,235
0
5,235 $
10,227
0
10,227 $
10,623
16,075
18,191
2,563
10,401
57,853
95,084
87,682
7,402
95,084
$
$
$
2007 Annual Report 37
Changes in Expenses and Net Income
Operating income for fiscal year 2007 increased to $11.6 million from $9.9 million in fiscal year 2006, and from
$8.9 million in fiscal year 2005. Our net income available to common shareholders for fiscal year 2007 was $11.7
million, compared to $9.2 million in fiscal year 2006 and $12.7 million in fiscal year 2005. On a per common share
basis, net income was $.24 per common share in fiscal year 2007, compared to $.20 per common share in fiscal year
2006 and $.30 in fiscal year 2005.
These changes in operating income and net income result from the changes in revenues and expenses detailed
below:
Changes in net income available to common shareholders for fiscal year 2007 resulted from:
An increase in net operating income primarily due to new acquisitions
An increase in interest income
An increase in non-operating income
An increase in income from discontinued operations, net
A decrease in minority interest of other partnership’s income
These increases were offset by:
An increase in depreciation/amortization expense related to real estate investments
An increase in interest expense primarily due to debt placed on new acquisitions
An increase in minority interest of operating partnership income
An increase in operating expenses, administrative, advisory & trustee services
An increase in amortization related to non-real estate investments
A decrease in gain on sale of other investments
Total increase in fiscal 2007 net income available to common shareholders
Changes in net income available to common shareholders for fiscal year 2006 resulted from:
An increase in net operating income primarily due to new acquisitions
An increase in interest income
An increase in gain on sale of other investments
An increase in non-operating income
A decrease in operating expenses, administrative, advisory & trustee services
These increases were offset by:
An increase in depreciation/amortization expense related to real estate investments
An increase in interest expense primarily due to debt placed on new acquisitions
An increase in amortization related to non-real estate investments
An increase in minority interest of operating partnership income
An increase in minority interest of other partnership’s income
A decrease in income from discontinued operations, net
Total decrease in fiscal 2006 net income available to common shareholders
(in thousands)
17,853
$
1,128
297
265
510
(7,528)
(7,723)
(1,333)
(528)
(337)
(61)
2,543
$
(in thousands)
8,402
$
238
20
16
191
(3,980)
(3,334)
(315)
(158)
(105)
(4,484)
(3,509)
$
Factors Impacting Net Income During Fiscal Year 2007 as Compared to Fiscal Year 2006
Our results during the fiscal year ended April 30, 2007, compared to the fiscal year ended April 30, 2006, show
continued overall improvement in occupancy levels and rental revenues. Economic occupancy rates in four of our
five segments increased compared to the year-earlier period, and real estate revenue increased in fiscal year 2007
compared to fiscal year 2006 in all of our reportable segments. Net income available to common shareholders
increased to $11.7 million in fiscal year 2007, compared to $9.2 million in fiscal year 2006. Revenue increases
during fiscal year 2007 were offset somewhat by increases in maintenance, utilities, mortgage interest due to
increased borrowing, real estate taxes, property management and amortization expense. Insurance expense
decreased in fiscal year 2007.
2007 Annual Report 38
• Economic Occupancy. During fiscal year 2007, economic occupancy levels at our properties improved over
year-earlier levels in each of our reportable segments other than commercial office. Economic occupancy
represents actual rental revenues recognized for the period indicated as a percentage of scheduled rental
revenues for the period. Percentage rents, tenant concessions, straightline adjustments and expense
reimbursements are not considered in computing either actual revenues or scheduled rent revenues.
Economic occupancy rates on a stabilized property basis for the fiscal year ended April 30, 2007 compared to
the fiscal year ended April 30, 2006 are shown below:
Multi-Family Residential
Commercial Office
Commercial Medical
Commercial Industrial
Commercial Retail
Fiscal Year Ended April 30,
2007
93.2%
90.5%
96.8%
94.8%
89.3%
2006
91.7%
92.6%
95.3%
87.2%
89.2%
% Change
1.5%
(2.1%)
1.5%
7.6%
0.1%
During fiscal year 2007, results continued to improve at our multi-family residential properties. While we
had limited success in increasing scheduled rental rates at our apartment communities, the construction of
competing apartment units, single-family homes and condominium units has abated in most of our markets.
Combined with positive absorption of previously-constructed housing, this reduction in construction of
competing product has allowed us to reduce vacancy and tenant concessions in our multi-family residential
segment. We also saw during fiscal year 2007 an accelerating demand for industrial space, although as in
past periods rental rates in this segment continue to remain at levels lower than in prior fiscal years. We did
not see in fiscal year 2007 any consistent sustained demand for commercial office space or for existing
smaller retail developments, which comprise a majority of IRET’s retail portfolio. However, our expectation
is that demand in IRET’s markets for our multi-family, medical, office and industrial locations will strengthen
in fiscal year 2008.
• Concessions. Our overall level of tenant concessions declined slightly for the fiscal year ended April 30,
2007 compared to the year-earlier period. To maintain or increase physical occupancy levels at our properties,
we may offer tenant incentives, generally in the form of lower or abated rents, which results in decreased
revenues and income from operations at our properties. Rent concessions offered during the fiscal year ended
April 30, 2007 lowered our operating revenues by approximately $5.0 million, as compared to an
approximately $5.2 million reduction in operating revenues attributable to rent concessions offered in fiscal
year 2006.
The following table shows the approximate reduction in our operating revenues due to rent concessions, by
segment, for the fiscal years ended April 30, 2007 and 2006:
Multi-Family Residential
Commercial Office
Commercial Medical
Commercial Industrial
Commercial Retail
Total
(in thousands)
Fiscal Year Ended April 30,
2007
3,147
1,769
70
14
22
5,022
$
$
$
$
$
$
2006
3,848
1,213
74
53
23
5,211
%Change
(18.2%)
45.8%
(5.4%)
(73.6%)
(4.3%)
(3.6%)
$
$
$
$
$
$
•
Increased Maintenance Expense. Maintenance expenses totaled $21.7 million in fiscal year 2007, compared
to $19.2 million in fiscal year 2006. Maintenance expenses at properties newly acquired in fiscal years 2007
and 2006 added $2.5 million to the maintenance expense category during fiscal year 2007, while maintenance
expenses at existing properties decreased by $31,000, resulting in a net increase of $2.5 million or 13.0% in
maintenance expenses in fiscal year 2007 compared to fiscal year 2006. 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 general rent increases.
2007 Annual Report 39
Maintenance expenses by reportable segment for the fiscal years ended April 30, 2007 and 2006 are as
follows:
2007
2006
% change (2007 vs. 2006)
(in thousands)
Multi-Family
Residential
8,640
$
7,872
$
9.8%
Commercial
Office
9,245
7,582
21.9%
$
$
Commercial
Medical
2,611
2,471
5.7%
$
$
Commercial
Industrial
218
201
8.5%
$
$
Commercial
Retail
1,000
1,107
(9.7%)
$
$
•
Increased Utility Expense. Utility expense totaled $15.2 million in fiscal year 2007, compared to $13.5
million in fiscal year 2006. Utility expenses at properties newly acquired in fiscal years 2007 and 2006 added
$1.6 million to the utility expense category during fiscal year 2007, while utility expenses at existing
properties increased by $88,000, for a total increase of $1.7 million or 12.6% in utility expenses in fiscal year
2007 compared to fiscal year 2006.
Utility expenses by reportable segment for the fiscal years ended April 30, 2007 and 2006 are as follows:
2007
2006
% change (2007 vs. 2006)
(in thousands)
Multi-Family
Residential
6,711
$
6,587
$
1.9%
Commercial
Office
6,290
4,805
30.9%
$
$
Commercial
Medical
1,771
1,600
10.7%
$
$
Commercial
Industrial
57
91
(37.4%)
$
$
Commercial
Retail
377
390
(3.3%)
$
$
•
Increased Mortgage Interest Expense. Our mortgage interest expense increased approximately $7.1 million,
or 14.3%, to approximately $56.6 million during fiscal year 2007, compared to $49.5 million in fiscal year
2006. Mortgage interest expense for properties newly acquired in fiscal years 2007 and 2006 added $7.7
million to our total mortgage interest expense in fiscal year 2007, while mortgage interest expense on existing
properties decreased $627,000. Our overall weighted average interest rate on all outstanding mortgage debt
was 6.43% as of April 30, 2007, compared to 6.63% as of April 30, 2006. Our mortgage debt increased
approximately $185.2 million, or 24.2%, to approximately $951.1 million as of April 30, 2007, compared to
$765.9 million on April 30, 2006.
Mortgage interest expense by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as
follows:
2007
2006
% change (2007 vs. 2006)
(in thousands)
Multi-Family
Residential
18,745
$
17,969
$
4.3%
Commercial
Office
20,157
14,774
36.4%
$
$
Commercial
Medical
11,291
10,534
7.2%
$
$
Commercial
Industrial
2,325
2,240
3.8%
$
$
Commercial
Retail
4,070
4,029
1.0%
$
$
•
Increased Amortization Expense. In accordance with SFAS No. 141, Business Combinations, which
establishes standards for valuing in-place leases in purchase transactions, the Company allocates a portion of
the purchase price paid for properties to in-place lease intangible assets. The amortization period of these
intangible assets is the term of the lease, rather than the estimated life of the buildings and improvements.
The Company accordingly initially records additional amortization expense due to this shorter amortization
period, which has the effect in the short term of decreasing the Company’s net income available to common
shareholders, as computed in accordance with GAAP. Amortization expense related to in-places leases
totaled $9.2 million in fiscal year 2007, compared to $6.7 million in fiscal year 2006. The increase in
amortization expense in fiscal year 2007 compared to fiscal year 2006 was primarily due to a significant
acquisition completed by the Company in the second quarter of fiscal year 2007, of a portfolio of properties
from Magnum Resources, Inc.
2007 Annual Report 40
•
Increased Real Estate Tax Expense. Real estate taxes on properties newly acquired in fiscal years 2007 and
2006 added $2.9 million to real estate tax expense, while real estate taxes on existing properties increased by
$638,000, for a total increase of $3.5 million or 17.7% in real estate tax expense in fiscal year 2007 compared
to fiscal year 2006, from $19.8 million to $23.3 million.
Real estate tax expense by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as
follows:
2007
2006
% change (2007 vs. 2006)
(in thousands)
Multi-Family
Residential
7,322
$
6,982
$
4.9%
Commercial
Office
10,844
8,022
35.2%
$
$
Commercial
Medical
2,322
2,283
1.7%
$
$
Commercial
Industrial
755
771
(2.1%)
$
$
Commercial
Retail
2,079
1,727
20.4%
$
$
• Decreased Insurance Expense. Insurance expense decreased in fiscal year 2007 compared to fiscal year
2006, from $2.7 million to $2.4 million, a decrease of approximately 11.1%. Insurance expense at properties
newly-acquired in fiscal years 2007 and 2006 totaled $208,000, while insurance expense at existing properties
decreased $488,000, for a net decrease of $280,000 in insurance expense in fiscal year 2007 compared to
fiscal year 2006.
Insurance expense by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as follows:
2007
2006
% change (2007 vs. 2006)
(in thousands)
Multi-Family
Residential
1,094
$
1,399
$
(21.8%)
Commercial
Office
773
705
9.6%
$
$
Commercial
Medical
274
298
(8.1%)
$
$
Commercial
Industrial
75
81
(7.4%)
$
$
Commercial
Retail
166
179
(7.3%)
$
$
•
Increased Property Management Expense. Property management expense increased in fiscal year 2007
compared to fiscal year 2006, from $11.8 million to $13.9 million, an increase of $2.1 million or
approximately 17.8%. Of this increase, $1.3 million is attributable to existing properties, while $829,000 is
due to properties acquired in fiscal years 2007 and 2006. The increase at existing properties is primarily due
to an increase in property revenue resulting in higher management fees payable (management fees are
generally a percentage of rents received).
Property management expense by reportable segment for the fiscal years ended April 30, 2007 and 2006 is as
follows:
2007
2006
% change (2007 vs. 2006)
(in thousands)
Multi-Family
Residential
7,808
$
7,010
$
11.4%
Commercial
Office
3,348
2,488
34.6%
$
$
Commercial
Medical
1,697
1,662
2.1%
$
$
Commercial
Industrial
148
108
37.0%
$
$
Commercial
Retail
853
541
57.7%
$
$
Factors Impacting Net Income During Fiscal Year 2006 as Compared to Fiscal Year 2005
A discussion of the factors having the greatest impact on our operational results in fiscal year 2006 compared to
fiscal year 2005 is set forth below.
•
Increased concessions and limited ability to raise rents. During fiscal year 2006, economic occupancy levels
at our multi-family residential and commercial properties improved. However, our level of tenant
concessions continued to rise, and, despite some positive developments in the general economy, a majority of
the markets in which we operated continued to experience lower-than-expected levels of job creation and
demand for multi-family residential and commercial space. Accordingly, we were unable to raise rents
2007 Annual Report 41
significantly at the majority of our properties. Economic occupancy levels at our stabilized multi-family
residential properties increased throughout our entire portfolio during fiscal year 2006, to 92.0% compared to
90.1% at the end of fiscal year 2005. “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.
Economic occupancy levels at our stabilized total commercial segment properties increased to 91.1% during
fiscal year 2006, from 89.9% at the end of fiscal year 2005. On an individual commercial segment basis,
economic occupancy levels at our stabilized commercial office, medical and industrial properties increased to
91.5%, 94.1% and 87.2%, respectively, during fiscal year 2006, from 90.2%, 90.9% and 86.8%, respectively,
during fiscal year 2005. Economic vacancy levels at our stabilized commercial retail properties decreased to
89.3% during fiscal year 2006, compared to 89.8% during fiscal year 2005.
To maintain physical occupancy levels at our multi-family residential properties, we may offer tenant
incentives, generally in the form of lower rents, which results in decreased revenues and income from
operations at our stabilized properties. We estimate that rent concessions offered during fiscal year 2006
lowered our operating revenues by approximately $5.2 million, compared to an estimated approximately $4.4
million reduction in operating revenues attributable to rent concessions offered in fiscal year 2005.
•
•
•
•
Increased real estate taxes. Real estate taxes on properties newly acquired in fiscal years 2005 and 2006
added $2.0 million to the real estate taxes category, while real estate taxes on existing properties decreased by
$406,000, resulting in a net increase in real estate tax expense of $1.6 million, or 8.1%, for fiscal year 2006,
as compared to fiscal year 2005.
Increased maintenance expense. Maintenance expenses at our properties increased by $3.2 million, or 19.7%
for the fiscal year ended April 30, 2006, as compared to fiscal year 2005. Of the increased maintenance costs
for the fiscal year ended April 30, 2006, $2.4 million, or 74.5%, was attributable to the addition of new real
estate acquired in fiscal 2006 and 2005, while $774,000, or 25.5%, was 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 non-commercial real estate properties, any
increase in our maintenance costs must be collected from tenants in the form of a general rent increase.
Increased utility expense. The utility expense category increased by $2.9 million, or 26.4%, for the fiscal
year ended April 30, 2006, compared to fiscal year 2005. Of the increased utility costs, $1.6 million, or
56.5%, was attributable to the addition of new real estate acquired in fiscal years 2006 and 2005, while $1.2
million, or 43.5%, 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. For our other
non-commercial real estate properties, any increase in our utility costs must be collected from tenants in the
form of a general rent increase. Additionally, 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 mortgage interest expense. Our mortgage debt increased $57.3 million, or 8.1%, for the fiscal year
ended April 30, 2006 compared to fiscal year 2005, to approximately $765.9 million from approximately
$708.6 million. Mortgage interest expense at properties newly acquired in fiscal years 2005 and 2006 added
$4.6 million to the mortgage interest expense category, while mortgage interest expense at existing properties
decreased by $549,000, resulting in a net increase of $4.0 million or 8.8% in mortgage interest expense in
fiscal year 2006 compared to fiscal year 2005.
2007 Annual Report 42
Comparison of Results from Commercial and Residential Properties
The following table presents an analysis of the relative investment in (corresponding to “Property owned” on the
balance sheet, i.e., cost), and net operating income of, our commercial and multi-family residential properties over
the past three fiscal years:
Fiscal Years Ended April 30
Real Estate Investments – (cost)
Multi-Family Residential
Commercial Office
Commercial Medical
Commercial Industrial
Commercial Retail
Total
Net Operating Income
Multi-Family Residential
Commercial Office
Commercial Medical
Commercial Industrial
Commercial Retail
Total
(in thousands)
2007
(in thousands)
2006
%
(in thousands)
2005
%
%
$ 489,644
536,431
274,779
75,257
113,176
37.5%
30.0%
17.4%
4.9%
10.2%
$1,489,287 100.0% $1,269,423 100.0% $1,179,856 100.0%
35.6% $ 442,109
353,536
30.2%
205,333
20.7%
58,233
4.7%
120,645
8.8%
32.9% $ 452,251
383,280
36.0%
263,300
18.4%
59,583
5.1%
111,009
7.6%
$
35,639
43,140
26,108
6,838
9,614
29.4% $
35.6%
21.5%
5.6%
7.9%
32,056
33,921
23,356
5,120
9,033
31.0% $
32.8%
22.6%
4.9%
8.7%
$ 121,339 100.0% $ 103,486 100.0% $
32.9%
31,253
30.6%
29,123
20.2%
19,246
5.5%
5,235
10,227
10.8%
95,084 100.0%
Analysis of Lease Expirations and Credit Risk
The following table shows the annual lease expiration percentages and base rent of expiring leases for the total
commercial segments properties owned by us as of April 30, 2007, for fiscal years 2008 through 2017, and the
leases that will expire during fiscal year 2018 and beyond. Our multi-family residential properties are excluded from
this table, since residential leases are generally for a one-year term.
Fiscal Year of Lease Expiration
2008(1)
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018 and beyond
Totals
Square Footage of
Expiring Leases
1,144,829
981,320
1,263,332
1,271,698
1,354,986
663,706
351,009
172,080
330,083
221,267
1,535,816
9,290,126
Percentage of Total
Commercial Segments
Leased Square Footage
12.3%
10.6%
13.6%
13.7%
14.6%
7.1%
3.8%
1.9%
3.5%
2.4%
16.5%
100.0%
Annualized Base
Rent of Expiring
Leases at Expiration
10,288,847
$
8,905,984
13,797,728
14,147,317
13,905,217
6,450,824
4,378,351
2,682,858
2,809,501
4,039,499
16,757,407
98,163,533
$
Percentage of Total
Commercial Segments
Annualized Base Rent
10.5%
9.1%
14.0%
14.4%
14.2%
6.6%
4.5%
2.7%
2.8%
4.1%
17.1%
100.0%
(1)
Includes month-to-month leases for approximately 189,900 square feet, with annualized base rent totaling approximately $1,102,662.
2007 Annual Report 43
The following table lists our top ten commercial tenants on April 30, 2007, for the total commercial segments
properties owned by us as of April 30, 2007, based upon minimum rents in place as of April 30, 2007:
Lessee
Edgewood Vista Senior Living, Inc.
St. Lukes Hospital of Duluth, Inc.
Applied Underwriters
Best Buy Co., Inc. (NYSE: BBY)
UGS Corp.
HealthEast Care System
Microsoft (Nasdaq: MSFT)
Smurfit - Stone Container (Nasdaq: SSCC)
Allina Health System
Nebraska Orthopaedic Hospital
All Others
Total Monthly Rent as of April 30, 2007
Property Acquisitions
(in thousands)
% of Total Commercial
Segments Minimum
Rents as of April 30, 2007
6.4%
4.0%
2.5%
2.4%
1.9%
1.9%
1.7%
1.7%
1.7%
1.6%
74.2%
100.0%
IRET Properties paid approximately $220.7 million for real estate properties added to its portfolio during fiscal year
2007, compared to $93.4 million in fiscal year 2006. The fiscal year 2007 and 2006 additions are detailed below.
Fiscal 2007 (May 1, 2006 to April 30, 2007)
Fiscal 2007 Acquisitions
Multi-Family Residential
192-unit Arbors Apartments – Sioux City, NE
154-unit Quarry Ridge Apartments – Rochester, MN
389-unit St. Cloud Apartments – St. Cloud, MN
120-unit Indian Hills Apartments – Sioux City, IA
72-unit Rum River Apartments – Isanti, MN
Commercial Property – Office
143,061 sq. ft. Pacific Hills – Omaha, NE
141,724 sq. ft. Corporate Center West – Omaha, NE
94,832 sq. ft. Farnam Executive Center – Omaha, NE
84,475 sq. ft. Miracle Hills One – Omaha, NE
60,942 sq. ft. Woodlands Plaza IV – Maryland Heights, MO
122,567 sq. ft. Riverport – Maryland Heights, MO
90,315 sq. ft. Timberlands – Leawood, KS
138,825 sq. ft. Flagship – Eden Prairie, MN
59,827 sq. ft. Gateway Corporate Center – Woodbury, MN
71,430 sq. ft. Highlands Ranch I – Highlands Ranch, CO
Commercial Property – Medical (including senior housing/assisted living)
26,336 sq. ft. Fox River Cottages – Grand Chute, WI
10,796 sq. ft. St. Michael Clinic – St. Michael, MN*
Commercial Property – Industrial
100,850 sq. ft. Bloomington 2000 – Bloomington, MN
172,057 sq. ft. Roseville 2929 – Roseville, MN
Commercial Property – Retail
16,921 sq. ft. Dakota West Plaza – Minot, ND
14,820 sq. ft. Weston Walgreens – Weston, WI**
(in thousands)
Acquisition Cost
$
7,000
14,570
7,800
3,120
5,650
38,140
16,502
21,497
12,853
11,950
5,840
21,906
14,546
26,094
9,612
12,250
153,050
3,200
2,587
5,787
6,750
10,300
17,050
625
2,144
2,769
2007 Annual Report 44
Fiscal 2007 Acquisitions
Unimproved Land
Monticello Unimproved Parcel (City) – Monticello, MN
St. Michaels Unimproved – St. Michael, MN
Monticello Unimproved Parcel (Other) – Monticello, MN
Weston Unimproved – Weston, WI
Quarry Ridge Unimproved – Rochester MN
Minot Prairie Green – Minot, ND
Total Fiscal 2007 Property Acquisitions
* Development property placed in service March 1, 2007.
** Development property placed in service May 1, 2006.
(in thousands)
Acquisition Cost
5
320
75
800
930
1,750
3,880
220,676
$
In addition to the above property acquisitions, in the fourth quarter of fiscal year 2007 IRET Properties issued
limited partnership units with a value at issuance of approximately $5.25 million to purchase an approximately 29%
ownership interest in a limited liability company in which IRET already owned a 71% interest. This entity owns the
Southdale Medical Building in Edina, Minnesota, and with its acquisition of this remaining ownership interest,
IRET now is the sole owner of this property.
Fiscal 2006 (May 1, 2005 to April 30, 2006)
Fiscal 2006 Acquisitions
Multi-Family Residential
36-unit Legacy 7 - Grand Forks, ND
Commercial Property—Office
15,594 sq. ft. Spring Valley IV Office Building - Omaha, NE
23,913 sq. ft. Spring Valley V Office Building - Omaha, NE
24,000 sq. ft. Spring Valley X Office Building - Omaha, NE
24,000 sq. ft. Spring Valley XI Office Building - Omaha, NE
30,000 sq. ft. Brook Valley I Office Building - La Vista, NE
146,087 sq. ft. Northpark Corporate Center - Arden Hills, MN
Commercial Property—Medical (including assisted living)
74,112 sq. ft. Edgewood Vista - Bismarck, ND
60,161 sq. ft. Edgewood Vista - Spearfish, SD
82,535 sq. ft. Edgewood Vista - Brainerd, MN
160,485 sq. ft. Edgewood Vista - Hermantown, MN
50,409 sq. ft. Ritchie Medical Plaza - St. Paul, MN
54,971 sq. ft. 2800 Medical Building - Minneapolis, MN
47,950 sq. ft. Stevens Point - Stevens Point, WI
Unimproved Land
Stevens Point Unimproved - Stevens Point, WI
Eagan Unimproved Land - Eagan, MN
Total Fiscal 2006 Property Acquisitions
Property Dispositions
(in thousands)
Acquisition Cost
$
$
2,445
2,445
1,250
1,375
1,275
1,250
2,100
18,597
25,847
10,750
6,687
10,625
12,315
10,750
9,000
4,215
64,342
310
423
733
93,367
During fiscal year 2007, IRET Properties disposed of 14 properties and two parcels of unimproved land for an
aggregate sale price of $22.5 million, compared to 17 properties and two unimproved parcels sold for an aggregate
sale price of $14.2 million in total during fiscal year 2006. Real estate assets sold by IRET during fiscal years 2007
and 2006 were as follows:
2007 Annual Report 45
Fiscal 2007 Dispositions
Multi-Family Residential
60-unit Clearwater Apartments – Boise, ID
122-unit Park East Apartments – Fargo, ND
Commercial Property – Office
5,640 sq. ft. Greenwood Office – Greenwood, MN
Commercial Property – Medical (Assisted Living)
29,408 sq. ft. Wedgewood Sweetwater – Lithia Springs, GA
Commercial Property – Retail
4,560 sq. ft. Moundsview Bakery – Mounds View, MN
3,571 sq. ft. Howard Lake C-Store – Winsted, MN
6,225 sq. ft. Wilmar Sam Goody – Wilmar, MN
3,571 sq. ft. Winsted C-Store – Winsted, MN
7,700 sq. ft. Buffalo Strip Center – Buffalo, MN
4,800 sq. ft. Glencoe C-Store – Glencoe, MN
5,216 sq. ft. Long Prairie C-Store – Long Prairie, MN
5,600 sq. ft. Faribault Checkers Auto – Faribault, MN
4,800 sq. ft. Paynesville C-Store – Paynesville, MN
6,800 sq. ft. Prior Lake Strip Center I – Prior Lake, MN
4,200 sq. ft. Prior Lake Strip Center III – Prior Lake, MN
Unimproved Land
IGH Land – Inver Grove Heights, MN
Long Prairie Unimproved Land – Long Prairie, MN
Total Fiscal 2007 Property Dispositions
Fiscal 2006 Dispositions
Commercial - Office
(in thousands)
Book Value
and Sales Cost
Sales Price
$
4,000
6,188
10,188
$
1,500
1,500
4,550
4,550
380
550
450
190
800
350
302
525
149
1,105
545
5,346
3,413
4,476
7,889
961
961
3,836
3,836
287
374
409
214
667
344
304
337
150
993
465
4,544
Gain/Loss
$
587
1,712
2,299
539
539
714
714
93
176
41
(24)
133
6
(2)
188
(1)
112
80
802
900
59
959
22,543
$
613
60
673
17,903
$
287
(1)
286
4,640
$
(in thousands)
Book Value
and Sales Cost
Sales Price
Gain/Loss
1,600 sq. ft. Greenwood Chiropractic - Greenwood, MN
$
490
$
345
$
145
Commercial – Retail
3,000 sq. ft. Centerville Convenience Store - Centerville, MN
4,800 sq. ft. East Bethel C-Store - East Bethel, MN
6,325 sq. ft. Lino Lake Strip Center - Lino Lakes, MN
8,400 sq. ft. IGH Strip Center - Inver Grove Heights, MN
46,720 sq. ft. Sleep Inn - Brooklyn Park, MN
7,993 sq. ft. Excelsior Strip Center - Excelsior, MN
3,000 sq. ft. Andover C-Store - Andover, MN
6,266 sq. ft. Oakdale Strip Center - Oakdale, MN
6,225 sq. ft. Rochester Auto - Rochester, MN
3,650 sq. ft. Lakeland C-Store - Lakeland, MN
4,000 sq. ft. Lindstrom C-Store - Lindstrom, MN
3,571 sq. ft. Mora C-Store - Mora, MN
3,000 sq. ft. Shoreview C-Store - Shoreview, MN
8,750 sq. ft. Blaine Strip Center - Blaine, MN
3,444 sq. ft. St. Louis Park Retail - St. Louis Park, MN
3,864 sq. ft. Mound Strip Center - Mound, MN
340
660
650
1,280
3,350
965
383
1,050
465
610
450
380
400
990
845
550
324
498
462
940
2,990
891
308
745
431
436
345
296
326
599
365
358
16
162
188
340
360
74
75
305
34
174
105
84
74
391
480
192
2007 Annual Report 46
Fiscal 2006 Dispositions
Unimproved Land
(in thousands)
Book Value
and Sales Cost
Sales Price
Gain/Loss
40,000 sq. ft. Centerville Unimproved Land - Centerville, MN
Andover Unimproved Land - Andover, MN
Total Fiscal 2006 Property Dispositions
110
230
14,198
$
105
164
10,928
$
$
5
66
3,270
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.”
Because of limitations of the FFO definition adopted by NAREIT, IRET has made certain interpretations in applying
the definition. IRET believes all such interpretations not specifically provided for in the NAREIT definition are
consistent with the definition.
IRET management considers that FFO, by excluding depreciation costs, the gains or losses from the sale of
operating real estate properties and extraordinary items as defined by GAAP, is useful to investors in providing an
additional perspective on IRET’s operating results. Historical cost accounting for real estate assets in accordance
with GAAP assumes, through depreciation, that the value of real estate assets decreases predictably over time.
However, real estate asset values have historically risen or fallen with market conditions. NAREIT’s definition of
FFO, by excluding depreciation costs, reflects the fact that real estate, as an asset class, generally appreciates over
time and that depreciation charges required by GAAP may not reflect underlying economic realities. Additionally,
the exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales of previously depreciated
operating real estate assets, allows IRET management and investors to better identify the operating results of the
long-term assets that form the core of IRET’s investments, and assists in comparing those operating results between
periods. FFO is used by IRET’s management and investors to identify trends in occupancy rates, rental rates and
operating costs.
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.
FFO does not represent cash generated from operating activities in accordance with GAAP, 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 limited partnership units for the fiscal year ended April 30, 2007 increased to
$57.0 million, compared to $46.7 million and $42.3 million for the fiscal years ended April 30, 2006 and 2005,
respectively.
2007 Annual Report 47
Per
Share
and
Unit (3)
$
Reconciliation of Net Income to Funds From Operations
For the years ended April 30, 2007, 2006 and 2005:
Fiscal Years Ended April 30,
2007
Weighted Avg
Shares and
Units (2)
Amount
(in thousands, except per share amounts)
2006
Per
Share
and
Unit (3)
Weighted Avg
Shares and
Units (2)
Amount
Per
Share
and
Unit (3)
2005
Weighted Avg
Shares and
Units (2)
Amount
Net income
Less dividends to preferred
shareholders
Net income available to
common shareholders
Adjustments:
Minority interest in earnings
of unitholders
Depreciation and
Amortization(1)
Gains on depreciable
property sales
Funds from operations
applicable to common
shares and Units(4)
$
14,110
$
$
11,567
$
$
15,076
(2,372)
(2,372)
(2,372)
11,738
47,672
.25
9,195
45,717
.20
12,704
43,214
.30
4,299
17,017
45,568
(4,602)
2,705
38,104
(3,293)
13,329
3,873
12,621
34,342
(8,605)
$
57,003
64,689 $
.88 $
46,711
59,046 $
.79 $
42,314
55,835 $
.76
(1) Real estate depreciation and amortization consists of the sum of depreciation/amortization related to real estate investments and
amortization related to non-real estate investments from the Consolidated Statements of Operations, totaling $45,563, and
depreciation/amortization from Discontinued Operations of $246, less corporate-related depreciation and amortization on office equipment
and other assets of $241, for the fiscal year ended April 30, 2007.
(2) UPREIT Units of the Operating Partnership are exchangeable for common shares of beneficial interest on a one-for-one basis.
(3) Net income is calculated on a per share basis. FFO is calculated on a per share and unit basis.
(4)
In accordance with SEC and NAREIT guidance, IRET does not exclude impairment write-downs from FFO (that is, impairment charges are
not added back to GAAP net income in calculating FFO). IRET recorded impairment charges of $640, $409 and $570 for the fiscal years
ended April 30, 2007, 2006 and 2005, respectively. If these impairment charges are excluded from the Company's calculation of FFO, the
Company's FFO per share and unit would be $.89, $.80 and $.77 for fiscal years 2007, 2006 and 2005, respectively
Cash Distributions
The following cash distributions were paid to our common shareholders and UPREIT unitholders during fiscal years
2007, 2006, and 2005:
Quarters
First
Second
Third
Fourth
Fiscal Years
$
$
2007
.1645
.1650
.1655
.1660
.6610
$
$
2006
.1625
.1630
.1635
.1640
.6530
$
$
2005
.1605
.1610
.1615
.1620
.6450
The fiscal year 2007 cash distributions increased 1% over the cash distributions paid during fiscal year 2006 and
fiscal year 2005, respectively.
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, property development,
debt repayments and tenant improvements.
2007 Annual Report 48
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.
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, 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, 2007, the Company had three unsecured lines of credit, in the amounts of $10.0 million, $12.0
million and $10.0 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, 2007. Borrowings under the lines of credit bear interest based on the
following, respectively: (1) Bremer Financial Corporation Reference Rate, (2) 175 basis points below the Prime
Rate as published in the Wall Street Journal with a floor of 5.25% and a ceiling of 8.25%, and (3) Wall Street
Journal prime rate. 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 Company’s
lines of credit with Bremer Bank, First Western Bank and First International Bank and Trust expire in September
2007, December 2011 and December 2007, respectively. The Company will seek to renew these lines of credit prior
to their expiration.
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 an aggregate initial offering price of $150 million
during the period that the registration statement remains effective. The Company did not issue any common or
preferred shares under this registration statement in fiscal years 2007 and 2006. The Company issued 1,652,000
common shares under this registration statement in fiscal year 2005, for net proceeds of $15.8 million. As of April
30, 2007, the Company had available securities under this registration statement in the aggregate amount of
approximately $101.5 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 2007, approximately 1.2 million common shares were issued under this plan, with an
additional 1.2 million common shares issued during fiscal year 2006, and 1.1 million common shares issued during
fiscal year 2005.
The issuance of UPREIT Units for property acquisitions continues to be a source of capital for the Company.
Approximately 6.7 million units were issued in connection with property acquisitions during fiscal year 2007, and
approximately 1.1 million units and 2.0 million units, respectively, were issued in connection with property
acquisitions during fiscal years 2006 and 2005.
Primarily as a result of the conversion of UPREIT units and the issuance of common shares pursuant to our
distribution reinvestment plan, net of fractional shares repurchased, the Company’s equity capital increased during
fiscal 2007 by $15.1 million. Additionally, the equity capital of the Company was increased by $51.4 million as a
result of contributions of real estate in exchange for UPREIT units, as summarized above, resulting in a total
increase in equity capital for the Company during fiscal year 2007 of $66.5 million. The Company’s equity capital
increased by $26.2 million and $35.9 million in fiscal years 2006 and 2005, respectively.
Cash and cash equivalents on April 30, 2007 totaled $44.5 million, compared to $17.5 million and $23.5 million on
the same date in 2006 and 2005, respectively. Net cash provided from operating activities increased to $58.4 million
2007 Annual Report 49
in fiscal year 2007 from $48.4 million in fiscal year 2006, due primarily to increased net income as a result of higher
occupancy rates at Company properties. Net cash provided from operating activities increased to $48.4 million in
fiscal year 2006 from $48.3 million in fiscal year 2005, also due primarily to increased net income as a result of
higher occupancy rates at Company properties.
Net cash used in investing activities increased to $161.4 million in fiscal year 2007, from $82.6 million in fiscal year
2006. Net cash used in investing activities was $70.4 million in fiscal year 2005. The increase in net cash used in
investing activities in fiscal year 2007 compared to fiscal year 2006 was primarily a result of fewer proceeds from
sales of properties. Net cash provided from financing activities also increased to $130.0 million during fiscal year
2007, from $28.2 million during fiscal year 2006, due primarily to an increase in proceeds received from mortgage
borrowings and refinancings. Net cash provided from financing activities increased to $28.2 million during fiscal
year 2006, from $14.0 million during fiscal year 2005, also due primarily to an increase in proceeds received from
mortgage borrowings and refinancings.
Financial Condition
Mortgage Loan Indebtedness. Mortgage loan indebtedness increased to $951.1 million on April 30, 2007, due to the
acquisition of new investment properties, from $765.9 million on April 30, 2006 and $708.6 million on April 30,
2005. Approximately 97.7% 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, 2007, the weighted average rate of interest on the
Company’s mortgage debt was 6.43%, compared to 6.63% on April 30, 2006 and 6.75% on April 30, 2005.
Revolving lines of credit. As of April 30, 2007, the Company had no amounts outstanding under its unsecured credit
lines with Bremer Bank, First Western Bank and Trust, and First International Bank and Trust. As of April 30, 2006,
the Company had $3.5 million outstanding under its unsecured credit line with First Western Bank and Trust. The
Company had no amounts outstanding under these credit lines as of April 30, 2005.
Mortgage Loans Receivable. Mortgage loans receivable decreased to $399,000 at April 30, 2007, from $409,000 at
April 30, 2006 and $619,000 at April 30, 2005.
Real Estate Owned. Real estate owned increased to $1,489.3 million at April 30, 2007, from $1,269.4 million at
April 30, 2006. The increases 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.
Cash and Cash Equivalents. Cash and cash equivalents on April 30, 2007, totaled $44.5 million, compared to $17.5
million on April 30, 2006 and $23.5 million on April 30, 2005. The increase in cash on hand on April 30, 2007, as
compared to April 30, 2006, was due primarily to proceeds from an increase in mortgage loan borrowings.
Marketable Securities. During fiscal year 2007, IRET decreased its investment in marketable securities classified as
available-for-sale to $2.0 million on April 30, 2007, from $2.4 million on April 30, 2006 and $2.5 million on April
30, 2005. 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 20.0
million units on April 30, 2007, compared to 13.7 million units on April 30, 2006 and 13.1 million units on April 30,
2005. The increase in units outstanding at April 30, 2007 as compared to April 30, 2006 and 2005, 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,
2007 totaled 48.6 million compared to 46.9 million common shares outstanding on April 30, 2006 and 45.2 million
common shares outstanding on April 30, 2005. This increase in common shares outstanding from April 30, 2006 and
2005, to April 30, 2007, was primarily due to the issuance of common shares pursuant to our distribution
reinvestment plan. Preferred shares of beneficial interest outstanding on April 30, 2007, 2006 and 2005 totaled 1.15
million.
2007 Annual Report 50
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 had no amounts outstanding under its lines of credit at April 30, 2007. The
principal and interest payments on the mortgage notes payable for the years subsequent to April 30, 2007, are
included in the table below as “Long-term debt.” The other debt category consists of two unsecured promissory
notes for leasehold improvements at two of our properties, Southdale Medical Center in Edina, Minnesota, and the
Wells Fargo Building in St. Cloud, Minnesota.
The Company has sold investment certificates to the public, with interest rates varying from 6.5% to 9.0% per
annum. The sales of these investment certificates has been discontinued and the outstanding certificates will be
redeemed as they mature. Amounts due with respect to these investment certificates are reflected in the “Investment
Certificates” category below.
As of April 30, 2007, the Company is a tenant under operating ground leases on eight of its properties. The
Company pays a total of approximately $283,000 per year in rent under these ground leases, which have terms
ranging from 7 to 90 years, and expiration dates ranging from July 2012 to April 2095.
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, 2007, which the Company expects to
finance through debt and operating cash, 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 (principal and interest)
Investment Certificates
Other Debt
Operating Lease Obligations
Purchase Obligations
Off-Balance-Sheet Arrangements
(in thousands)
Total
$ 1,364,206
11
$
$
146
18,085
$
25,697
$
Less Than
1 Year
$ 91,016
0
$
72
$
$
283
$ 25,697
1-3 Years
$ 284,893
11
$
74
$
566
$
0
$
3-5 Years
$ 268,557
0
$
0
$
566
$
0
$
More than
5 Years
$ 719,740
0
$
0
$
16,670
$
0
$
As of April 30, 2007, 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 July 2, 2007, the Company paid a distribution of 51.56 cents per
share on the Company’s Series A Cumulative Redeemable Preferred Shares, to preferred shareholders of record on
June 15, 2007. Also on July 2, 2007, the Company paid a distribution of 16.65 cents per share on the Company’s
common shares of beneficial interest, to common shareholders and UPREIT unitholders of record on June 15, 2007.
This distribution represented an increase of .05 cents or .3% over the previous regular quarterly distribution of 16.60
cents per common share/unit paid April 2, 2007.
Closed and Pending Acquisitions; Pending Dispositions. Subsequent to its April 30, 2007 fiscal year end in May
2007, the Company closed on its purchase of the two-story, approximately 18,500 square foot Barry Pointe medical
office building in Kansas City, Missouri. The Company paid approximately $3.2 million for this property,
excluding closing costs. In June 2007, the Company closed on the two-story, approximately 50,400 square foot
Cedar Lake Business Center in St. Louis Park, Minnesota. The Company paid approximately $4.04 million,
excluding closing costs, for this office/warehouse property. Also in June 2007, the Company completed its
2007 Annual Report 51
acquisition of a one-story office/warehouse property located in Urbandale, Iowa. The Company paid approximately
$14 million, excluding closing costs (approximately $4.25 million of which purchase price consisted of the issuance
of UPREIT Units), for this approximately 519,813 square foot building.
As of April 30, 2007, the Company had signed a purchase agreement for the acquisition of an additional two
office/warehouse properties, located in Minnesota, for a total purchase price of approximately $6 million, excluding
closing costs. The buildings have, respectively, approximately 70,000 and 20,000 square feet of rentable space.
These pending acquisitions are subject to various closing conditions and contingencies, and no assurance can be
given that these transactions will be completed. Subsequent to its April 30, 2007 fiscal year end, in June 2007, the
Company signed a lease with an anchor tenant committing the Company to construct an approximately 26,000
square foot addition to the Company’s existing Southdale Medical Building located in Edina, Minnesota. The
estimated cost of this expansion project is approximately $6.4 million, with an additional approximately $2 million
in relocation, tenant improvement and leasing costs expected to be incurred to relocate tenants in the existing
facility. This proposed construction project is subject to various conditions and contingencies, and no assurance can
be given that this project will be completed.
During the third quarter of fiscal year 2007, the tenant in four of the Company’s Edgewood Vista assisted living
facilities, located in, respectively, Fremont, Nebraska; Hastings, Nebraska; Omaha, Nebraska and Kalispell,
Montana, exercised its options to purchase these properties. Under the terms of the options, the specified purchase
price for each of these assisted living properties is the higher of the fair market value of the property as determined
by an independent appraisal, or an annual compounded increase at 2.5% per year based on the purchase price paid
by the Company for the property. Also subsequent to its April 30, 2007 fiscal year end, the Company signed an
agreement for the sale of an office building located in Minnetonka, Minnesota, for a sale price of approximately
$345,000. These pending dispositions are subject to various closing conditions and contingencies, and no
assurances can be given that these transactions will be completed.
Development Project. During fiscal year 2007, the Company purchased an unimproved parcel of land in Minot,
North Dakota for approximately $1.75 million. The Company is in the preliminary stages of planning the
construction of a mixed-use project for this site, to consist of apartments and office and retail space. The Company
currently expects that it will move its Minot, North Dakota offices to this location, occupying approximately half of
the proposed office/retail space. Current estimates are that the project would be completed in the second quarter of
the Company’s fiscal year 2009. No firm cost estimates have yet been developed for this project, and no assurances
can be given that this project will be undertaken as currently proposed, or completed.
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. Because approximately 97.7% of our debt, as of April 30, 2007 (96.8% and 96.2%
respectively, as of April 30, 2006 and 2005), is at fixed interest rates, we have little exposure to interest rate
fluctuation risk on our existing debt, and accordingly interest rate increases during fiscal year 2007 did not have a
material effect on the Company. However, even though our goal is to maintain a fairly low exposure to interest rate
risk, we are still vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our
fixed or variable 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, 2007, we had the following
amount of future principal and interest payments due on mortgages secured by our real estate.
Long Term Debt
Fixed Rate
Variable Rate
2008
$ 29,740 $
1,091
2009
2010
45,176 $ 126,620
1,127
Future Principal Payments (in thousands)
2011
$ 100,082
1,200
2012
$ 82,416
3,297
2,525
Thereafter
$ 545,440
12,425
Average Interest Rate (%)
(1)
(1)
(1)
(1)
(1)
(1)
Total
$ 929,474
21,665
$ 951,139
(1)
2007 Annual Report 52
Long Term Debt
Fixed Rate
Variable Rate
2008
$ 58,803 $
1,382
2009
2010
56,206 $ 50,852
1,148
Future Interest Payments (in thousands)
2011
$ 42,934
1,076
2012
$ 36,649
903
1,239
Thereafter
$ 160,341
1,534
Average Interest Rate (%)
(1)
(1)
(1)
(1)
(1)
(1)
Total
$ 405,785
7,282
$ 413,067
(1)
(1) The weighted average interest rate on our debt as of April 30, 2007, was 6.43%. Any fluctuations in variable interest rates could increase or
decrease our interest expenses. For example, an increase of one percent per annum on our $21.7 million of variable rate indebtedness
would increase our annual interest expense by $217,000.
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, 2007 and 2006, IRET had approximately $2.0 million and $2.4
million, respectively, 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 approximately $2.5 million of securities
classified as “available-for-sale” as of April 30, 2005. The values of these securities will fluctuate with changes in
market interest rates. As of April 30, 2007 and 2006 the unrealized loss recorded in other comprehensive income on
these securities was $16,000 and $48,000, respectively.
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.
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures: As of April 30, 2007, 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
Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the
Securities Exchange act of 1934, as amended). Based upon that evaluation, the Company’s Chief Executive Officer,
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.
Internal Control Over Financial Reporting: There have been no changes in the Company’s internal control over
financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during
the fourth quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.
2007 Annual Report 53
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Investors Real Estate Trust (together with its consolidated subsidiaries, the “Company’), is
responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s
internal control over financial reporting is a process designed under the supervision of the Company’s principal
executive and principal financial officers to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance
with United States generally accepted accounting principles.
As of April 30, 2007, management conducted an assessment of the effectiveness of the Company’s internal control
over financial reporting, based on the framework established in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment,
management has determined that the Company’s internal control over financial reporting as of April 30, 2007, is
effective.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and acquisitions and
dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with United States generally accepted accounting principles, and that receipts
and expenditures are being made only in accordance with authorizations of management and the trustees of the
Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of Company assets that could have a material effect on the Company’s financial statements.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of April
30, 2007, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in
their report appearing below, which expresses unqualified opinions on management’s assessment and on the
effectiveness of the Company’s internal control over financial reporting as of April 30, 2007.
(The remainder of this page has been intentionally left blank.)
2007 Annual Report 54
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 management's assessment, included in the accompanying Management’s Report on Internal
Control Over Financial Reporting, that Investors Real Estate Trust and subsidiaries (the “Company”) maintained
effective internal control over financial reporting as of April 30, 2007, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The Company's management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is
to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the 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 effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, evaluating management's
assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the
company's principal executive and principal financial officers, or persons performing similar functions, and effected
by the company's board of trustees, management, and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and trustees of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion
or improper management override of controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management's assessment that the Company maintained effective internal control over financial
reporting as of April 30, 2007, is fairly stated, in all material respects, based on the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of April 30, 2007, based on the criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements as of and for the year ended April 30, 2007, of the Company and our
report dated July 13, 2007, expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, MN
July 13, 2007
2007 Annual Report 55
Item 9B. Other Information
None.
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 2007 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 2007 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item will be contained in our definitive Proxy Statement for our 2007 Annual
Meeting of Shareholders and such information is incorporated herein by reference. We do not have any equity
compensation plans and, accordingly, are not required to include the disclosure required by Item 201(d) of
Regulation S-K.
Item 13. Certain Relationships and Related Transactions, and Trustee Independence
The information required by this Item will be contained in our definitive Proxy Statement for our 2007 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be contained in our definitive Proxy Statement for our 2007 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
2007 Annual Report 56
PART IV
Item 15. Exhibits, Financial Statement Schedules
(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 (b) below.
(b)
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.
Third Restated Trustees’ Regulations (Bylaws), dated May 16, 2007, and incorporated herein by
reference to the Company’s Current Report on Form 8-K , filed with the SEC on May 16, 2007.
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.
10.2 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.
10.3 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.
2007 Annual Report 57
10.4 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.
10.5 Agreement for Purchase and Sale of Property dated February 13, 2004, by and between IRET Properties
and the Sellers specified therein, filed as Exhibit 10.5 to the Company’s Form 10-K filed July 20, 2004, and
incorporated herein by reference.
10.6 Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed March 11, 2005, and incorporated herein by reference.
10.7 Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed December 12, 2005, and incorporated herein by reference.
10.8 Contribution Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2006, and
incorporated herein by reference.
10.09 Description of Compensation of Trustees, filed as Exhibit 10 to the Company’s Form 10-Q filed
September 11, 2006, and incorporated herein by reference.
10.10 Loan and Security Agreement, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
September 18, 2006, and incorporated herein by reference.
10.11 Description of Compensation of Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed March 12, 2007, and incorporated herein by reference.
21.1
Subsidiaries of Investors Real Estate Trust, filed herewith.
23.1 Consent of Deloitte & Touche LLP, filed herewith.
31.1
Section 302 Certification of President and Chief Executive Officer, filed herewith.
31.2
Section 302 Certification of Senior Vice President and Chief Financial Officer, filed herewith.
32.1
Section 906 Certification of the President and Chief Executive Officer, filed herewith.
32.2 Section 906 Certification of the Senior Vice President and Chief Financial Officer, filed herewith.
2007 Annual Report 58
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 11, 2007
Investors Real Estate Trust
By:
/s/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr.
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
/s/ Jeffrey L. Miller
Jeffrey L. Miller
Title
Date
Trustee & Chairman
July 11, 2007
Stephen L. Stenehjem
Trustee & Vice Chairman
/s/ Thomas A. Wentz. Sr.
Thomas A. Wentz, Sr.
/s/ Timothy P. Mihalick
Timothy P. Mihalick
/s/ Thomas A. Wentz, Jr.
Thomas A. Wentz, Jr.
/s/ Diane K. Bryantt
Diane K. Bryantt
/s/ John D. Stewart
John D. Stewart
/s/ Patrick G. Jones
Patrick G. Jones
/s/ C.W. “Chip” Morgan
C.W. “Chip” Morgan
/s/ Edward T. Schafer
Edward T. Schafer
/s/ W. David Scott
W. David Scott
President & Chief Executive Officer
(Principal Executive Officer)
July 11, 2007
Trustee, Senior Vice President & Chief
Operating Officer
July 11, 2007
Trustee & Senior Vice President
July 11, 2007
Senior Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
July 11, 2007
Trustee
Trustee
Trustee
Trustee
Trustee
July 11, 2007
July 11, 2007
July 11, 2007
July 11, 2007
July 11, 2007
2007 Annual Report 59
(This page has been intentionally left blank.)
2007 Annual Report
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
April 30, 2007, 2006 and 2005
ADDITIONAL INFORMATION
FOR THE YEAR ENDED
April 30, 2007
and
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PO Box 1988
12 Main Street South
Minot, ND 58702-1988
701-837-4738
fax: 701-838-7785
info@iret.com
www.iret.com
2007 Annual Report
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.....................................
CONSOLIDATED FINANCIAL STATEMENTS
F-3 – F-4
Consolidated Balance Sheets .....................................................................................................................
F-5
Consolidated Statements of Operations .....................................................................................................
F-6
Consolidated Statements of Shareholders’ Equity.....................................................................................
Consolidated Statements of Cash Flows....................................................................................................
F-7 – F-8
Notes to Consolidated Financial Statements.............................................................................................. F-9 – F-29
ADDITIONAL INFORMATION
Report of Independent Registered Public Accounting Firm on Financial Statement Schedules ...............
Schedule II - Valuation and Qualifying Accounts .....................................................................................
Schedule III - Real Estate and Accumulated Depreciation........................................................................
Schedule IV - Investments in Mortgage Loans on Real Estate..................................................................
F-30
F-31
F-32-40
F-41
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.
2007 Annual Report 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 sheets of Investors Real Estate Trust and subsidiaries (the
“Company”) as of April 30, 2007 and 2006, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three fiscal years in the period ended April 30, 2007. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the 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 financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of
Investors Real Estate Trust as of April 30, 2007 and 2006, and the results of its operations, and its cash flows for
each of the three fiscal years in the period ended April 30, 2007, in conformity with accounting principles generally
accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the effectiveness of the Company's internal control over financial reporting as of April 30, 2007, based on
the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated July 13, 2007, expressed an unqualified opinion on
management's assessment of the effectiveness of the Company's internal control over financial reporting and an
unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, MN
July 13, 2007
2007 Annual Report F-2
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 2007 and 2006
ASSETS
Real estate investments
Property owned
Less accumulated depreciation
Unimproved land
Mortgage loan 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, net of allowance
Real estate deposits
Prepaid and other assets
Intangible assets, net of accumulated amortization
Tax, insurance, and other escrow
Property and equipment, net
Goodwill
Deferred charges and leasing costs – net
TOTAL ASSETS
(in thousands)
2007
2006
$
$
1,489,287 $
(180,544)
1,308,743
7,392
399
1,316,534
44,516
2,048
12,558
3,171
735
568
33,240
7,222
1,458
1,397
11,942
1,435,389 $
1,269,423
(148,607)
1,120,816
5,175
409
1,126,400
17,485
2,402
9,474
2,364
1,177
436
26,449
8,893
1,506
1,441
9,288
1,207,315
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2007 Annual Report F-3
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
April 30, 2007 and 2006
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Accounts payable and accrued expenses
Revolving lines of credit
Mortgages payable
Investment certificates issued
Other
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES (NOTE 15)
MINORITY INTEREST IN PARTNERSHIPS
MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP
(19,981,259 units at April 30, 2007 and 13,685,522 units at April 30, 2006)
SHAREHOLDERS’ EQUITY
Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares,
no par value,1,150,000 hares issued and outstanding at April 30, 2007 and 2006,
aggregate liquidation preference of $28,750,000)
Common Shares of Beneficial Interest (Unlimited authorization, no par value,
48,570,461 shares outstanding at April 30, 2007, and 46,915,352 shares
outstanding at April 30, 2006)
Accumulated distributions in excess of net income
Accumulated other comprehensive loss
Total shareholders’ equity
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
(in thousands)
2007
2006
$
28,995 $
0
951,139
11
885
981,030
12,925
156,465
24,223
3,500
765,890
2,451
1,075
797,139
16,403
104,213
27,317
27,317
354,495
(96,827)
(16)
284,969
339,384
(77,093)
(48)
289,560
$ 1,435,389 $ 1,207,315
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2007 Annual Report F-4
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended April 30, 2007, 2006, and 2005
REVENUE
Real estate rentals
Tenant reimbursement
TOTAL REVENUE
OPERATING EXPENSE
(in thousands, except per share data)
2007
2006
2005
$ 162,680
35,137
197,817
$ 142,059 $ 127,809
25,128
152,937
28,389
170,448
Interest
Depreciation/amortization related to real estate investments
Utilities
Maintenance
Real estate taxes
Insurance
Property management expenses
Administrative expenses
Advisory and trustee services
Other operating expenses
Amortization related to non-real estate investments
TOTAL OPERATING EXPENSE
Operating income
Interest income
Other non-operating income
Income before minority interest and discontinued operations and (loss)
gain on sale of other investments
(Loss) gain on sale of other investments
Minority interest portion of operating partnership income
Minority interest portion of other partnerships’ loss (income)
Income from continuing operations
Discontinued operations, net of minority interest
NET INCOME
Dividends to preferred shareholders
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
Earnings per common share from continuing operations
Earnings per common share from discontinued operations
NET INCOME PER COMMON SHARE – BASIC & DILUTED
$
$
$
58,450
44,481
15,206
21,714
23,322
2,382
13,854
4,162
289
1,240
1,082
186,182
11,635
1,944
721
50,727
36,953
13,473
19,233
19,785
2,662
11,809
3,673
221
1,269
745
160,550
9,898
816
424
14,300
(38)
(3,229)
26
11,059
3,051
14,110
(2,372)
11,738
.18
.06
.24
$
$
$
11,138
23
(1,896)
(484)
8,781
2,786
11,567
(2,372)
9,195 $
.14 $
.06
.20 $
47,393
32,973
10,623
16,075
18,191
2,563
10,401
3,844
103
1,407
430
144,003
8,934
578
408
9,920
3
(1,738)
(379)
7,806
7,270
15,076
(2,372)
12,704
.13
.17
.30
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2007 Annual Report F-5
BALANCE APRIL 30, 2004
Comprehensive Income
Net income
Unrealized gain for the
period on securities
available- for-sale
Total comprehensive income
Distributions - common
shares
Distributions - preferred
shares
Distribution reinvestment
plan
Sale of shares
Redemption of units for
common shares
Fractional shares repurchased
BALANCE APRIL 30, 2005
Comprehensive Income
Net income
Unrealized loss for the
period on securities
available- for-sale
Total comprehensive income
Distributions - common
shares
Distributions - preferred
shares
Distribution reinvestment
plan
Sale of shares
Redemption of units for
common shares
Fractional shares repurchased
BALANCE APRIL 30, 2006
Comprehensive Income
Net income
Unrealized gain for the
period on securities
available- for-sale
Total comprehensive income
Distributions - common
shares
Distributions - preferred
shares
Distribution reinvestment
plan
Sale of shares
Redemption of units for
common shares
Fractional shares repurchased
BALANCE APRIL 30, 2007
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
for the years ended April 30, 2007, 2006, and 2005
(in thousands)
NUMBER OF
PREFERRED
SHARES
1,150 $
PREFERRED
SHARES
27,343
NUMBER
OF
COMMON
SHARES
41,693 $
COMMON
SHARES
292,400
$
ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME
(41,083) $
ACCUMULATED
OTHER
COMPRE-
HENSIVE
(LOSS)
(31) $
TOTAL
SHARE-
HOLDERS’
EQUITY
278,629
15,076
(27,892)
(2,404)
9
$
(56,303)
(22)
11,567
(29,985)
(2,372)
(26)
$
(77,093)
(48)
14,110
(31,472)
(2,372)
32
$
(96,827) $
(16) $
15,076
9
15,085
(27,892)
(2,404)
10,738
15,748
5,306
(38)
295,172
11,567
(26)
11,541
(29,985)
(2,372)
11,076
139
4,006
(17)
289,560
14,110
32
14,142
(31,472)
(2,372)
11,412
303
3,411
(15)
284,969
(26)
1,150
27,317
1,146
1,652
701
(4)
45,188
10,738
15,774
5,306
(38)
324,180
1,213
15
501
(2)
46,915
11,076
139
4,006
(17)
339,384
1,150
27,317
1,215
32
410
(2)
1,150 $
27,317
48,570 $
11,412
303
3,411
(15)
354,495
$
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2007 Annual Report F-6
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended April 30, 2007, 2006, and 2005
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 investments
Bad debt expense
Changes in other assets and liabilities:
Increase in receivable arising from straight-lining of rents
(Increase) decrease in accounts receivable
(Increase) decrease in prepaid and other assets
Decrease in tax, insurance and other escrow
Increase in deferred charges and leasing costs
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
(Proceeds) payments of real estate deposits
Principal proceeds on mortgage loans receivable
Purchase of marketable securities - available-for-sale
Proceeds from sale of real estate and other investments
Payments for acquisitions and improvements of real estate
investments
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 mortgages payable
Proceeds from minority partner
Proceeds from revolving lines of credit
Repurchase of fractional shares and minority interest units
Distributions paid to common shareholders, net of reinvestment
Distributions paid to preferred shareholders
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 revolving lines of credit and other debt
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)
2007
2006
2005
$
14,110
$
11,567 $
15,076
46,695
4,273
(4,602)
0
640
507
(3,247)
(1,007)
(132)
1,671
(4,801)
4,334
58,441
525
442
23
(132)
22,375
(184,613)
(161,380)
303
0
257,664
54
20,500
(15)
(20,865)
(2,372)
(10,258)
(170)
(2,440)
(88,345)
(24,086)
129,970
27,031
17,485
44,516
$
39,219
3,189
(3,293)
127
409
167
(2,261)
(1,137)
724
175
(2,914)
2,428
48,400
174
1,365
210
(57)
13,480
(97,810)
(82,638)
139
0
80,276
248
3,500
(17)
(19,649)
(2,372)
(7,881)
(189)
(2,312)
(23,482)
(76)
28,185
35,803
4,252
(8,605)
243
570
359
(1,314)
457
1,517
2,233
(2,921)
611
48,281
0
(975)
4,274
(35)
47,877
(121,544)
(70,403)
15,742
(26)
115,460
161
13
(38)
(17,923)
(2,207)
(7,318)
(1,064)
(2,682)
(61,097)
(25,065)
13,956
(6,053)
(8,166)
23,538
17,485 $
31,704
23,538
$
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2007 Annual Report F-7
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended April 30, 2007, 2006, and 2005
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Distribution reinvestment plan
Operating partnership distribution reinvestment plan
Preferred dividends payable
Property acquired through issue of shares
Real estate investment acquired through assumption of indebtedness and
accrued costs
Other assets acquired in lieu of cash
Other debt reclassified to mortgage payable
Assets acquired through the issuance of minority interest units in the
operating partnership
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)
2007
2006
2005
10,607 $
805
0
0
10,336 $
741
0
0
16,838
6
0
62,427
3,411
0
129
539
10,898
4,006
9,969
769
197
32
21,071
134
0
20,071
5,306
56,918 $
164
812
57,894 $
49,900 $
231
100
50,231 $
46,647
254
370
47,271
$
$
$
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2007 Annual Report F-8
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007, 2006, and 2005
NOTE 1 • ORGANIZATION
Investors Real Estate Trust (“IRET” or the “Company”) 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, Kansas, Montana, Missouri, Nebraska, South
Dakota, Texas, Michigan and Wisconsin. As of April 30, 2007, IRET owned 69 multi-family residential properties
with approximately 9,397 apartment units and 148 commercial properties, consisting of office, medical, industrial
and retail properties, totaling approximately 10.0 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 70.9% and 77.4% as
of April 30, 2007 and 2006, which includes 100% of the general partnership interest. The limited partners have a
redemption option that they may exercise. Upon exercise of the redemption option by the limited partners, 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 February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”).
SFAS 159 permits entities to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent
measurement attribute for many financial assets and liabilities and certain other items. Entities electing the fair value
option are required to recognize changes in fair value in earnings and to expense upfront cost and fees associated
with the item for which the fair value option is elected. SFAS 159 is effective for the Company on May 1, 2008. We
are currently assessing the impact of adopting SFAS 159.
2007 Annual Report F-9
NOTE 2 • continued
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”), which defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS 157 is effective for the Company on May 1, 2008. We are
currently evaluating the impact of adopting SFAS 157.
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation
of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
a company’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48
prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-
recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48
was effective for the Company on May 1, 2007. We are currently evaluating the impact of adopting FIN 48.
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 INVESTMENTS
Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any.
Acquisitions of real estate investments 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 and intangible 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 fair 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.
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 and foregone rental income 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.
2007 Annual Report F-10
NOTE 2 • continued
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 and depreciated 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 and the Company has no significant involvement with
the property sold.
In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, 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 period of each asset and legal and environmental concerns. 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, and as a result of discontinued operations,
reclassifications of prior year revenues and expenses have been made.
IDENTIFIED INTANGIBLE ASSETS AND GOODWILL
Upon acquisition of real estate, the Company records the intangible assets acquired (for example, if the leases in
place for the real estate property acquired carry rents above the market rent, the difference is classified as an
intangible asset) at their estimated fair value separate and apart from goodwill. The Company amortizes identified
intangible assets that are determined to have finite lives based on the period over which the assets are expected to
contribute directly or indirectly to the future cash flows of the real estate property acquired (generally the life of the
lease). In fiscal years 2007 and 2006, the Company added $15,976,000 and $8,486,000 of new intangible assets,
respectively, all of which were classified as in-place leases. The weighted average lives of these intangibles are 3.8
years for fiscal 2007 and 4.6 years for fiscal year 2006. Intangible assets subject to amortization are reviewed for
impairment whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and
its carrying amount exceeds its estimated fair value.
As of April 30, 2007 and 2006, respectively, the net carrying amounts of the Company’s identified intangible assets,
were $33,240,000 and $26,449,000 (net of accumulated amortization of $24,149,000 and $14,718,000),
respectively. The estimated annual amortization of the Company’s identified intangible assets for each of the five
succeeding years is as follows:
Year Ended April 30,
2008
2009
2010
2011
2012
(in thousands)
8,831
$
6,684
5,558
4,009
2,203
2007 Annual Report F-11
NOTE 2 • continued
The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including
identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill is not amortized, but is tested
for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset
might be impaired. Goodwill book values as of April 30, 2007 and 2006 were $1,397,000 and $1,441,000. The
annual reviews for these same periods indicated no impairment. In fiscal 2007 the Company disposed of three
properties that had goodwill assigned, and as a result, $44,000 of goodwill was derecognized.
PROPERTY AND EQUIPMENT
Property and equipment consists of the administrative office buildings and equipment contained at IRET’s
headquarters in Minot, North Dakota, and other locations in Minneapolis, Minnesota and Omaha, Nebraska. The
balance sheet reflects these assets at cost, net of accumulated depreciation. As of April 30, 2007 and 2006, the cost
was $1.5 million, respectively. Accumulated depreciation was $1.1 million and $.9 million as of April 30, 2007 and
2006, respectively.
MORTGAGE LOAN RECEIVABLE
The mortgage loan receivable is stated at the outstanding principal balance, net of an allowance for uncollectibility.
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.
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 marketable 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 fair 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 records a charge to earnings to write 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
2007 Annual Report F-12
NOTE 2 • continued
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, 2007, 2006 and 2005 is as
follows:
Balance at beginning of year
Provision
Write-off
Balance at close of year
TAX, INSURANCE, AND OTHER ESCROW
(in thousands)
2007
725 $
507
(322)
910 $
2006
725 $
230
(230)
725 $
2005
475
438
(188)
725
$
$
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.
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 to interest expense over the life
of the loan.
MINORITY INTERESTS
Interests in the Operating Partnership held by limited partners are represented by 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 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 operates in a manner intended to enable it to continue to qualify as a 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 dividend 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 shareholders. The Company 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 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 Units.
Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated
real estate.
2007 Annual Report F-13
NOTE 2 • continued
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 generally 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. Rent concessions, including free rent,
are amortized on a straight-line basis over the terms of the related leases.
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.
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 Company has no potentially dilutive financial
interests; the potential exchange of Units for common shares will have no effect on net income per share because
Unitholders and common shareholders effectively share equally in the net income of the Operating Partnership.
NOTE 3 • CREDIT RISK
The Company is potentially exposed to credit risk for 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.
NOTE 4 • PROPERTY OWNED
Property, consisting principally of real estate, is stated at cost less accumulated depreciation of $1,308.7 million and
$1,120.8 million as of April 30, 2007, and April 30, 2006, respectively.
Construction period interest of $69,256, $21,058, and $137,591, has been capitalized for the years ended April 30,
2007, 2006, and 2005, respectively.
2007 Annual Report F-14
NOTE 4 • continued
The future minimum lease proceeds to be received under non-cancellable leases for commercial properties as of
April 30, 2007, assuming that no options to renew or buy out the lease are exercised, are as follows:
Year Ended April 30,
2008
2009
2010
2011
2012
Thereafter
(in thousands)
$
91,368
82,328
74,402
61,703
47,268
241,836
598,905
$
During fiscal 2007, the Company incurred a loss of $640,000 due to impairment of three properties and one parcel
of unimproved land. For the year ended April 30, 2006, the Company incurred a loss of $409,000 due to impairment
on one property. For the year ended April 30, 2005, the Company incurred a loss of $570,000 due to impairment on
one property. The 2007, 2006 and 2005 impairment losses were related to properties which were subsequently sold;
accordingly such losses are included in discontinued operations (Note 12).
NOTE 5 • MORTGAGE LOAN RECEIVABLE - NET
The mortgage loan receivable consists of one loan that is collateralized by real estate. The interest rate on this loan is
6.0% and it matures in fiscal 2010. Future principal payments due under this mortgage loan as of April 30, 2007, are
as follows:
Year Ended April 30,
2008
2009
2010
Less allowance for doubtful accounts
(in thousands)
$
24
25
362
$
(12)
399
There were no non-performing mortgage loan receivables as of April 30, 2007, and 2006.
NOTE 6 • MARKETABLE SECURITIES
The amortized cost and fair value of marketable securities available-for-sale at April 30, 2007 and 2006 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:
2007
US government & agency debt securities
Agency MBS
Corporate bonds
Bank certificates of deposit
Other
(in thousands)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized Cost
$
$
369
871
328
422
74
2,064
$
$
1
0
0
0
0
1
$
$
0
14
3
0
0
17
$
$
370
857
325
422
74
2,048
2007 Annual Report F-15
NOTE 6 • continued
2006
US government & agency debt securities
Agency MBS
Corporate bonds
Bank certificates of deposit
Other
(in thousands)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized Cost
$
$
196
779
553
875
47
2,450
$
$
0
0
0
0
0
0
$
$
6
30
12
0
0
48
$
$
190
749
541
875
47
2,402
As of April 30, 2007, the investment in Marketable Securities, at cost, will mature as follows:
US government & agency debt securities
Agency MBS
Corporate bonds
Bank certificates of deposit
Other
Total
Total
369
871
328
422
74
2,064
$
(in thousands)
Less Than
1 Year
62
0
92
422
74
650
$
1-3 Years
182
179
176
0
0
537
$
3-5 Years
39
0
60
0
0
99 $
More than
5 Years
86
692
0
0
0
778
$
There were no realized gains or losses on sales of securities available-for-sale for the fiscal years ended April 30,
2007, 2006 and 2005. None of the securities with an unrealized loss at April 30, 2007 are considered to be other-
than-temporarily impaired.
NOTE 7 • REVOLVING LINES OF CREDIT
IRET has lines of credit with three financial institutions as of April 30, 2007. Interest payments on outstanding
borrowings are due monthly. These credit facilities are summarized in the following table:
(in thousands)
Amount
Outstanding as
of April 30,
2007
Amount
Outstanding
as of April 30,
2006
Applicable
Interest Rate
as of April 30,
2007
Maturity
Date
Amount
Available
Weighted
Average Int.
Rate on
Borrowings
during fiscal
year 2007
Financial Institution
Lines of Credit
(1) First Western Bank & Trust $
(2) First Int’l Bank & Trust
(3) Bremer Bank
12,000
10,000
10,000
$
Total
$
32,000
$
0
0
0
0
$
$
3,500
0
0
3,500
6.50% 12/26/11
8.25% 12/13/07
8.25% 9/13/07
8.09%
7.91%
8.00%
Borrowings under the lines of credit bear interest based on the following: (1) 175 basis points below the Prime Rate
as published in the Wall Street Journal with a floor of 5.25% and a ceiling of 8.25%, (2) Wall Street Journal prime
rate, and (3) Bremer Financial Corporation Reference Rate.
NOTE 8 • MORTGAGES PAYABLE
The Company’s mortgages payable are collateralized by substantially all of its properties owned. The majority of the
Company’s mortgages payable are secured by individual properties or groups of properties, and are non-recourse to
the Company, other than for standard carve-out obligations such as fraud, waste, failure to insure, environmental
conditions and failure to pay real estate taxes. Interest rates on mortgages payable range from 4.67% to 8.25%, and
the mortgages have varying maturity dates from June 8, 2007, through May 31, 2035.
2007 Annual Report F-16
NOTE 8 • continued
Of the mortgages payable, the balances of fixed rate mortgages totaled $929.5 million and $741.6 million, and the
balances of variable rate mortgages totaled $21.7 million and $24.3 million as of April 30, 2007, and 2006,
respectively. The Company does not utilize derivative financial instruments to mitigate its exposure to changes in
market interest rates. Most of the fixed rate mortgages have substantial pre-payment penalties. As of April 30, 2007,
the weighted average rate of interest on the Company’s mortgage debt was 6.43%, compared to 6.63% on April 30,
2006. The aggregate amount of required future principal payments on mortgages payable as of April 30, 2007, is as
follows:
Year Ended April 30,
2008
2009
2010
2011
2012
Later Years
Total payments
(in thousands)
30,831
$
47,701
127,747
101,282
85,713
557,865
$ 951,139
NOTE 9 • TRANSACTIONS WITH RELATED PARTIES
PROPERTY MANAGEMENT SERVICES
In fiscal years 2007, 2006 and 2005, Hoyt Properties, Inc. earned management fees from the Company in the
amounts of $8,436, $641,046 and $682,286, respectively, a portion of which was reimbursed by tenants.
Additionally, during those same periods, the Company paid leasing commissions to Hoyt Properties in the amounts
of $14,450, $172,875 and $49,309, respectively. Hoyt Properties, Inc. is owned by Steven B. Hoyt, a former
member of the Company’s Board of Trustees. Mr. Hoyt resigned from the Company’s Board of Trustees on
September 21, 2004 at the expiration of his term of office.
PROPERTY ACQUISITIONS
During fiscal year 2005, the Company acquired four office/warehouse buildings from a limited liability company in
which Steven Hoyt was a member. The Company closed on its purchase of these buildings, the Plymouth I, II and
III office buildings in Plymouth, Minnesota, and the Northgate I office building in Maple Grove, Minnesota, on June
30, 2004. At the time of the transaction, Mr. Hoyt was a trustee of the Company. The buildings together contain
approximately 157,935 square feet. The Company paid approximately $14,000,000 for these properties, excluding
closing costs. Of the $14,000,000 purchase price, $13,900,000 was paid in cash, and the remainder was paid
through the issuance to the sellers of 10,000 Units valued at $10 per Unit. Independent appraisals were obtained by
the Company for this property acquisition, and the purchase price was based on the results of these appraisals.
PURCHASE OPTION
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 were granted the right to purchase certain real
property acquired by the Company as a result of the merger. Charles Wm. James, a former executive officer of the
Company and a former member of the Company’s Board of Trustees, has an ownership interest in these entities.
Under the terms of the agreement, one of the entities had the option, but not the obligation, to purchase a
commercial strip mall located in Excelsior, Minnesota, for the price the Company paid to acquire the property, plus
an annual Consumer Price Index increase. This option was exercised during the fourth quarter of fiscal year 2006 at
a purchase price of approximately $965,000, and Mr. James resigned from the Company’s Board of Trustees.
2007 Annual Report F-17
NOTE 9 • continued
VEHICLE PURCHASES
During fiscal year 2005, the Company purchased four vehicles from Fisher Motors, Inc., an automobile dealership
wholly-owned by John D. Stewart, a member of the Company’s Board of Trustees. The Company paid
approximately $100,000 for these four vehicles, which were purchased for the use of Company employees,
including the Company’s Chief Operating Officer. The Company purchased no vehicles from Fisher Motors during
fiscal years 2007 and 2006.
BANKING SERVICES
The Company maintains an unsecured line of credit with First International Bank and Trust, Watford City, North
Dakota. During fiscal year 2006, the amount available to be borrowed under this line of credit was increased to $10
million from $5 million. During fiscal years 2007, 2006 and 2005, respectively, the Company’s interest charges
were $71,128, $14,167, and less than $500 for borrowings under the First International line of credit. During fiscal
year 2007, the Company entered into two mortgage loans with First International in the amounts of $450,000 and
$2,400,000, respectively, paying a total of $34,287 in origination fees and loan closing costs for these two loans, and
paying interest on the loans of $24,545 and $69,328, respectively, during fiscal year 2007. The Company also
maintains a number of checking accounts with First International. In each of fiscal years 2007, 2006 and 2005,
respectively, IRET paid less than $500 in total in various wire transfer and other fees charged on these checking
accounts. Steven L. Stenehjem, a member of the Company’s Board of Trustees and Audit Committee, is the
President and Chief Executive Officer of First International, and the bank is owned by Mr. Stenehjem and members
of his family.
NOTE 10 • ACQUISITIONS AND DISPOSITIONS IN FISCAL YEARS 2007 AND 2006
PROPERTY ACQUISITIONS
IRET Properties paid approximately $220.7 million for real estate properties added to its portfolio during fiscal
2007, compared to $93.4 million paid in fiscal 2006. The fiscal 2007 and 2006 additions are detailed below.
Fiscal 2007 (May 1, 2006 to April 30, 2007)
Fiscal 2007 Acquisitions
Multi-Family Residential
192-unit Arbors Apartments – Sioux City, NE
154-unit Quarry Ridge Apartments – Rochester, MN
389-unit St. Cloud Apartments – St. Cloud, MN
120-unit Indian Hills Apartments – Sioux City, IA
72-unit Rum River Apartments – Isanti, MN
Commercial Property – Office
143,061 sq. ft. Pacific Hills – Omaha, NE
141,724 sq. ft. Corporate Center West – Omaha, NE
94,832 sq. ft. Farnam Executive Center – Omaha, NE
84,475 sq. ft. Miracle Hills One – Omaha, NE
60,942 sq. ft. Woodlands Plaza IV – Maryland Heights, MO
122,567 sq. ft. Riverport – Maryland Heights, MO
90,315 sq. ft. Timberlands – Leawood, KS
138,825 sq. ft. Flagship – Eden Prairie, MN
59,827 sq. ft. Gateway Corporate Center – Woodbury, MN
71,430 sq. ft. Highlands Ranch I – Highlands Ranch, CO
Commercial Property – Medical (including assisted living)
26,336 sq. ft. Fox River Cottages – Grand Chute, WI
10,796 sq. ft. St. Michael Clinic – St. Michael, MN*
(in thousands)
Acquisition Cost
$
7,000
14,570
7,800
3,120
5,650
38,140
16,502
21,497
12,853
11,950
5,840
21,906
14,546
26,094
9,612
12,250
153,050
3,200
2,587
5,787
2007 Annual Report F-18
NOTE 10 • continued
Fiscal 2007 Acquisitions
Commercial Property – Industrial
100,850 sq. ft. Bloomington 2000 – Bloomington, MN
172,057 sq. ft. Roseville 2929 – Roseville, MN
Commercial Property – Retail
16,921 sq. ft. Dakota West Plaza – Minot, ND
14,820 sq. ft. Weston Walgreens – Weston, WI**
Unimproved Land
Monticello Unimproved Parcel (City) – Monticello, MN
St. Michaels Unimproved – St. Michael, MN
Monticello Unimproved Parcel (Other) – Monticello, MN
Weston Unimproved – Weston, WI
Quarry Ridge Unimproved – Rochester MN
Minot Prairie Green – Minot, ND
Total Fiscal 2007 Property Acquisitions
* Development property placed in service March 1, 2007.
** Development property placed in service May 1, 2006.
(in thousands)
Acquisition Cost
6,750
10,300
17,050
625
2,144
2,769
5
320
75
800
930
1,750
3,880
220,676
$
In addition to the above property acquisitions, in the fourth quarter of fiscal year 2007 IRET Properties issued
limited partnership units with a value at issuance of approximately $5.25 million to purchase an approximately 29%
ownership interest in a limited liability company in which IRET already owned a 71% interest. This entity owns the
Southdale Medical Building in Edina, Minnesota, and with its acquisition of this remaining ownership interest,
IRET now is the sole owner of this property.
Fiscal 2006 (May 1, 2005 to April 30, 2006)
Fiscal 2006 Acquisitions
Multi-Family Residential
36-unit Legacy 7 - Grand Forks, ND
Commercial Property - Office
15,594 sq. ft. Spring Valley IV Office Building - Omaha, NE
23,913 sq. ft. Spring Valley V Office Building - Omaha, NE
24,000 sq. ft. Spring Valley X Office Building - Omaha, NE
24,000 sq. ft. Spring Valley XI Office Building - Omaha, NE
30,000 sq. ft. Brook Valley I Office Building - La Vista, NE
146,087 sq. ft. Northpark Corporate Center - Arden Hills, MN
Commercial Property - Medical (including assisted living)
74,112 sq. ft. Edgewood Vista - Bismarck, ND
60,161 sq. ft. Edgewood Vista - Spearfish, SD
82,535 sq. ft. Edgewood Vista - Brainerd, MN
160,485 sq. ft. Edgewood Vista - Hermantown, MN
50,409 sq. ft. Ritchie Medical Plaza - St. Paul, MN
54,971 sq. ft. 2800 Medical Building - Minneapolis, MN
47,950 sq. ft. Stevens Point - Stevens Point, WI
Unimproved Land
Stevens Point Unimproved - Stevens Point, WI
Eagan Unimproved Land - Eagan, MN
Total Fiscal 2006 Property Acquisitions
(in thousands)
Acquisition Cost
$
$
2,445
2,445
1,250
1,375
1,275
1,250
2,100
18,597
25,847
10,750
6,687
10,625
12,315
10,750
9,000
4,215
64,342
310
423
733
93,367
2007 Annual Report F-19
NOTE 10 • continued
Property Dispositions
During fiscal year 2007, IRET Properties disposed of 14 properties and two parcels of unimproved land for an
aggregate sale price of $22.5 million, compared to 17 properties and two unimproved parcels sold for an aggregate
sale price of $14.2 million in total during fiscal year 2006. Real estate assets sold by IRET during fiscal years 2007
and 2006 were as follows:
Fiscal 2007 Dispositions
Multi-Family Residential
60-unit Clearwater Apartments – Boise, ID
122-unit Park East Apartments – Fargo, ND
Commercial Property – Office
5,640 sq. ft. Greenwood Office – Greenwood, MN
Commercial Property – Medical (Assisted Living)
29,408 sq. ft. Wedgewood Sweetwater – Lithia Springs, GA
Commercial Property – Retail
4,560 sq. ft. Moundsview Bakery – Mounds View, MN
3,571 sq. ft. Howard Lake C-Store – Winsted, MN
6,225 sq. ft. Wilmar Sam Goody – Wilmar, MN
3,571 sq. ft. Winsted C-Store – Winsted, MN
7,700 sq. ft. Buffalo Strip Center – Buffalo, MN
4,800 sq. ft. Glencoe C-Store – Glencoe, MN
5,216 sq. ft. Long Prairie C-Store – Long Prairie, MN
5,600 sq. ft. Faribault Checkers Auto – Faribault, MN
4,800 sq. ft. Paynesville C-Store – Paynesville, MN
6,800 sq. ft. Prior Lake Strip Center I – Prior Lake, MN
4,200 sq. ft. Prior Lake Strip Center III – Prior Lake, MN
Unimproved Land
IGH Land – Inver Grove Heights, MN
Long Prairie Unimproved Land – Long Prairie, MN
Total Fiscal 2007 Property Dispositions
Fiscal 2006 Dispositions
Commercial - Office
(in thousands)
Book Value
and Sales Cost
Sales Price
$
$
4,000
6,188
10,188
1,500
1,500
4,550
4,550
380
550
450
190
800
350
302
525
149
1,105
545
5,346
3,413
4,476
7,889
961
961
3,836
3,836
287
374
409
214
667
344
304
337
150
993
465
4,544
Gain/Loss
$
587
1,712
2,299
539
539
714
714
93
176
41
(24)
133
6
(2)
188
(1)
112
80
802
900
59
959
22,543
$
$
613
60
673
17,903
$
287
(1)
286
4,640
(in thousands)
Book Value
and Sales Cost
Sales Price
Gain/Loss
1,600 sq. ft. Greenwood Chiropractic - Greenwood, MN
$
490
$
345
$
145
Commercial – Retail
3,000 sq. ft. Centerville Convenience Store - Centerville, MN
4,800 sq. ft. East Bethel C-Store - East Bethel, MN
6,325 sq. ft. Lino Lake Strip Center - Lino Lakes, MN
8,400 sq. ft. IGH Strip Center - Inver Grove Heights, MN
46,720 sq. ft. Sleep Inn - Brooklyn Park, MN
7,993 sq. ft. Excelsior Strip Center - Excelsior, MN
3,000 sq. ft. Andover C-Store - Andover, MN
6,266 sq. ft. Oakdale Strip Center - Oakdale, MN
6,225 sq. ft. Rochester Auto - Rochester, MN
3,650 sq. ft. Lakeland C-Store - Lakeland, MN
340
660
650
1,280
3,350
965
383
1,050
465
610
324
498
462
940
2,990
891
308
745
431
436
16
162
188
340
360
74
75
305
34
174
2007 Annual Report F-20
NOTE 10 • continued
Fiscal 2006 Dispositions
Commercial – Retail - continue
4,000 sq. ft. Lindstrom C-Store - Lindstrom, MN
3,571 sq. ft. Mora C-Store - Mora, MN
3,000 sq. ft. Shoreview C-Store - Shoreview, MN
8,750 sq. ft. Blaine Strip Center - Blaine, MN
3,444 sq. ft. St. Louis Park Retail - St. Louis Park, MN
3,864 sq. ft. Mound Strip Center - Mound, MN
Unimproved Land
40,000 sq. ft. Centerville Unimproved Land - Centerville, MN
Andover Unimproved Land - Andover, MN
Total Fiscal 2006 Property Dispositions
NOTE 11 • OPERATING SEGMENTS
(in thousands)
Book Value
and Sales Cost
Sales Price
Gain/Loss
$
$
450
380
400
990
845
550
110
230
14,198
$
$
345
296
326
599
365
358
105
164
10,928
$
$
105
84
74
391
480
192
5
66
3,270
IRET reports its results in five reportable segments: multi-family residential properties, and commercial office,
medical (including assisted living facilities), industrial (including miscellaneous commercial properties) and retail
properties. Our reportable segments are aggregations of similar properties. The accounting policies of each of these
segments are the same as those described in Note 2. We disclose segment information in accordance with SFAS
131, Disclosures about Segments of an Enterprise and Related Disclosures (“SFAS 131”). SFAS 131 requires that
segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing
segment performance.
IRET’s internal reporting system produces reports in which business activities are presented in a variety of ways.
Based on these reports, IRET management and our Board of Trustees evaluate the performance of our segments
using a number of different metrics. IRET has previously disclosed segment information using a measure we called
“Segment Operating Profit,” which we defined as total revenues less property operating expenses and real estate
taxes, with mortgage interest and depreciation/amortization related to real estate investments included in property
operating expenses. However, our management and Board also evaluate segment performance based upon operating
income from the combined properties in each segment. Net operating income is a key measurement of our segment
profit and loss, and, beginning in the fourth quarter of fiscal year 2007, we now consider it our primary
measurement of segment performance. Accordingly, segment information in this report is presented based on net
operating income, which we define as total revenues less property operating expenses and real estate taxes. Prior
year segment information has been revised for presentation based on net operating income.
The following tables present revenues and net operating income for the fiscal years ended April 30, 2007, 2006 and
2005 from our five reportable segments, and reconcile net operating income of reportable segments to operating
income as reported. Segment assets are also reconciled to Total Assets as reported in the consolidated financial
statements.
Year Ended April 30, 2007
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
Real estate revenue
Real estate expenses
Net operating income
$
$
67,214
31,575
35,639
$
$
73,640
30,500
43,140
$
$
34,783 $
8,675
26,108 $
8,091 $
1,253
6,838 $
Interest
Depreciation/amortization
Administrative, advisory and trustee fees
Operating expenses
Non-operating income
Income before minority interest and discontinued operations and gain on sale of other investments
14,089 $ 197,817
4,475 76,478
9,614 $ 121,339
(58,450)
(45,563)
(4,451)
(1,240)
2,665
$ 14,300
2007 Annual Report F-21
NOTE 11 • continued
Year Ended April 30, 2006
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
Real estate revenue
Real estate expenses
Net operating income
$
$
61,906
29,850
32,056
$
$
57,523
23,602
33,921
$
$
31,670 $
8,314
23,356 $
6,372 $
1,252
5,120 $
Interest
Depreciation/amortization
Administrative, advisory and trustee fees
Operating expenses
Non-operating income
Income before minority interest and discontinued operations and gain on sale of other investments
12,977 $ 170,448
3,944 66,962
9,033 $ 103,486
(50,727)
(37,698)
(3,894)
(1,269)
1,240
$ 11,138
Year Ended April 30, 2005
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
Real estate revenue
Real estate expenses
Net operating income
$
$
58,702
27,449
31,253
$
$
48,604
19,481
29,123
$
$
25,424 $
6,178
19,246 $
6,459 $
1,224
5,235 $
Interest
Depreciation/amortization
Administrative, advisory and trustee fees
Operating expenses
Non-operating income
Income before minority interest and discontinued operations and gain on sale of other investments
Segment Assets and Accumulated Depreciation
13,748 $ 152,937
3,521 57,853
10,227 $ 95,084
(47,393)
(33,403)
(3,947)
(1,407)
986
9,920
$
As of April 30, 2007
Segment assets
Property owned
Less accumulated
depreciation/amortization
Total property owned
Cash
Marketable securities
Receivables and other assets
Unimproved land
Mortgage receivables
Total Assets
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
$ 489,644
$ 536,431
$ 274,779
$ 75,257
$ 113,176 $1,489,287
(89,541)
$ 400,103
(44,204)
$ 492,227
(24,787)
$ 249,992
(8,257)
$ 67,000
(13,755)
(180,544)
$ 99,421 $1,308,743
44,516
2,048
72,261
7,392
399
$1,435,359
2007 Annual Report F-22
NOTE 11 • continued
As of April 30, 2006
Segment assets
Property owned
Less accumulated
depreciation/amortization
Total property owned
Cash
Marketable securities
Receivables and other assets
Unimproved land
Mortgage receivables
Total Assets
Multi-Family
Residential
Commercial-
Office
Commercial-
Medical
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
$ 452,251
$ 383,280
$ 263,300
$ 59,583
$ 111,009 $1,269,423
(79,150)
$ 373,101
(32,193)
$ 351,087
(18,954)
$ 244,346
(6,625)
$ 52,958
(11,685)
(148,607)
$ 99,324 $1,120,816
17,485
2,402
61,028
5,175
409
$1,207,315
NOTE 12 • 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 classified as held for sale as of April 30, 2007, 2006 or 2005. 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, 2007, 2006 and 2005.
REVENUE
Real estate rentals
Tenant reimbursement
TOTAL REVENUE
OPERATING EXPENSE
Interest
Depreciation/amortization related to real estate investments
Utilities
Maintenance
Real estate taxes
Insurance
Property management expenses
Administrative expenses
Other operating expenses
Amortization related to non-real estate investments
Loss on impairment of real estate
TOTAL OPERATING EXPENSE
Operating (loss) income
Non-operating income
Income before minority interest and gain on sale
Minority interest
Gain on sale of discontinued operations
DISCONTINUED OPERATIONS, NET
Segment Data
Multi-Family Residential
Commercial - Office
Commercial - Medical
Commercial - Industrial
Commercial - Retail
Unimproved Land
Total
2007
1,339
57
1,396
389
237
156
191
161
26
104
2
9
0
640
1,915
(519)
0
(519)
(1,070)
4,640
3,051
1,745
397
605
0
170
134
3,051
$
$
$
$
(in thousands)
2006
2005
$
3,251 $
287
3,538
5,497
639
6,136
900
635
218
336
417
60
213
1
25
0
409
3,214
324
1
325
(809)
3,270
2,786 $
57 $
55
259
0
2,383
32
2,786 $
1,535
1,136
433
518
633
90
382
1
28
8
570
5,334
802
1
803
(2,135)
8,602
7,270
3,122
(493)
2,059
0
2,601
(19)
7,270
$
$
$
2007 Annual Report F-23
NOTE 12 • continued
Property Sale Data
Sales price
Net book value and sales costs
Gain
NOTE 13 • EARNINGS PER SHARE
(in thousands)
2007
2006
2005
$
$
22,543
17,903
4,640
$
$
14,198 $ 48,906
40,304
10,928
8,602
3,270 $
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 options,
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,
2007, 2006, and 2005:
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 14 • RETIREMENT PLANS
For Years Ended April 30,
(in thousands, except per share data)
2007
2006
2005
$
$ 11,059
3,051
14,110
(2,372)
8,781 $
2,786
11,567
(2,372)
7,806
7,270
15,076
(2,372)
11,738
4,299
$ 16,037
9,195
2,705
12,704
3,873
$ 11,900 $ 16,577
47,672
17,017
64,689
.18
.06
.24
$
$
45,717
13,329
59,046
$
$
.14 $
.06
.20 $
43,214
12,621
55,835
.13
.17
.30
IRET sponsors a defined contribution profit sharing retirement plan and a defined contribution 401(k) 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. Participation in IRET’s defined contribution 401(k) plan is available to all employees over the
age of 21 immediately upon their employment with the Company, and employees participating in the 401(k) plan
may contribute up to maximum levels established by the IRS. Employer contributions to the profit sharing and
401(k) plans are at the discretion of the Company’s management. IRET currently contributes 4.5% of the salary of
each employee participating in the profit sharing plan, and 3% of the salary of each employee participating in the
401(k) plan, for a total contribution of 7.5% of the salary of each of the employees participating in both plans.
Contributions by IRET to these plans on behalf of employees totaled $257,783 in fiscal year 2007, $217,599 in
fiscal year 2006 and $204,141 in fiscal year 2005.
NOTE 15 • COMMITMENTS AND CONTINGENCIES
Ground Leases. As of April 30, 2007, the Company is a tenant under operating ground leases on eight of its
properties. The Company pays a total of approximately $283,000 per year in rent under these ground leases, which
have terms ranging from 7 to 90 years, and expiration dates ranging from July 2012 to April 2095. The Company
has renewal options for three of the eight ground leases, and rights of first offer or first refusal for the remainder.
2007 Annual Report F-24
NOTE 15 • continued
The expected timing of Ground Lease payments as of April 30, 2007 is as follows:
Year Ended April 30, (in thousands)
2008
2009
2010
2011
2012
Thereafter
Total
Lease Payments
283
283
283
283
283
16,670
18,085
$
$
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.
Environmental Matters. It is generally IRET’s policy to obtain a Phase I environmental assessment of each property
that the Company seeks to acquire. Such assessments have not revealed, nor is the Company aware of, any
environmental liabilities that IRET believes would have a material adverse effect on IRET’s financial position or
results of operations. IRET owns properties that contain or potentially contain (based on the age of the property)
asbestos or lead, or have underground fuel storage tanks. For certain of these properties, the Company estimated the
fair value of the conditional asset retirement obligation in accordance with FASB Interpretation No. 47, Accounting
for Conditional Asset Retirement Obligations, or FIN 47, and chose not to book a liability, because the amounts
involved were immaterial. With respect to certain other properties, the Company has not recorded any related asset
retirement obligation, as the fair value of the liability cannot be reasonably estimated, due to uncertainties in the
timing and manner of settlement of these obligations.
Purchase Options. The Company has granted options to purchase certain IRET properties to tenants in these
properties, under lease agreements. In general, the options grant the tenant the right to purchase the property at the
greater of such property’s appraised value or an annual compounded increase of 2% to 2.5% of the initial cost of the
property to IRET. The property cost and gross rental revenue of these properties are as follows:
Property
Edgewood Vista - Bismarck, ND
Edgewood Vista - Brainerd, MN
Edgewood Vista - Duluth, MN
Edgewood Vista - Fremont, NE
Edgewood Vista - Hastings, NE
Edgewood Vista - Hermantown, MN
Edgewood Vista - Kalispell, MT
Edgewood Vista - Missoula, MT
Edgewood Vista - Omaha, NE
Edgewood Vista - Spearfish, SD
Edgewood Vista - Virginia, MN
Fox River Cottage - Grand Chute, WI
Great Plains Software - Fargo, ND
Healtheast - Woodbury & Maplewood, MN
Minnesota National Bank - Duluth, MN
St. Michael Clinic - St. Michael, MN
Stevens Point - Stevens Point, WI
Total
(in thousands)
Gross Rental Revenue
Property Cost
10,868
$
10,634
11,709
552
572
12,325
588
962
641
6,757
12,182
3,860
15,375
21,601
2,104
2,587
12,504
125,821
$
$
$
2007
980
968
1,472
68
68
1,124
72
132
76
608
1,320
260
1,876
2,032
135
35
630
11,856
$
$
2006
653
645
1,472
62
63
749
62
120
70
406
1,320
0
1,876
2,032
100
0
102
9,732
$
$
2005
0
0
1,406
59
61
0
62
120
67
0
1,320
0
1,876
2,032
189
0
0
7,192
Income Guarantees. In connection with its acquisition in April 2004 of a portfolio of properties located in and near
Duluth, Minnesota, the Company received from the seller of the properties a guarantee, for five years from the
closing date of the acquisition, of a specified minimum amount of annual net operating income, before debt service
(principal and interest payments), from two of the properties included in the portfolio. As of April 30, 2007, the
Company has recorded a receivable for payment of $233,344 under this guarantee. Separately, in connection with
2007 Annual Report F-25
NOTE 15 • continued
its acquisition of Olympik Village Apartments, a multi-family residential property in Rochester, Minnesota, the
Company received from the seller of the property a guarantee of 12.5% return on IRET’s equity or $150,000 per
year whichever is greater, for a period of 24 months ending March 1, 2007. As of April 30, 2007, $192,131 was due
under the Olympik Village income guarantee.
Restrictions on Taxable Dispositions. Approximately 129 of our properties, consisting of approximately 5.9 million
square feet of our combined commercial segment’s properties and 4,008 apartment units, are subject to restrictions
on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties. The
real estate investment amount of these properties (net of accumulated depreciation) was approximately $765.5
million at April 30, 2007. The restrictions on taxable dispositions are effective for varying periods. The terms of
these agreements generally prevent us from selling the properties in taxable transactions. We do not believe that the
agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties
during the restriction period because we generally hold these and our other properties for investment purposes,
rather than for sale. Historically, however, where we have deemed it to be in our shareholders’ best interests to
dispose of restricted properties, we have done so through transactions structured as tax-deferred transactions under
Section 1031 of the Internal Revenue Code.
Joint Venture Buy/Sell Options. Certain of our joint venture agreements contain buy/sell options in which each
party under certain circumstances has the option to acquire the interest of the other party, but do not generally
require that we buy our partners’ interests. We have one joint venture which allows our unaffiliated partner, at its
election, to require that we buy its interest at a purchase price to be determined by an appraisal conducted in
accordance with the terms of the agreement, or at a negotiated price. In accordance with Statement of Accounting
Standards No. 5, Accounting for Contingencies, we have not recorded a liability or the related asset that would result
from the acquisition in connection with the above potential obligation because the probability of our unaffiliated
partner requiring us to buy their interest is not currently determinable, and we are unable to estimate the amount of
the payment required for that purpose.
Development Projects. The Company has certain funding commitments under contracts for property development
and renovation projects. As of April 30, 2007, IRET’s funding commitments included the following:
Stevens Point Assisted Living: During fiscal year 2006, IRET purchased an existing senior housing complex
and adjoining vacant parcel of land in Stevens Point, Wisconsin. IRET is committed to fund construction of an
expansion to the existing facility on the adjoining parcel of land, to be leased to the tenant of the existing senior
housing complex. The construction costs to be paid by IRET were capped at approximately $10.7 million.
Construction on this project began in May 2006 and was completed in June 2007. As of April 30, 2007, IRET
had funded approximately $7.7 million of the construction cost.
Fox River Senior Living: During fiscal year 2006, IRET purchased a partially-completed senior housing project
and adjoining vacant land located in Grand Chute, Wisconsin. IRET has committed to fund the completion of
eight senior living villas and the construction of ten new senior living cottages. The construction costs to be
paid by IRET are capped at approximately $2.2 million. Construction on this project began in August 2006 and
is expected to be completed in the fall of 2007. As of April 30, 2007, IRET had funded approximately $1.5
million of the construction cost.
St. Michael Medical Clinic: In July 2006, construction commenced on a medical clinic located on land owned
by IRET in St. Michael, Minnesota. IRET committed to fund approximately $2.8 million in project costs to
construct this clinic. The clinic was completed as scheduled in February 2007, with total costs to IRET of
approximately $2.3 million. IRET has also committed to construct an expansion to the clinic if requested to do
so by the clinic’s tenant; the cost for the expansion project is capped at approximately $1.1 million.
2828 Chicago Avenue Medical Building: In fiscal year 2006, IRET purchased an approximately 55,000 square
foot, five-story medical office building located in Minneapolis, Minnesota. During fiscal year 2007, IRET
committed to construct an approximately 56,000 square foot medical office building adjacent to the existing
structure, and an adjoining parking ramp, with a planned project completion date of August 2008 and an
2007 Annual Report F-26
NOTE 15 • continued
estimated total project cost of $15.7 million. Approximately 60% of this new medical office building has been
pre-leased to an anchor tenant.
Cottonwood Apartments: During fiscal year 2007, the Company began construction of a multi-family
residential property adjacent to three existing apartment buildings owned by the Company in Bismarck, North
Dakota. The 67-unit Cottonwood IV apartment complex is expected to cost approximately $6.1 million to
construct, and is targeted for completion in the third quarter of fiscal year 2008.
Crosstown Circle Office Building, Eden Prairie, MN. The Company’s Crosstown Circle Office Building in Eden
Prairie, Minnesota was acquired in October 2004 from Best Buy Company, which is leasing all but 7,500 square feet
of the 185,000 square foot building under a master lease expiring September 30, 2010. Under the terms of the
financing obtained by the Company for this building, the Company is obligated to fund a leasing reserve account in
the event that a specified occupancy level is not met at the time the Best Buy master lease expires. The amount to be
deposited in the leasing reserve account would be calculated by multiplying a specified amount per square foot by
the difference between the specified occupancy level and the building’s actual occupied square feet. The maximum
amount the Company would be required to deposit in such leasing reserve account is $4,625,000. Funds in the
leasing reserve account would be released as leases for vacant space in the building are executed.
Pending Acquisitions and Dispositions. As of April 30, 2007, the Company has signed a purchase agreement for the
acquisition of two office/warehouse properties, located in Minnesota, with, respectively, approximately 70,000 and
20,000 square feet of rentable space. The Company has agreed to pay approximately $6 million for these properties,
excluding closing costs. These pending acquisitions are subject to various closing conditions and contingencies, and
no assurance can be given that these transactions will be completed. Subsequent to its April 30, 2007 fiscal year
end, in June 2007, the Company signed a lease with an anchor tenant committing the Company to construct an
approximately 26,000 square foot addition to the Company’s existing Southdale Medical Building located in Edina,
Minnesota. The estimated cost of this expansion project is approximately $6.4 million, with an additional
approximately $2 million in relocation, tenant improvement and leasing costs expected to be incurred to relocate
tenants in the existing facility. This proposed construction project is subject to various conditions and contingencies,
and no assurance can be given that this project will be completed. During the third quarter of fiscal year 2007, the
tenant in four of the Company’s Edgewood Vista assisted living facilities, located in, respectively, Fremont,
Nebraska; Hastings, Nebraska; Omaha, Nebraska and Kalispell, Montana, exercised its options to purchase these
properties. Under the terms of the options, the specified purchase price for each of these assisted living properties is
the higher of the fair market value of the property as determined by an independent appraisal, or an annual
compounded increase at 2.5% per year based on the purchase price paid by the Company for the property. Also
subsequent to its April 30, 2007 fiscal year end, the Company signed an agreement for the sale of an office building
located in Minnetonka, Minnesota, for a sale price of approximately $345,000. These pending dispositions are
subject to various closing conditions and contingencies, and no assurances can be given that these transactions will
be completed.
NOTE 16 • FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments.
Mortgage Loan 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
fair 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.
2007 Annual Report F-27
NOTE 16 • continued
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, 2007 and 2006, are as follows:
FINANCIAL ASSETS
Mortgage loans receivable
Cash and cash equivalents
Marketable securities - available-for-sale
FINANCIAL LIABILITIES
Notes payable
Other debt
Mortgages payable
Investment certificates issued
(in thousands)
2007
Carrying
Amount
Fair Value
2006
Carrying
Amount
Fair Value
$
$
399 $
399 $
409 $
44,516
2,048
44,516
2,048
17,485
2,402
409
17,485
2,402
0 $
0 $
146
951,139
11
148
944,843
11
3,500 $
233
765,890
2,451
3,500
234
761,831
2,444
NOTE 17 • COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST AND
SHAREHOLDERS’ EQUITY
Distribution Reinvestment Plan. During fiscal years 2007 and 2006, IRET issued 1.2 million common shares,
respectively, pursuant to its distribution reinvestment plan, at a total value at issuance of $11.4 million and $11.1
million, respectively. 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.
Conversion of Units to Common Shares. During fiscal years 2007 and 2006, respectively, 0.4 million and 0.5
million Units were converted to common shares, with a total value of $3.4 million and $4.0 million included in
shareholders’ equity.
Issuance of Common Shares. During fiscal year 2005, in May 2004, the Company concluded a “best efforts”
offering under which approximately .2 million common shares were sold, at $10.10 per share, for gross proceeds to
the Company of approximately $2.6 million, before payment of commissions of six percent per share to the broker-
dealers selling the shares, and before payment of other expenses of the offering.
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest. During fiscal year 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. 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.
2007 Annual Report F-28
NOTE 18 • QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)
QUARTER ENDED
Revenues
Operating Income
Net Income available to common shareholders
Net Income per common share - basic & diluted
QUARTER ENDED
Revenues
Operating Income
Net Income available to common shareholders
Net Income per common share - basic & diluted
(in thousands, except per share data)
July 31, 2006 October 31, 2006 January 31, 2007 April 30, 2007
52,698
$
3,525
$
3,442
$
.07
$
51,372 $
3,340 $
2,861 $
.06 $
48,962
2,111
2,915
.06
44,785
2,659
2,520
.05
$
$
$
$
$
$
$
$
(in thousands, except per share data)
July 31, 2005 October 31, 2005 January 31, 2006 April 30, 2006
43,346
$
2,726
$
4,408
$
.10
$
42,772 $
2,445 $
1,728 $
.04 $
43,153
2,908
1,980
.04
41,177
1,819
1,079
.02
$
$
$
$
$
$
$
$
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 19 • SUBSEQUENT EVENTS
Common and Preferred Share Distributions. On July 2, 2007, the Company paid a distribution of 51.56 cents per
share on the Company’s Series A Cumulative Redeemable Preferred Shares to preferred shareholders of record on
June 15, 2007, and a distribution of 16.65 cents per share on the Company’s common shares and units, to common
shareholders and Unitholders of record on June 15, 2007. This common share/unit distribution represented an
increase of .05 cents or 0.3% over the previous regular quarterly distribution of 16.60 cents per common share/unit
paid April 2, 2007.
Closed Acquisitions. Subsequent to its April 30, 2007 fiscal year end, in May 2007, the Company closed on its
purchase of the two-story, approximately 18,500 square foot Barry Pointe medical office building in Kansas City,
Missouri. The Company paid approximately $3.2 million for this property, excluding closing costs. In June 2007,
the Company closed on its acquisition of the two-story, approximately 50,400 square foot Cedar Lake Business
Center in St. Louis Park, Minnesota. The Company paid approximately $4.04 million, excluding closing costs, for
this office/warehouse property. Also in June 2007, the Company completed its acquisition of a one-story
office/warehouse property located in Urbandale, Iowa. The Company paid approximately $14 million excluding
closing costs (approximately $4.25 million of which purchase price consisted of the issuance of UPREIT Units), for
this approximately 519,813 square foot building.
2007 Annual Report F-29
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 consolidated financial statements of Investors Real Estate Trust and subsidiaries (the
“Company”) as of April 30, 2007 and 2006, and for each of the three fiscal years in the period ended April 30, 2007,
management's assessment of the effectiveness of the Company's internal control over financial reporting as of April
30, 2007, and the effectiveness of the Company's internal control over financial reporting as of April 30, 2007, and
have issued our reports thereon dated July 13, 2007; such reports are included elsewhere in this Form 10-K. Our
audits also included the consolidated financial statement schedules of the Company listed in the table of contents to
the consolidated financial statements. These consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such
consolidated financial statement schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
July 13, 2007
2007 Annual Report F-30
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
Description
Fiscal Year Ended April 30, 2007
Allowance for doubtful accounts
Fiscal Year Ended April 30, 2006
Allowance for doubtful accounts
Fiscal Year Ended April 30, 2005
Allowance for doubtful accounts
(in thousands)
Column A
Balance at
Beginning of
Year
Column B
Additions
Charged
Against
Operations
Column C
Column E
Uncollectible
Accounts
Written-off
Balance at
End of Year
$
$
$
725
725
475
$
$
$
507
230
438
$
$
$
(322)
(230)
(188)
$
$
$
910
725
725
2007 Annual Report F-31
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Description
Multi-Family Residential
17 S Main Apartments - Minot, ND
405 Grant Avenue (Lonetree) - Harvey, ND
408 1st Street SE - Minot, ND
Applewood On The Green - Omaha, NE
Arbors Apts - S Sioux City, NE
Boulder Court - Eagan, MN
Brookfield Village Apartments - Topeka, KS
Candlelight Apartments - Fargo, ND
Canyon Lake Apartments - Rapid City, SD
Castle Rock - Billings, MT
Chateau Apartments - Minot, ND
Colonial Villa - Burnsville, MN
Colton Heights Properties - Minot, ND
Cottonwood Lake I - Bismarck, ND
Cottonwood Lake II - Bismarck, ND
Cottonwood Lake III - Bismarck, ND
Country Meadows I - Billings, MT
Country Meadows II - Billings, MT
Crestview Apartments - Bismarck, ND
Crown Colony Apartments - Topeka, KS
Dakota Hill At Valley Ranch - Irving, TX
East Park Apartments - Sioux Falls, SD
Forest Park Estates - Grand Forks, ND
Heritage Manor - Rochester, MN
Indian Hills Apartments - Sioux City, IA
Jenner Properties - Grand Forks, ND
Kirkwood Manor - Bismarck, ND
Lancaster Place - St. Cloud, MN
Legacy Buildings I & II - Grand Forks, ND
Legacy Building III - Grand Forks, ND
Legacy Building IV - Grand Forks, ND
Legacy Building V - Grand Forks, ND
Legacy Building VI - Grand Forks, ND
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances
Land
Buildings &
Improvements
Costs
capitalized
subsequent to
acquisition
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
$
$
$
0 $
0
0
7,039
4,386
4,434
5,034
1,459
2,797
3,507
1,864
8,867
588
2,474
2,601
2,441
3,481
2,140
4,343
6,708
23,528
1,646
6,550
4,933
0
1,698
2,033
1,338
5,002
2,660
4,374
1,914
2,006
0
14
10
706
350
1,067
509
80
305
736
122
2,401
80
264
264
264
246
246
235
620
3,650
115
810
403
294
184
449
289
467
233
252
137
137
0
156
35
9,588
6,625
5,498
6,698
758
3,958
4,864
2,224
11,515
734
3,982
3,341
4,125
4,005
3,804
4,290
9,956
33,810
2,405
5,579
6,968
2,921
1,514
2,725
2,899
6,219
3,263
5,102
1,973
2,463
$
216 $
103
3
2,290
341
610
597
958
108
979
771
1,540
228
406
802
452
109
452
649
970
1,801
284
2,859
981
17
463
944
536
835
505
1,525
768
420
0
20
12
889
360
1,227
569
210
324
816
167
2,603
108
291
313
300
259
260
435
708
3,844
152
1,054
411
294
263
517
383
709
311
427
144
144
216 $
253
36
11,695
6,956
5,948
7,235
1,586
4,047
5,763
2,950
12,853
934
4,361
4,094
4,541
4,101
4,242
4,739
10,838
35,417
2,652
8,194
7,941
2,938
1,898
3,601
3,341
6,812
3,690
6,452
2,734
2,876
216 $
273
48
12,584
7,316
7,175
7,804
1,796
4,371
6,579
3,117
15,456
1,042
4,652
4,407
4,841
4,360
4,502
5,174
11,546
39,261
2,804
9,248
8,352
3,232
2,161
4,118
3,724
7,521
4,001
6,879
2,878
3,020
(3)
(95)
(36)
(1,754)
(149)
(581)
(661)
(561)
(582)
(1,256)
(650)
(1,233)
(582)
(1,014)
(990)
(781)
(964)
(771)
(1,708)
(2,109)
(6,458)
(347)
(2,715)
(1,820)
(9)
(491)
(953)
(643)
(1,842)
(841)
(1,206)
(177)
(163)
2006
1990
1986
2001
2006
2003
2003
1992
2001
1998
1998
2003
1984
1997
1997
1997
1995
1995
1994
1999
2000
2002
1993
1998
2007
1997
1997
2000
1995
1995
1996
2004
2005
40 years
24-40 years
40 years
40 years
40 years
40 years
40 years
24-40 years
40 years
40 years
12-40 years
40 years
40 years
40 years
40 years
40 years
33-40 years
40 years
24-40 years
40 years
40 years
40 years
24-40 years
40 years
40 years
40 years
12-40 years
40 years
24-40 years
24-40 years
40 years
40 years
40 years
2007 Annual Report F-32
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Initial Cost to Company
Gross amount at which carried at
close of period
Description
Multi-Family Residential - continued
Legacy Building VII - Grand Forks, ND
Magic City Apartments - Minot, ND
Meadows Phase I - Jamestown, ND
Meadows Phase II - Jamestown, ND
Meadows Phase III - Jamestown, ND
Miramont Apartments - Fort Collins, CO
Monticello Apartments - Monticello, MN
Neighborhood Apartments - Colorado Springs, CO
North Pointe - Bismarck, ND
Oakmont Apartments - Sioux Falls, SD
Oakwood - Sioux Falls, SD
Olympic Village - Billings, MT
Olympik Village Apartments - Rochester, MN
Oxbow - Sioux Falls, SD
Park Meadows I - Waite Park, MN
Park Meadows II - Waite Park, MN
Pebble Springs - Bismarck, ND
Pinecone Apartments - Fort Collins, CO
Pinehurst Apartments - Billings, MT
Pointe West - Rapid City, SD
Prairie Winds Apartments - Sioux Falls, SD
Prairiewood Meadows - Fargo, ND
Quarry Ridge Apartments - Rochester, MN
Ridge Oaks - Sioux City, IA
Rimrock Apartments - Billings, MT
Rocky Meadows - Billings, MT
Rum River Apartments - Isanti, MN
St. Cloud Student Housing - St. Cloud, MN
Sherwood Apartments - Topeka, KS
Southbrook & Mariposa - Topeka, KS
South Pointe - Minot, ND
Southview Apartments - Minot, ND
Encumbrances
Land
Buildings &
Improvements
$
$
1,930 $
2,904
929
929
1,048
11,445
3,253
10,314
2,158
3,852
3,609
7,879
5,164
3,933
2,735
7,269
374
10,112
450
2,985
1,590
2,625
13,047
2,703
2,305
3,275
0
2,748
10,063
3,286
9,755
782
137
370
56
56
478
1,470
490
1,034
144
423
543
1,164
1,034
404
381
762
7
905
72
240
144
280
1,312
178
330
656
848
1,170
1,150
399
550
185
2,707
3,875
1,635
1,429
1,454
12,765
3,756
9,812
2,244
4,838
2,784
10,441
6,109
3,152
3,033
6,066
748
12,105
687
3,538
1,816
2,531
13,362
4,073
3,489
5,726
4,818
6,688
14,684
5,110
9,548
469
Costs
capitalized
subsequent to
acquisition
$
53 $
1,352
184
472
284
1,010
179
2,147
104
112
3,085
1,197
283
1,915
1,231
2,356
66
1,173
53
945
272
687
14
871
317
619
0
1
1,372
131
781
190
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
$
141
504
78
61
484
1,533
575
1,136
155
429
744
1,384
1,051
466
480
941
34
1,001
74
301
207
334
1,313
243
337
741
848
1,170
1,386
415
686
215
2,756 $
5,093
1,797
1,896
1,732
13,712
3,850
11,857
2,337
4,944
5,668
11,418
6,375
5,005
4,165
8,243
787
13,182
738
4,422
2,025
3,164
13,375
4,879
3,799
6,260
4,818
6,689
15,820
5,225
10,193
629
2,897 $
5,597
1,875
1,957
2,216
15,245
4,425
12,993
2,492
5,373
6,412
12,802
7,426
5,471
4,645
9,184
821
14,183
812
4,723
2,232
3,498
14,688
5,122
4,136
7,001
5,666
7,859
17,206
5,640
10,879
844
(134)
(1,242)
(347)
(343)
(261)
(3,633)
(317)
(3,139)
(675)
(642)
(1,902)
(2,013)
(351)
(1,542)
(1,590)
(2,172)
(159)
(3,932)
(98)
(1,479)
(733)
(548)
(209)
(959)
(754)
(1,698)
(5)
(35)
(3,083)
(314)
(2,822)
(208)
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
2005
1997
1998
1998
2000
1996
2004
1997
1995
2002
1993
2000
2005
1994
1997
1997
1999
1995
2002
1994
1993
2000
2006
2001
1999
1995
2007
2007
1999
2004
1995
1994
40 years
12-40 years
40 years
40 years
40 years
40 years
40 years
40 years
24-40 years
40 years
40 years
40 years
40 years
24-40 years
40 years
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
40 years
40 years
40 years
24-40 years
24-40 years
2007 Annual Report F-33
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Description
Multi-Family Residential - continued
Southwind Apartments - Grand Forks, ND
Sunset Trail Phase I - Rochester, MN
Sunset Trail Phase II - Rochester, MN
Sweetwater Properties - Devils Lake & Grafton, ND
Sycamore Village Apartments - Sioux Falls, SD
Terrace On The Green - Moorhead, MN
Valley Park Manor - Grand Forks, ND
Village Green - Rochester, MN
West Stonehill - Waite Park, MN
Westwood Park - Bismarck, ND
Winchester - Rochester, MN
Woodridge Apartments - Rochester, MN
Total Multi-Family Residential
Office
1st Avenue Building - Minot, ND
401 South Main - Minot, ND
2030 Cliff Road - Eagan, MN
7800 W Brown Deer Road - Milwaukee, WI
American Corporate Center - Mendota Heights, MN
Ameritrade - Omaha, NE
Benton Business Park - Sauk Rapids, MN
Bloomington Business Plaza - Bloomington, MN
Brenwood - Minnetonka, MN
Brook Valley I - La Vista, NE
Burnsville Bluffs II - Burnsville, MN
Cold Spring Center - St. Cloud, MN
Corporate Center West - Omaha, NE
Crosstown Centre - Eden Prairie, MN
Dewey Hill Business Center - Edina, MN
Farnam Executive Center - Omaha, NE
Flagship - Eden Prairie, MN
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances
Land
Buildings &
Improvements
Costs
capitalized
subsequent to
acquisition
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
$
$
$
$
$
$
6,227 $
4,067
3,968
0
926
1,473
3,662
1,697
9,568
1,060
4,155
2,961
400
168
168
72
101
24
294
234
939
116
748
370
302,441 $ 37,545
0 $
0
543
6,016
10,217
4,666
901
4,526
8,048
1,526
1,385
4,531
17,315
15,722
2,804
12,160
21,565
30
71
146
1,455
893
327
188
1,300
1,762
347
300
588
3,880
2,884
985
2,188
1,899
$
$
$
5,034
5,935
6,879
998
1,317
1,490
4,137
2,296
10,167
1,909
5,622
6,028
390,168
80
334
835
9,267
16,768
7,957
1,261
6,106
12,138
1,671
2,154
7,808
17,509
14,569
3,507
11,404
21,638
1,384 $
1,063
603
814
216
1,489
1,479
78
2,887
647
568
938
639
208
215
161
141
128
379
262
1,143
228
871
409
61,931 $ 43,513
$
6,179 $
6,958
7,435
1,723
1,493
2,875
5,531
2,346
12,850
2,444
6,067
6,927
6,818 $
7,166
7,650
1,884
1,634
3,003
5,910
2,608
13,993
2,672
6,938
7,336
$
446,131 $ 489,644 $
$
580 $
238
1
320
2,603
64
30
635
2,204
27
759
465
0
480
843
0
34
32
77
146
1,475
893
327
188
1,305
1,771
347
301
592
3,880
2,887
995
2,188
1,899
658 $
566
836
9,567
19,371
8,021
1,291
6,736
14,333
1,698
2,912
8,269
17,509
15,046
4,340
11,404
21,672
690 $
643
982
11,042
20,264
8,348
1,479
8,041
16,104
2,045
3,213
8,861
21,389
17,933
5,335
13,592
23,571
(1,784)
(1,159)
(1,071)
(1,234)
(199)
(2,009)
(1,181)
(228)
(3,810)
(601)
(583)
(1,915)
(89,541)
(360)
(257)
(126)
(1,236)
(2,507)
(1,610)
(127)
(1,042)
(1,825)
(69)
(486)
(1,261)
(274)
(970)
(776)
(178)
(340)
1995
1999
1999
1974
2002
1970
1999
2003
1995
1998
2003
1997
1981
1987
2001
2003
2002
1999
2003
2001
2002
2005
2001
2001
2006
2004
2000
2006
2006
24-40 years
40 years
40 years
5-40 years
40 years
33-40 years
40 years
40 years
40 years
40 years
40 years
40 years
33-40 years
24-40 years
19-40 years
40 years
40 years
40 years
40 years
40 years
40 years
45 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
2007 Annual Report F-34
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Initial Cost to Company
Gross amount at which carried at
close of period
Description
Office - continued
Gateway Corporate Center, Woodbury, MN
Golden Hills Office Center - Golden Valley, MN
Great Plains - Fargo, ND
Highlands Ranch I- Highlands Ranch, CO
Highlands Ranch II - Highlands Ranch, CO
Interlachen Corporate Center - Edina, MN
Mendota Office Center I - Mendota Heights, MN
Mendota Office Center II - Mendota Heights, MN
Mendota Office Center III - Mendota Heights, MN
Mendota Office Center IV - Mendota Heights, MN
Minnesota National Bank - Duluth, MN
Minnetonka Office Building - Minnetonka, MN
Miracle Hills One - Omaha, NE
Nicollett VII - Burnsville, MN
Northgate I - Maple Grove, MN
Northgate II - Maple Grove, MN
Northpark Corporate Center - Arden Hills, MN
Pacific Hills - Omaha, NE
Pillsbury Business Center - Bloomington, MN
Plaza VII - Boise, ID
Plymouth I - Plymouth, MN
Plymouth II - Plymouth, MN
Plymouth III - Plymouth, MN
Plymouth IV - Plymouth, MN
Plymouth V - Plymouth, MN
Prairie Oak Business Center - Eden Prairie, MN
Rapid City, SD - 900 Concourse Drive - Rapid City, SD
Riverport - Maryland Heights, MO
Southeast Tech Center - Eagan, MN
Spring Valley IV - Omaha, NE
Spring Valley V - Omaha, NE
Spring Valley X - Omaha, NE
Encumbrances
Land
Buildings &
Improvements
$
8,700 $
14,882
7,176
9,200
9,385
10,419
4,052
6,488
3,728
4,841
1,145
0
8,895
4,306
6,076
1,387
14,279
16,770
1,052
1,299
1,362
1,362
1,676
3,433
4,940
0
3,342
19,690
3,754
908
999
926
$
1,637
3,018
126
2,268
1,437
1,650
835
1,121
970
1,070
287
40
1,974
429
1,062
359
2,034
4,220
284
300
530
367
507
641
695
531
285
1,891
560
178
212
180
7,763
24,482
15,240
8,362
9,549
14,983
6,169
10,085
5,734
7,635
1,454
361
10,117
6,931
6,358
1,944
14,584
11,988
1,556
3,058
1,133
1,264
1,495
5,251
7,441
4,069
6,600
18,982
5,496
916
1,123
1,024
Costs
capitalized
subsequent to
acquisition
$
19 $
(4,018)
9
(1)
534
93
199
532
84
0
4
10
256
27
369
142
734
68
64
178
9
12
10
494
367
1,156
203
0
282
44
29
24
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
1,637 $
3,018
126
2,268
1,437
1,652
835
1,121
970
1,070
288
40
1,974
436
1,067
403
2,034
4,220
284
351
530
367
507
641
696
563
321
1,891
569
178
212
180
7,782 $
9,419 $
20,464
15,249
8,361
10,083
15,074
6,368
10,617
5,818
7,635
1,457
371
10,373
6,951
6,722
2,042
15,318
12,056
1,620
3,185
1,142
1,276
1,505
5,745
7,807
5,193
6,767
18,982
5,769
960
1,152
1,048
23,482
15,375
10,629
11,520
16,726
7,203
11,738
6,788
8,705
1,745
411
12,347
7,387
7,789
2,445
17,352
16,276
1,904
3,536
1,672
1,643
2,012
6,386
8,503
5,756
7,088
20,873
6,338
1,138
1,364
1,228
(121)
(2,092)
(2,939)
(96)
(669)
(2,168)
(871)
(1,692)
(765)
(979)
(111)
(122)
(179)
(1,057)
(461)
(392)
(401)
(195)
(246)
(351)
(82)
(92)
(108)
(988)
(1,223)
(569)
(1,151)
(297)
(1,136)
(40)
(46)
(42)
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
2006
2003
1997
2006
2004
2001
2002
2002
2002
2002
2004
2001
2006
2001
2004
1999
2006
2006
2001
2003
2004
2004
2004
2001
2001
2003
2000
2006
1999
2005
2005
2005
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
41 years
42 years
43 years
2007 Annual Report F-35
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Description
Office - continued
Spring Valley XI - Omaha, NE
Superior Office Building - Duluth, MN
TCA Building - Eagan, MN
Three Paramount Plaza - Bloomington, MN
Thresher Square - Minneapolis, MN
Timberlands - Leawood, KS
UHC Office - International Falls, MN
US Bank Financial Center - Bloomington, MN
Viromed - Eden Prairie, MN
Wayroad Corporate - Minnetonka, MN
Wells Fargo Center - St Cloud, MN
West River Business Park - Waite Park, MN
Westgate - Boise, ID
Wirth Corporate Center - Golden Valley, MN
Woodlands Plaza IV-Maryland Heights, MO
Total Office
Medical
2800 Medical Building - Minneapolis, MN
6517 Drew Avenue South - Edina, MN
Abbott Northwest - Sartell, MN
Airport Medical - Bloomington, MN
Denfeld Clinic - Duluth, MN
Edgewood Vista - Bismarck, ND
Edgewood Vista - Brainerd, MN
Edgewood Vista - Duluth, MN
Edgewood Vista - Fremont, NE
Edgewood Vista - Hastings, NE
Edgewood Vista - Hermantown, MN
Edgewood Vista - Kalispell, MT
Edgewood Vista - Missoula, MT
Edgewood Vista - Omaha, NE
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances
Land
Buildings &
Improvements
Costs
capitalized
subsequent to
acquisition
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
$
$
$
908 $
143
336
627
1,261
1,094
2,375
119
3,117
666
530
869
235
1,000
970
771
364,894 $ 65,054
1,723
9,483
4,400
0
13,155
1,460
15,023
1,857
4,008
7,401
901
7,138
4,680
4,360
6,387 $
1,289
6,963
2,522
2,206
7,111
7,028
3,199
259
267
8,144
275
496
309
930
353
0
0
501
511
587
288
56
49
719
70
109
89
$
$
$
$
$
$
1,094
2,200
8,571
6,149
10,026
12,218
2,366
13,350
4,197
4,860
8,373
1,195
10,618
7,659
4,609
455,638
7,135
660
11,781
4,678
2,597
9,193
8,999
9,871
490
517
10,517
502
854
547
28 $
3
705
634
954
83
20
222
1
241
549
46
613
362
62
143
336
684
1,298
1,104
2,375
119
3,119
666
577
869
235
1,000
971
771
15,739 $ 65,456
$
1,122 $
2,203
9,219
6,746
10,970
12,301
2,386
13,570
4,198
5,054
8,922
1,241
11,231
8,020
4,671
1,265 $
2,539
9,903
8,044
12,074
14,676
2,505
16,689
4,864
5,631
9,791
1,476
12,231
8,991
5,442
$
470,975 $ 536,431 $
686 $
502
872
0
1
0
0
1,550
6
6
(1)
17
(1)
5
$
930
353
0
0
501
511
587
288
56
49
719
70
109
89
7,821 $
1,162
12,653
4,678
2,598
9,193
8,999
11,421
496
523
10,516
519
853
552
8,751 $
1,515
12,653
4,678
3,099
9,704
9,586
11,709
552
572
11,235
589
962
641
(45)
(167)
(925)
(933)
(1,375)
(213)
(185)
(717)
(861)
(681)
(469)
(117)
(1,213)
(1,102)
(76)
(44,204)
(364)
(106)
(1,542)
(541)
(198)
(374)
(366)
(1,598)
(79)
(84)
(427)
(80)
(224)
(84)
2005
2004
2003
2002
2002
2006
2004
2005
1999
2002
2005
2003
2003
2002
2006
2005
2002
2002
2002
2004
2005
2005
2000
2000
2000
2005
2001
1996
2001
44 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
2007 Annual Report F-36
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Description
Medical - continued
Edgewood Vista - Spearfish, SD
Edgewood Vista - Virginia, MN
Edgewood Vista Phase II - Virginia, MN
Fox River Cottages - Grand Chute, WI
Fresenius - Duluth, MN
Garden View - St. Paul, MN
Gateway Clinic - Sandstone, MN
Health East St John & Woodwinds - Maplewood &
Woodbury, MN
High Pointe Health Campus - Lake Elmo, MN
Mariner Clinic - Superior, WI
Nebraska Orthopaedic Hospital - Omaha, NE
Park Dental - Brooklyn Center, MN
Pavilion I - Duluth, MN
Pavilion II - Duluth, MN
Ritchie Medical Plaza - St Paul, MN
St Michael Clinic - St Michael, MN
Southdale FM - Edina, MN
Southdale SMB - Edina, MN
Stevens Point - Stevens Point, WI
Wells Clinic - Hibbing, MN
Total Medical
Industrial
API Building - Duluth, MN
Bloomington 2000 W 94th ST - Bloomington, MN
Bodycote Industrial Building - Eden Prairie, MN
Dixon Avenue Industrial Park - Des Moines, IA
Lexington Commerce Center - Eagan, MN
Lighthouse - Duluth, MN
Metal Improvement Company - New Brighton, MN
Roseville 2929 Long Lake Road - Roseville, MN
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances
Land
Buildings &
Improvements
$
$
$
4,427 $
4,438
3,214
2,382
1,051
3,766
1,278
315
246
0
305
50
0
66
16,227
4,776
2,794
14,135
1,447
7,362
13,547
7,645
2,150
9,939
22,587
2,701
1,948
3,239
1,305
0
0
185
1,245
2,715
1,615
328
755
3,480
442
162
174,269 $ 20,715
1,168 $
4,243
1,426
8,222
3,019
1,226
1,318
6,240
115
2,133
198
1,439
453
90
240
1,966
$
$
$
5,807
6,712
5,111
2,746
1,520
7,408
1,699
18,362
10,528
3,781
20,272
2,767
8,898
14,673
7,851
2,259
8,054
26,432
3,888
2,497
229,606
1,605
4,097
1,154
10,758
4,352
1,788
2,189
7,272
Costs
capitalized
subsequent to
acquisition
$
(1) $
112
0
661
2
180
0
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
$
315
246
0
305
50
0
66
5,806 $
6,824
5,111
3,407
1,522
7,588
1,699
6,121 $
7,070
5,111
3,712
1,572
7,588
1,765
(236)
(860)
(410)
(54)
(116)
(949)
(129)
0
205
7
240
0
1
1,937
81
0
5,190
4,219
7,979
2
3,239
1,308
6
0
185
1,245
2,715
1,647
328
755
3,480
442
162
24,458 $ 20,756
18,362
10,730
3,782
20,512
2,767
8,899
16,610
7,900
2,259
13,244
30,651
11,867
2,499
21,601
12,038
3,788
20,512
2,952
10,144
19,325
9,547
2,587
13,999
34,131
12,309
2,661
$
254,023 $ 274,779 $
(3,194)
(748)
(288)
(1,516)
(320)
(640)
(1,594)
(370)
0
(1,570)
(5,336)
(200)
(190)
(24,787)
3 $
(1)
800
946
1,370
6
78
(1)
$
115
2,133
198
1,439
480
90
240
1,966
1,608 $
4,096
1,954
11,704
5,695
1,794
2,267
7,271
1,723 $
6,229
2,152
13,143
6,175
1,884
2,507
9,237
(122)
(38)
(565)
(1,400)
(1,094)
(137)
(281)
(68)
$
$
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
2005
2002
2004
2006
2004
2002
2004
2000
2004
2004
2004
2002
2004
2004
2005
2007
2003
2001
2006
2004
2004
2006
1992
2002
1999
2004
2002
2006
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
2007 Annual Report F-37
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Description
Industrial - continued
Stone Container - Fargo, ND
Stone Container - Roseville, MN
Waconia Industrial Building - Waconia, MN
Wilson's Leather - Brooklyn Park, MN
Winsted Industrial Building - Winsted, MN
Total Industrial
Retail
17 South Main - Minot, ND
Anoka Strip Center - Anoka, MN
Burnsville 1 Strip Center - Burnsville, MN
Burnsville 2 Strip Center - Burnsville, MN
Champlin South Pond - Champlin, MN
Chan West Village - Chanhassen, MN
Dakota West Plaza - Minot , ND
Duluth Denfeld Retail - Duluth, MN
Duluth NAPA - Duluth, MN
Eagan 1 Retail Center - Eagan, MN
Eagan 2 Retail Center - Eagan, MN
Eagan 3 C Store - Eagan, MN
East Grand Station - East Grand Forks, MN
Fargo Express Center - Fargo, ND
Fargo Express SC Pad 1 - Fargo, ND
Forest Lake Auto - Forest Lake, MN
Forest Lake Westlake Center - Forest Lake, MN
Grand Forks Carmike - Grand Forks, ND
Grand Forks Medpark Mall - Grand Forks, ND
Jamestown Buffalo Mall - Jamestown, ND
Jamestown Business Center - Jamestown, ND
Kalispell Retail Center - Kalispell, MT
Kentwood Thomasville Furniture - Kentwood, MI
Ladysmith Pamida - Ladysmith, WI
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances
Land
Buildings &
Improvements
Costs
capitalized
subsequent to
acquisition
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
$
$
$
3,813 $
4,546
876
7,933
0
44,030 $
0 $
469
610
485
2,161
14,864
442
3,279
993
1,594
0
0
498
1,212
0
0
5,096
2,114
3,056
2,075
796
1,652
839
1,146
$
$
$
$
$
$
440
810
165
1,368
100
9,517
15
123
208
291
842
5,035
92
276
130
196
291
214
150
305
69
50
2,446
184
681
566
297
250
225
89
6,597
7,440
1,492
11,643
901
61,288
75
602
773
469
2,703
14,665
493
4,699
1,800
244
879
466
1,235
1,120
300
446
5,304
2,360
4,808
3,209
1,023
2,250
1,889
1,411
104 $
0
347
794
6
4,452 $
189 $
8
20
44
90
1,199
17
10
3
78
201
104
7
16
(1)
5
437
2
208
1,234
615
970
8
1
$
$
$
440
810
187
1,368
100
9,566
15
123
208
291
866
5,090
106
276
130
196
293
214
150
316
69
50
2,480
184
699
695
326
253
225
89
6,701 $
7,440
1,817
12,437
907
65,691 $
7,141 $
8,250
2,004
13,805
1,007
75,257 $
264 $
610
793
513
2,769
15,809
496
4,709
1,803
322
1,078
570
1,242
1,125
299
451
5,707
2,362
4,998
4,314
1,609
3,217
1,897
1,412
279 $
733
1,001
804
3,635
20,899
602
4,985
1,933
518
1,371
784
1,392
1,441
368
501
8,187
2,546
5,697
5,009
1,935
3,470
2,122
1,501
(1,603)
(1,000)
(308)
(1,480)
(161)
(8,257)
(31)
(64)
(88)
(69)
(214)
(1,677)
(12)
(361)
(137)
(33)
(111)
(59)
(231)
(119)
(17)
(44)
(598)
(738)
(923)
(326)
(160)
(288)
(497)
(148)
1995
2001
2000
2002
2001
2000
2003
2003
2003
2004
2003
2006
2004
2004
2003
2003
2003
1999
2003
2005
2003
2003
1994
2000
2003
2003
2003
1996
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
2007 Annual Report F-38
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Description
Retail - continued
Lakeville Strip Center - Lakeville, MN
Livingston Pamida - Livingston, MT
Minot Arrowhead SC - Minot, ND
Minot Plaza - Minot, ND
Monticello C Store - Monticello, MN
Omaha Barnes & Noble - Omaha, NE
Pine City C Store - Pine City, MN
Pine City Evergreen Square - Pine City, MN
Rochester Maplewood Square - Rochester, MN
St. Cloud Westgate SC - St. Cloud, MN
Weston Retail - Weston, WI
Weston Walgreens - Weston, WI
Total Retail
Unimproved Land
2828 Chicago Avenue - Minneapolis, MN
Cottonwood Lake IV - Bismarck, ND
Eagan Unimproved Land - Eagan, MN
Kalispell Unimproved Land - Kalispell, MT
Minot Unimproved Land - Minot, ND
Monticello Unimproved Land - Monticello, MN
Quarry Ridge Unimproved Land - Rochester, MN
River Falls Unimproved Land - River Falls, WI
St. Michael Unimproved Property - St. Michael, MN
Weston Unimproved Land - Weston, WI
Total Unimproved Land
Total
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances
Land
Buildings &
Improvements
Costs
capitalized
subsequent to
acquisition
Buildings &
Improvements
Land
Accumulated
Depreciation
Total
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
$
$
$
$
$
1,211 $
1,362
1,067
673
0
3,141
352
2,163
4,721
3,968
0
3,466
46
227
100
50
86
600
83
154
3,275
1,219
79
66
65,505 $ 19,010
0 $
0
0
0
0
0
0
0
0
0
0 $
0
264
423
1,400
1,754
89
942
200
0
811
5,883
$
$
$
$
1,142
1,573
1,064
453
770
3,099
357
2,646
8,610
5,535
1,575
1,718
81,765
0
0
0
0
0
0
0
0
0
0
0
951,139 $ 157,724
$ 1,218,465
$
$
$
$
$
783 $
0
4,922
92
33
0
2
228
91
87
27
671
94
227
354
59
118
600
83
206
3,294
1,242
80
67
12,401 $ 19,768
254
1,102
0
24
13
0
0
5
111
0
1,509 $
0
286
423
1,411
1,754
89
942
203
0
811
5,919
$
$
$
$
1,877 $
1,573
5,732
536
771
3,099
359
2,822
8,682
5,599
1,601
2,388
93,408 $ 113,176 $
1,971 $
1,800
6,086
595
889
3,699
442
3,028
11,976
6,841
1,681
2,455
(216)
(165)
(2,572)
(182)
(82)
(891)
(38)
(313)
(1,690)
(437)
(169)
(55)
(13,755)
254 $
1,080
0
13
13
0
0
2
0
0
1,362 $
254 $
1,366
423
1,424
1,767
89
942
205
111
811
7,392 $
0
0
0
0
0
0
0
0
0
0
0
120,490 $ 164,978
$ 1,331,590 $ 1,496,679 $
(180,544)
2003
2003
1973
1993
2003
1995
2003
2003
1999
2004
2003
2006
2007
1997
2006
2003
2007
2006
2006
2003
2007
2006
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
40 years
40 years
2007 Annual Report F-39
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Reconciliations of total real estate carrying value for the three years ended April 30, 2007, 2006, and 2005 are as
follows:
Balance at beginning of year
Additions during year
Residential Real Estate
Commercial Office Real Estate
Commercial Medical Real Estate
Commercial Industrial Real Estate
Commercial Retail Real Estate
Improvements and Other
Deductions during year
Cost of Real Estate Sold
Impairment charge
Balance at close of year(1)
(in thousands)
2006
2007
2005
$ 1,269,423 $ 1,179,856 $ 1,082,773
38,562
147,302
5,638
15,467
2,382
30,865
1,509,639
2,445
25,034
58,200
0
0
14,771
1,280,306
12,643
67,532
42,245
0
3,120
17,688
1,226,001
(19,797)
(555)
(45,575)
(570)
$ 1,489,287 $ 1,269,423 $ 1,179,856
(10,474)
(409)
Reconciliations of accumulated depreciation/amortization for the three years ended April 30, 2007, 2006, and 2005,
are as follows:
Balance at beginning of year
Additions during year
Provisions for depreciation
Deductions during year
(in thousands)
2007
2006
2005
$
148,607
$
118,512 $
98,923
35,143
30,585
27,605
Accumulated depreciation on real estate sold
Balance at close of year
(3,206)
180,544
$
(490)
(8,016)
148,607 $ 118,512
$
(1) The net basis of the Company’s real estate investments for Federal Income Tax purposes is approximately $879 million.
2007 Annual Report F-40
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2007
Schedule IV
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE
Interest
Rate
Final
Maturity
Date
Payment
Terms
Prior
Liens
Face Amt. of
Mortgages
Prin. Amt
of Loans
Subject to
Delinquent
Prin. or Int.
Carrying
Amt. of
Mortgages
(in thousands)
First Mortgage
Martin Property – Pioneer Seed
6.00% 05/01/09
Less:
Allowance for Loan Losses
Monthly/
Balloon
0 $
$
475 $
475 $
$
$
411
411
(12)
399
MORTGAGE LOANS RECEIVABLE, BEGINNING OF YEAR
Collections
Transferred to other assets
MORTGAGE LOANS RECEIVABLE, END OF YEAR
$
$
2007
409
(22)
12
399
$
(in thousands)
2006
619 $
619
(210)
0
409 $
$
0
2005
4,893
4,893
(4,274)
0
619
2007 Annual Report F-41
SUBSIDIARIES OF INVESTORS REAL ESTATE TRUST
Name of Subsidiary
Applewood - IRET Properties, a Nebraska Limited Partnership
Applewood - IRET, Inc.
Dakota - IRET, Inc.
Dakota Hill Properties, a Texas Limited Partnership
DRF Omaha/NOH, LLC
Forest Park - IRET, Inc.
Forest Park Properties, a North Dakota Limited Partnership
France Medical LLC
France Medical MM LLC
Health Investors Business Trust
IRET - BD, LLC
IRET - Brenwood, LLC
IRET - DMS, LLC
IRET - MR9, LLC
IRET - MR9 Holding, LLC
IRET - Oakmont, LLC
IRET - QR, LLC
IRET - Quarry Ridge, LLC
IRET - Ridge Oaks, LLC
IRET Properties, a North Dakota Limited Partnership
IRET, Inc.
IRET-1715 YDR, LLC
IRET-Brown Deer, LLC
IRET- Candlelight, LLC
IRET- Golden Jack, L.L.C.
IRET-Plymouth, LLC
Meadow 2 - IRET, Inc.
Meadow 2 Properties, L.P.
MedPark - IRET, Inc.
Medpark Properties Limited Partnership
Mendota Office Holdings LLC
Mendota Office Three & Four LLC
Mendota Properties, LLC
Minnesota Medical Investors LLC
Ridge Oaks, L.P.
SMB MM LLC
SMB Operating Company LLC
Thomasbrook - IRET, Inc.
Thomasbrook Properties, a Nebraska Limited Partnership
West Stonehill - IRET, Inc.
Exhibit 21.1
State of
Incorporation or
Organization
Nebraska
Nebraska
Texas
Texas
Minnesota
North Dakota
North Dakota
Delaware
Delaware
Delaware
Minnesota
Minnesota
Minnesota
Delaware
Delaware
South Dakota
Delaware
Delaware
Iowa
North Dakota
North Dakota
Minnesota
North Dakota
North Dakota
Delaware
Minnesota
North Dakota
North Dakota
North Dakota
North Dakota
Minnesota
Minnesota
Minnesota
Delaware
Iowa
Delaware
Delaware
Nebraska
Nebraska
Minnesota
2007 Annual Report
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-141341, 333-137699, 333-131894,
333-128745, 333-122289, 333-119547, 333-117121, 333-115082, 333-112465, 333-114162, 333-112272, 333-
110003, 333-109387, 333-107729, 333-106748, 333-104267, 333-102610, 333-101782, 333-100272, 333-98575,
333-91788, 333-85930, 333-85352, 333-76034, 333-76266, 333-57676, 333-89761 and 333-67317 on Form S-3 and
in Registration Statement No. 333-140176 on Form S-8 of our reports, relating to the consolidated financial
statements and financial statement schedules of Investors Real Estate Trust, and management’s report on the
effectiveness of internal control over financial reporting, dated July, 13, 2007, appearing in the Annual Report on
Form 10-K of Investors Real Estate Trust for the year ended April 30, 2007.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
July 13, 2007
2007 Annual Report
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 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)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c) 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
d) 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 11, 2007
By:
/s/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr., President & CEO
2007 Annual Report
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 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)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c) 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
d) 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 11, 2007
By:
/s/ Diane K. Bryantt
Diane K. Bryantt, Senior Vice President & CFO
2007 Annual Report
The following certification is furnished as provided by Rule 13a-14(b) promulgated under the Securities Act of 1934
and Item 601(b) (32) (ii) of Regulation S-K.
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Investors Real Estate Trust (the “Company”) on Form 10-K for the year
ended April 30, 2007, as filed with the Securities and Exchange Commission on July 16, 2007, (the “Report”), I,
Thomas A. Wentz, Sr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my
knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr.
President and Chief Executive Officer
July 11, 2007
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
2007 Annual Report
The following certification is furnished as provided by Rule 13a-14(b) promulgated under the Securities Act of 1934
and Item 601(b) (32) (ii) of Regulation S-K.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Investors Real Estate Trust (the “Company”) on Form 10-K for the year
ended April 30, 2007, as filed with the Securities and Exchange Commission on July 16, 2007, (the “Report”), I
Diane K. Bryantt, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my
knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ Diane K. Bryantt
Diane K. Bryantt
Senior Vice President and Chief Financial Officer
July 11, 2007
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
2007 Annual Report
S H A R E H O L D E R I N F O R M AT I O N
TRUSTEES
Patrick G. Jones(6)(8)
Private Investor
Jeffrey L. Miller (1)(6)(8)
President
M&S Concessions, Inc.
(food service and facility management company)
C.W. “Chip” Morgan(4)(6)(8)
President and Chief Executive Officer
Northwest Respiratory Services, LLC
(home medical company)
Edward T. Schafer(6)(8)
Private Investor
W. David Scott
Chief Executive Officer
Magnum Resources, Inc.,
(real estate services and investment firm)
Timothy P. Mihalick
Senior Vice President & Chief Operating Officer
Investors Real Estate Trust
Stephen L. Stenehjem(2)(4)(5)(7)
President and Chief Executive Officer
Watford City BancShares, Inc.
(bank holding company)
John D. Stewart(3)(6)(8)
President and Chief Executive Officer
Fisher Motors, Inc.
(automobile dealership)
Thomas A. Wentz, Jr.
Senior Vice President
Investors Real Estate Trust
EXECUTIVE OFFICERS
ANNUAL MEETING
The Annual Meeting of Shareholders of the Company will be
held at 7:00 p.m. CDT on September 18, 2007, at the Grand
International, 1505 North Broadway, Minot, North Dakota.
SHARES LISTED
The Company’s common shares of beneficial interest are
listed on the NASDAQ Global Select Market under the
symbol “IRETS.”
The Company’s Series A cumulative preferred shares of
beneficial interest are listed on the NASDAQ Global Select
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
Fulbright & Jaworski L.L.P.
Minneapolis, Minnesota
DISTRIBUTION REINVESTMENT PLAN
The Company has a distribution reinvestment plan. Interested
participants can obtain more information by contacting the
Investor Relations Department at 701-837-4738 or at
info@iret.com.
Thomas A. Wentz, Sr.
President and Chief Executive Officer
FORM 10-K
Timothy P. Mihalick
Senior Vice President and Chief Operating Officer
Diane K. Bryantt
Senior Vice President and Chief Financial Officer
Thomas A. Wentz, Jr.
Senior Vice President - Asset Management and
Finance
Kelly A. Walters
Vice President - Capital Markets and New Business
Development
Michael A. Bosh
General Counsel and 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
Front Cover: Miracle Hills One
Omaha, Nebraska
A copy of the annual report on Form 10-K for the Company’s
fiscal year ended April 30, 2007, 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, or address or
name changes should be directed to: Investor Relations,
Investors Real Estate Trust, PO Box 1988, Minot, ND 58702-
1988.
COMPANY HEADQUARTERS
Investors Real Estate Trust
12 Main Street South • PO Box 1988
Minot, ND 58702-1988
Telephone: (701)837-4738 / Fax: (701)838-7785
info@iret.com
www.iret.com
IINNVVEESSTTOORRSS RREEAALL EESSTTAATTEE TTRRUUSSTT
12 Main Street South • PO Box 1988
Minot, ND 58702-1988
www.iret.com