2013 Annual Report
1400 31st Avenue SW, Suite 60
P.O. Box 1988
Minot, North Dakota 58702-1988
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:53)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 2013
or
(cid:133)
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
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.)
1400 31st Avenue SW, Suite 60
Post Office Box 1988
Minot, ND 58702-1988
(Address of principal executive offices) (Zip code)
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) - New York Stock Exchange
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (no par value) -
New York Stock Exchange
Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (no par value) -
New York Stock Exchange
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:59) Yes
(cid:134) 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
2013 Annual Report
Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Website, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was
required to submit and post such files).
(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:134)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
(cid:59) Large accelerated filer
(cid:134) Non-accelerated filer (cid:134) Smaller reporting Company
(cid:134) 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
The aggregate market value of the Registrant’s outstanding common shares of beneficial interest held by non-
affiliates of the Registrant as of October 31, 2012 was $770,620,552 based on the last reported sale price on the
NASDAQ Global Select Market on October 31, 2012. For purposes of this calculation, the Registrant has assumed
that its trustees and executive officers are affiliates.
The number of common shares of beneficial interest outstanding as of June 10, 2013, was 102,034,523.
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 2013 Annual Meeting
of Shareholders to be held on September 17, 2013 are incorporated by reference into Part III (Items 10, 11, 12, 13
and 14) hereof.
2013 Annual Report
INVESTORS REAL ESTATE TRUST
INDEX
PAGE
PART I
5
Item 1. Business .................................................................................................................................................
Item 1A. Risk Factors ........................................................................................................................................... 11
Item 1B. Unresolved Staff Comments .................................................................................................................. 22
Item 2. Properties ............................................................................................................................................... 22
Item 3. Legal Proceedings .................................................................................................................................. 34
Item 4. Mine Safety Disclosures ........................................................................................................................ 34
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities .................................................................................................................................... 35
Item 6. Selected Financial Data ......................................................................................................................... 37
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ................. 37
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ................................................................ 77
Item 8. Financial Statements and Supplementary Data ...................................................................................... 78
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................ 78
Item 9A. Controls and Procedures ........................................................................................................................ 78
Item 9B. Other Information................................................................................................................................... 80
PART III
Item 10. Trustees, Executive Officers and Corporate Governance ...................................................................... 80
Item 11. Executive Compensation ....................................................................................................................... 80
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters .................................................................................................................................................. 80
Item 13. Certain Relationships and Related Transactions, and Trustee Independence ........................................ 80
Item 14. Principal Accountant Fees and Services ................................................................................................ 80
PART IV
Item 15. Exhibits, Financial Statement Schedules ............................................................................................... 81
Exhibit Index ......................................................................................................................................................... 81
Signatures .............................................................................................................................................................. 83
Reports of Independent Registered Public Accounting Firms and Financial Statements ........................ F-1 to F-49
2013 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,” “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;
• compliance with applicable laws, including those concerning the environment and access by persons with
disabilities; and
•
the availability and cost of casualty insurance for losses.
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.
2013 Annual Report 4
Item 1. Business
Overview
PART I
Investors Real Estate Trust (“IRET” or the “Company”) 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 through 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, commercial
healthcare, commercial industrial and commercial retail properties. These properties are located primarily in the
upper Midwest states of Minnesota and North Dakota. For the fiscal year ended April 30, 2013, our real estate
investments in these two states accounted for 69.5% of our total gross revenue. Our principal executive office is
located in Minot, North Dakota. We also have corporate offices in Minneapolis and St. Cloud, Minnesota, and
additional property management offices in Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota and
South Dakota.
We seek to diversify our investments among multi-family residential, commercial office, commercial healthcare,
commercial industrial and commercial retail properties. As of April 30, 2013, our real estate portfolio consisted of:
• 87 multi-family residential properties containing 10,280 apartment units and having a total real estate
investment amount net of accumulated depreciation of $519.3 million;
• 67 commercial office properties containing approximately 5.1 million square feet of leasable space and
having a total real estate investment amount net of accumulated depreciation of $475.5 million;
• 65 commercial healthcare properties (including senior housing) containing approximately 3.0 million square
feet of leasable space and having a total real estate investment amount net of accumulated depreciation of
$410.3 million;
• 20 commercial industrial properties containing approximately 2.9 million square feet of leasable space and
having a total real estate investment amount net of accumulated depreciation of $102.1 million; and
• 30 commercial retail properties containing approximately 1.4 million square feet of leasable space and
having a total real estate investment amount net of accumulated depreciation of $105.3 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, 2013, no individual tenant accounted for more than 10% of our
total real estate rentals, although affiliated entities of Edgewood Vista together accounted for approximately 13.2%
of our total commercial segments’ minimum rents.
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 “Internal Revenue Code”), and since February 1, 1997, we have been structured as an UPREIT. Since
restructuring as an UPREIT, we have conducted our daily business operations primarily 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, 2013, IRET, Inc. owned an 82.4% interest in IRET Properties. The
remaining ownership of IRET Properties is held by individual limited partners.
2013 Annual Report
5
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. 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 in commercial office, commercial
healthcare, commercial industrial and commercial retail 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 Colorado, Idaho, Iowa, Kansas,
Missouri, Montana, Nebraska, South Dakota, Wisconsin and Wyoming.
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 12 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.
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, 2013 and 2012, we had no junior mortgages
outstanding. We had no investments in real estate mortgages at April 30, 2013 and 2012.
2013 Annual Report 6
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:
Distributions to shareholders and holders of limited partnership units. One of the requirements of the Internal
Revenue Code for a REIT is that it distribute 90% of its net taxable income, excluding net capital gains, to its
shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu
thereof. Our general policy has been to make 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. Distributions to our common shareholders
and unitholders in fiscal years 2013 and 2012 totaled approximately 75.4% and 86.4%, respectively, on a per share
and unit basis of our funds from operations.
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”), and on August 7, 2012 we issued 4,600,000
shares of 7.95% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B 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 generally accepted accounting principles (“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, 2013, our ratio of total indebtedness to total real estate investments was 64.1% while our ratio of
total indebtedness as compared to our Net Assets (computed in accordance with our Bylaws) was 91.0%.
Offering securities in exchange for property. Our organizational structure allows us to issue shares and to offer
limited partnership units of IRET Properties in exchange for real estate. The limited partnership units are convertible
into cash, or, at our option, common shares on a one-for-one basis after a minimum one-year holding period. All
limited partnership units receive the same cash distributions as those paid on common shares. Limited partners are
not entitled to vote on any matters affecting us until they convert their limited partnership units to common shares.
Our declaration of trust, as amended (our “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, net of issue costs
2013
1,620
$ 12,632
(in thousands)
2012
1,024
$ 8,055 $
2011
555
4,996
Acquiring or repurchasing shares. As a REIT, it is our intention to invest only in real estate assets. Our 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 Internal Revenue 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.
2013 Annual Report 7
During fiscal year 2013, 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.
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. We had no investments in real estate mortgages at April 30, 2013 and
2012.
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 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.
Information about Segments
We currently operate in five reportable real estate segments: multi-family residential; commercial office;
commercial healthcare, including senior housing (formerly referred to as the commercial medical segment; the
composition of this segment has not changed from prior periods); commercial industrial and commercial 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.
Executive Officers of the Company
Set forth below are the names, ages, titles and biographies of each of our executive officers as of July 1, 2013.
Name
Timothy P. Mihalick
Thomas A. Wentz, Jr.
Diane K. Bryantt
Michael A. Bosh
Mark W. Reiling
Charles A. Greenberg
Ted E. Holmes
Andrew Martin
Age
54
47
49
42
55
54
42
40
Title
President and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Financial Officer
Executive Vice President and General Counsel
Executive Vice President of Asset Management
Senior Vice President, Commercial Asset Management
Senior Vice President, Finance
Senior Vice President, Residential Property Management
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 served
as the Chief Operating Officer from 1997 to 2009, as a Senior Vice President from 2002 to 2009, and as a member
of our Board of Trustees since 1999. In September 2009, Mr. Mihalick was named President and Chief Executive
Officer.
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 served as Senior Vice President of Asset
Management and Finance from 2002 to 2009 and as a member of our Board of Trustees since 1996. In September
2009, Mr. Wentz was named Senior Vice President and Chief Operating Officer, and in June 2012 Mr. Wentz was
named Executive Vice President and Chief Operating Officer. 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.
Diane K. Bryantt is a graduate of Minot State University. Ms. Bryantt joined us in June 1996, and served as our
Controller and Corporate Secretary before being appointed to the positions of Senior Vice President and Chief
Financial Officer in 2002 and Executive Vice President and Chief Financial Officer in June 2012. 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 and Executive Vice President and General Counsel in June 2012. Prior to 2002, Mr.
Bosh was a shareholder in the law firm of Pringle & Herigstad, P.C. Mr. Bosh graduated from Jamestown College in
2013 Annual Report 8
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.
Mark W. Reiling joined IRET in June 2012 as Executive Vice President of Asset Management. Mr. Reiling holds a
Bachelor’s degree in Business Administration (Finance) from the University of Notre Dame and has over 30 years
of commercial real estate experience. He was associated with the Towle Real Estate Company and its successors
(now Cassidy Turley) for 29 years, 17 as president and 9 as the owner, providing appraisal, brokerage, consulting,
mortgage banking and property management services. During the same time, as owner of Towle Properties, Inc., he
acquired and developed real estate properties and provided third party asset management services. Previously, he
was a senior account officer with Citicorp Real Estate, Inc. Mr. Reiling holds the CRE designation from the
Counselors of Real Estate and the SIOR designation from the Society of Industrial and Office Realtors. He is a
director of Sunrise Banks.
Charles A. Greenberg joined IRET in August 2005 as Director of Commercial Asset Management, and was named
Senior Vice President, Commercial Asset Management in November 2008. He is a graduate of the University of
Wisconsin-Madison and has over 27 years of experience in both asset and property management of institutional-
grade real estate investments. From 1989 to 2005, Mr. Greenberg was General Manager at Northco Corporation, a
Minneapolis-based real estate investment firm.
Ted E. Holmes joined us in 2009 as Vice President of Finance, and was promoted to Senior Vice President of
Finance in December 2010. Mr. Holmes has over 18 years of experience in the finance industry, including the
placement of debt and equity as a commercial and multi-family mortgage banker. From 1994 to 2002 Mr. Holmes
was an Analyst and Assistant Vice President with Towle Financial Services/Midwest, a privately held mortgage
banking company in Minneapolis, and he served as Director with Wells Fargo Bank, NA from 2003 to 2009. He
holds a Bachelor of Arts degree in Economics from St. Cloud State University and is a licensed Minnesota Broker.
Andrew Martin joined IRET in December 2009 to lead the Company’s Residential Property Management division.
In May 2011 Mr. Martin was promoted to Senior Vice President of Residential Property Management. He has over
18 years of experience in the commercial and multi-family property management industry. Prior to his employment
with IRET, Mr. Martin was a partner with INH Companies, a property management firm based in St. Cloud,
Minnesota, and also worked in Minneapolis, Minnesota for United Properties as a regional property manager. Mr.
Martin holds a bachelor’s degree in Real Estate and a Master’s degree in Business Administration from St. Cloud
State University, and has earned the designation of Certified Property Manager from the Institute of Real Estate
Management.
Employees
As of April 30, 2013, we had 422 employees, of whom 353 were full-time and 69 part-time employees. Of these 422
employees, 60 are corporate staff in our Minot, North Dakota and Minneapolis, Minnesota offices, and 362 are
property management employees based at our properties or in local property management offices.
Environmental Matters and Government Regulation
Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment,
a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third
parties for property damage or personal injuries and for investigation and clean-up costs incurred in connection with
any contamination. In addition, some environmental laws create a lien on a contaminated site 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
2013 Annual Report 9
•
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 for acquisitions. We do not believe we have a dominant position in any of
the geographic markets in which we operate, but some of our competitors may be 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
Our 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 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.
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
Investors/Financial Reporting section of our 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 and Governance Committees of our Board of Trustees are also
available on our website under the heading “Corporate Governance” in the Investors/Corporate Overview section of
2013 Annual Report 10
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 58702-1988. 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, terrorist acts or acts of war which may result in
uninsured or underinsured losses; and
• decreases in the underlying value of our real estate.
The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws
and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. Government, may
adversely affect our business. We depend on the Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac) for financing for the majority of our multi-family
residential properties. Fannie Mae and Freddie Mac are U.S. Government-sponsored entities, or GSEs, but their
guarantees are not backed by the full faith and credit of the United States. In September 2008 Fannie Mae and
Freddie Mac were placed in federal conservatorship. The problems faced by Fannie Mae and Freddie Mac resulting
in their being placed into federal conservatorship stirred debate among some federal policy makers regarding the
continued role of the U.S. Government in providing liquidity for the residential mortgage market. It is unclear how
future legislation may impact Fannie Mae and Freddie Mac’s involvement in multi-family residential financing.
The scope and nature of the actions that the U.S. Government may undertake with respect to the future of Fannie
Mae and Freddie Mac are unknown and will continue to evolve. It is possible that each of Fannie Mae and Freddie
Mac could be dissolved and the U.S. Government could decide to stop providing liquidity support of any kind to the
multi-family residential mortgage market. Future legislation could further change the relationship between Fannie
Mae and Freddie Mac and the U.S. Government, and could also nationalize or eliminate such GSEs entirely. Any
law affecting these GSEs may create market uncertainty and have the effect of reducing the credit available for
financing multi-family residential properties. The loss or reduction of this important source of credit would be likely
to result in higher loan costs for us, and could result in inability to borrow or refinance maturing debt, all of which
could materially adversely affect our business, operations and financial condition.
2013 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 to quickly and efficiently integrate new acquisitions into our existing operations.
These risks could have an adverse effect on our results of operations and financial condition and the amount of cash
available for payment of distributions.
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, 2013, we
received approximately 69.5% 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, 2013, approximately 1.4 million square feet,
or 11.6% of our total commercial property square footage, was vacant. Approximately 551 of our 10,280 apartment
units, or 5.4%, were vacant. As of April 30, 2013, leases covering approximately 14.4% of our total commercial
segments net rentable square footage will expire in fiscal year 2014, 10.0% in fiscal year 2015, 13.8% in fiscal year
2016, 11.6% in fiscal year 2017, and 5.7% in fiscal year 2018, assuming that none of the tenants exercise future
renewal options, and excluding the effect of early renewals completed on existing leases.
2013 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. These considerations
impact our decisions on whether or not to dispose of certain of our assets.
Capital markets and economic conditions can materially affect our financial condition and results of operations, the
value of our equity securities, and our ability to sustain payment of our distribution at current levels. Many factors
affect the value of our equity securities and our ability to make or maintain at current levels distributions to the
holders of our shares of beneficial interest, including the state of the capital markets and the economy, which in
recent years have negatively affected substantially all businesses, including ours. Demand for office, industrial, and
retail space has declined nationwide due to bankruptcies, downsizing, layoffs and cost cutting. The availability of
credit has been and may in the future again be adversely affected by illiquid credit markets. Regulatory pressures
and the burden of troubled and uncollectible loans led some lenders and institutional investors to reduce, and in
some cases, cease to provide funding to borrowers. If these market conditions recur, they may limit our ability and
the ability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity
needs, which may materially affect our financial condition and results of operations and the value of our equity
securities. Declining rental revenues from our properties due to persistent negative economic conditions may have a
material adverse effect on our ability to make distributions to the holders of our shares of beneficial interest. In
fiscal years 2013 and 2012, distributions to our common shareholders and unitholders of the Operating Partnership
in cash and common shares pursuant to our Distribution Reinvestment and Share Purchase Plan (DRIP) totaled
approximately 76.2% and 88.7%, respectively, of our net cash provided by operating activities.
Inability to manage rapid growth effectively may adversely affect our operating results. We have experienced
significant growth at various times in the past; 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 rapid growth presents challenges, including:
•
•
•
the need to expand our management team and staff;
the need to enhance internal operating systems and controls; and
the ability to consistently achieve targeted returns on individual properties.
2013 Annual Report 13
We may not be able to maintain similar rates of growth in the future, or manage our growth effectively.
Additionally, an inability to make accretive property acquisitions may adversely affect our ability to increase our net
income. The acquisition of additional real estate properties is critical to our ability to increase our net income. If we
are unable 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 net
income may be materially and adversely affected. 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
to pay higher prices for new properties than we otherwise would have paid, or may prevent us from purchasing a
desired property at all.
High leverage on our overall portfolio may result in losses. As of April 30, 2013, 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 91.0%. As of April 30, 2012 and 2011, our percentage of total indebtedness to total Net Assets was
approximately 117.2% and 117.9%, respectively. Under our Bylaws we may increase our total indebtedness up to
300.0% of our Net Assets, or by an additional approximately $2.5 billion. 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 securities 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 have
a limited ability 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.
These risks increase when credit markets are tight; in general, when the credit markets are constrained, we may
encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions,
and the terms of such financing or refinancing are likely to be less favorable to us 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 a significant 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
2013 Annual Report 14
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.
As of April 30, 2013, approximately 6.2% of our mortgage debt is due for repayment in fiscal year 2014. As of April
30, 2013, we had approximately $64.9 million of principal payments and approximately $57.2 million of interest
payments due in fiscal year 2014 on fixed and variable-rate mortgages secured by our real estate. Additionally, as of
April 30, 2013, we had $10.0 million outstanding under our $60.0 million multi-bank line of credit, which has a
maturity date of August 12, 2014.
The cost of our indebtedness may increase. Portions of our fixed-rate 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. In addition, we have incurred, and we expect to continue to incur, indebtedness that bears interest at a variable
rate.
As of April 30, 2013, $26.2 million, or approximately 2.5%, of the principal amount of our total mortgage
indebtedness was subject to variable interest rate agreements. Additionally, our $60.0 million multi-bank line of
credit bears interest at a rate of 1.25% over the Wall Street Journal Prime Rate, with a floor of 5.15% and a cap of
8.65%. 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.
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 commercial healthcare 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 healthcare properties (including senior housing) and may acquire more in the future. As of April 30,
2013, our real estate portfolio consisted of 65 commercial healthcare properties, with a total real estate investment
amount, net of accumulated depreciation, of $410.3 million, or approximately 25.5% of the total real estate
investment amount, net of accumulated depreciation, of our entire real estate portfolio. The healthcare industry
continues to experience: 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
2013 Annual Report 15
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 commercial healthcare 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 commercial healthcare 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.
New federal healthcare reform laws may adversely affect the operators and tenants of our commercial healthcare
(including senior housing) properties. In March 2010, the President signed into law The Patient Protection and
Affordable Care Act (“PPACA”) and The Health Care and Education and Reconciliation Act of 2010 (the
“Reconciliation Act”), which amends the PPACA (collectively, the “Health Reform Acts”). The Health Reform
Acts contain various provisions that may affect us directly as an employer, and that may affect the operators and
tenants of commercial healthcare (including senior housing) properties. While some of the provisions of these laws
may have a positive impact on operators’ or tenants’ revenues, by increasing coverage of uninsured individuals,
other provisions may have a negative effect on operator or tenant reimbursements, for example by changing the
“market basket” adjustments for certain types of healthcare facilities. The Health Reform Acts also enhance certain
fraud and abuse penalty provisions that could apply to our operators and tenants in the event of one or more
violations of complex federal healthcare laws. Additionally, provisions in the Health Reform Acts may affect the
health coverage that we and our operators and tenants provide to our respective employees. We currently cannot
predict the impact that this far-reaching, landmark legislation will have on our business and the businesses and
operations of our tenants. Any loss of revenues and/or additional expenditures incurred by us or by operators and
tenants of our properties as a result of the Health Reform Acts could adversely affect our cash flow and results of
operations and have a material adverse effect on our ability to make distributions to the holders of our shares of
beneficial interest.
Adverse changes in applicable laws may affect our potential liabilities relating to our properties and operations.
Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to all tenants in
the form of higher rents. As a result, any increase may adversely affect our cash available for distribution, our ability
to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our
debt. Similarly, changes in laws that increase the potential liability for environmental conditions existing on
properties, that increase the restrictions on discharges or other conditions or that affect development, construction
and safety requirements may result in significant unanticipated expenditures that could have a material adverse
effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay
amounts due on our debt. In addition, future enactment of rent control or rent stabilization laws or other laws
regulating multi-family residential properties may reduce rental revenues or increase operating costs.
Complying with laws benefiting disabled persons 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.
2013 Annual Report 16
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
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.
If the level of drilling and production in the Bakken Shale Formation declines substantially near our North Dakota
real estate assets, our physical occupancy levels and revenues could decline. We have significant existing real estate
assets in our home market of North Dakota, and we are committing additional resources to the development of
multi-family residential and commercial real estate in North Dakota in a response to unprecedented demand for
office and residential space resulting from the development of the Bakken Shale Formation. We believe that our
ability to maintain or increase physical occupancy levels and rental revenues at our commercial and multi-family
residential properties in North Dakota will be significantly affected by the level of drilling and production by third
parties in the Bakken Shale Formation. Drilling and production are impacted by factors beyond our control,
including: the demand for and prices of crude oil and natural gas; environmental regulation and enforcement;
producers’ finding and development costs of reserves; producers’ desire and ability to obtain necessary permits in a
timely and economic manner; oil and natural gas field characteristics and production performance; and
transportation and capacity constraints on natural gas, crude oil and natural gas liquids pipelines from the producing
areas. Oil field activity could decline precipitously and substantially in North Dakota as a result of any or all of these
2013 Annual Report 17
factors, 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.
Risks related to properties under construction or development may adversely affect our financial performance. Our
development and construction activities involve significant risks that may adversely affect our cash flow and results
of operations, and consequently 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 connection with our renovation, redevelopment, development and
related construction activities, we may be unable to obtain, or may suffer delays in obtaining, necessary zoning,
land-use, building, occupancy and other required governmental permits and authorizations. These denials or delays
could result in increased costs or our abandonment of projects. In addition, we may not be able to obtain financing
on favorable terms, which may prevent us from proceeding with our development activities, and we may not be able
to complete construction and lease-up of a property on schedule, which could result in increased debt service
expense or construction costs. Additionally, the time required for development, construction and lease-up means that
we may have to wait years for significant cash returns. Because we are required to make cash distributions to our
shareholders, if our cash flow from operations or refinancings is not sufficient, we may be forced to borrow
additional money to fund such distributions. Newly developed properties may not produce the cash flow that we
expect, which could adversely affect our overall financial performance. In deciding whether to develop a particular
property, we make assumptions regarding the expected future performance of that property. In particular, we
estimate the return on our investment based on expected occupancy and rental rates. If our financial projections with
respect to a new property are inaccurate, and the property is unable to achieve the expected occupancy and rental
rates, it may fail to perform as we had expected. Our estimate of the costs of repositioning or redeveloping an
acquired property may also prove to be inaccurate, which may result in our failure to meet our profitability goals.
Risks related to joint ventures may adversely affect our financial performance and results of operations. We have
entered into, and may continue in the future to enter into, partnerships or joint ventures with other persons or
entities. Joint venture investments involve risks that may not be present with other methods of ownership, including
the possibility: that our partner might become insolvent, refuse to make capital contributions when due or otherwise
fail to meet its obligations, which may result in certain liabilities to us for guarantees and other commitments; that
our partner might at any time have economic or other business interests or goals that are or become inconsistent with
our interests or goals; that we could become engaged in a dispute with our partner, which could require us to expend
additional resources to resolve such disputes and could have an adverse impact on the operations and profitability of
the joint venture; and that our partner may be in a position to take action or withhold consent contrary to our
instructions or requests. In addition, our ability to transfer our interest in a joint venture to a third party may be
restricted. In some instances, we and/or our partner may have the right to trigger a buy-sell arrangement, which
could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have
initiated such a transaction. Our ability to acquire our partner’s interest may be limited if we do not have sufficient
cash, available borrowing capacity or other capital resources. In such event, we may be forced to sell our interest in
the joint venture when we would otherwise prefer to retain it. Joint ventures may require us to share decision-
making authority with our partners, which could limit our ability to control the properties in the joint ventures. Even
when we have a controlling interest, certain major decisions may require partner approval, such as the sale,
acquisition or financing of a property.
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 certain passive 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
2013 Annual Report 18
distributions to the holders of our securities 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.
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 regular 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 securities 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 securities. To the extent that distributions to the holders of our securities 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 (such as a publicly-
traded partnership 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 and value of the outstanding 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 Declaration of Trust may limit a change in control and deter a takeover. In order to
maintain our qualification as a REIT, our Declaration of Trust provides that any transaction, other than a transaction
entered into through the NASDAQ National Market, (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 securities, (ii) less than 100 people owning our securities, (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 securities 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
securities 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 securities 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 securities.
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
2013 Annual Report 19
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.
Complying with REIT requirements may force us to forego otherwise attractive opportunities or liquidate otherwise
attractive investments. To qualify and maintain our status as a REIT, we must satisfy certain requirements with
respect to the character of our assets. If we fail to comply with these requirements at the end of any quarter, we
must correct such failure within 30 days after the end of the quarter (by, possibly, selling assets notwithstanding
their prospects as an investment) to avoid losing our REIT status. If we fail to comply with these requirements at
the end of any quarter, and the failure exceeds a minimum threshold, we may be able to preserve our REIT status if
(a) the failure was due to reasonable cause and not to willful neglect, (b) we dispose of the assets causing the failure
within six months after the last day of the quarter in which we identified the failure, (c) we file a schedule with the
IRS describing each asset that caused the failure, and (d) we pay an additional tax of the greater of $50,000 or the
product of the highest applicable tax rate multiplied by the net income generated on those assets. As a result,
compliance with the REIT requirements may require us to liquidate or forego otherwise attractive investments.
These actions could have the effect of reducing our income and amounts available for distribution to our
shareholders.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow. Even if we qualify for
taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including
taxes on any undistributed income, tax on income from some activities conducted a result of a foreclosure, and state
or local income, property and transfer taxes, such as mortgage recording taxes. Any of these taxes would decrease
cash available for distribution to our shareholders. In addition, in order to meet the REIT qualification requirements,
or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or
inventory, we may hold some of our assets through a taxable REIT subsidiary (“TRS”). While the TRS structure
would allow the economic benefits of ownership to flow to us, a TRS is subject to tax on its income from the
operations of the assisted living facilities at the federal and state level. In addition, a TRS is subject to detailed tax
regulations that affect how it may be capitalized and operated.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our
common shares. At any time, the federal income tax laws governing REITs or the administrative interpretations of
those laws may be amended. Any of those new laws or interpretations may take effect retroactively and could
adversely affect us or the market price of our common shares of beneficial interest.
The U.S. federal income tax laws governing REITs are complex. We intend to operate in a manner that will qualify
us as a REIT under the U.S. federal income tax laws. The REIT qualification requirements are extremely complex,
however, and interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited.
Accordingly, we cannot be certain that we will be successful in operating so we can continue to qualify as a REIT.
At any time, new laws, interpretations, or court decisions may change the federal tax laws or the U.S. federal income
tax consequences of our qualification as a REIT.
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.
2013 Annual Report 20
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 in our debt financing documents.
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 shareholders taxed at individual rates has been reduced to a
maximum rate of 15% if a taxpayer is in the 25%, 28%, 33% or 35% tax brackets and 20% if a taxpayer is in the
39.6% tax bracket. 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 shareholders taxed at individual rates will generally be subject to the tax rates that
are otherwise applicable to ordinary income which, currently, are as high as 39.6%. Although the earnings of a
REIT that are distributed to its shareholders are still generally subject to less federal income taxation than earnings
of a non-REIT C corporation that are distributed to its shareholders net of corporate-level income tax, this law
change may make an investment in our securities 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 securities. 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, Series B preferred shares and any other securities to be issued in the future. These conditions
include, but are not limited to:
• 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.
2013 Annual Report 21
Higher market interest rates may adversely affect the market price of our securities, and low trading volume on the
New York Stock Exchange may prevent the timely resale of our securities. 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
rise, 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 New York Stock Exchange,
the daily trading volume of our shares may be lower than the trading volume for other companies. The average
daily trading volume for the period of May 1, 2012 through April 30, 2013 was 341,316 shares and the average
monthly trading volume for the period of May 1, 2012 through April 30, 2013 was 6,996,973 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 Internal Revenue Code, and is in the business of owning,
leasing, developing and acquiring real estate properties. These real estate investments are managed by our own
employees and by third-party professional real estate management companies on our behalf.
Total Real Estate Rental Revenue
As of April 30, 2013, our real estate portfolio consisted of 87 multi-family residential properties and 182
commercial properties, consisting of commercial office, commercial healthcare, commercial industrial and
commercial retail properties, comprising 32.2%, 29.5%, 25.5%, 6.3%, and 6.5%, 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, 2013. 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:
Fiscal Year
Ended April
30,
(in thousands)
2013
2012
2011
Multi-
Family
Residential
Gross
Revenue
Commercial
Office
Gross
Revenue
Commercial
Commercial
Retail
Healthcare
Gross
Gross
Revenue
Revenue
$ 90,759 35.0% $ 77,162 29.7% $ 61,975 23.9% $ 14,911 5.8% $ 14,599
$ 72,500 30.3% $ 74,334 31.1% $ 64,511 27.0% $ 14,325 6.0% $ 13,408
$ 65,229 27.9% $ 77,747 33.2% $ 64,879 27.7% $ 13,165 5.6% $ 13,156
Commercial
Industrial
Gross
Revenue
%
%
%
%
%
All
Segments
Gross
Revenue
5.6% $ 259,406
5.6% $ 239,078
5.6% $ 234,176
Average Effective Annual Rent
The table below sets out the average effective annual rent per square foot or unit at stabilized properties for each of
the last five fiscal years in each of our five segments. Stabilized properties are properties owned or in service for the
entirety of the periods being compared, and, in the case of development or re-development properties, which have
achieved a target level of occupancy of 90% for multi-family residential properties and 85% for commercial office,
healthcare, industrial and retail properties.
As of April 30
2013
2012
2011
2010
2009
$
$
$
$
$
Average Effective Annual Rent per square foot or unit
Multi-family
Residential(1)
744
719
691
684
678
$
$
$
$
$
Commercial
Office(2)
14
13
13
13
13
$
$
$
$
$
Commercial
Healthcare(2)
Commercial
Industrial(2)
16
16
19
18
18
$
$
$
$
$
4
4
4
4
4
$
$
$
$
$
Commercial
Retail(2)
9
8
8
9
8
(1) Monthly rent per unit, calculated as annualized rental revenue, net of free rent, including rent abatements and rent credits, divided by the
occupied units as of April 30.
(2) Monthly rental rate per square foot calculated as annualized contractual base rental income, net of free rent and excluding operating
expense reimbursements, divided by the leased square feet as of April 30.
2013 Annual Report 22
Physical Occupancy Rates
Physical occupancy represents the actual number of units or square footage leased divided by the total number of
units or square footage at the end of the period. Physical occupancy levels on a stabilized property and all-property
basis are shown below for each property type in each of the three most recent fiscal years ended April 30. 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.
Segments
Multi-Family Residential
Commercial Office
Commercial Healthcare
Commercial Industrial
Commercial Retail
Certain Lending Requirements
Stabilized Properties
Fiscal Year Ended April 30,
All Properties
Fiscal Year Ended April 30,
2013
2011
2012
94.7% 94.2% 92.9%
80.2% 78.6% 79.5%
94.6% 94.0% 95.7%
96.8% 95.5% 90.0%
86.5% 87.1% 83.2%
2013
2011
2012
94.6% 93.7% 92.9%
80.2% 78.6% 79.7%
94.7% 94.4% 95.9%
96.8% 95.5% 90.1%
86.5% 87.1% 82.2%
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
liability companies, 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
We conduct our corporate operations from offices in Minot, North Dakota and Minneapolis and St. Cloud,
Minnesota. We also have property management offices in Kansas, Minnesota, Missouri, Montana, Nebraska, North
Dakota, and South Dakota. The day-to-day management of our properties is carried out by our own employees and
in certain cases by third-party property management companies. In markets where the amount of rentable square
footage we own does not justify self-management, when properties acquired have effective pre-existing property
management in place, or when for other reasons particular properties are in our judgment not attractive candidates
for self-management, we utilize third-party professional management companies for day-to-day management.
However, 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 implemented by
the third-party management companies. Generally, our management contracts provide for compensation ranging
from 2.5% to 6.0% 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,
Real estate investments
Property owned
Less accumulated depreciation
Development in progress
Unimproved land
Mortgage loans receivable
Total real estate investments
2013
%
2012
%
2011
%
(in thousands, except percentages)
$
$
$
2,032,970
(420,421)
1,612,549
46,782
21,503
0
1,680,834
$ 1,892,009
(373,490)
95.9% $ 1,518,519
2.8%
27,599
10,990
1.3%
0.0%
0
100.0% $ 1,557,108
$ 1,770,798
(328,952)
97.5% $ 1,441,846
1.8%
9,693
6,550
0.7%
0.0%
156
100.0% $ 1,458,245
98.9%
0.7%
0.4%
0.0%
100.0%
2013 Annual Report 23
Summary of Individual Properties Owned as of April 30, 2013
The following table presents information regarding our 269 residential and commercial properties as well as
unimproved land and development properties owned as of April 30, 2013. 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. Additional information is included in Schedule III
to our financial statements included in the Annual Report on Form 10-K.
* = Real estate not owned in fee; all or a portion is leased under a ground or air rights lease.
Property Name and Location
MULTI-FAMILY RESIDENTIAL
11th Street 3 Plex - Minot, ND
4th Street 4 Plex - Minot, ND
Apartments on Main - Minot, ND
Arbors - S Sioux City, NE
Ashland - Grand Forks, ND
Boulder Court - Eagan, MN
Brookfield Village - Topeka, KS
Brooklyn Heights - Minot, ND
Campus Center - St. Cloud, MN
Campus Heights - St. Cloud, MN
Campus Knoll - St. Cloud, MN
Campus Plaza - St. Cloud, MN
Campus Side - St. Cloud, MN
Campus View - St. Cloud, MN
Canyon Lake - Rapid City, SD
Castlerock - Billings, MT
Chateau I - Minot, ND
Cimarron Hills - Omaha, NE
Colonial Villa - Burnsville, MN
Colony - Lincoln, NE
Colton Heights - Minot, ND
Cornerstone - St. Cloud, MN
Cottage West Twin Homes - Sioux Falls, SD
Cottonwood - Bismarck, ND
Country Meadows - Billings, MT
Crestview - Bismarck, ND
Crown - Rochester, MN
Crown Colony - Topeka, KS
East Park - Sioux Falls, SD
Evergreen - Isanti, MN
Evergreen II - Isanti, MN
Fairmont - Minot, ND
First Avenue - Minot, ND
Forest Park - Grand Forks, ND
Gables Townhomes - Sioux Falls, SD
Grand Gateway - St. Cloud, MN
Greenfield - Omaha, NE
Heritage Manor - Rochester, MN
Indian Hills - Sioux City, IA
Kirkwood Manor - Bismarck, ND
2013 Annual Report 24
(in thousands)
Investment
(initial cost plus
improvements less
impairment)
Units
Physical
Occupancy as of
April 30, 2013
3 $
4
10
192
84
115
160
72
92
49
71
24
48
48
109
166
32
234
240
232
18
24
50
268
133
152
48
220
84
36
36
12
20
269
24
116
96
182
120
108
76
110
1,305
8,256
8,356
9,161
8,476
2,380
2,810
810
1,874
410
807
801
5,272
7,416
6,050
14,422
18,175
17,353
1,144
413
5,050
21,397
9,510
5,947
3,721
12,586
3,248
3,184
3,484
416
2,909
12,943
2,404
8,253
5,286
9,793
6,524
4,617
100.0%
100.0%
100.0%
90.1%
100.0%
93.9%
91.3%
100.0%
87.0%
85.7%
83.1%
91.7%
75.0%
79.2%
94.5%
99.4%
100.0%
94.9%
67.5%
97.0%
100.0%
91.7%
100.0%
100.0%
94.7%
100.0%
100.0%
98.6%
98.8%
91.7%
100.0%
100.0%
100.0%
98.1%
91.7%
90.5%
99.0%
94.5%
92.5%
100.0%
Property Name and Location
MULTI-FAMILY RESIDENTIAL - continued
Lakeside Village - Lincoln, NE
Lancaster - St. Cloud, MN
Landmark - Grand Forks, ND
Legacy - Grand Forks, ND
Mariposa - Topeka, KS
Meadows - Jamestown, ND
Monticello Village - Monticello, MN
North Pointe - Bismarck, ND
Northern Valley - Rochester, MN
Oakmont Estates - Sioux Falls, SD
Oakwood Estates - Sioux Falls, SD
Olympic Village - Billings, MT
Olympik Village - Rochester, MN
Oxbow Park - Sioux Falls, SD
Park Meadows - Waite Park, MN
Pebble Springs - Bismarck, ND
Pinehurst - Billings, MT
Pines - Minot, ND
Plaza - Minot, ND
Pointe West - Rapid City, SD
Ponds at Heritage Place - Sartell, MN
Prairie Winds - Sioux Falls, SD
Quarry Ridge - Rochester, MN
Quarry Ridge II - Rochester, MN
Regency Park Estates - St. Cloud, MN
Ridge Oaks - Sioux City, IA
Rimrock West - Billings, MT
Rocky Meadows - Billings, MT
Rum River - Isanti, MN
Sherwood - Topeka, KS
Sierra Vista - Sioux Falls, SD
South Pointe - Minot, ND
Southview - Minot, ND
Southwind - Grand Forks, ND
Summit Park - Minot, ND
Sunset Trail - Rochester, MN
Sycamore Village - Sioux Falls, SD
Temple - Minot, ND
Terrace Heights - Minot, ND
Thomasbrook - Lincoln, NE
University Park Place - St. Cloud, MN
Valley Park - Grand Forks, ND
Villa West - Topeka, KS
Village Green - Rochester, MN
West Stonehill - Waite Park, MN
Westridge - Minot, ND
(in thousands)
Investment
(initial cost plus
improvements less
impairment)
Units
Physical
Occupancy as of
April 30, 2013
208 $
83
90
361
54
81
60
73
16
79
160
274
140
120
360
16
21
16
71
90
58
48
154
159
145
132
78
98
72
300
44
196
24
164
95
146
48
4
16
264
35
168
308
36
312
33
17,140
4,169
2,602
28,959
5,901
6,309
4,681
4,729
784
5,711
7,461
14,168
8,636
6,024
14,648
887
988
431
15,897
5,231
5,064
2,396
15,638
17,638
11,538
6,268
5,232
7,378
5,771
18,555
2,660
12,449
968
8,061
3,204
15,472
1,888
228
424
13,777
601
7,105
17,430
3,149
15,760
2,045
91.3%
95.2%
96.7%
95.6%
88.9%
100.0%
100.0%
100.0%
100.0%
98.7%
98.1%
96.4%
94.3%
97.5%
88.9%
100.0%
95.2%
100.0%
100.0%
100.0%
89.7%
95.8%
100.0%
98.7%
86.9%
93.9%
100.0%
98.0%
97.2%
92.7%
95.5%
100.0%
100.0%
98.2%
98.9%
98.6%
100.0%
100.0%
100.0%
97.0%
97.1%
96.4%
86.7%
100.0%
86.9%
100.0%
2013 Annual Report 25
(in thousands)
Investment
(initial cost plus
improvements less
impairment)
Units
Physical
Occupancy as of
April 30, 2013
65 $
336
145
115
108
10,280 $
3,698
27,563
19,112
7,967
8,152
659,696
98.5%
100.0%
99.3%
92.2%
94.4%
94.6%
Approximate
Net Rentable
Square
Footage
(in thousands)
Investment
(initial cost plus
improvements)
Physical
Occupancy as of
April 30, 2013
4,427 $
13,374
78,190
175,610
138,959
73,742
30,464
22,187
121,669
176,800
30,000
45,019
78,086
141,724
181,224
73,338
95,216
138,825
59,827
190,758
122,040
71,430
81,173
105,084
65,320
59,852
88,398
60,776
72,231
18,869
15,000
83,448
118,125
69
1,071
9,403
12,544
21,569
8,349
1,535
2,798
9,031
17,326
2,099
3,430
9,488
22,346
19,926
5,396
13,592
24,961
10,465
25,201
15,477
11,057
12,513
19,028
7,373
7,857
12,707
7,401
9,283
1,915
2,318
13,541
7,770
100.0%
100.0%
100.0%
98.0%
87.4%
100.0%
70.2%
100.0%
56.2%
62.7%
50.1%
67.2%
96.0%
100.0%
67.9%
35.7%
63.9%
94.9%
56.4%
87.1%
100.0%
100.0%
88.7%
88.5%
91.5%
66.5%
89.9%
65.3%
100.0%
100.0%
100.0%
78.5%
94.1%
Property Name and Location
MULTI-FAMILY RESIDENTIAL - continued
Westwood Park - Bismarck, ND
Whispering Ridge - Omaha, NE
Williston Garden - Williston, ND
Winchester - Rochester, MN
Woodridge - Rochester, MN
TOTAL MULTI-FAMILY RESIDENTIAL
Property Name and Location
COMMERCIAL OFFICE
1st Avenue Building - Minot, ND
2030 Cliff Road - Eagan, MN
610 Business Center IV - Brooklyn Park, MN
7800 West Brown Deer Road - Milwaukee, WI
American Corporate Center - Mendota Heights, MN
Ameritrade - Omaha, NE
Benton Business Park - Sauk Rapids, MN
Bismarck 715 East Broadway - Bismarck, ND
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
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
Intertech Building - Fenton, MO
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
Minot 2505 16th Street SW - Minot, ND
Miracle Hills One - Omaha, NE
Nicollett VII - Burnsville, MN
2013 Annual Report 26
Property Name and Location
COMMERCIAL OFFICE - continued
Northgate I - Maple Grove, MN
Northgate II - Maple Grove, MN
Northpark Corporate Center - Arden Hills, MN
Omaha 10802 Farnam Dr - Omaha, NE
Pacific Hills - Omaha, NE
Pillsbury Business Center - Bloomington, MN
Plaza 16 - Minot, ND
Plaza VII - Boise, ID
Plymouth 5095 Nathan Lane - Plymouth, MN
Plymouth I - Plymouth, MN
Plymouth II - Plymouth, MN
Plymouth III - Plymouth, MN
Plymouth IV & V - Plymouth, MN
Prairie Oak Business Center - Eden Prairie, MN
Rapid City 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
Wells Fargo Center - St Cloud, MN
West River Business Park - Waite Park, MN
Westgate - Boise, ID
Whitewater Plaza - Minnetonka, MN
Wirth Corporate Center - Golden Valley, MN
Woodlands Plaza IV - Maryland Heights, MO
TOTAL COMMERCIAL OFFICE
Approximate
Net Rentable
Square
Footage
(in thousands)
Investment
(initial cost plus
Improvements less
impairment)
Physical
Occupancy as of
April 30, 2013
79,297 $
26,000
146,087
58,574
143,075
42,929
50,610
28,994
20,528
26,186
26,186
26,186
126,930
36,421
75,815
121,316
58,300
15,700
24,171
24,000
24,000
20,000
103,640
75,526
117,144
90,795
30,000
153,311
48,700
86,477
24,075
103,342
61,138
74,568
61,820
5,063,026 $
8,410
2,587
18,203
7,228
18,387
2,011
9,676
3,836
1,940
1,728
1,671
2,367
16,170
6,452
7,621
21,427
6,475
1,154
1,586
1,264
1,273
2,619
10,109
9,165
12,763
15,998
2,565
17,077
4,864
10,690
1,480
13,539
6,240
9,540
6,821
613,775
100.0%
100.0%
45.2%
98.6%
89.4%
61.2%
100.0%
39.7%
100.0%
100.0%
100.0%
100.0%
69.2%
75.8%
99.9%
64.6%
30.4%
100.0%
100.0%
60.0%
100.0%
100.0%
89.0%
69.8%
27.0%
80.6%
100.0%
91.9%
100.0%
91.7%
87.5%
100.0%
49.8%
20.1%
100.0%
80.2%
2013 Annual Report 27
Property Name and Location
COMMERCIAL HEALTHCARE
2800 Medical Building - Minneapolis, MN
2828 Chicago Avenue - Minneapolis, MN
Airport Medical - Bloomington, MN*
Barry Pointe Office Park - Kansas City, MO
Billings 2300 Grant Road - Billings, MT
Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN
Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN
Casper 1930 E 12th Street (Park Place) - Casper, WY
Casper 3955 E 12th Street (Meadow Wind) - Casper, WY
Cheyenne 4010 N College Drive (Aspen Wind) - Cheyenne, WY
Cheyenne 4606 N College Drive (Sierra Hills) - Cheyenne, WY
Denfeld Clinic - Duluth, MN
Eagan 1440 Duckwood Medical - Eagan, MN
Edgewood Vista - Belgrade, MT
Edgewood Vista - Billings, MT
Edgewood Vista - Bismarck, ND
Edgewood Vista - Brainerd, MN
Edgewood Vista - Columbus, NE
Edgewood Vista - East Grand Forks, MN
Edgewood Vista - Fargo, ND
Edgewood Vista - Fremont, NE
Edgewood Vista - Grand Island, NE
Edgewood Vista - Hastings, NE
Edgewood Vista - Hermantown I, MN
Edgewood Vista - Hermantown II, MN
Edgewood Vista - Kalispell, MT
Edgewood Vista - Minot, ND
Edgewood Vista - Missoula, MT
Edgewood Vista - Norfolk, NE
Edgewood Vista - Omaha, NE
Edgewood Vista - Sioux Falls, SD
Edgewood Vista - Spearfish, SD
Edgewood Vista - Virginia, MN
Edina 6363 France Medical - Edina, MN*
Edina 6405 France Medical - Edina, MN*
Edina 6517 Drew Avenue - Edina, MN
Edina 6525 Drew Avenue - Edina, MN
Edina 6525 France SMC II - Edina, MN
Edina 6545 France SMC I - Edina MN*
Fresenius - Duluth, MN
Garden View - St. Paul, MN*
Gateway Clinic - Sandstone, MN*
Healtheast St John & Woodwinds - Maplewood & Woodbury, MN
High Pointe Health Campus - Lake Elmo, MN
Jamestown Medical Office Building - Jamestown, ND*
Laramie 1072 N 22nd Street (Spring Wind) - Laramie, WY
Mariner Clinic - Superior, WI*
Minneapolis 701 25th Avenue Medical - Minneapolis, MN*
Missoula 3050 Great Northern - Missoula, MT
Nebraska Orthopedic Hospital - Omaha, NE*
2013 Annual Report 28
Approximate
Net Rentable
Square
Footage
(in thousands)
Investment
(initial cost plus
Improvements less
impairment)
Physical
Occupancy as of
April 30, 2013
53,750 $
56,239
24,218
18,502
14,705
53,896
36,199
65,160
57,822
47,509
54,072
20,512
17,640
5,192
11,800
74,112
82,535
5,194
18,488
167,391
6,042
5,185
6,042
119,349
160,485
10,295
108,503
10,150
5,135
6,042
11,800
84,126
147,183
70,934
55,478
12,140
3,431
67,409
227,626
9,052
43,404
12,444
114,316
60,364
45,222
62,291
28,928
57,212
14,640
61,758
9,530
17,672
4,678
2,853
1,865
9,436
6,084
6,381
10,907
11,160
8,190
3,099
2,587
819
1,889
9,818
9,640
870
1,657
21,654
588
836
610
11,673
11,269
1,175
12,705
1,035
771
678
1,300
8,964
12,184
14,437
12,242
1,542
505
14,827
46,687
1,572
8,117
1,765
21,601
13,463
7,605
10,574
3,871
8,966
1,971
21,887
87.0%
100.0%
100.0%
64.2%
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%
100.0%
100.0%
100.0%
100.0%
88.6%
100.0%
100.0%
77.7%
95.1%
85.0%
100.0%
100.0%
100.0%
100.0%
75.4%
80.5%
100.0%
100.0%
96.7%
100.0%
100.0%
Property Name and Location
COMMERCIAL HEALTHCARE – continued
Park Dental - Brooklyn Center, MN
Pavilion I - Duluth, MN*
Pavilion II - Duluth, MN
Ritchie Medical Plaza - St Paul, MN
Sartell 2000 23rd Street South - Sartell, MN*
Spring Creek-American Falls - American Falls, ID
Spring Creek-Boise - Boise, ID
Spring Creek-Eagle - Eagle, ID
Spring Creek-Meridian - Meridian, ID
Spring Creek-Overland - Overland, ID
Spring Creek-Soda Springs - Soda Springs, ID
Spring Creek-Ustick - Meridian, ID
St Michael Clinic - St Michael, MN
Trinity at Plaza 16 - Minot, ND
Wells Clinic - Hibbing, MN
TOTAL COMMERCIAL HEALTHCARE
Property Name and Location
COMMERCIAL INDUSTRIAL
API Building - Duluth, MN
Bloomington 2000 W 94th Street - Bloomington, MN
Bodycote Industrial Building - Eden Prairie, MN
Brooklyn Park 7401 Boone Avenue - Brooklyn Park, MN
Cedar Lake Business Center - St. Louis Park, MN
Clive 2075 NW 94th Street - Clive, IA
Dixon Avenue Industrial Park - Des Moines, IA
Eagan 2785 & 2795 Highway 55 - Eagan, MN
Fargo 1320 45th Street N - Fargo, ND
Lexington Commerce Center - Eagan, MN
Lighthouse - Duluth, MN
Metal Improvement Company - New Brighton, MN
Minnetonka 13600 County Road 62 - Minnetonka, MN
Minot IPS - Minot, ND
Roseville 2929 Long Lake Road - Roseville, MN
Stone Container - Fargo, ND
Stone Container - Roseville, MN
Urbandale 3900 106th Street - Urbandale, IA
Winsted Industrial Building - Winsted, MN
Woodbury 1865 Woodlane - Woodbury, MN
TOTAL COMMERCIAL INDUSTRIAL
Approximate
Net Rentable
Square
Footage
(in thousands)
Investment
(initial cost plus
Improvements less
impairment)
Physical
Occupancy as of
April 30, 2013
9,998 $
45,081
73,000
52,116
59,760
17,273
16,311
15,559
31,820
26,605
15,571
26,605
10,796
24,795
18,810
2,956,022 $
2,952
10,174
19,325
11,377
12,716
4,015
5,004
4,038
7,148
6,628
2,233
4,300
2,851
9,560
2,661
501,191
100.0%
100.0%
100.0%
49.9%
25.7%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
94.7%
Approximate
Net Rentable
Square
Footage
(in thousands)
Investment
(initial cost plus
Improvements less
impairment)
Physical
Occupancy as of
April 30, 2013
35,000 $
101,567
41,880
322,751
50,400
42,510
606,006
198,600
42,244
90,260
59,292
49,620
69,984
27,698
172,057
195,075
229,072
518,161
41,685
69,600
2,963,462 $
1,723
7,415
2,152
15,132
3,773
3,066
13,806
5,628
4,160
6,787
1,885
2,507
3,702
5,962
10,967
7,141
8,504
14,788
1,054
5,620
125,772
100.0%
100.0%
100.0%
93.7%
73.8%
100.0%
100.0%
74.3%
100.0%
100.0%
84.6%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
96.8%
2013 Annual Report 29
Property Name and Location
COMMERCIAL RETAIL
17 South Main - Minot, ND
Anoka Strip Center - Anoka, MN
Arrowhead First International Bank - Minot, ND
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 4615 Grand - Duluth, MN
Duluth Denfeld Retail - Duluth, MN
Eagan Community - Eagan, MN
Fargo Express Community - 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
Lakeville Strip Center - Lakeville, MN
Minot 1400 31st Ave - Minot, ND
Minot Arrowhead - 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 - St. Cloud, MN
Weston Retail - Weston, WI
Weston Walgreens - Weston, WI
TOTAL COMMERCIAL RETAIL
SUBTOTAL
Approximate
Net Rentable
Square
Footage
(in thousands)
Investment
(initial cost plus
Improvements less
impairment)
Physical
Occupancy as of
April 30, 2013
2,454 $
10,625
3,702
8,526
8,400
26,020
137,572
16,921
15,582
37,770
23,187
34,226
6,836
100,570
28,528
59,117
213,271
100,249
52,000
9,488
48,960
81,594
10,843
3,575
26,985
4,800
63,225
118,398
105,446
25,644
14,820
1,399,334 $
12,392,124 $
287
750
1,600
1,186
974
3,614
21,687
615
1,934
5,135
2,745
2,571
509
8,237
2,546
5,740
9,153
2,652
3,473
2,040
11,521
8,379
650
872
3,699
452
3,406
13,851
8,122
1,681
2,455
132,536
2,032,970
100.0%
28.2%
100.0%
100.0%
47.5%
77.2%
97.4%
94.9%
30.5%
78.4%
73.9%
100.0%
100.0%
50.3%
100.0%
100.0%
87.1%
85.9%
100.0%
76.0%
100.0%
96.0%
100.0%
100.0%
100.0%
100.0%
75.2%
97.9%
100.0%
0.0%
100.0%
86.5%
2013 Annual Report 30
Property Name and Location
UNIMPROVED LAND
Badger Hills - Rochester, MN
Bismarck 4916 - Bismarck, ND
Bismarck 700 E Main - Bismarck, ND
Cypress Court - St. Cloud, MN
Eagan - Eagan, MN
Georgetown Square - Grand Chute, WI
Grand Forks 2150 - Grand Forks, ND
Grand Forks - Grand Forks, ND
Kalispell - Kalispell, MT
Minot (Southgate Lot 4) - Minot, ND
Monticello - Monticello, MN
Renaissance Heights - Williston, ND
River Falls - River Falls, WI
Urbandale - Urbandale, IA
Weston - Weston, WI
Williston - Williston, ND
TOTAL UNIMPROVED LAND
DEVELOPMENT IN PROGRESS
Arcata - Golden Valley, MN
Chateau II - Minot, ND
Commons at Southgate - Minot, ND
Cypress Court - St. Cloud, MN
Landing at Southgate - Minot, ND
Renaissance Heights I - Williston, ND
River Ridge - Bismarck, ND
TOTAL DEVELOPMENT IN PROGRESS
(in thousands)
Investment
(initial cost plus
improvements less
impairment)
$
$
$
$
1,050
3,250
872
447
423
1,860
1,600
4,278
1,423
1,882
117
2,373
179
114
812
823
21,503
2,657
258
6,465
6,459
7,420
10,077
13,175
46,511
TOTAL UNITS – RESIDENTIAL SEGMENT
TOTAL SQUARE FOOTAGE – COMMERCIAL SEGMENTS
TOTAL REAL ESTATE
10,280
12,381,844
$
2,100,984
Mortgages Payable and Line of Credit
As of April 30, 2013, individual first mortgage loans on the above properties totaled $1.0 billion. Of the $1.0 billion
total of mortgage indebtedness on April 30, 2013, $26.2 million, or 2.5%, 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.
Principal payments due on our mortgage indebtedness are as follows:
Year Ended April 30,
2014
2015
2016
2017
2018
Thereafter
Total
$
(in thousands)
Mortgage Principal
64,923
110,972
92,336
219,315
66,944
494,716
1,049,206
$
2013 Annual Report 31
In addition to the individual first mortgage loans included in the Company’s $1.0 billion of mortgage indebtedness,
the Company also has a revolving, multi-bank line of credit with First International Bank and Trust, Watford City,
North Dakota, as lead bank. This line of credit had, as of April 30, 2013, lending commitments of $60.0 million.
The facility has a maturity date of August 12, 2014, and is secured by mortgages on 23 properties; under the terms
of the line of credit, properties may be added and removed from the collateral pool with the agreement of the
lenders. Participants in this credit facility as of April 30, 2013 included, in addition to First International Bank, the
following financial institutions: The Bank of North Dakota; First Western Bank and Trust; Dacotah Bank; United
Community Bank; American State Bank & Trust Company and Town & Country Credit Union. The line of credit
has a current interest rate of 5.15% and a minimum outstanding principal balance requirement of $10.0 million, and
as of April 30, 2013, the Company had borrowed $10.0 million. The facility includes covenants and restrictions
requiring the Company to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base
collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and the Company is also
required to maintain minimum depository account(s) totaling $6.0 million with First International, of which $1.5
million is to be held in a non-interest bearing account. As of April 30, 2013, the Company believes it is in
compliance with the facility covenants.
Future Minimum Lease Receipts
The future minimum lease receipts to be received under leases for commercial properties in place as of April 30,
2013, assuming that no options to renew or buy out the leases are exercised, are as follows:
Year Ended April 30,
2014
2015
2016
2017
2018
Thereafter
Total
(in thousands)
Lease Payments
114,118
102,967
92,131
77,193
61,744
195,986
644,139
$
$
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, 2013, we spent approximately $36.4 million on capital improvements,
tenant improvements and other capital expenditures.
The following table shows total and weighted average per square foot/unit recurring and non-recurring capital
expenditures (excluding capital expenditures recoverable from tenants and capital expenditures at properties sold
during the period), and, for our stabilized commercial segment properties, tenant improvements (excluding tenant-
funded tenant improvements) and leasing costs for the three years ended April 30, 2013, 2012 and 2011. We define
recurring capital expenditures as those made on a regular or recurring basis to maintain a property’s competitive
position within its market, generally with a depreciable life of 5 to 12 years, but excluding (a) capital expenditures
made in the year of acquisition and in subsequent periods until the property is stabilized (i.e., excluding capital
expenditures on non-stabilized properties), (b) improvements associated with the expansion or re-development of a
building, (c) renovations to a building which change the underlying classification of the building (for example, from
industrial to office or Class C office to Class A office) or (d) capital improvements that represent the addition of
something new to a property, rather than the replacement of an existing item. We believe that recurring capital
expenditures is a useful measure of performance because it provides an indication of the expenses that we can
expect to incur on an on-going basis. Non-recurring capital expenditures correspond to major capital expenditures
for items such as roof replacements or items that result in something new being added to the property (for example,
the addition of a new heating and air conditioning unit that is not replacing one previously there), generally with a
depreciable life of 20 to 40 years, and include expenditures completed in the year of acquisition and in subsequent
periods until the property is stabilized (i.e., including capital expenditures on non-stabilized properties).
2013 Annual Report 32
(in thousands except per SF or Unit data)
Years Ended April 30,
2013
Amount
Rate/SF
or Unit
2012
Amount
Rate/SF
or Unit
2011
Amount
Rate/SF
or Unit
0
754
6,154
3,411
49
356
1,573
784
0
0
777
658
0
678
1,335
275
0.00
0.15
1.22
0.67
0.02
0.12
0.58
0.29
0.00
0.00
0.26
0.22
0.00
0.48
0.96
0.20
5,941
6,737
713
655
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
148
992
5,179
1,683
86
562
3,736
557
5
256
1,179
317
49
1,062
214
215
0.03
0.20
1.02
0.33
0.03
0.19
1.28
0.19
0.00
0.09
0.40
0.11
0.04
0.76
0.15
0.15
6,416
5,001
752
546
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
371
985
4,547
2,097
78
81
2,090
186
0
511
1,870
398
67
174
775
280
0.08
0.19
0.90
0.41
0.03
0.03
0.77
0.07
0.00
0.17
0.63
0.13
0.05
0.12
0.53
0.19
4,997
5,025
586
580
Commercial Office Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures
Non-recurring capital expenditures
Tenant improvements at stabilized
properties
Leasing costs at stabilized properties
Commercial Healthcare Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures
Non-recurring capital expenditures
Tenant improvements at stabilized
properties
Leasing costs at stabilized properties
Commercial Industrial Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures
Non-recurring capital expenditures
Tenant improvements at stabilized
properties
Leasing costs at stabilized properties
Commercial Retail Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures
Non-recurring capital expenditures
Tenant improvements at stabilized
properties
Leasing costs at stabilized properties
Multi-Family Residential Properties:
Recurring Capital Expenditures
Non-Recurring Capital Expenditures
Contracts or Options to Purchase
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
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 a specified percentage of the initial cost to us. As
of April 30, 2013, our properties subject to purchase options, the cost, plus improvements, of each such property and
its gross rental revenue are as follows:
2013 Annual Report 33
Property
Billings 2300 Grant Road - Billings, MT
Fargo 1320 45th Street N - Fargo, ND
Healtheast St John & Woodwinds - Maplewood &
Woodbury, MN
Missoula 3050 Great Northern - Missoula, MT
Sartell 2000 23rd Street South - Sartell, MN
Spring Creek American Falls- American Falls, ID
Spring Creek Boise - Boise, ID
Spring Creek Eagle - Eagle, ID
Spring Creek Meridian - Meridian, ID
Spring Creek Overland - Overland, ID
Spring Creek Soda Springs - Soda Springs, ID
Spring Creek Ustick - Meridian, ID
St. Michael Clinic - St. Michael, MN
Urbandale - Urbandale, IA
Winsted Industrial Building - Winsted, MN
Total
Properties by State
Investment Cost
2,522
4,160
$
$
(in thousands)
Gross Rental Revenue
2013
299
400
$
2012
291
400
$
21,601
2,723
12,716
4,070
5,075
4,100
7,250
6,725
2,262
4,300
2,851
15,218
1,054
96,627
$
$
2,152
323
365
352
440
356
624
580
196
368
249
1,153
70
7,927
$
2,152
315
868
234
293
237
417
387
130
246
248
n/a
32
6,250
$
2011
226
333
2,152
243
1,209
n/a
n/a
n/a
n/a
n/a
n/a
n/a
244
n/a
n/a
4,407
The following table presents, as of April 30, 2013, the total amount of property owned, net of accumulated
depreciation, by state of each of the five major segments of properties owned by us - multi-family residential,
commercial office, commercial healthcare, commercial industrial and commercial retail:
(in thousands)
State
Minnesota
North Dakota
Nebraska
Kansas
South Dakota
Idaho
Wyoming
Montana
Iowa
Missouri
Colorado
Wisconsin
Total
Commercial
Multi-Family
Residential
Commercial
Office
Commercial
Healthcare
Commercial
Industrial
$ 162,025 $ 284,567 $ 236,188 $
23,609
76,531
13,395
5,346
12,776
0
0
0
30,608
19,362
9,311
Retail All Segments
59,817 $ 804,176
270,559
37,130
192,493
2,343
63,212
0
48,437
0
44,710
0
43,735
0
41,028
2,712
36,146
0
33,064
0
19,362
0
15,627
3,316
$ 519,342 $ 475,505 $ 410,300 $ 102,084 $ 105,318 $ 1,612,549
61,579 $
14,324
0
0
0
0
0
0
26,181
0
0
0
139,738
92,933
49,817
34,225
0
0
30,639
9,965
0
0
0
55,758
20,686
0
8,866
31,934
43,735
7,677
0
2,456
0
3,000
% of All
Segments
49.9%
16.8%
11.9%
3.9%
3.0%
2.8%
2.7%
2.5%
2.2%
2.1%
1.2%
1.0%
100.0%
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. Mine Safety Disclosures
Not Applicable
2013 Annual Report 34
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Quarterly Share and Distribution Data
Prior to December 18, 2012, our common shares traded on the Nasdaq Global Select Market under the symbol
“IRET.” On December 18, 2012, our common shares began trading on the New York Stock Exchange (“NYSE”)
under the symbol “IRET.” The following table shows the high and low sales prices for our common shares for the
periods indicated, as reported by the Nasdaq Global Select Market through December 17, 2012 and the NYSE
thereafter, and the distributions per common share and limited partnership unit declared with respect to each period.
On June 10, 2013, the last reported sales price per share of our common shares on the NYSE was $8.77.
Quarter Ended
Fiscal Year 2013
April 30, 2013
January 31, 2013
October 31, 2012
July 31, 2012
Quarter Ended
Fiscal Year 2012
April 30, 2012
January 31, 2012
October 31, 2011
July 31, 2011
High
$ 10.00 $
9.40
8.49
8.31
$
High
7.97 $
7.64
8.12
9.69
Low
9.20
7.73
7.92
7.05
Low
7.22
6.89
6.92
8.07
Distributions Declared
(per share and unit)
$
0.1300
0.1300
0.1300
0.1300
Distributions Declared
(per share and unit)
$
0.1300
0.1300
0.1300
0.1715
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 10, 2013, the Company had 4,288 common shareholders of record, and 102,034,523 common shares of
beneficial interest (plus 21,940,855 limited partnership units potentially convertible into 21,940,855 common
shares) were outstanding.
Unregistered Sales of Shares
Sales of Unregistered Securities. During the fiscal years ended April 30, 2013, 2012 and 2011, respectively, we
issued an aggregate of 180,935, 518,019 and 221,573 unregistered common shares to holders of limited partnership
units of IRET Properties upon redemption and conversion of an aggregate of 180,935, 518,019 and 221,573 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.
Issuer Purchases of Equity Securities. The Company did not repurchase any of its equity securities during fiscal year
2013, except for repurchases of nominal amounts of fractional common shares, at shareholder request.
2013 Annual Report 35
Comparative Stock Performance
The information contained in this Comparative Stock Performance 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 Exchange Act, except to the extent that we specifically incorporate it by reference into a document
filed under the Securities Act or the Exchange Act.
Set forth below is a graph that compares, for the five fiscal years commencing May 1, 2008, and ending April 30,
2013, 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 FTSE NAREIT Equity REITs Index, which is
an index prepared by the FTSE Group for 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, 2008, the last trading day of fiscal year
2008, $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 FTSE NAREIT Equity REITs Index are based on the Company’s fiscal year ending April 30.
Total Return Performance
150
125
Investors Real Estate Trust
S&P 500
FTSE NAREIT Equity REITs
100
e
u
l
a
V
x
e
d
n
75
I
50
25
04/30/08
04/30/09
04/30/10
04/30/11
04/30/12
04/30/13
Investors Real Estate Trust
S&P 500
FTSE NAREIT Equity REITs
Source: SNL Financial LC
FY08
103.55
95.32
87.49
FY09
100.36
61.66
45.31
FY10
102.15
85.61
76.43
FY11
118.95
100.36
93.43
FY12
97.85
105.13
102.60
FY13
135.46
128.92
140.20
2013 Annual Report 36
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
Gain on sale of real estate, land, and
other investments
Income from continuing operations
Income (loss) from discontinued
operations
Net income
Net income attributable to noncontrolling
interests – Operating Partnership
Net income attributable to Investors Real
Estate Trust
Consolidated Balance Sheet Data
Total real estate investments
Total assets
Mortgages payable
Revolving lines of credit
Total Investors Real Estate Trust
shareholders’ equity
(in thousands, except per share data)
2013
2012
2011
2010
2009
$ 259,406
$ 239,078
$ 234,176
$ 227,769 $ 224,429
$
$
$
$
$
$
6,885
22,964
7,008
29,972
$
$
$
$
349
9,763
$
$
19,365
4,373
(57) $
$
9,706
19,978
24,351
$
$
$
$
68 $
5,534 $
54
9,512
(949) $
4,585 $
1,201
10,713
(3,633) $
(1,359) $
(4,449) $
(562) $
(2,227)
25,530
$
8,212
$
20,082
$
4,001 $
8,526
$1,680,834
$1,889,554
$1,049,206
10,000
$
$ 1,557,108
$ 1,714,367
$ 1,048,689
39,000
$
$ 1,458,245
$ 1,615,363
$ 993,803
30,000
$
$ 1,500,889 $ 1,472,575
$ 1,660,930 $ 1,605,091
$ 1,057,619 $ 1,070,158
5,500
$
6,550 $
$ 612,787
$ 432,989
$ 411,690
$ 409,523 $ 333,009
Consolidated Per Common Share Data
(basic and diluted)
Income from continuing operations -
Investors Real Estate Trust
Income (loss) from discontinued
operations - Investors Real Estate Trust
Net income
Distributions
$
$
$
$
CALENDAR YEAR
Tax status of distributions
Capital gain
Ordinary income
Return of capital
.11
.06
.17
.52
$
$
$
$
.07
.00
.07
.56
$
$
$
$
.02
.20
.22
.69
$
$
$
$
.04 $
(.01) $
.03 $
.68 $
.09
.02
.11
.68
2012
2011
2010
2009
2008
2.41% 37.48%
0.00%
0.00%
23.17% 18.04% 28.53% 39.17% 53.43%
74.42% 44.48% 71.47% 60.74% 46.57%
0.09%
For the fiscal year ended April 30, 2013, IRET recognized approximately $1.9 million of net capital gain for federal
income tax purposes. IRET designates the entire $1.9 million of net capital gain as capital gain dividends.
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, 2013.
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, 2013, our real estate portfolio consisted of 87 multi-family residential properties containing
10,280 apartment units and having a total real estate investment amount net of accumulated depreciation of $519.3
2013 Annual Report 37
million, and 182 commercial properties containing approximately 12.4 million square feet of leasable space and
having a total real estate investment amount net of accumulated depreciation of $1.1 billion.
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. We have paid quarterly distributions continuously since our
first distribution in 1971.
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. As described further below, the process of allocating
property costs to its components involves a considerable amount of subjective judgments to be made by Company
management. 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) and assumed 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. Techniques used to estimate fair value include
discounted cash flow analysis 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 a relative fair value allocation if acquired in a merger or in a portfolio acquisition.
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 the fair value analysis 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 relative
fair value of the tangible and intangible assets acquired.
The Company follows the real estate project costs guidance in ASC 970, Real Estate – General, in accounting for
the costs of development and re-development projects. As real estate is undergoing development or redevelopment,
all project costs directly associated with and attributable to the development and construction of a project, including
interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period
begins when development activities and expenditures begin and ends upon completion, which is when the asset is
ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended
use upon completion of tenant improvements (in the case of commercial properties) or upon issuance of a certificate
of occupancy (in the case of multi-family residential properties). General and administrative costs are expensed as
incurred.
2013 Annual Report 38
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.
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.
The application of current accounting principles that govern the classification of any of our properties as held-for-
sale on the balance sheet requires management to make certain significant judgments. The Company makes a
determination as to the point in time that it is probable that a sale will be consummated. It is not unusual for real
estate sales contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of
the contract. In addition, certain other matters critical to the final sale, such as financing arrangements, often remain
pending even upon contract acceptance. As a result, properties under contract may not close within the expected
time period, or may not close at all. Due to these uncertainties, it is not likely that the Company can meet the criteria
of the current accounting principles governing the classification of properties as held-for-sale prior to a sale formally
closing. Therefore, any properties categorized as held-for-sale represent only those properties that management has
determined are probable to close within the requirements set forth in current accounting principles.
The Company reports, in discontinued operations, the results of operations and the related gains or losses of a
property that has either been disposed of or is classified as held for sale and otherwise meets the classification of a
discontinued operation.
Impairment. The Company’s long-lived assets are reviewed for impairment when and if events or changes in
circumstances or triggering events (such as adverse market conditions, including conditions resulting from an
ongoing economic recession) indicate that the cost of a long lived asset might not be recoverable. Judgments
regarding existence of impairment indicators are based on factors such as operational performance, market
conditions, expected holding period of each asset and events that occur that affect the financial strength of
significant tenants of the assets, including tenants who have filed for bankruptcy. For long-lived assets in which a
triggering event has been identified, the Company compares the expected future undiscounted cash flows for the
long-lived asset against the carrying amount of the asset, including any associated intangibles, subject to evaluation.
The evaluation of undiscounted cash flows is subjective and reflects assumptions regarding current market
conditions relative to the long-lived asset being evaluated, such as future occupancy, rental rates and capital
requirements that could differ materially from actual results. A worsening real estate market may cause the
Company to re-evaluate the assumptions used in our impairment analysis. If the undiscounted cash flows plus
reversion are less than the asset’s carrying value, impairment is recorded based on the estimated fair value (typically
based on a current independent appraisal) of the long-lived asset in comparison to its carrying value. The results of
the Company’s evaluation of 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 (approximately $563,000 as of April 30, 2013) 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 deferred rents receivable arising from the straight-lining
of rents (approximately $830,000 as of April 30, 2013) and from mortgage loans ($0 as of April 30, 2013). The
straight-lining of rents receivable arises from earnings recognized in excess of amounts currently due under lease
agreements. Management exercises judgment in establishing these allowances and considers payment history and
current credit status in developing these estimates. If estimates differ from actual results this would impact reported
results.
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
2013 Annual Report 39
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 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. 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 and that the Company’s tax
and accounting positions do not change. 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.
Fiscal 2013 Significant Events and Transactions
During fiscal year 2013, the Company successfully completed various acquisition, development, disposition,
financing and capital raising transactions, including the following significant activities:
Acquisitions, Dispositions, and Development Projects Placed in Service:
During fiscal year 2013, the Company added approximately 1,394 apartment units to its multi-family residential
portfolio during fiscal year 2013, through its acquisition of five multi-family residential properties and the
placement in service of three multi-family residential development projects, and sold three multi-family properties in
Fargo, North Dakota, with a total of 267 units, for a net addition to the Company’s multi-family residential portfolio
in fiscal year 2013 of approximately 1,127 apartment units.
Additional development projects placed in service during fiscal year 2013 were a medical office building in
Jamestown, North Dakota; an expansion of the Company’s senior housing project in Laramie, Wyoming; an
industrial building in Minot, North Dakota, and a branch bank building in Minot, North Dakota. The Company also
acquired a number of parcels of unimproved land in North Dakota and Minnesota for possible future development,
for purchase prices totaling approximately $22.5 million.
During fiscal year 2013, in addition to its sale of three multi-family residential projects in Fargo, North Dakota, the
Company also disposed of a small retail property in Kentwood, Michigan; four condominium units in its
Georgetown Square project in Grand Chute, Wisconsin; and a healthcare property in Stevens Point, Wisconsin.
2013 Annual Report 40
Development Projects in Process:
During fiscal year 2013, the Company began construction of its 146-unit River Ridge Apartments project in
Bismarck, North Dakota and of its 132-unit Cypress Court Apartment Homes project in St. Cloud, Minnesota, of
which the Company owns approximately 79%, with the remaining 21% owned by the Company’s joint venture
partner. The Company also acquired an approximately 51% interest in a joint venture entity constructing the
Southgate Apartments project in Minot, North Dakota.
Common Share Offering:
In April 2013, the Company completed a public offering of approximately 6.0 million common shares at a public
offering price of $9.25 per share, for net proceeds of approximately $53.0 million after underwriting discounts and
estimated offering expenses.
Preferred Share Offering:
The Company completed, in August 2012, a public offering of 4.6 million Series B preferred shares, for net
proceeds of approximately $111.2 million, after underwriting discounts and estimated offering expenses.
Credit Facility and Term Loan Transactions:
During fiscal year 2013, the Company executed an amendment to the Company’s multi-bank line of credit, to lower
the floor on the interest rate to 5.15% per annum and to change the interest rate under the loan agreement to the
prime rate plus 1.25%. Additionally, in March 2013, a joint venture entity in which the Company owns a 70%
interest entered into a Construction and Term Loan Agreement in the maximum principal amount of approximately
$43.7 to construct a multi-family apartment facility in Williston, North Dakota (the Company’s Renaissance Heights
project). The construction and term loan has a maturity date of October 1, 2019, and is secured in part by a first
mortgage on the project and by the guaranty of the Company’s Operating Partnership.
Transfer of Stock Exchange Listing:
In December 2012, the Company transferred the listing of its common and preferred shares to the New York Stock
Exchange from the NASDAQ Global Select Market.
Market Conditions and Outlook
During the Company’s fiscal year 2013, real estate operating fundamentals continued to improve, particularly in the
Company’s multi-family residential segment. High occupancy levels in its multi-family residential portfolio allowed
the Company to implement selected rent increases, and the Company’s three multi-family residential development
projects placed in service during the year (the Company’s Quarry Ridge II project in Rochester, Minnesota;
Buildings 3 and 4 of the Company’s four-building Williston Garden project in Williston, North Dakota, and the
Company’s 20-unit First Avenue project in Minot, North Dakota) leased up quickly, with Quarry Ridge 98.7%
leased as of April 30, 2013; the four buildings of the Williston Garden project 99.3% leased as of April 30, 2013;
and the First Avenue project 100% leased as of April 30, 2013. The Company expects to see continued favorable
results in this segment in fiscal year 2014; however, the Company’s ability to maintain occupancy levels and
selectively raise rents remains dependent on continued economic recovery and employment and wage growth. The
Company also observes considerable multi-family development activity in the Company’s markets, and as this new
construction is completed and leased, the Company will experience increased competition for tenants.
The Company’s commercial office segment, while still negatively affected by a number of adverse macro
conditions, including unemployment levels that remain elevated and stagnant wage growth, also showed some
progress, with new leasing activity matching absorption rates in the Company’s Minneapolis market and in other of
its office markets. However, these absorption rates remain low, and businesses, in a continued focus on costs, appear
to be increasing the density of their work spaces by placing more employees in less total square footage and giving
back the excess space or downsizing upon lease renewals. The Company continues to expect recovery of the overall
office market to be challenged by the slow and uneven recovery of the broader economy and by relatively high
unemployment rates.
2013 Annual Report 41
The Company’s healthcare segment consists of medical office properties and senior housing facilities. The medical
office sector remains stable with modest increases in both occupancy and rents, as the uncertainty of healthcare
reform is replaced with implementation and the corresponding expected increase in healthcare utilization, as
previously uninsured patients enter the traditional medical services system. Likewise, senior housing assets continue
to benefit from a recovery of the housing market, as occupancy trends are closely aligned with the ability of seniors
to sell their homes in anticipation of moving to a senior care facility.
Both the retail and industrial property markets are showing signs of revival. In the retail segment, better-located
retail properties are enjoying more leasing success, while outlying shopping centers continue to experience higher
vacancy rates. In the industrial segment, a relative lack of new supply is leading to vacant industrial space being
absorbed. Industrial rents are not yet rising to reflect this lack of new supply, but tenant concessions appear to be
dissipating.
The Company plans to continue in fiscal year 2014 its selective disposition of assets in non-core markets,
particularly industrial and retail segment assets, and intends to use the proceeds from these dispositions to continue
deleveraging its portfolio and for developing and acquiring high-quality assets in its multi-family and healthcare
segments. Subsequent to the end of fiscal year 2013, on May 13, 2013, the Company sold four industrial properties
in Minnesota and North Dakota, for a total sales price of approximately $19.5 million, and a smaller retail property
for a sale price of approximately $2.3 million. Also subsequent to the end of fiscal year 2013, the Company has
signed agreements to sell four industrial properties in Minnesota and Iowa, and three office properties in Minnesota.
These pending dispositions are subject to various contingencies, and no assurances can be given that these sales
transactions will be completed.
The Company continues to allocate resources to the dynamic economy of the energy-rich Bakken Shale Formation
region of eastern Montana, western and central North Dakota, northwest South Dakota and western Minnesota.
Development projects currently scheduled for completion in fiscal years 2014 and 2015 in this region include the
Company’s 146-unit River Ridge apartment project in Bismarck, North Dakota; the 108-unit Landing at Southgate
and 233-unit Commons at Southgate apartment projects in Minot, North Dakota, in which the Company has a 51%
interest; and the 288-unit Renaissance Heights Phase I apartment project in Williston, North Dakota, in which the
Company has a 70% interest. Energy activity in the Bakken Shale region continues to be robust, and the Company
expects this activity to remain strong in the next several years.
Stabilized and Non-Stabilized Properties
Throughout this Annual Report on Form 10-K, we have provided certain information on a stabilized and non-
stabilized properties basis. Information provided on a stabilized properties basis includes the results of properties
that we have owned and operated for the entirety of both periods being compared (except for properties for which
significant redevelopment or expansion occurred during either of the periods being compared, and properties
classified as discontinued operations), and which, in the case of development or re-development properties, have
achieved a target level of occupancy of 90% for multi-family residential properties and 85% for commercial office,
healthcare, industrial and retail properties.
For the comparison of fiscal years 2013 and 2012, all or a portion of 27 properties were non-stabilized, of which
non-stabilized properties 7 were redevelopment or in-service development properties. For the fiscal year 2013/2012
comparison, all or a portion of 9 properties were added to non-stabilized and all or a portion of 8 properties were
moved to stabilized compared to the designations for the fiscal year 2012/2011 comparison. For the comparison of
2012 and 2011, all or a portion of 26 were non-stabilized, of which non-stabilized properties 4 were redevelopment
or in-service development properties.
While there are judgments to be made regarding changes in designation, we typically remove properties from
stabilized to non-stabilized when redevelopment has or is expected to have a significant impact on property net
operating income within the fiscal year. Acquisitions are moved to stabilized once we have owned the property for
the entirety of comparable periods and the property is not under significant redevelopment or expansion. Our
development projects in progress are not included in our non-stabilized properties category until they are placed in-
service, which occurs upon the substantial completion of a commercial property, and upon receipt of a certificate of
occupancy, in the case of a multi-family residential development project. They are then subsequently moved from
non-stabilized to stabilized when the property has been in-service for the entirety of both periods being compared
and has reached the target level of occupancy specified above.
2013 Annual Report 42
RESULTS OF OPERATIONS
Consolidated Results of Operations
The discussion that follows is based on our consolidated results of operations for the fiscal years ended April 30,
2013, 2012 and 2011.
(in thousands)
Year Ended April 30
2013 vs. 2012
2012 vs. 2011
Real estate rentals
Tenant reimbursement
TOTAL REVENUE
Depreciation/amortization
related to real estate
investments
Utilities
Maintenance
Real estate taxes
Insurance
Property management
expenses
Other property expenses
Administrative expenses
Advisory and trustee
services
Other expenses
Amortization related to non-
real estate investments
Impairment of real estate
investments
TOTAL EXPENSES
Gain on involuntary
conversion
Operating income
Interest expense
Interest income
Other income
Income from continuing
operations
Income (loss) from
discontinued operations
NET INCOME
Net income attributable to
noncontrolling interests –
Operating Partnership
Net (income) loss
attributable to
noncontrolling interests –
consolidated real estate
entities
Net income attributable to
Investors Real Estate
Trust
Dividends to preferred
shareholders
NET INCOME
AVAILABLE TO
COMMON
SHAREHOLDERS
2013
2012
2011
$ Change % Change
$ 212,969 $ 196,149 $ 189,245 $ 16,820
3,508
20,328
46,437
259,406
44,931
234,176
42,929
239,078
8.6% $
8.2%
8.5%
$ Change % Change
3.6%
(4.5%)
2.1%
6,904
(2,002)
4,902
61,996
19,172
29,237
34,380
3,927
15,408
1,008
7,904
590
2,173
56,426
17,442
26,354
31,581
3,502
18,651
(142)
6,694
687
1,898
3,274
3,216
55,080
18,020
28,955
30,637
2,256
20,348
665
6,617
605
1,747
2,679
305
179,374
0
166,309
0
167,609
5,084
85,116
(62,900)
222
526
274
73,043
(64,066)
148
638
0
66,567
(62,735)
259
282
5,570
1,730
2,883
2,799
425
9.9%
9.9%
10.9%
8.9%
12.1%
1,346
(578)
(2,601)
944
1,246
2.4%
(3.2%)
(9.0%)
3.1%
55.2%
(3,243)
1,150
1,210
(17.4%)
(809.9%)
18.1%
(1,697)
(807)
77
(8.3%)
(121.4%)
1.2%
(97)
275
58
305
13,065
4,810
12,073
1,166
74
(112)
(14.1%)
14.5%
1.8%
n/a
7.9%
1755.5%
16.5%
(1.8%)
50.0%
(17.6%)
82
151
13.6%
8.6%
537
20.0%
0
(1,300)
274
6,476
(1,331)
(111)
356
n/a
(0.8%)
n/a
9.7%
2.1%
(42.9%)
126.2%
22,964
9,763
4,373
13,201
135.2%
5,390
123.3%
7,008
29,972
(57)
9,706
19,978
24,351
7,065 (12394.7%)
208.8%
20,266
(20,035)
(14,645)
(100.3%)
(60.1%)
(3,633)
(1,359)
(4,449)
(2,274)
167.3%
3,090
(69.5%)
(809)
(135)
180
(674)
499.3%
(315)
(175.0%)
25,530
8,212
20,082
17,318
210.9%
(11,870)
(59.1%)
(9,229)
(2,372)
(2,372)
$
16,301 $
5,840 $ 17,710
2013 Annual Report 43
Revenues. Total revenues increased by 8.5% to $259.4 million in fiscal year 2013, compared to $239.1 million in
fiscal year 2012. Total revenues increased by 2.1% to $239.1 million in fiscal year 2012, compared to $234.2
million in fiscal year 2011. These increases were primarily attributable to the addition of new income-producing real
estate properties.
For fiscal 2013, the increase in revenue of $20.3 million resulted from:
Rent in Fiscal 2013 primarily from properties acquired and development projects placed in
service in fiscal year 2012 in excess of that received in 2012 from the same properties
Rent primarily from properties acquired and development projects placed in service in
fiscal year 2013
Increase in rental income on stabilized properties due primarily to an increase in occupancy
and rents
Decrease in rental income on stabilized properties due to changes within the assisted living
portfolio in the commercial healthcare segment(1)
Net change in tenant concessions and straight line rent
(in thousands)
$
8,154
8,820
7,086
(5,300)
1,568
$ 20,328
(1) Decrease in rent was offset by $5.0 million decrease in expense. See analysis of commercial healthcare NOI on page 51 of the MD&A
for additional information.
For fiscal 2012, the increase in revenue of $4.9 million resulted from:
Rent in Fiscal 2012 primarily from properties acquired and development projects placed in
service in fiscal year 2011 in excess of that received in 2011 from the same properties
Rent primarily from properties acquired and development projects placed in service in
fiscal year 2012
Decrease in rental income on stabilized properties due primarily to a decrease in occupancy
Decrease in rental income on stabilized properties due to changes within the assisted living
portfolio in the commercial healthcare segment(1)
Net change in tenant concessions and straight line rent
(in thousands)
$
2,342
4,707
(1,511)
(2,200)
1,564
4,902
$
(1) Decrease in rent was offset by $2.2 million decrease in expense. See analysis of commercial healthcare NOI on page 57 of the MD&A
for additional information.
As illustrated above, the majority of the increase in our gross revenue for fiscal years 2013 and 2012 ($17.0 million
and $7.0 million respectively) resulted from the addition of new income-producing real estate properties to the IRET
Properties’ portfolio. Rental revenue from stabilized properties increased in fiscal year 2013 by $1.8 million and
decreased in fiscal year 2012 by $3.7 million. For the next 12 months, we continue to look to acquisitions and
development of new properties and recovery in our stabilized portfolio to be the most significant factors in any
increases in our revenues and ultimately our net income. However, identifying attractive acquisition possibilities
remains a continuing challenge.
Depreciation/Amortization Related to Real Estate Investments. Depreciation/amortization related to real estate
investments increased by 9.9% to $62.0 million in fiscal year 2013, compared to $56.4 million in fiscal year 2012.
This increase was primarily attributable to the addition of depreciable assets from acquisitions, development projects
placed in service, capital improvements and tenant improvements.
Depreciation/amortization related to real estate investments increased by 2.4% to $56.4 million in fiscal year 2012,
compared to $55.1 million in fiscal year 2011. This increase was primarily attributable to the addition of depreciable
assets from acquisitions, development projects placed in service, capital improvements and tenant improvements.
Utilities. Utilities increased by 9.9% to $19.2 million in fiscal year 2013, compared to $17.4 million in fiscal year
2012. This increase was primarily attributable to the addition of new income-producing real estate properties which
added $1.2 million in utility expense in fiscal 2013 compared to fiscal 2012. Utilities at stabilized properties
increased by approximately $573,000 in fiscal year 2013, primarily due to the effect of milder weather on heating
costs in the prior period.
2013 Annual Report 44
Utilities decreased by 3.2% to $17.4 million in fiscal year 2012, compared to $18.0 million in fiscal year 2011. This
decrease was primarily attributable to the effect of milder weather on heating costs in fiscal year 2012 as compared
to the prior year.
Maintenance. Maintenance expenses increased by 10.9% to $29.2 million in fiscal year 2013, compared to $26.4
million in fiscal year 2012. The addition of new income-producing real estate properties accounted for
approximately half of this increase. The remainder of the increase was due to increased snow removal costs at
stabilized properties compared to the prior year.
Maintenance expenses decreased by 9.0% to $26.4 million in fiscal year 2012, compared to $29.0 million in fiscal
year 2011. This decrease was primarily attributable to reduced snow removal costs at stabilized properties compared
to the prior year.
Real Estate Taxes. Real estate taxes increased by 8.9% to $34.4 million in fiscal year 2013, compared to $31.6
million in fiscal year 2012. The addition of new income-producing real estate properties accounted for
approximately half of this increase. The remainder of the increase was due to increased real estate taxes at stabilized
properties compared to the prior year.
Real estate taxes increased by 3.1% to $31.6 million in fiscal year 2012, compared to $30.6 million in fiscal year
2011. This increase was primarily attributable to the addition of new income-producing real estate properties.
Insurance. Insurance expense increased by 12.1% to $3.9 million in fiscal year 2013, compared to $3.5 million in
fiscal year 2012. This increase was primarily attributable to the addition of new income-producing real estate
properties.
Insurance expense increased by 55.2% to $3.5 million in fiscal year 2012, compared to $2.3 million in fiscal year
2011. This increase was primarily due to the addition of new income-producing real estate properties and a change
in estimate for the Company’s self-insurance reserve.
Property Management Expenses. Property management expenses decreased by 17.4% to $15.4 million in fiscal year
2013, compared to $18.7 million in fiscal year 2012. This decrease was primarily due to the restructuring of the
Company’s assisted living portfolio in the third quarter of fiscal year 2012, when the Company sold its wholly-
owned taxable REIT subsidiary. Following the sale of this entity, the Company’s revenue from its Wyoming
assisted living portfolio is received as rent under the lease agreement with the tenant in the facilities, and property
management expenses are paid by the tenant, rather than (as was previously the case) included in the property
management expense category of the Company’s statements.
Property management expenses decreased by 8.3% to $18.7 million in fiscal year 2012, compared to $20.3 million
in fiscal year 2011. This decrease was primarily due to the restructuring of the Company’s assisted living portfolio
in the third quarter of fiscal year 2012, when the Company sold its wholly-owned taxable REIT subsidiary.
Following the sale of this entity, the Company’s revenue from its Wyoming assisted living portfolio is received as
rent under the lease agreement with the tenant in the facilities, and property management expenses are paid by the
tenant, rather than (as was previously the case) included in the property management expense category of the
Company’s statements.
Other Property Expenses. Other property expense, consisting of bad debt provision expense, increased by 809.9%
to $1.0 million in fiscal year 2013, compared to approximately $142,000 of revenue in fiscal year 2012. In fiscal
2012 approximately $715,000 was received in the bankruptcy settlement of a former tenant. The remainder of the
change from fiscal year 2012 to fiscal year 2013 was due to increased bad debt write-offs in fiscal year 2013.
Other property expense decreased by 121.4%, resulting in revenue of approximately $142,000 in fiscal year 2012,
compared to approximately $665,000 of expense in fiscal year 2011. In fiscal 2012 approximately $715,000 was
received in the bankruptcy settlement of a former tenant.
Administrative Expenses. Administrative expenses increased by 18.1% to $7.9 million in fiscal year 2013,
compared to $6.7 million in fiscal year 2012. This increase was primarily due to an increase of approximately
$407,000 in salary expense related to high labor costs in our energy-impacted markets, $467,000 in executive bonus
expense per the compensation plan and an increase of approximately $317,000 in health insurance costs in fiscal
2013 Annual Report 45
year 2013 as compared to the prior year. Administrative expenses increased slightly by 1.2% to $6.7 million in fiscal
year 2012, compared to $6.6 million in fiscal year 2011.
Advisory and Trustee Services. Advisory and trustee services expense decreased by 14.1% to $590,000 in fiscal
year 2013, compared to $687,000 in fiscal year 2012. Advisory and trustee services expense increased by 13.6% to
$687,000 in fiscal year 2012, compared to $605,000 in fiscal year 2011. These changes in advisory and trustee
services expense were primarily due to changes in the composition of the board of trustees.
Other Expenses. Other expenses increased 14.5% to $2.2 million in fiscal year 2013, compared to $1.9 million in
fiscal year 2012. This increase was primarily due to increases in securities issuance and registration expenses.
Other expenses increased 8.6% to $1.9 million in fiscal year 2012, compared to $1.7 million in fiscal year 2011.
This increase was primarily attributable to an increase in acquisition fees of approximately $363,000 in fiscal year
2012 as compared to fiscal year 2011, due to increased acquisition activity. This increase was partially offset by
decreases in legal and other operating expenses.
Amortization Related to Non-Real Estate Investments. Amortization related to non-real estate investments increased
1.8% in fiscal year 2013 to $3.3 million, compared to $3.2 million in fiscal year 2012, primarily due to the
amortization of new leasing commissions.
Amortization related to non-real estate investments increased 20.0% in fiscal year 2012 to $3.2 million, compared to
$2.7 million in fiscal year 2011, primarily due to the amortization of new leasing commissions.
Impairment of Real Estate Investments. During fiscal year 2013, the Company incurred a loss of approximately
$305,000 due to the impairment of a commercial retail property. See Note 2 of the Notes to Consolidated Financial
Statements in this report for additional information.
Gain on Involuntary Conversion. During fiscal years 2013 and 2012, the Company recognized gains on involuntary
conversion of $5.1 million and approximately $274,000, respectively. See Note 2 of the Notes to Consolidated
Financial Statements in this report for additional information.
Interest Expense. Our mortgage interest expense increased approximately $525,000, or 0.9%, to $60.1 million
during fiscal year 2013, compared to $59.6 million in fiscal year 2012. Mortgage interest expense for properties
newly acquired in fiscal years 2013 and 2012 added $3.8 million to our total mortgage interest expense in fiscal year
2013, while mortgage interest expense on existing properties decreased $3.2 million. The decrease in mortgage
interest expense is due to loan payoffs and refinancings in our stabilized properties portfolio. The mortgage interest
expense category does not include interest expense on our line of credit, which totaled approximately $980,000 and
$2.4 million in fiscal year 2013 and 2012, respectively. Mortgage interest expense and interest expense on our line
of credit are all components of “Interest expense” on our Condensed Consolidated Statements of Operations. Our
overall weighted average interest rate on all outstanding mortgage debt (excluding borrowings under our secured
line of credit and construction loans) was 5.55% as of April 30, 2013 and 5.78% as of April 30, 2012. Our mortgage
debt on April 30, 2013 increased approximately $517,000 0.0% from April 30, 2012. Mortgage debt does not
include our multi-bank line of credit or our construction loans which appear on our Condensed Consolidated
Balance Sheets in “Revolving line of credit” and “Other,” respectively.
In addition to IRET’s mortgage interest expense, the Company incurs interest expense for a line of credit,
construction loans, amortization of loan costs, security deposits, and special assessments offset by capitalized
construction interest. For fiscal years 2013, 2012 and 2011 these amounts were $2.8 million, $4.5 million and $2.9
million, respectively, for a total interest expense for fiscal years 2013, 2012 and 2011 of $62.9 million, $64.1 million
and $64.0 million. Interest expense on the line of credit decreased by $1.5 million in fiscal year 2013 as compared to
the prior year due to the pay down of the line of credit with part of the proceeds from the Series B Preferred
offering. Interest expense on the line of credit increased by $1.4 million in fiscal year 2012 as compared to fiscal
year 2011 due to increased borrowings on the line of credit to fund acquisitions and development projects.
Interest Income and Other Income. The Company recorded interest income in fiscal years 2013, 2012 and 2011 of
approximately $222,000, $148,000 and $259,000, respectively. The change in interest income was due to changes
in the amounts deposited in interest-bearing accounts and changes in the interest rate earned.
2013 Annual Report 46
Other income consists of real estate tax appeal refunds and other miscellaneous income. The Company earned
other income in fiscal years 2013, 2012 and 2011 of approximately $526,000, $638,000 and $282,000, respectively.
Income from Discontinued Operations. Income from discontinued operations was $7.0 million in fiscal year 2013,
compared to a loss of approximately $57,000 in fiscal year 2012 and income of $20.0 million in fiscal year 2011.
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. The Company also reports any gains or losses from the sale of a property in
discontinued operations. During fiscal year 2013, the Company disposed of five properties and four condominium
units. There were no properties classified as held for sale at April 30, 2013. During fiscal year 2012, the Company
disposed of two properties. During fiscal year 2011, the Company disposed of six properties and one patio home.
The Company realized a gain on sale of real estate, land and other investments for fiscal year 2013 of approximately
$6.9 million. This compares to an approximately $349,000 gain on sale of real estate recognized in fiscal year 2012
and $19.4 million recognized in fiscal year 2011. Properties sold in fiscal years 2013 and 2012 are detailed below in
the section captioned “Property Dispositions.” See Note 12 of the Notes to Consolidated Financial Statements in this
report for further information on discontinued operations.
Net Income. Net income available to common shareholders for fiscal year 2013 was $16.3 million, compared to
$5.8 million in fiscal year 2012 and $17.7 million in fiscal year 2011. The increase in net income in fiscal year 2013
as compared to fiscal year 2012 was primarily due to an increase in the gain on involuntary conversion and the gain
on sale of discontinued operations. The decrease in net income in fiscal year 2012 as compared to fiscal year 2011
was primarily due to a higher gain on sale of discontinued operations in the prior year. On a per common share
basis, net income was $.17 per common share in fiscal year 2013, compared to $.07 per common share in fiscal year
2012 and $.22 in fiscal year 2011.
Net Operating Income
Net Operating Income (“NOI”) is a non-GAAP measure which we define as total real estate revenues and gain on
involuntary conversion less real estate expenses (which consist of utilities, maintenance, real estate taxes, insurance,
property management expenses and other property expenses). 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 real estate revenues, real estate operating expenses, gain on involuntary conversion and
NOI by reportable operating segment for fiscal years 2013, 2012 and 2011. For a reconciliation of net operating
income of reportable segments to net 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 or in service for the entirety of the periods being
compared, and, in the case of development or re-development properties, which have achieved a target level of
occupancy of 90% for multi-family residential properties and 85% for commercial office, healthcare, industrial and
retail properties. 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 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.
The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from
stabilized properties, since changes from one fiscal year to another in real estate revenue and expenses from non-
stabilized properties are due to the addition of those properties to the Company’s real estate portfolio, and
accordingly provide less useful information for evaluating the ongoing operational performance of the Company’s
real estate portfolio.
2013 Annual Report
47
Fiscal Year 2013 Compared to Fiscal Year 2012
All Segments
The following table of selected operating data reconciles NOI to net income and provides the basis for our
discussion of NOI by segment in fiscal year 2013 compared to fiscal year 2012.
(in thousands, except percentages)
Years Ended April 30
2012
$ Change
2013
All Segments
Real estate revenue
Stabilized
Non-stabilized(1)
Total
Real estate expenses
Stabilized
Non-stabilized(1)
Total
Gain on involuntary conversion
Stabilized
Non-stabilized(1)
Total
Net operating income
Stabilized
Non-stabilized(1)
Total
Depreciation/amortization
Administrative, advisory and trustee services
Other expenses
Impairment of real estate investments
Interest expense
Interest and other income
Income from continuing operations
Income (loss) from discontinued operations(2)
Net income
$
$
$
$
$
$
$
$
$
236,701
22,705
259,406
96,106
7,026
103,132
1,232
3,852
5,084
141,827
19,531
161,358
(65,270)
(8,494)
(2,173)
(305)
(62,900)
748
22,964
7,008
29,972
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
233,928
5,150
239,078
95,987
1,401
97,388
274
0
274
138,215
3,749
141,964
(59,642)
(7,381)
(1,898)
0
(64,066)
786
9,763
(57)
9,706
% Change
1.2%
340.9%
8.5%
0.1%
401.5%
5.9%
349.6%
n/a
1755.5%
2,773
17,555
20,328
119
5,625
5,744
958
3,852
4,810
3,612
15,782
19,394
2.6%
421.0%
13.7%
(1)
Non-stabilized properties consist of the following properties (re-development and in-service development properties are listed in bold type):
FY2013 - Multi-Family Residential - Ashland, Grand Forks, ND; Chateau I, Minot, ND; Colony, Lincoln, NE; Cottage West Twin Homes, Sioux
Falls, SD; Evergreen II, Isanti, MN; First Avenue, Minot, ND; Gables Townhomes, Sioux Falls, SD;
Grand Gateway, St Cloud, MN; Lakeside Village, Lincoln, NE; Ponds at Heritage Place, Sartell, MN;
Quarry Ridge II, Rochester, MN; Regency Park Estates, St Cloud, MN; Villa West, Topeka, KS;
Whispering Ridge, Omaha, NE and Williston Garden, Williston, ND.
Total number of units, 1,953.
Commercial Healthcare - Edina 6525 Drew Avenue, Edina, MN; Jamestown Medical Office Building, Jamestown, ND; Spring
Creek American Falls, American Falls, ID; Spring Creek Soda Springs, Soda Springs, ID; Spring Creek
Eagle, Eagle, ID; Spring Creek Meridian, Meridian, ID; Spring Creek Overland, Boise, ID; Spring Creek
Boise, Boise, ID; Spring Creek Ustick, Meridian, ID and Trinity at Plaza 16, Minot, ND.
Total rentable square footage, 223,192.
Commercial Industrial - Minot IPS, Minot, ND.
Commercial Retail -
Total rentable square footage, 27,698.
Arrowhead First International Bank, Minot, ND.
Total rentable square footage, 3,702.
2013 Annual Report 48
FY2012 - Multi-Family Residential - Ashland, Grand Forks, ND; Chateau I, Minot, ND; Cottage West Twin Homes, Sioux Falls, SD; Evergreen
II, Isanti, MN; Gables Townhomes, Sioux Falls, SD; Grand Gateway, St Cloud, MN; Regency Park Estates,
St Cloud, MN; Villa West, Topeka, KS; and Williston Garden, Williston, ND.
Total number of units, 561.
Commercial Healthcare - Edina 6525 Drew Avenue, Edina, MN; Spring Creek American Falls, American Falls, ID; Spring Creek
Soda Springs, Soda Springs, ID; Spring Creek Eagle, Eagle, ID; Spring Creek Meridian, Meridian, ID;
Spring Creek Overland, Boise, ID; Spring Creek Boise, Boise, ID; Spring Creek Ustick, Meridian, ID and
Trinity at Plaza 16, Minot, ND.
Total rentable square footage, 177,970.
(2)
Discontinued operations include gain on disposals and income from operations for:
2013 Dispositions and Properties Held for Sale – Candlelight, Georgetown Square Condominiums, Kentwood Thomasville Furniture,
Prairiewood Meadows, Stevens Point and Terrace on the Green.
2012 Dispositions and Properties Held for Sale – Livingston Pamida, East Grand Station, Georgetown Square Condominiums and
Kentwood Thomasville Furniture.
An analysis of NOI by segment follows.
Multi-Family Residential
Real estate revenue from stabilized properties in our multi-family residential segment increased by $3.1 million in
the twelve months ended April 30, 2013 compared to the same period in the prior fiscal year. The continued levels
of high occupancy allowed for rental rate increases of approximately $2.4 million. The remainder of the real estate
revenue increase is attributable to a decrease of $400,000 in allowances and concessions and an increase of
$263,000 in other fee revenue items.
Real estate expenses at stabilized properties decreased by $356,000 in the twelve months ended April 30, 2013
compared to the same period in the prior fiscal year. Real estate taxes increased by $371,000; utilities expense
increased by $288,000 and insurance expense increased by $132,000. These increases in expenses were offset by a
decrease in property management expenses of $1,065,000 and a combined decrease in maintenance and other
property expenses of $82,000 for a net decrease in overall expenses of $356,000. The decrease in property
management expenses is attributable to recoverable allocations of internal management fees as compared to prior
periods.
(in thousands, except percentages)
Years Ended April 30,
2013
2012
$ Change
% Change
Multi-Family Residential
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Gain on involuntary conversion
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
$
$
$
$
$
$
$
$
72,948
17,811
90,759
32,445
6,271
38,716
0
3,852
3,852
40,503
15,392
55,895
$
$
$
$
$
$
$
$
69,883
2,617
72,500
32,801
1,104
33,905
0
0
0
37,082
1,513
38,595
$
$
$
$
$
$
$
$
3,065
15,194
18,259
(356)
5,167
4,811
0
3,852
3,852
4.4%
580.6%
25.2%
(1.1%)
468.0%
14.2%
n/a
n/a
n/a
3,421
13,879
17,300
9.2%
917.3%
44.8%
2013 Annual Report 49
Occupancy
Stabilized
Non-stabilized
Total
Number of Units
Stabilized
Non-stabilized
Total
Commercial Office
2013
94.7%
94.5%
94.6%
2013
8,327
1,953
10,280
2012
94.2%
85.4%
93.7%
2012
8,333
561
8,894
Real estate revenue from stabilized properties in our commercial office segment increased by $2.8 million in the
twelve months ended April 30, 2013 compared to the same period from the prior fiscal year. Real estate rentals
increased by $1.2 million and tenant reimbursements increased by $1.6 million due to an increase in occupancy and
increased recoverable operating expenses.
Real estate expenses at stabilized properties increased by 9.0%, or $3.1 million in the twelve months ended April 30,
2013 compared to the same period from the prior fiscal year. The increase was primarily due to an increase in real
estate taxes of $741,000; an increase in property management expense of $917,000; an increase in maintenance
expenses of $973,000 and an increase of $498,000 in other expense items. The increase in property management
expenses is attributable to recoverable allocations of internal management fees as compared to prior periods, while
the increase in maintenance expenses is primarily due to increased snow removal costs.
(in thousands, except percentages)
Years Ended April 30,
2013
2012
$ Change
% Change
$
$
$
$
$
$
77,162
0
77,162
37,946
0
37,946
39,216
0
39,216
$
$
$
$
$
$
74,334
0
74,334
34,816
0
34,816
39,518
0
39,518
$
$
$
$
$
$
2,828
0
2,828
3,130
0
3,130
(302)
0
(302)
2013
80.2%
n/a
80.2%
3.8%
n/a
3.8%
9.0%
n/a
9.0%
(0.8%)
n/a
(0.8%)
2012
78.6%
n/a
78.6%
2013
5,063,026
0
5,063,026
2012
5,061,212
0
5,061,212
Commercial Office
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
2013 Annual Report 50
Commercial Healthcare
Real estate revenue from stabilized properties in our commercial healthcare segment decreased by $4.7 million in
the twelve months ended April 30, 2013 compared to the same period from the prior fiscal year. The decrease was
primarily due to the reduction in revenue of $5.3 million at our Wyoming senior living facilities and a reduction of
$367,000 in straight-line rent. These reductions in revenue were offset by an increase in percentage rent revenue of
$476,000 at our Edgewood Vista senior living facilities due to a percentage rent clause that was newly effective in
fiscal year 2013 and an increase in tenant reimbursements of $532,000 due to slight increases in occupancy and
reimbursable expenses. The revenue reduction at our Wyoming senior living facilities (which is offset by a $5.0
million reduction in real estate expenses outlined below) is the result of the restructuring of the Company’s assisted
living portfolio in the third quarter of fiscal year 2012, when the Company sold its wholly-owned taxable REIT
subsidiary. Following the sale of this entity, the Company’s revenue from its Wyoming assisted living portfolio is
received as rent under the lease agreement with the tenant in the facilities, and property management expenses are
paid by the tenant, rather than (as was previously the case) included in the property management expense category
of the Company’s statements.
Real estate expenses from stabilized properties decreased by $4.3 million in the twelve months ended April 30, 2013
compared to the same period from the prior fiscal year. A decrease of $5.0 million was the result of the portfolio
restructuring discussed above. This reduction in expenses was offset by an increase in property management
expenses of $615,000 and other real estate expenses of $33,000. The increase in property management expenses is
attributable to recoverable allocations of internal management fees as compared to prior periods.
(in thousands, except percentages)
Years Ended April 30,
2013
2012
$ Change
% Change
$
$
$
$
$
$
57,304
4,671
61,975
16,027
752
16,779
41,277
3,919
45,196
$
$
$
$
$
$
61,978
2,533
64,511
20,353
297
20,650
41,625
2,236
43,861
$
$
$
$
$
$
Commercial Healthcare
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
(4,674)
2,138
(2,536)
(4,326)
455
(3,871)
(348)
1,683
1,335
2013
94.6%
95.7%
94.7%
(7.5%)
84.4%
(3.9%)
(21.3%)
153.2%
(18.7%)
(0.8%)
75.3%
3.0%
2012
94.0%
99.8%
94.4%
2013
2,732,830
223,192
2,956,022
2012
2,701,768
177,970
2,879,738
2013 Annual Report 51
Commercial Industrial
Real estate revenue from stabilized properties in our commercial industrial segment increased by $374,000 in the
twelve months ended April 30, 2013 compared to the same period in the prior fiscal year. The increase was
primarily due to increased tenant reimbursements of $259,000 which was attributable to our Dixon Avenue
Property. The increase at Dixon Avenue was the result of 90,000 square feet of previously vacant space being leased
and additional expiring space that was previously leased as a gross lease renewing as a net lease which allows for
the additional collections of expense reimbursements. An increase in rental revenue of $183,000 was realized due to
a slight increase in occupancy while other revenue items decreased by $68,000.
Real estate expenses from stabilized properties increased by $706,000 in the twelve months ended April 30, 2013
compared to the same period in the prior fiscal year. The increase was primarily due to an increase in bad debt
provision of $684,000 which was the result of a bad debt collection at our Brooklyn Park 7401 Boone Avenue
property in the prior fiscal year. All other expenses combined increased by $22,000.
(in thousands, except percentages)
Years Ended April 30,
2013
2012
$ Change
% Change
$
$
$
$
$
$
14,699
212
14,911
4,255
0
4,255
10,444
212
10,656
$
$
$
$
$
$
14,325
0
14,325
3,549
0
3,549
10,776
0
10,776
$
$
$
$
$
$
374
212
586
706
0
706
(332)
212
(120)
2013
96.8%
100.0%
96.8%
2.6%
n/a
4.1%
19.9%
n/a
19.9%
(3.1%)
n/a
(1.1%)
2012
95.5%
n/a
95.5%
2013
2,935,764
27,698
2,963,462
2012
2,945,239
0
2,945,239
Commercial Industrial
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
2013 Annual Report 52
Commercial Retail
Real estate revenue from stabilized properties in our commercial retail segment increased by $1.2 million in the
twelve months ended April 30, 2013 compared to the same period of the prior fiscal year. The increase was due
primarily to a $488,000 increase in real estate rentals with the remaining increase of $692,000 being attributable to
tenant reimbursements. Increased occupancy and stabilization of our Minot Arrowhead Shopping Center post-flood
accounted for $442,000 of the increase in real estate revenue. Increased occupancy at our Rochester Maplewood
Square property resulted in increased real estate revenue of $292,000 as well.
Real estate expenses from stabilized properties increased by $965,000, primarily due to an increase in maintenance
expense of $633,000; an increase in real estate taxes of $167,000 and an increase in other expenses combined of
$165,000. The increase in maintenance expenses was primarily due to more general maintenance items being
completed and an increase in snow removal.
(in thousands, except percentages)
Years Ended April 30,
2013
2012
$ Change
% Change
$
$
$
$
$
$
$
$
14,588
11
14,599
5,433
3
5,436
1,232
0
1,232
10,387
8
10,395
$
$
$
$
$
$
$
$
13,408
0
13,408
4,468
0
4,468
274
0
274
9,214
0
9,214
$
$
$
$
$
$
$
$
Commercial Retail
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Gain on involuntary conversion
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
1,180
11
1,191
965
3
968
958
0
958
1,173
8
1,181
2013
86.5%
100.0%
86.5%
8.8%
n/a
8.9%
21.6%
n/a
21.7%
349.6%
n/a
349.6%
12.7%
n/a
12.8%
2012
87.1%
n/a
87.1%
2013
1,395,632
3,702
1,399,334
2012
1,392,133
0
1,392,133
2013 Annual Report 53
Fiscal Year 2012 Compared to Fiscal Year 2011
All Segments
The following table of selected operating data reconciles NOI to net income and provides the basis for our
discussion of NOI by segment in fiscal year 2012 compared to fiscal year 2011.
(in thousands, except percentages)
Years Ended April 30
2012
2011
$ Change
% Change
All Segments
Real estate revenue
Stabilized
Non-stabilized(1)
Total
Real estate expenses
Stabilized
Non-stabilized(1)
Total
Gain on involuntary conversion
Stabilized
Non-stabilized(1)
Total
Net operating income
Stabilized
Non-stabilized(1)
Total
Depreciation/amortization
Administrative, advisory and trustee services
Other expenses
Interest expense
Interest and other income
Income from continuing operations
(Loss) income from discontinued operations(2)
Net income
$
$
$
$
$
$
$
$
$
229,025
10,053
239,078
94,942
2,446
97,388
274
0
274
134,357
7,607
141,964
(59,642)
(7,381)
(1,898)
(64,066)
786
9,763
(57)
9,706
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
231,164
3,012
234,176
100,270
611
100,881
0
0
0
130,894
2,401
133,295
(57,759)
(7,222)
(1,747)
(62,735)
541
4,373
19,978
24,351
(2,139)
7,041
4,902
(5,328)
1,835
(3,493)
274
0
274
3,463
5,206
8,669
(0.9%)
233.8%
2.1%
(5.3%)
300.3%
(3.5%)
n/a
n/a
n/a
2.6%
216.8%
6.5%
(1)
Non-stabilized properties consist of the following properties (redevelopment and in-service development properties are listed in bold
type):
FY2012 - Multi-Family Residential - Ashland, Grand Forks, ND; Chateau, Minot, ND; Cottage West Twin Homes, Sioux Falls, SD; Evergreen
Commercial Office -
II, Isanti, MN; Gables Townhomes, Sioux Falls, SD; Grand Gateway, St Cloud, MN; North Pointe II,
Bismarck, ND; Regency Park Estates, St Cloud, MN; Sierra Vista, Sioux Falls, SD and Williston Garden,
Williston, ND.
Total number of units, 629.
First Avenue Building, Minot, ND and Omaha 10802 Farnam Drive, Omaha, NE.
Total rentable square footage, 63,001.
Commercial Healthcare - Billings 2300 Grant Road, Billings, MT; Edgewood Vista-Minot, Minot, ND; Edina 6525 Drew Avenue,
Edina, MN; Missoula 3050 Great Northern Avenue, Missoula, MT; Spring Creek American Falls,
American Falls, ID; Spring Creek Soda Springs, Soda Springs, ID; Spring Creek Eagle, Eagle, ID; Spring
Creek Meridian, Meridian, ID; Spring Creek Overland, Boise, ID; Spring Creek Boise, Boise, ID; Spring
Creek Ustick, Meridian, ID and Trinity at Plaza 16, Minot, ND
Total rentable square footage, 315,818.
Commercial Industrial - Fargo 1320 45th Street North, Fargo, ND.
Commercial Retail -
Total rentable square footage, 42,244.
Minot 1400 31st Ave, Minot, ND.
Total rentable square footage, 48,960.
2013 Annual Report 54
FY2011 - Multi-Family Residential - Chateau, Minot, ND; North Pointe II, Bismarck, ND and Sierra Vista, Sioux Falls, SD.
Commercial Office -
Total number of units, 132.
First Avenue Building, Minot, ND and Omaha 10802 Farnam Drive, Omaha, NE.
Total rentable square footage, 63,001.
Commercial Healthcare - Billings 2300 Grant Road, Billings, MT; Edgewood Vista-Minot, Minot, ND and Missoula 3050 Great
Commercial Industrial - Fargo 1320 45th Street North, Fargo, ND.
Northern Avenue, Missoula, MT .
Total rentable square footage, 137,848.
Commercial Retail -
Total rentable square footage, 42,244.
Minot 1400 31st Ave, Minot, ND.
Total rentable square footage, 47,709.
(2)
Discontinued operations include gain on disposals and income from operations for:
2013 Dispositions and Properties Held for Sale – Candlelight, Georgetown Square Condominiums, Kentwood Thomasville Furniture,
Prairiewood Meadows, Stevens Point and Terrace on the Green.
2012 Dispositions and Properties Held for Sale – Livingston Pamida, East Grand Station, Georgetown Square Condos and Kentwood
Thomasville Furniture.
2011 Dispositions – Miramont Apartments, Neighborhood Apartments, Pinecone Apartments, Waconia, Dakota Hill, Edgewood Vista
Fargo and Ladysmith Pamida.
An analysis of NOI by segment follows.
Multi-Family Residential
Real estate revenue from stabilized properties in our multi-family residential segment increased by approximately
$4.8 million in fiscal year 2012 compared to fiscal year 2011. Approximately $2.8 million of this increase was due
to increased occupancy across our multifamily portfolio; increased occupancy allowed for rental rate increases of
approximately $1.1 million of additional revenue in this segment in fiscal year 2012 compared to fiscal year 2011.
The remainder of the real estate revenue increase is attributable to a decrease of $396,000 in allowances and
concessions and an increase of $450,000 in other fee revenue items.
Real estate expenses at stabilized properties decreased by $394,000 in fiscal year 2012 compared to fiscal year 2011.
The mild winter season permitted overall lower utilities usage for a reduction in expense of approximately $42,000,
and reduced snow removal expenses by $500,000. Additionally, of the $394,000 decrease in real estate expenses in
this segment in fiscal year 2012 compared to fiscal year 2011, approximately $309,000 was due to lower property
management expense, which includes lower fees to third party managers, savings from the Company’s internal
management initiative and less bad debt write-off. These decreases in expenses were offset by an increase in
insurance expense of $435,000 and an increase in losses not covered by insurance due to deductible levels of
$324,000. Other expense items decreased by $303,000.
Multi-Family Residential
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
(in thousands, except percentages)
Years Ended April 30,
2012
2011
$ Change
% Change
$
$
$
$
$
$
69,292
3,208
72,500
32,486
1,419
33,905
36,806
1,789
38,595
$
$
$
$
$
$
64,471
758
65,229
32,880
336
33,216
31,591
422
32,013
$
$
$
$
$
$
4,821
2,450
7,271
(394)
1,083
689
5,215
1,367
6,582
7.5%
323.2%
11.1%
(1.2%)
322.3%
2.1%
16.5%
323.9%
20.6%
2013 Annual Report 55
Occupancy
Stabilized
Non-stabilized
Total
Number of Units
Stabilized
Non-stabilized
Total
Commercial Office
2012
94.2%
86.8%
93.7%
2012
8,265
629
8,894
2011
92.9%
93.9%
92.9%
2011
8,262
132
8,394
Real estate revenue from stabilized properties in our commercial office segment decreased by approximately $4.3
million in fiscal year 2012 compared to fiscal year 2011, due to a continued decrease in occupancy which resulted in
a reduction in rental revenue of $1.3 million and in tenant reimbursements of $2.8 million. Allowances and
concessions increased by $1.2 million, further reducing revenue. These reductions in revenue were offset by an
increase in straight line rents of $615,000 and an increase in lease termination fees of $313,000.
Real estate expenses from stabilized properties decreased by approximately $1.6 million in fiscal year 2012 as
compared to fiscal 2011, primarily due to maintenance expense decreasing by $1.4 million, mainly as a result of
lower snow removal costs, a reduction in real estate taxes of $267,000 due to successful appeals, and a reduction of
$283,000 in third party management fees due to bringing property management in-house; offset by an increase in
insurance expense of $405,000 and an increase in other expense items of $55,000.
(in thousands, except percentages)
Years Ended April 30,
2012
2011
$ Change
% Change
$
$
$
$
$
$
72,995
1,339
74,334
34,256
560
34,816
38,739
779
39,518
$
$
$
$
$
$
77,257
490
77,747
35,855
200
36,055
41,402
290
41,692
$
$
$
$
$
$
(4,262)
849
(3,413)
(1,599)
360
(1,239)
(2,663)
489
(2,174)
(5.5%)
173.3%
(4.4%)
(4.5%)
180.0%
(3.4%)
(6.4%)
168.6%
(5.2%)
2012
2011
78.4%
98.7%
78.6%
2012
4,998,211
63,001
5,061,212
79.5%
98.7%
79.7%
2011
4,998,572
63,001
5,061,573
Commercial Office
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
2013 Annual Report 56
Commercial Healthcare
Real estate revenue from stabilized properties in our commercial healthcare segment decreased by approximately
$3.7 million in fiscal year 2012 compared to fiscal year 2011. The decrease was primarily due to a reduction in
revenue of $2.2 million at our Wyoming senior living facilities following the sale of our TRS and a change to a
triple net lease structure in December 2011. The decrease was also due to a reduction of $1.9 million in scheduled
rent at some assisted living facilities, following amendment of the leases to shorten terms and remove purchase
options. Lower occupancy also decreased revenue by approximately $799,000, offset by an increase in straight line
rent of $1.5 million and an increase in other revenue items of $233,000.
Real estate expenses from stabilized properties decreased by approximately $2.1 million, primarily due to the
operating change from a TRS structure to a triple net lease structure, which reduced real estate expenses by
approximately $2.2 million, and to a decrease in maintenance expense of $382,000, primarily due to lower snow
removal costs, a reduction in utilities expense of $110,000, and other total expense reductions of $130,000. These
expense reductions were offset by an increase in real estate taxes of $234,000 and an increase in insurance expense
of $228,000.
(in thousands, except percentages)
Years Ended April 30,
2012
2011
$ Change
% Change
$
$
$
$
$
$
60,026
4,485
64,511
20,337
313
20,650
39,689
4,172
43,861
$
$
$
$
$
$
63,717
1,162
64,879
22,420
23
22,443
41,297
1,139
42,436
$
$
$
$
$
$
Commercial Healthcare
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
(3,691)
3,323
(368)
(2,083)
290
(1,793)
(1,608)
3,033
1,425
2012
93.7%
99.9%
94.4%
2012
2,563,920
315,818
2,879,738
(5.8%)
286.0%
(0.6%)
(9.3%)
1,260.9%
(8.0%)
(3.9%)
266.3%
3.4%
2011
95.7%
100.0%
95.9%
2011
2,541,407
137,848
2,679,255
2013 Annual Report 57
Commercial Industrial
Real estate revenue from stabilized properties in our commercial industrial segment increased by approximately $1.1
million in fiscal year 2012 compared to fiscal year 2011. The increase was primarily due to increased occupancy,
which provided for additional revenue from rents of $717,000 and additional tenant reimbursements of $599,000,
offset by an increase in allowance and concessions of $197,000 and an increase in other revenue items of $19,000.
Real estate expenses from stabilized properties decreased by $778,000 in fiscal 2012 compared to fiscal 2011,
primarily due to a recovered bad debt from a former tenant in bankruptcy of approximately $700,000 and reduced
utility expense of $325,000, offset by an increase in real estate taxes of $167,000, an increase in insurance expense
of $108,000, and an increase in other total expenses of $42,000.
(in thousands, except percentages)
Years Ended April 30,
2012
2011
$ Change
% Change
$
$
$
$
$
$
13,884
441
14,325
3,543
6
3,549
10,341
435
10,776
$
$
$
$
$
$
12,797
368
13,165
4,321
7
4,328
8,476
361
8,837
$
$
$
$
$
$
1,087
73
1,160
(778)
(1)
(779)
1,865
74
1,939
2012
95.4%
100.0%
95.5%
8.5%
19.8%
8.8%
(18.0%)
(14.3%)
(18.0%)
22.0%
20.5%
21.9%
2011
90.0%
100.0%
90.1%
2012
2,902,995
42,244
2,945,239
2011
2,936,235
42,244
2,978,479
Commercial Industrial
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
2013 Annual Report 58
Commercial Retail
Real estate revenue from stabilized properties in our commercial retail segment decreased by approximately $94,000
in fiscal year 2012 compared to fiscal year 2011. Occupancy increased as a percentage of square feet leased;
however, lease renewal rates were lower for new or existing tenants.
Real estate expenses from stabilized properties decreased by $474,000, primarily due to decreased maintenance
expense of $513,000, mainly as a result of reduced snow removal expense, and to utility expenses decreasing by
$68,000, offset by an increase in real estate tax of $83,000, an increase in insurance expense of $106,000 and an
increase in other property management expense items of $82,000.
(in thousands, except percentages)
Years Ended April 30,
2012
2011
$ Change
% Change
$
$
$
$
$
$
$
$
12,828
580
13,408
4,320
148
4,468
274
0
274
8,782
432
9,214
$
$
$
$
$
$
$
$
12,922
234
13,156
4,794
45
4,839
0
0
0
8,128
189
8,317
$
$
$
$
$
$
$
$
Commercial Retail
Real estate revenue
Stabilized
Non-stabilized
Total
Real estate expenses
Stabilized
Non-stabilized
Total
Gain on involuntary conversion
Stabilized
Non-stabilized
Total
Net operating income
Stabilized
Non-stabilized
Total
Occupancy
Stabilized
Non-stabilized
Total
Rentable Square Footage
Stabilized
Non-stabilized
Total
(94)
346
252
(474)
103
(371)
274
0
274
654
243
897
2012
86.6%
100.0%
87.1%
(0.7%)
147.9%
1.9%
(9.9%)
228.9%
(7.7%)
n/a
n/a
n/a
8.0%
128.6%
10.8%
2011
83.2%
53.6%
82.2%
2012
1,343,173
48,960
1,392,133
2011
1,342,655
47,709
1,390,364
2013 Annual Report 59
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 before
depreciation)
Multi-Family Residential
Commercial Office
Commercial Healthcare
Commercial Industrial
Commercial Retail
Total
Net Operating Income
Multi-Family Residential
Commercial Office
Commercial Healthcare
Commercial Industrial
Commercial Retail
Total
2013
(in thousands, except percentages)
2012
%
%
2011
%
$ 659,696
613,775
501,191
125,772
132,536
27.4%
33.6%
25.3%
6.6%
7.1%
$2,032,970 100.0% $1,892,009 100.0% $1,770,798 100.0%
28.5% $ 484,815
595,491
32.0%
447,831
26.4%
117,602
6.3%
125,059
6.8%
32.4% $ 539,783
605,318
30.2%
500,268
24.7%
119,002
6.2%
127,638
6.5%
$
55,895
39,216
45,196
10,656
10,395
24.0%
31.3%
31.8%
6.6%
6.3%
$ 161,358 100.0% $ 141,964 100.0% $ 133,295 100.0%
34.7% $
24.3%
28.0%
6.6%
6.4%
27.2% $
27.8%
30.9%
7.6%
6.5%
32,013
41,692
42,436
8,837
8,317
38,595
39,518
43,861
10,776
9,214
Analysis of Commercial Segments’ Credit Risk and Leases
Credit Risk
The following table lists our top ten commercial tenants on April 30, 2013, for all commercial properties owned by
us, measured by percentage of total commercial segments’ minimum rents as of April 1, 2013. Our results of
operations are dependent on, among other factors, the economic health of our tenants. We attempt to mitigate tenant
credit risk by working to secure creditworthy tenants that meet our underwriting criteria and monitoring our
portfolio to identify potential problem tenants. We believe that our credit risk is also mitigated by the fact that no
individual tenant accounts for more than approximately 10% of our total real estate rentals, although affiliated
entities of Edgewood Vista together accounted for approximately 13.2% of our total commercial segments’
minimum rents as of April 1, 2013.
As of April 30, 2013, 62 of our 182 commercial properties, including all 20 of our Edgewood Vista properties, all 7
of our Idaho Spring Creek senior housing properties, and all 5 of our Wyoming senior housing properties, were
leased under triple net leases under which the tenant pays a monthly lump sum base rent as well as all costs
associated with the property, including property taxes, insurance, replacement, repair or restoration, in addition to
maintenance. The failure by any of our triple net tenants to effectively conduct their operations or to maintain and
improve our properties in accordance with the terms of their respective triple net leases could adversely affect their
business reputations and ability to attract and retain residents and customers to our properties, which could have an
indirect adverse effect on us.
We regularly monitor the relative credit risk of our significant tenants, including our triple net tenants. The metrics
the Company uses to evaluate a significant tenant’s liquidity and creditworthiness depend on facts and
circumstances specific to that tenant and to the industry in which it operates, and include the tenant’s credit history
and economic conditions related to the tenant, its operations and the markets in which it operates, that may change
over time. Prior to signing a lease with a tenant, the Company generally assesses the prospective tenant’s credit
quality through review of its financial statements and tax returns, and the result of that review is a factor in
establishing the rent to be charged (e.g., higher risk tenants will be charged higher rent). Over the course of a lease,
the Company’s property management and asset management personnel have regular contact with tenants and tenant
employees, and, where the terms of the lease permit, receive tenant financial information for periodic review, or
review publicly-available financial statements, in the case of public company tenants or non-profit entities, such as
hospital systems, whose financial statements are required to be filed with state agencies. Through these means the
Company monitors tenant credit quality.
2013 Annual Report 60
Lessee
Affiliates of Edgewood Vista
St. Luke’s Hospital of Duluth, Inc.
Fairview Health Services
Applied Underwriters
HealthEast Care System
Affiliates of Siemens USA
Nebraska Orthopaedic Hospital
Arcadis Corporate Services, Inc.
Microsoft (NASDAQ: MSFT)
State of ID Dept of Health & Welfare
All Others
Total Monthly Commercial Rent as of April 1, 2013
Commercial Leasing Activity
% of Total Commercial
Segments Minimum
Rents as of April 1, 2013
13.2%
3.5%
3.4%
2.3%
1.6%
1.3%
1.3%
1.2%
1.2%
1.1%
69.9%
100.0%
During Fiscal 2013, we executed new and renewal commercial leases for our stabilized rental properties on
1,010,136 square feet. As a result of our leasing efforts, occupancy in our stabilized commercial portfolio increased
to 88.2% as of April 30, 2013, up from 87.1% as of April 30, 2012.
The total leasing activity for our stabilized commercial rental properties, expressed in square feet of leases signed
during the period, and the resulting physical occupancy levels are as follows for the years ended April 30, 2013 and
2012 respectively.
Square Feet of
New Leases(1)
2012
324,633
98,987
144,833
84,634
653,087
2013
263,799
51,126
36,982
92,662
444,569
Square Feet of
Leases Renewed(1) (2)
2012
2013
522,656
399,399
41,463
55,718
526,576
23,572
110,832
86,878
1,201,527
565,567
Total
Square Feet of
Leases Executed(1)
2012
847,289
140,450
671,409
195,466
1,854,614
2013
663,198
106,844
60,554
179,540
1,010,136
2013
Physical Occupancy
Fiscal Year Ended April
30,
2012
80.2% 78.6%
94.6% 94.0%
96.8% 95.5%
86.5% 87.1%
88.2% 87.1%
Segments
Office
Healthcare
Industrial
Retail
Total
(1) The leasing activity presented is based on leases signed or executed for our stabilized rental properties during the period and is not
intended to coincide with the commencement of rental revenue in accordance with GAAP.
(2) Leases renewed include the retained occupancy of tenants on a month-to-month basis past their original lease expiration date.
New Leases
The following table sets forth the average effective rents and the estimated costs of tenant improvements and leasing
commissions, on a per square foot basis, that we are obligated to fulfill under the new leases signed for our
stabilized commercial rental properties during the years ended April 30, 2013 and 2012, respectively:
Square Feet of
New Leases(1)
2012
324,633
98,987
144,833
84,634
653,087
2013
263,799
51,126
36,982
92,662
444,569
Office
Healthcare
Industrial
Retail
Total
Estimated Tenant
Improvement Cost
per Square Foot(1)
2012
Average Term
Average
Effective Rent(2)
in Years
2012
2012
2013
4.5 $ 14.53 $ 11.51 $ 14.24 $ 11.36 $
7.5
1.7
4.5
5.0 $ 13.20 $ 9.99 $ 15.16 $
22.88
0.39
5.97
9.97 $
2013
5.5
8.2
4.8
5.0
5.9
20.14
4.84
8.93
17.35
2.80
7.87
37.99
3.90
9.66
2013
Leasing
Commissions per
Square Foot(1)
2013
2012
5.34 $ 4.01
3.27
7.06
0.42
1.43
2.21
1.47
4.56 $ 2.77
(1) The leasing activity presented is based on leases signed or executed for our stabilized rental properties during the period and is not
intended to coincide with the commencement of rental revenue in accordance with GAAP. Tenant improvements and leasing commissions
presented are based on square feet leased during the period.
(2) Effective rents represent average annual base rental payments, on a straight-line basis for the term of each lease, excluding operating
expense reimbursements. The underlying leases contain various expense structures including gross, modified gross, net and triple net.
2013 Annual Report 61
Our ability to maintain or increase occupancy rates is a principal driver of maintaining and increasing the average
effective rents in our commercial segments. The increase in the average effective rental rates of new leases executed
for the fiscal year ended April 30, 2013 when compared to new leases executed for the same period in the prior year
is due primarily to the recovery of higher per square foot tenant improvements and leasing commissions and is not a
function of significant increases in market rent.
Lease Renewals
The following table summarizes our lease renewal activity within our stabilized commercial segments for the years
ended April 30, 2013 and 2012, respectively (square feet data in thousands):
Square Feet of
Leases Renewed(1)
2012
522,656
41,463
526,576
110,832
565,567 1,201,527
2013
399,399
55,718
23,572
86,878
Percent of Expiring
Leases Renewed(2)
2012
2013
73.8%
87.1%
74.1%
23.9%
30.9% 100.0%
91.2%
72.4%
79.4%
70.1%
Average Term
in Years
2012
3.5
4.3
3.8
4.0
3.8
2013
3.1
6.5
3.1
3.4
3.9
Office
Healthcare
Industrial
Retail
Total
Estimated
Tenant
Improvement
Cost per Square
Foot(1)
2012
Weighted Average
Growth (Decline)
in Effective Rents(3)
2012
2013
5.8% $ 5.89 $ 5.53 $
(3.2%)
16.67
1.5%
0.21
12.0%
1.03
5.0% $ 5.97 $ 3.01 $ 3.69 $
Leasing
Commissions per
Square Foot(1)
2012
2013
2.23
4.47 $
2.74
4.74
0.64
0.59
0.46
0.25
1.39
2013
(5.3%)
4.6%
(2.8%)
8.6%
(2.6%)
8.53
0.66
0.17
(1) The leasing activity presented is based on leases signed or executed for our stabilized rental properties during the period and is not
intended to coincide with the commencement of rental revenue in accordance with GAAP. Tenant improvements and leasing commissions
are based on square feet leased during the period.
(2) Renewal percentage of expiring leases is based on square footage of renewed leases and not the number of leases renewed. Expiring leases
where the tenant retained occupancy on a month-to-month basis past the lease expiration date were considered to have been renewed.
(3) Represents the percentage change in effective rent between the original leases and the renewal leases. Effective rents represent average
annual base rental payments, on a straight-line basis for the term of each lease, excluding operating expense reimbursements. The
underlying leases contain various expense structures including gross, modified gross, net and triple net.
Lease Expirations
Our ability to maintain and improve occupancy rates, and base rents, primarily depends upon our continuing ability
to re-lease expiring space. The following table reflects the in-service portfolio lease expiration schedule of our
consolidated commercial segments properties, including square footage and annualized base rent for expiring leases,
as of April 30, 2013.
Fiscal Year of Lease
Expiration
2014(1)
2015
2016
2017
2018
2019
2020
2021
2022
2023
Thereafter
Totals
# of Leases
209
137
114
99
79
39
16
20
42
10
31
796
Square Footage of
Expiring Leases(3)
1,777,267
1,233,502
1,714,308
1,436,680
710,246
968,062
461,541
223,328
1,437,143
460,613
518,177
10,940,867
Percentage of
Total
Commercial
Segments
Leased Square
Footage
16.2% $
11.3%
15.7%
13.1%
6.5%
8.9%
4.2%
2.1%
13.1%
4.2%
4.7%
Annualized Base
Rent of Expiring
Leases at
Expiration(2)
18,575,753
13,456,175
18,143,439
19,981,679
11,794,092
11,753,118
4,688,991
3,195,545
16,268,643
1,829,322
10,513,593
100.0% $ 130,200,350
Percentage of Total
Commercial
Segments
Annualized Base
Rent
14.3%
10.3%
13.9%
15.3%
9.1%
9.0%
3.6%
2.5%
12.5%
1.4%
8.1%
100.0%
Includes month-to-month leases. As of April 30, 2013 month-to-month leases accounted for 417,506 square feet.
(1)
(2) Annualized Base Rent is monthly scheduled rent as of April 1, 2013, multiplied by 12.
(3) Assuming that none of the tenants exercise renewal or termination options, and including leases renewed prior to expiration.
2013 Annual Report 62
Information on current market rents can be difficult to obtain, is highly subjective, and is often not directly
comparable between properties. Because of this, we believe the increase or decrease in effective rent on lease
renewals, as previously defined, is the most objective and meaningful relationship between rents on leases expiring
in the near-term and current market rents.
Property Acquisitions
IRET Properties paid approximately $135.8 million for real estate properties added to its portfolio during fiscal year
2013, compared to $97.1 million in fiscal year 2012. The fiscal year 2013 and 2012 acquisitions and development
projects placed in service are detailed below.
Fiscal 2013 (May 1, 2012 to April 30, 2013)
Acquisitions
Multi-Family Residential
Date Acquired
Land
Building
Intangible
Assets
Acquisition
Cost
(in thousands)
308 unit - Villa West - Topeka, KS
232 unit - Colony - Lincoln, NE
208 unit - Lakeside Village - Lincoln, NE
58 unit - Ponds at Heritage Place - Sartell, MN
336 unit - Whispering Ridge - Omaha, NE
2012-05-08 $
2012-06-04
2012-06-04
2012-10-10
2013-04-24
1,590 $ 15,760 $
15,731
1,515
1,215 15,837
4,564
25,424
77,316
395
2,139
6,854
300 $ 17,650
17,500
254
17,250
198
5,020
61
28,314
751
85,734
1,564
Unimproved Land
University Commons - Williston, ND
Cypress Court - St. Cloud, MN
Cypress Court Apartment Development - St. Cloud,
MN(1)
Badger Hills - Rochester, MN(2)
Grand Forks - Grand Forks, ND
Minot (Southgate Lot 4) - Minot, ND
Commons at Southgate - Minot, ND(3)
Landing at Southgate - Minot, ND(3)
Grand Forks 2150 - Grand Forks, ND
Bismarck 4916 - Bismarck, ND
Arcata - Golden Valley, MN
2012-08-01
2012-08-10
2012-08-10
2012-12-14
2012-12-31
2013-01-11
2013-01-22
2013-01-22
2013-03-25
2013-04-12
2013-04-30
823
447
1,136
1,050
4,278
1,882
3,691
2,262
1,600
3,250
2,088
22,507
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
823
447
1,136
1,050
4,278
1,882
3,691
2,262
1,600
3,250
2,088
22,507
Total Property Acquisitions
$ 29,361 $ 77,316 $ 1,564 $ 108,241
Land is owned by a joint venture in which the Company has an approximately 79% interest.
(1)
(2) Acquisition of unimproved land consisted of two parcels acquired separately on December 14 and December 20, 2012, respectively.
(3) Land is owned by a joint venture entity in which the Company has an approximately 51% interest.
2013 Annual Report 63
Development Projects Placed in Service
Multi-Family Residential
Date Placed in
Service
Land
Building
Developme
nt Cost
(in thousands)
159 unit - Quarry Ridge II - Rochester, MN(1)
73 unit - Williston Garden Buildings 3 and 4 - Williston, ND(2) 2012-07-31
20 unit - First Avenue - Minot, ND(3)
2013-04-15
2012-06-29 $
Commercial Healthcare
26,662 sq ft Spring Wind Expansion - Laramie, WY(4)
45,222 sq ft Jamestown Medical Office Building - Jamestown,
ND(5)
Commercial Industrial
27,698 sq ft Minot IPS - Minot, ND(6)
2012-11-16
2013-01-01
2012-12-17
Commercial Retail
3,702 sq ft Arrowhead First International Bank - Minot, ND(7)
2013-03-19
0 $
0
0
0
4,591 $ 4,591
7,058
7,058
2,356
2,356
14,005
14,005
0
0
0
0
0
1,675
1,675
6,597
8,272
6,597
8,272
4,087
4,087
1,165
1,165
Total Development Projects Placed in Service
$
0 $
27,529 $27,529
(1) Development property placed in service June 29, 2012. Additional costs paid in fiscal years 2012 and 2011, and land acquired in fiscal
year 2007, totaled $13.0 million, for a total project cost at April 30, 2013 of $17.6 million.
(2) Development property placed in service July 31, 2012. Buildings 1 and 2 were placed in service in fiscal year 2012. Additional costs paid in
fiscal year 2012 totaled $12.0 million, for a total project cost at April 30, 2013 of $19.1 million.
(3) Redevelopment property placed in service April 15, 2013. Additional costs paid in fiscal years 2012 and 2011 totaled approximately
$321,000, for a total project cost at April 30, 2013 of $2.7 million.
(4) Expansion project placed in service November 16, 2012. Additional costs paid in fiscal year 2012 totaled $1.8 million, for a total project
cost at April 30, 2013 of $3.5 million.
(5) Development property placed in service January 1, 2013. Additional costs paid in fiscal year 2012 totaled $1.0 million, for a total project
cost at April 30, 2013 of $7.6 million.
(6) Development property placed in service December 17, 2012. Additional costs paid in fiscal year 2012 totaled $1.8 million, for a total
project cost at April 30, 2013 of $5.9 million.
(7) Development property placed in service March 19, 2013. Additional costs paid in fiscal year 2012 totaled approximately $75,000, for a
total project cost at April 30, 2013 of $1.2 million
2013 Annual Report 64
Fiscal 2012 (May 1, 2011 to April 30, 2012)
Acquisitions
Multi-Family Residential
Date
Acquired
Land
Building
Intangible
Assets
Acquisition
Cost
(in thousands)
147 unit - Regency Park Estates - St. Cloud, MN
50 unit - Cottage West Twin Homes - Sioux Falls, SD 2011-10-12
2011-10-12
24 unit - Gables Townhomes - Sioux Falls, SD
2011-11-01
36 unit - Evergreen II - Isanti, MN
2012-02-16
116 unit - Grand Gateway - St. Cloud MN
2012-03-16
84 unit - Ashland - Grand Forks, ND
2011-08-01 $
702 $ 10,198 $
968
349
691
814
741
4,265
3,762
1,921
2,784
7,086
7,569
33,320
0 $ 10,900
4,730
0
2,270
0
3,475
0
7,900
0
8,310
0
37,585
0
Commercial Healthcare
17,273 sq. ft Spring Creek American Falls - American
Falls, ID
2011-09-01
145
3,870
55
4,070
15,571 sq. ft Spring Creek Soda Springs - Soda
Springs, ID
15,559 sq. ft Spring Creek Eagle - Eagle, ID
31,820 sq. ft Spring Creek Meridian - Meridian, ID
26,605 sq. ft Spring Creek Overland - Boise, ID
16,311 sq. ft Spring Creek Boise - Boise, ID
26,605 sq. ft Spring Creek Ustick - Meridian, ID
Meadow Wind Land - Casper, WY
3,431 sq. ft Edina 6525 Drew Ave S - Edina, MN
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-10-13
Unimproved Land
Industrial-Office Build-to-Suit - Minot, ND
Renaissance Heights - Williston, ND
2011-09-07
2012-04-11
66
263
424
687
708
467
50
388
3,198
416
4,600
5,016
2,134
3,775
6,724
5,941
4,296
3,833
0
117
30,690
0
0
0
30
62
102
97
71
0
0
0
417
0
0
0
2,230
4,100
7,250
6,725
5,075
4,300
50
505
34,305
416
4,600
5,016
Total Property Acquisitions
$ 12,479 $ 64,010 $
417 $ 76,906
2013 Annual Report 65
Development Projects Placed in Service
Multi-Family Residential
(in thousands)
Date Placed in
Service
Land
Building
Development
Cost
72 unit - Williston Garden Buildings 1 and 2 - Williston, ND(1)
2012-04-27 $
700 $ 8,978 $
9,678
Commercial Healthcare
24,795 sq. ft Trinity at Plaza 16 - Minot, ND(2)
22,193 sq. ft Meadow Winds Addition - Casper, WY(3)
2011-09-23
2011-12-30
Commercial Retail
19,037 sq. ft. Jamestown Buffalo Mall - Jamestown, ND(4)
2011-06-15
0
0
0
0
5,685
3,952
9,637
5,685
3,952
9,637
879
879
Total Development Projects Placed in Service
$
700 $ 19,494 $ 20,194
(1) Development property placed in service April 27, 2012. Buildings 3 and 4 of this project are expected to be placed in service during the
first quarter of fiscal year 2013.
(2) Development property placed in service September 23, 2011. Additional costs paid in fiscal year 2011 totaled $3.3 million, for a total
project cost at April 30, 2012 of $9.0 million.
(3) Expansion project placed in service December 30, 2011.
(4) Construction project placed in service June 15, 2011. Additional costs paid in fiscal year 2011 totaled $1.4 million, for a total project cost
at April 30, 2012 of $2.3 million.
Property Dispositions
During fiscal year 2013, the Company disposed of three multi-family residential properties, one retail property, one
healthcare property and four condominium units for an aggregate sales price of $26.3 million, compared to
dispositions totaling $3.2 million in fiscal year 2012. The fiscal year 2013 and 2012 dispositions are detailed below.
Fiscal 2013 (May 1, 2012 to April 30, 2013)
Dispositions
Multi-Family Residential
116 unit - Terrace on the Green - Fargo, ND
85 unit - Prairiewood Meadows - Fargo, ND
66 unit - Candlelight - Fargo, ND
Date
Disposed
(in thousands)
Book Value
Sales Price
and Sales Cost Gain/(Loss)
2012-09-27 $
2012-09-27
2012-11-27
3,450 $
3,450
1,950
8,850
1,248 $
2,846
1,178
5,272
2,202
604
772
3,578
Commercial Retail
16,080 sq ft Kentwood Thomasville - Kentwood, MI
2012-06-20
625
692
(67)
Commercial Healthcare
47,950 sq ft Steven’s Pointe -Steven’s Point, WI
2013-04-25
16,100
12,667
3,433
Other
Georgetown Square Condominiums 5 and 6
Georgetown Square Condominiums 3 and 4
2012-06-21
2012-08-02
330
368
698
336
421
757
(6)
(53)
(59)
Total Property Dispositions
$
26,273 $
19,388 $
6,885
2013 Annual Report 66
Fiscal 2012 (May 1, 2011 to April 30, 2012)
Dispositions
Commercial Retail
Date
Disposed
(in thousands)
Book Value
Sales Price
and Sales Cost Gain/(Loss)
41,200 sq ft. Livingstone Pamida - Livingston, MT
12,556 sq ft. East Grand Station – East Grand Forks,
2011-08-01 $
2,175 $
1,586 $
589
MN
2012-03-03
1,062
1,302
(240)
Total Property Dispositions
$
3,237 $
2,888 $
349
Development and Re-Development Projects
The following tables provide additional detail, as of April 30, 2013 and 2012, on the Company’s in-service
(completed) development and re-development projects, and development and re-development projects in progress.
All of these projects are excluded from the stabilized pool. The Company measures initial yield on its development
projects upon completion and achievement of target lease-up levels by measuring net operating income from the
development against the cost of the project. Estimated initial yields on the projects listed below range from an
estimated approximate 5.50% to an estimated approximate 13% initial yield. While development costs in the
Company's markets in the energy-impacted region of western and central North Dakota are significantly higher than
in other Company markets, the Company continues to experience heightened tenant demand, low vacancy, and rent
growth in this region, and accordingly actual initial yields upon project completion for projects in these
markets have been trending higher than the estimated initial yields forecast at the project underwriting stage. For
example, the Company estimated an approximately 11.94% initial yield for its Williston Garden Apartments project
in Williston, North Dakota; the Company calculates that actual initial yield after project completion and target lease-
up was approximately 17.45%. The Company expects these trends of heightened tenant demand and low vacancy to
continue to affect yields on its development projects in the region.
Projects Completed in Fiscal Year 2013
Project Name and
Location
First Avenue - Minot,
ND
Quarry Ridge II -
Rochester, MN
Williston Garden -
Williston, ND
Jamestown Medical
Office Building -
Jamestown, ND
Spring Wind
Expansion -
Laramie, WY
Minot IPS - Minot,
ND
Arrowhead First
International Bank -
Minot, ND
Total Rentable
Square Feet
or Number of Units
Convert 15,000 sf.
commercial office to 20
multi-family residential
units
159 unit apartment
building
144 unit apartment
building
45,222 square foot
commercial healthcare
building
26,662 square foot
commercial healthcare
expansion
27,698 square foot
commercial industrial
building
3,700 square foot
commercial retail
building
(in thousands)
Percentage
Leased
or
Committed
Anticipated
Total
Project
Cost(1)
Costs as of
April 30,
2013(1)
Cost per
Square Foot
or Unit(1)
Construction
Completion
Date
Anticipated Date
of Stabilization
100% $
3,000 $
2,900 $ 150,000
98.7%
16,600
16,600
104,403
99.3%
19,100
19,100
132,639
80.5%
7,600
7,600
100%
3,500
3,500
100%
6,400
5,900
100%
1,700
1,600
168
131
231
459
4th Quarter
Fiscal 2013
1st Quarter
Fiscal 2013
1st Quarter
Fiscal 2013
1st Quarter
Fiscal 2015
1st Quarter
Fiscal 2015
1st Quarter
Fiscal 2015
3rd Quarter
Fiscal 2013
1st Quarter
Fiscal 2015
3rd Quarter
Fiscal 2013
n/a
3rd Quarter
Fiscal 2013
1st Quarter
Fiscal 2015
4th Quarter
Fiscal 2013
1st Quarter
Fiscal 2015
(1) Excludes tenant improvements and leasing commissions.
2013 Annual Report 67
Projects in Progress at April 30, 2013
Project Name and Location
River Ridge - Bismarck, ND
Cypress Court Apartment Development -
St. Cloud, MN(1)
Landing at Southgate - Minot, ND(2)
Commons at Southgate - Minot, ND(2)
Renaissance Heights I - Williston, ND(3)
Arcata - Golden Valley, MN
Other
Total Rentable
Square Feet
or # of Units
Percentage
Leased
or Committed
Anticipated
Total
Cost
Cost to
Date
(in thousands)
146 unit apartment
building
132 unit apartment
building
three 36 unit apartment
buildings
233 unit apartment
building
288 unit apartment
building
165 unit apartment
building
n/a
16.4%
$
25,800 $
13,200
20.0%
12.0%
0%
0%
0%
n/a
14,300
6,500
15,000
7,400
37,200
6,500
62,200
10,100
33,400
n/a
$
187,900 $
2,700
400
46,800
Anticipated
Construction
Completion
2nd Quarter
Fiscal 2014
2nd Quarter
Fiscal 2014
2nd Quarter
Fiscal 2014
1st Quarter
Fiscal 2015
2nd Quarter
Fiscal 2015
3rd Quarter
Fiscal 2015
n/a
(1) The Company is a 79% partner in the joint venture entity constructing this property; the anticipated total cost amount given is the total cost
to the joint venture entity.
(2) The Company is a 51% partner in the joint venture entity constructing these properties; the anticipated total cost amount given is the total
cost to the joint venture entity
(3) The Company is a 70% partner in the joint venture entity constructing this property; the anticipated total cost amount given is the total cost
to the joint venture entity
Projects Completed in Fiscal Year 2012 (all information presented as of April 30, 2012)
Project Name and
Location
Buffalo Mall Theater -
Jamestown, ND
Trinity at Plaza 16 -
Minot, ND
Meadow Winds Addition
- Casper, WY
Williston Garden
Buildings 1 and 2 -
Williston, ND
Total Rentable
Square Feet
or Number of Units
19,037 square foot
commercial retail
building
24,795 square foot
commercial healthcare
building
22,193 square foot
commercial healthcare
building
72 unit apartment
building
(in thousands)
Percentage
Leased
or
Committed
Anticipated
Total
Project
Cost(1)
Costs as of
April 30,
2012(1)
Cost per
Square Foot
or Unit(1)
Construction
Completion
Date
Anticipated Date
of Stabilization
100% $
2,300 $
2,300
$
121
100%
9,700
9,000
100%
4,500
4,000
391
203
98.6%
9,700
9,700
134,722
1st Quarter
Fiscal 2012
1st Quarter
Fiscal 2014
2nd Quarter
Fiscal 2012
1st Quarter
Fiscal 2014
3rd Quarter
Fiscal 2012
n/a
4th Quarter
Fiscal 2012
1st Quarter
Fiscal 2014
(1) Excludes tenant improvements and leasing commissions.
2013 Annual Report 68
Projects in Progress at April 30, 2012 (all information presented as of April 30, 2012)
Total Rentable
Square Feet
or # of Units
Percentage
Leased
or Committed
Anticipated
Total
Cost
Cost to
Date
(in thousands)
72 unit apartment building
26,662 square foot
commercial healthcare
expansion
159 unit apartment building
27,698 square foot
commercial industrial
building
45,222 square foot
commercial healthcare
building
Convert 15,000 sf.
commercial office to 20
multi-family residential units
n/a
100%
$
9,700 $
4,700
100%
42.0%
3,800
1,800
18,300
15,400
100%
5,800
2,300
89.0%
9,200
1,600
0%
n/a
3,000
n/a
49,800 $
300
1,500
27,600
$
Anticipated
Construction
Completion
1st Quarter
Fiscal 2013
1st Quarter
Fiscal 2013
1st Quarter
Fiscal 2013
2nd Quarter
Fiscal 2013
3rd Quarter
Fiscal 2013
4th Quarter
Fiscal 2013
n/a
Project Name and Location
Williston Garden Buildings 3 and 4 -
Williston, ND
Spring Wind Expansion - Laramie, WY
Quarry Ridge II - Rochester, MN
Minot IPS - Minot, ND
Jamestown Medical Office Building -
Jamestown, ND
First Avenue - Minot, ND
Other
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”).
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.” In addition, in October 2011
NAREIT clarified its computation of FFO so as to exclude impairment charges for all periods presented. 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 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, assists IRET management and investors in
identifying 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.
2013 Annual Report 69
FFO applicable to common shares and limited partnership units for the fiscal year ended April 30, 2013 was $78.9
million, compared to $67.3 million and $62.2 million for the fiscal years ended April 30, 2012 and 2011,
respectively.
Reconciliation of Net Income Attributable to Investors Real Estate Trust to Funds From Operations
For the years ended April 30, 2013, 2012 and 2011:
Fiscal Years Ended April 30,
2013
(in thousands, except per share and unit amounts)
2012
2011
Weighted Avg
Shares and
Units(2)
Amount
Per
Share
and
Unit(3)
Weighted Avg
Shares and
Units(2)
Amount
Per
Share
and
Unit(3)
Weighted Avg
Shares and
Units(2)
Amount
Per
Share
and
Unit(3)
Net income attributable to
Investors Real Estate
Trust
Less dividends to preferred
shareholders
Net income available to
common shareholders
Adjustments:
Noncontrolling interests –
Operating Partnership
Depreciation and
amortization(1)
Impairment of real estate
Gains on depreciable
property sales
Funds from operations
applicable to common
shares and Units
$
25,530
$
$
8,212
$
$
20,082
$
(9,229)
(2,372)
(2,372)
16,301
93,344
0.17
5,840
83,557
0.07
17,710
78,628
0.22
3,633
21,191
65,542
305
(6,885)
1,359
60,057
428
(349)
19,875
4,449
20,154
59,402
0
(19,365)
$
78,896
114,535 $
0.69 $
67,335
103,432 $
0.65 $
62,196
98,782 $ 0.63
(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 $65,270, $59,642 and $57,759
and depreciation/amortization from Discontinued Operations of $479, $682 and $1,915, less corporate-related depreciation and
amortization on office equipment and other assets of $207, $267 and $272 for the fiscal year ended April 30, 2013, 2012 and 2011.
(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.
Cash Distributions
The following cash distributions were paid to our common shareholders and UPREIT unitholders during fiscal years
2013, 2012 and 2011:
Quarters
First
Second
Third
Fourth
Fiscal Years
$
$
2013
.1300
.1300
.1300
.1300
.5200
$
$
2012
.1715
.1300
.1300
.1300
.5615
$
$
2011
.1715
.1715
.1715
.1715
.6860
The fiscal year 2013 cash distributions decreased 7.4% over the cash distributions paid during fiscal year 2012, and
fiscal year 2012 cash distributions decreased 18.1% over the cash distributions paid during fiscal year 2011.
Liquidity and Capital Resources
Overview
The Company’s principal liquidity demands are maintaining distributions to the holders of the Company’s common
and preferred shares of beneficial interest and UPREIT Units, capital improvements and repairs and maintenance to
the Company’s properties, acquisition of additional properties, property development, tenant improvements and debt
service and repayments.
2013 Annual Report 70
The Company has historically met its short-term liquidity requirements through net cash flows provided by its
operating activities, and, from time to time, through draws on its lines of credit. Management considers the
Company’s ability to generate cash from property operating activities, cash-out refinancing of existing properties
and, from time to time, draws on its line of credit 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 also
generally expected to be funded from existing cash on hand, cash flow generated from property operations, cash-out
refinancing of existing properties, and/or new borrowings, and the Company believes it will have sufficient cash to
meet its commitments over the next twelve months. However, the commercial real estate markets continue to
experience challenges including reduced occupancies and rental rates as well as some restrictions on the availability
of financing. In the event of deterioration in property operating results, or absent the Company’s ability to
successfully continue cash-out refinancing of existing properties and/or new borrowings, the Company may need to
consider additional cash preservation alternatives, including scaling back development activities, capital
improvements and renovations. Budgeted expenditures for ongoing maintenance and capital improvements and
renovations at our properties are also generally expected to be funded from existing cash on hand, cash flow
generated from property operations, cash-out refinancing of existing properties, and/or new borrowings, and the
Company believes it will have sufficient cash to meet its commitments over the next twelve months, including an
estimated $23.9 million in capital expenditures (excluding capital expenditures recoverable from tenants and tenant
improvements). For the fiscal year ended April 30, 2013, the Company paid distributions of $46.8 million in cash
and $12.4 million in common shares pursuant to our DRIP to common shareholders and unitholders of the Operating
Partnership, as compared to net cash provided by operating activities of $77.7 million and FFO of $78.9 million.
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. However, our ability to raise funds
through the sale of equity securities, the sale of properties, and additional long-term secured or unsecured
borrowings is dependent on, among other things, general economic conditions, general market conditions for REITs,
our operating performance, and the current trading price of our common shares, and the capital and debt markets
may not consistently be available at all or on terms that we consider attractive. In particular, as a result of the
economic downturn and turmoil in the capital markets, the availability of secured and unsecured loans was for a
time sharply curtailed. We cannot predict whether these conditions will recur. As a result of general economic
conditions in our markets, economic downturns affecting the ability to attract and retain tenants, unfavorable
fluctuations in interest rates or our share price, unfavorable changes in the supply of competing properties, or our
properties not performing as expected, we may not generate sufficient cash flow from operations or otherwise have
access to capital on favorable terms, or at all. If we are unable to obtain capital from other sources, we may not be
able to pay the distribution required to maintain our status as a REIT, make required principal and interest payments,
make strategic acquisitions or make necessary routine capital improvements or undertake re-development
opportunities with respect to our existing portfolio of operating assets. In addition, if a property is mortgaged to
secure payment of indebtedness and we are unable to meet mortgage payments, the holder of the mortgage could
foreclose on the property, resulting in loss of income and asset values.
Sources and Uses of Cash
As of April 30, 2013, the Company had one secured line of credit with First International Bank and Trust, Watford
City, North Dakota, as lead bank. This line of credit matures on August 12, 2014, and had, as of April 30, 2013,
lending commitments of $60.0 million. Participants in this secured credit facility as of April 30, 2013 included, in
addition to First International Bank, the following financial institutions: The Bank of North Dakota; First Western
Bank and Trust; Dacotah Bank; United Community Bank of North Dakota; American State Bank & Trust Company
and Town & Country Credit Union. As of April 30, 2013, the Company had advanced $10.0 million under the line
of credit. The line of credit has a minimum outstanding principal balance requirement of $10.0 million. The interest
rate on borrowings under the facility is the Wall Street Journal Prime Rate +1.25%, with a floor of 5.15% and a cap
of 8.65%; interest-only payments are due monthly based on the total amount of advances outstanding. The line of
credit may be prepaid at par at any time. The facility includes covenants and restrictions requiring the Company to
achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the
aggregate and 1.00x on individual assets in the collateral pool, and the Company is also required to maintain
minimum depository account(s) totaling $6.0 million with First International, of which $1.5 million is to be held in a
2013 Annual Report 71
non-interest bearing account. As of April 30, 2013, 23 properties with a total cost of $117.3 million collateralized
this line of credit. As of April 30, 2013, the Company believes it is in compliance with the facility covenants.
The Company maintains compensating balances, not restricted as to withdrawal, with several financial institutions in
connection with financing received from those institutions and/or to ensure future credit availability. At April 30,
2013, the Company’s compensating balances totaled $8.9 million and consisted of the following: Dacotah Bank,
Minot, North Dakota, deposit of $350,000; United Community Bank, Minot, North Dakota, deposit of $275,000;
Commerce Bank, A Minnesota Banking Corporation, deposit of $250,000; First International Bank, Watford City,
North Dakota, deposit of $6.1 million; Peoples State Bank of Velva, North Dakota, deposit of $225,000; Equity
Bank, Minnetonka, Minnesota, deposit of $300,000; Associated Bank, Green Bay, Wisconsin, deposit of $500,000;
Venture Bank, Eagan, Minnesota, deposit of $500,000; and American National Bank, Omaha, Nebraska, deposit of
$400,000.
On April 1, 2013 the Company terminated its existing at-the-market (“ATM”) equity program under which the
Company from time to time offered and sold common shares to fund acquisitions and development and
redevelopment projects, to repay outstanding debt, and for other general corporate purposes. For the three months
ended April 30, 2013, the Company issued no common shares under this program. During the fiscal year ended
April 30, 2013, the Company issued 300,000 common shares at a weighted average price per share of $7.24 for net
cash proceeds of $2.1 million, and paid approximately $43,000 in commissions related to the sales of these common
shares. During fiscal year 2012, the Company issued 3.3 million common shares under this program at a weighted
average price per share of $7.48 for net cash proceeds of $24.0 million, and paid approximately $490,000 in
commissions related to the sales of these common shares. The Company currently has no ATM equity program in
place.
During fiscal year 2013, economic conditions in the United States continued to improve and credit markets
continued to be stable, with credit availability relatively unconstrained and benchmark interest rates remaining at or
near historic lows. Underwriting on commercial real estate continues to be more conservative compared to the
underwriting standards employed prior to the recessionary period, however, and we continue to find recourse
security more frequently required, lower amounts of proceeds available, and lenders limiting the amount of
financing available in an effort to manage capital allocations and credit risk. While we continue to expect to be able
to refinance our maturing debt without significant issues, we also expect lenders to continue to employ conservative
underwriting regarding asset quality, occupancy levels and tenant creditworthiness. As we were in regard to fiscal
year 2013, we remain cautious regarding our ability in fiscal year 2014 to rely on cash-out refinancing at levels we
had achieved in recent years to provide funds for investment opportunities and other corporate purposes.
Additionally, while to date there has been no material negative impact on our ability to borrow in our multi-family
segment, we continue to monitor proposals to modify the roles of the Federal Home Loan Mortgage Corporation
(Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) in financing multi-family residential
properties. We consider that one of the consequences of a modification in the agencies’ roles could potentially be a
narrowing of their lending focus away from the smaller secondary or tertiary markets which we generally target, to
multi-family residential properties in major metropolitan markets. IRET obtains a majority of its multi-family debt
from primarily Freddie Mac, and we continue to plan to refinance a majority of our maturing multi-family debt with
these two entities, so any change in their ability or willingness to lend going forward would most likely result in
higher loan costs and/or more constricted availability of financing for us. As of April 30, 2013, approximately
39.0%, or $14.5 million of our mortgage debt maturing in the next twelve months is placed on multi-family
residential assets, and approximately 61.0%, or $22.7 million, is placed on properties in our four commercial
segments. Mortgage debt maturing in the first two quarters of fiscal year 2014 totals approximately $16.2 million
under mortgage loans secured by properties in Minnesota; of this amount $1.0 million was paid off on May 1, 2013.
The Company typically seeks to refinance its maturing mortgage debt, although under certain circumstances the
Company may choose to repay the debt rather than refinance, depending on the loan amount outstanding, Company
plans for the property securing the debt, interest rates and other loan terms available, and other factors specific to a
particular property. Under present market conditions, the Company currently expects to be able to refinance its
individual mortgage loans maturing in the next twelve months, should it choose to refinance rather than pay off
some or all of these loans.
IRET during fiscal year 2013 acquired properties with an investment cost totaling $135.8 million. In fiscal year
2013, IRET disposed of three multi-family residential properties, one retail property, one healthcare property, and
four condominium units for sales prices totaling approximately $26.3 million, compared to dispositions totaling $3.2
million in fiscal year 2012.
2013 Annual Report 72
The Company has a Distribution Reinvestment and Share Purchase Plan (“DRIP”). The DRIP provides common
shareholders and UPREIT Unitholders of the Company an opportunity to invest their cash distributions in common
shares of the Company, and purchase additional shares through voluntary cash contributions, at a discount (currently
3%) from the market price. The maximum monthly voluntary cash contribution permitted without prior Company
approval is currently $10,000. The Company can issue waivers to DRIP participants to provide for investments in
excess of the $10,000 maximum monthly investment. During fiscal year 2013, the Company issued approximately
755,000 shares at an average price of $7.94 per share pursuant to such waivers, for total net proceeds to the
Company of $6.0 million. During fiscal year 2013, 5.3 million common shares with a total value of $43.1 million
were issued under the DRIP plan, with an additional 4.8 million common shares with a total value of $34.3 million
issued during fiscal year 2012, and 1.7 million common shares with a total value of $14.5 million issued during
fiscal year 2011.
The issuance of UPREIT Units for property acquisitions continues to be a source of capital for the Company. During
fiscal year 2013, 1.6 million units, valued at issuance at $12.6 million, were issued in connection with the
Company’s acquisition of property. Approximately 1.0 million units, valued at issuance at $8.1 million, and
approximately 555,000 units, valued at issuance at $5.0 million, respectively, were issued in connection with
property acquisitions during fiscal years 2012 and 2011.
As a result of the issuance of common shares pursuant to our shelf registration statement and distribution
reinvestment plan, net of fractional shares repurchased, the Company’s equity capital increased during fiscal 2013
by $99.0 million. Additionally, the equity capital of the Company increased by $12.6 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 of $111.6 million from these sources during fiscal year 2013. The Company’s equity capital increased
by $67.3 million and $36.2 million in fiscal years 2012 and 2011, respectively, as a result of the issuance of
common shares pursuant to our shelf registration statement and distribution reinvestment plan, net of fractional
shares repurchased, and contributions of real estate in exchange for UPREIT units.
Cash and cash equivalents on April 30, 2013 totaled $94.1 million, compared to $40.0 million and $41.2 million on
the same date in 2012 and 2011, respectively. Net cash provided by operating activities increased to $77.7 million in
fiscal year 2013 from $65.1 million in fiscal year 2012 due primarily to an increase in net income. Net cash provided
by operating activities increased to $65.1 million in fiscal year 2012 from $58.8 million in fiscal year 2011 due
primarily to an increase in net income from continuing operations due to acquisitions and increased occupancy.
Net cash used by investing activities increased to $134.1 million in fiscal year 2013, compared to $128.3 million in
fiscal year 2012. Net cash provided by investing activities was $11.7 million in fiscal year 2011. The increase in net
cash used by investing activities in fiscal year 2013 compared to fiscal year 2012 was due primarily to an increase in
payments for acquisitions of real estate assets and a decrease in refunds from lender holdbacks, net of an increase in
proceeds from the sale of discontinued operations. The increase in net cash used by investing activities in fiscal year
2012 compared to fiscal year 2011 was primarily a result of a decrease in proceeds from the sale of real estate
coupled with an increase in expenditures for acquisitions and improvements of real estate investments. Net cash
provided by financing activities increased to $110.6 million in fiscal 2013, compared to $61.9 million in fiscal year
2012, due primarily to proceeds from a public offering of preferred shares and a public offering of common shares,
net of an increase in principal payments on mortgages payable, a decrease in mortgage proceeds and the pay down
of the Company’s line of credit. Net cash provided by financing activities during fiscal year 2012 was $61.9 million,
compared to $84.1 million used by financing activities during fiscal year 2011, with the change due primarily to a
decrease in principal payments on mortgages payable.
Financial Condition
Mortgage Loan Indebtedness. Mortgage loan indebtedness was $1.0 billion on April 30, 2013 and April 30, 2012.
Approximately 97.5% 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, 2013, the weighted average rate of interest on the
Company’s mortgage debt was 5.55% compared to 5.78% on April 30, 2012.
Revolving lines of credit. As of April 30, 2013, the Company had one secured line of credit with First International
Bank and Trust, Watford City, North Dakota, as lead bank. This line of credit matures on August 12, 2014, and had,
as of April 30, 2013, lending commitments of $60.0 million. Participants in this secured credit facility as of April
2013 Annual Report 73
30, 2013 included, in addition to First International Bank, the following financial institutions: The Bank of North
Dakota; First Western Bank and Trust; Dacotah Bank; United Community Bank of North Dakota; American State
Bank & Trust Company and Town & Country Credit Union. As of April 30, 2013, the Company had advanced
$10.0 million under the line of credit. The line of credit has a minimum outstanding principal balance requirement of
$10.0 million. The interest rate on borrowings under the facility is the Wall Street Journal Prime Rate +1.25%, with
a floor of 5.15% and a cap of 8.65%; interest-only payments are due monthly based on the total amount of advances
outstanding. The line of credit may be prepaid at par at any time. The facility includes covenants and restrictions
requiring the Company to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base
collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and the Company is also
required to maintain minimum depository account(s) totaling $6.0 million with First International, of which $1.5
million is to be held in a non-interest bearing account. As of April 30, 2013, 23 properties with a total cost of $117.3
million collateralized this line of credit. As of April 30, 2013, the Company believes it is in compliance with the
facility covenants.
Property Owned. Property owned was $2.0 billion and $1.9 billion at April 30, 2013 and 2012, respectively.
Acquisitions, developments and improvements to existing properties in fiscal year 2013, partially offset by fiscal
year 2013 dispositions, resulted in the net increase in property owned as of April 30, 2013 compared to April 30,
2012.
Cash and Cash Equivalents. Cash and cash equivalents on April 30, 2013 totaled $94.1 million, compared to $40.0
million on April 30, 2012. The increase in cash on hand on April 30, 2013, as compared to April 30, 2012, was due
primarily to the issuance of preferred shares of beneficial interest.
Other Investments. Other investments, consisting of bank certificates of deposit, increased slightly to approximately
$639,000 on April 30, 2013, from $634,000 on April 30, 2012.
Operating Partnership Units. Outstanding limited partnership units in the Operating Partnership increased to 21.6
million units on April 30, 2013, compared to 20.3 million units on April 30, 2012. The increase in units outstanding
at April 30, 2013 as compared to April 30, 2012, resulted from the issuance of units in exchange for property, net of
the conversion of units to shares.
Common and Preferred Shares of Beneficial Interest. Common shares of beneficial interest outstanding on April 30,
2013 totaled 101.5 million, compared to 89.5 million common shares outstanding on April 30, 2012. This increase
in common shares outstanding from April 30, 2012 to April 30, 2013 was due to the issuance of common shares in a
public offering, in ATM equity program sales, in exchange for limited partnership interests of the Company’s
Operating Partnership, and under the Company’s distribution reinvestment plan.
On April 5, 2013, the Company completed the public offering of approximately 6.0 million common shares of
beneficial interest at a public offering price of $9.25 per share, for net proceeds of approximately $53.0 million after
underwriting discounts and estimated offering expenses. The Company contributed the net proceeds from the sale of
common shares to the Operating Partnership for general business purposes, including the acquisition and
development of income-producing real estate properties and debt repayment. The common shares were registered
under a shelf registration statement declared effective on May 4, 2010, and which expired on May 4, 2013.
During fiscal year 2013, IRET issued 300,000 common shares under its ATM equity program with BMO Capital
Markets Corp. as sales agent, for net proceeds (before offering expenses but after underwriting discounts and
commissions) of $2.1 million, used for general corporate purposes including the acquisition and development of
investment properties. The Company issued approximately 5.3 million common shares pursuant to its Distribution
Reinvestment and Share Purchase Plan during fiscal year 2013, for a total value of approximately $43.1 million.
Conversions of approximately 317,000 UPREIT Units to common shares during fiscal year 2013, for a total of
approximately $1.6 million in IRET shareholders’ equity, also increased the Company’s common shares of
beneficial interest outstanding during the twelve months ended April 30, 2013 compared to the twelve months ended
April 30, 2012.
On August 7, 2012, the Company completed the public offering of 4.6 million Series B Cumulative Redeemable
Preferred Shares of Beneficial Interest (“Series B preferred shares”) at a price of $25.00 per share for net proceeds
of approximately $111.2 million after underwriting discounts and estimated offering expenses. These shares are
nonvoting and redeemable for cash at $25.00 per share at the Company’s option on or after August 7, 2017. Holders
2013 Annual Report 74
of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of
Trustees). Distributions accrue at an annual rate of $1.9875 per share, which is equal to 7.95% of the $25.00 per
share liquidation preference ($115 million liquidation preference in the aggregate). The Company contributed the
net proceeds from the sale to the Operating Partnership for general business purposes, including the acquisition and
development of income-producing real estate properties and debt repayment, in exchange for 4.6 million Series B
preferred units, which carry terms that are substantially the same as the Series B preferred shares. On August 7,
2012, the Operating Partnership used a portion of the proceeds of the offering of Series B preferred shares to repay
$34.5 million in borrowings under its multi-bank line of credit, reducing outstanding borrowings under the line of
credit from $44.5 million to $10.0 million. The Series B preferred shares were registered under a shelf registration
statement declared effective on July 12, 2012. This shelf has since been terminated, upon the Company’s filing of a
new shelf registration statement. As of April 30, 2013, the Company had 1.2 million Series A preferred shares and
4.6 million Series B preferred shares outstanding.
Contractual Obligations and Other Commitments
The primary contractual obligations of the Company relate to its borrowings under its line of credit and mortgage
notes payable. The Company’s line of credit matures in August 2014, and had $10.0 million in loans outstanding at
April 30, 2013. The principal and interest payments on the mortgage notes payable for the years subsequent to April
30, 2013, are included in the table below as “Long-term debt.” Interest due on variable rate mortgage notes is
calculated using rates in effect on April 30, 2013. The “Other Debt” category consists of principal and interest
payments on construction loans and an unsecured promissory note issued by the Company to the sellers of an
office/warehouse property located in Minnesota (a portion of the purchase price was paid by the Company in the
form of a $1.0 million promissory note with a ten-year term; if the tenant defaults in the initial terms of the lease, the
then-current balance of the promissory note is forfeited to the Company).
As of April 30, 2013, the Company was a tenant under operating ground or air rights leases on twelve of its
properties. The Company pays a total of approximately $500,000 per year in rent under these leases, which have
remaining terms ranging from 2.5 to 88 years, and expiration dates ranging from October 2015 to October 2100.
Purchase obligations of the Company represent those costs that the Company is contractually obligated to pay in the
future. The Company’s significant purchase obligations as of April 30, 2013, which the Company expects to finance
through debt and operating cash, are summarized in the following table. The significant components in the purchase
obligation category are costs for construction and expansion projects and capital improvements at the Company’s
properties. Purchase 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)
Line of credit (principal and interest)(1)
Other Debt (principal and interest)
Operating Lease Obligations
Purchase Obligations
(in thousands)
Total
$ 1,338,330 $
10,671 $
$
19,264 $
$
24,053 $
$
7,495 $
$
Less Than
1 Year
122,155 $
481 $
755 $
504 $
7,495 $
1-3 Years
301,797 $
10,190 $
17,633 $
983 $
0 $
3-5 Years
353,432 $
0 $
187 $
899 $
0 $
More than
5 Years
560,946
0
689
21,667
0
(1) The future interest payments on the Company’s line of credit were estimated using the outstanding principal balance and interest rate in
effect as of April 30, 2013.
Off-Balance-Sheet Arrangements
As of April 30, 2013, the Company had no significant off-balance-sheet arrangements, as defined in Item
303(a)(4)(ii) of SEC Regulation S-K.
2013 Annual Report 75
Recent Developments
Common and Preferred Share Distributions. On July 1, 2013, 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 14, 2013. On July 1, 2013, the Company paid a distribution of 49.68 cents per share on the Company’s Series
B Cumulative Redeemable Preferred Shares, to preferred shareholders of record on June 14, 2013. On July 1, 2013,
the Company paid a distribution of 13.00 cents per share on the Company’s common shares of beneficial interest, to
common shareholders and UPREIT unitholders of record on June 14, 2013.
Completed Acquisitions and Dispositions. Subsequent to the end of fiscal year 2013, on May 1, 2013, the Company
closed on its acquisition of a 71-unit multi-family residential property in Rapid City, South Dakota, for a purchase
price totaling $6.2 million, of which approximately $2.9 million was paid in cash and the remainder in limited
partnership units of the Operating Partnership valued at approximately $3.3 million. On May 21, 2013, the Company
closed on its acquisition of an approximately 0.69-acre parcel of land in Minot, North Dakota for a purchase price of
approximately $171,000.
On May 13, 2013, the Company sold four industrial properties: Bodycote Industrial Building in Eden Prairie,
Minnesota; Metal Improvement Company in New Brighton, Minnesota; Roseville 2929 Long Lake Road in
Roseville, Minnesota and Fargo 1320 45th Street N in Fargo, North Dakota for a total sale price of $19.5 million.
On May 14, 2013, the Company sold a retail property in Eagan, Minnesota, for a sale price of approximately $2.3
million.
Pending Acquisitions. Subsequent to the end of fiscal year 2013, the Company signed purchase agreements to
acquire the following properties; all of these pending acquisitions are subject to various closing conditions and
contingencies, and no assurances can be given that any of these acquisitions will be completed:
• A multi-family residential property in Grand Forks, North Dakota with 96 units, for a purchase price of
$10.6 million, of which approximately $560,000 would be paid through the issuance of limited partnership
units of the Operating Partnership with the remainder in cash and
• An approximately 9-acre parcel of vacant land in Jamestown, North Dakota for a purchase of
approximately $700,000 to be paid in cash.
Pending Dispositions. The Company has signed agreements to sell the following properties; all of these pending
dispositions are subject to various closing conditions and contingencies, and no assurances can be given that any or
all of these transactions will be completed on the terms currently expected, or at all:
•
•
•
•
•
•
•
the Company’s 121,669-square foot Bloomington Business Plaza commercial office property in
Bloomington, Minnesota for a sale price of $4.5 million;
the 322,751-square foot Brooklyn Park 7401 Boone Avenue commercial industrial property in Brooklyn
Park, Minnesota for a sale price of $12.8 million;
the 50,400-square foot Cedar Lake Business Center commercial industrial property in St. Louis Park,
Minnesota for a sale price of $2.6 million;
the 118,125-square foot Nicollett VII commercial office property in Burnsville, Minnesota for a sale price
of $7.2 million;
the 42,929-square foot Pillsbury Business Center commercial office property in Bloomington, Minnesota
for a sale price of $1.3 million;
the 42,510-square foot Clive 2075 NW 94th Street commercial industrial property in Clive, Iowa for a sale
price of $2.7 million and
the 606,006-square foot Dixon Avenue Industrial Park commercial industrial property in Des Moines, Iowa
for a sale price of $14.7 million.
2013 Annual Report 76
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 97.5% of our mortgage debt, as of April 30, 2013 (98.5% and
99.8% as of April 30, 2012 and 2011, respectively), is at fixed interest rates, we have little exposure to interest rate
fluctuation risk on our existing mortgage debt. 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, 2013, we
had the following amount of future principal and interest payments due on mortgages secured by our real estate.
Future Principal Payments (in thousands, except percentages)
Long Term Debt
Fixed Rate
Average Fixed
Interest Rate
Variable Rate
Average Variable
Interest Rate
2014
2015
2016
2017
$ 61,146 $ 93,879 $ 92,213 $ 219,188 $
2018
Fair Value
66,813 $ 489,751 $ 1,022,990 $ 1,133,974
Thereafter
Total
5.49%
3,777 $ 17,093 $
5.39%
$
5.30%
4.81%
5.31%
123 $
127 $
131 $
4,965 $
26,216 $
26,216
4.46%
5.63%
3.30%
3.29%
3.29%
$ 1,049,206 $ 1,160,190
Long Term Debt
Fixed Rate
Variable Rate
2014
2015
2016
2017
$ 56,153 $ 51,817 $ 46,045 $ 37,277 $
1,079
450
177
172
2018
29,556 $
168
Thereafter
66,081 $
149
Future Interest Payments (in thousands)
$
Total
286,929
2,195
289,124
As of April 30, 2013, the weighted-average interest rate on our fixed rate and variable rate loans was 5.59% and
4.18%, respectively. The weighted-average interest rate on all of our mortgage debt as of April 30, 2013, was
5.55%. Any fluctuations in variable interest rates could increase or decrease our interest expenses. For example, an
increase of one percent per annum on our $26.2 million of variable rate mortgage indebtedness would increase our
annual interest expense by $262,000.
Exposure to interest rate fluctuation risk on our $60.0 million secured line of credit is limited by a cap on the interest
rate. The interest rate on borrowings under the facility is the Wall Street Journal Prime Rate +1.25%, with a floor of
5.15% and a cap of 8.65%; interest-only payments are due monthly based on the total amount of advances
outstanding. The line of credit may be prepaid at par at any time. The line of credit matures in August 2014 and
had an outstanding balance of $10.0 million at April 30, 2013.
Investments with Certain Financial Institutions. IRET has entered into a cash management arrangement with First
Western Bank (the “Bank”) with respect to deposit accounts that exceed Federal Deposit Insurance Corporation
(“FDIC”) coverage. On a daily basis, account balances are swept into a repurchase account. The Bank pledges
fractional interests in US Government Securities owned by the Bank at an amount equal to the excess over the
uncollected balance in the repurchase account. The amounts deposited by IRET pursuant to the repurchase
agreement are not insured by FDIC. At April 30, 2013 and 2012, these amounts totaled $29.6 million and $15.1
million, respectively.
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.
2013 Annual Report 77
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, and are incorporated herein by reference.
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, 2013, 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
Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that
information required to be disclosed by IRET in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and
forms, and is accumulated and communicated to management, including the Company’s principal executive and
principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
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 Exchange Act) 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.
2013 Annual Report 78
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, 2013, 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, 2013, was
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.
The Company’s internal control over financial reporting as of April 30, 2013, has been audited by Grant Thornton
LLP, an independent registered public accounting firm, as stated in their report on page F-3 hereof, which expresses
an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of April 30,
2013.
(The remainder of this page has been intentionally left blank.)
2013 Annual Report 79
Item 9B. Other Information
None.
Item 10. Trustees, Executive Officers and Corporate Governance
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 2013 Annual Meeting of Shareholders and such information is
incorporated herein by reference. IRET has adopted a Code of Ethics applicable to, among others, IRET’s principal
executive officer and principal financial and accounting officer. This Code is available on our website at
www.iret.com.
Item 11. Executive Compensation
The information required by this Item will be contained in our definitive Proxy Statement for our 2013 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 2013 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
The following table provides information as of April 30, 2013 regarding compensation plans (including individual
compensation arrangements) under which our common shares of beneficial interest are available for issuance:
Equity Compensation Plan Information
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected
in column (a))
(c)
0
0
0
0
0
0
1,847,685(2)
0
1,847,685
Plan category
Equity compensation plans
approved by security holders(1)
Equity compensation plans not
approved by security holders
Total
(1) The 2008 Incentive Award Plan of Investors Real Estate Trust and IRET Properties approved by shareholders on September 16, 2008.
(2) All of the shares available for future issuance under the 2008 Incentive Award Plan approved by shareholders may be issued as restricted
shares, performance awards or stock payment awards.
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 2013 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 2013 Annual
Meeting of Shareholders and such information is incorporated herein by reference.
2013 Annual Report 80
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:
Schedule III Real Estate Owned and Accumulated Depreciation
3. Exhibits
See the list of exhibits set forth in part (b) below.
(b)
3.1
3.2
3.3
4.1
4.2
The following is a list of Exhibits to this Annual Report on Form 10-K. We will furnish a printed 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, as
amended, incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on
Form S-3 (Reg. No. 333-182451), filed with the SEC on June 29, 2012.
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.
Loan Agreement dated August 12, 2010 by and among IRET Properties, as borrower, the financial
institutions party thereto as lenders, and First International Bank & Trust as lender and lead bank,
incorporated herein by reference to the Company’s Current Report on Form 8-K, filed with the SEC on
August 18, 2010.
Third Amendment to Loan Agreement dated June 15, 2012 by and between IRET Properties, as
borrower, and First International Bank & Trust, as lender, incorporated herein by reference to the
Company’s Current Report on Form 8-K, filed with the SEC on June 22, 2012.
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
10.3
10.4
Letter Agreement dated January 31, 2003, filed as Exhibit 10(i) to the Company’s Form 8-K filed
February 27, 2003, and incorporated herein by reference.
Option Agreement dated January 31, 2003, filed as Exhibit 10(ii) to the Company’s Form 8-K filed
February 27, 2003, and incorporated herein by reference.
Financial Statements of T.F. James Company filed as Exhibit 10 to the Company’s Form 8-K filed
January 31, 2003, and incorporated herein by reference.
2013 Annual Report 81
10.5
10.6
10.7
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.
Contribution Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2006, and
incorporated herein by reference.
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.
10.8* Short-Term Incentive Program, filed as Exhibit 10.1 to the Company’s Form 8-K filed June 4, 2012 and
incorporated herein by reference.
10.9* Long-Term Incentive Program, filed as Exhibit 10.2 to the Company’s Form 8-K filed June 4, 2012 and
incorporated herein by reference.
10.10* Description of Compensation of Trustees and Named Executive Officers, as described in 5.02 in the
Company’s Form 8-K filed June 4, 2012 and incorporated herein by reference.
10.11 Construction and Term Loan Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed March
21, 2013 and incorporated herein by reference.
12.1
Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Share Dividends, filed herewith.
21.1
Subsidiaries of Investors Real Estate Trust, filed herewith.
23.1
Consent of Independent Registered Public Accounting Firm, filed herewith.
23.2
Consent of Independent Registered Public Accounting Firm, filed herewith.
31.1
Section 302 Certification of President and Chief Executive Officer, filed herewith.
31.2
Section 302 Certification of Executive 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 Executive Vice President and Chief Financial Officer, filed herewith.
101
The following materials from our Annual Report on Form 10-K for the year ended April 30, 2013
formatted in eXtensible Business Reporting Language ("XBRL"): (i) the Consolidated Balance Sheets, (ii)
the Consolidated Statements of Operations, (iii) the Consolidated Statements of Equity, (iv) the
Consolidated Statements of Cash Flows, and (v) notes to these consolidated financial statements.(1)
Indicates management compensatory plan, contract or arrangement.
________________________
*
(1) Users of this data are advised pursuant to Rule 406T of Regulation S-T that these interactive data files are deemed not filed or part of a
registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, are deemed not filed for purposes of Section 18
of the Exchange Act, and otherwise are not subject to liability under these sections.
2013 Annual Report 82
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 1, 2013
Investors Real Estate Trust
By:
/s/ Timothy P. Mihalick
Timothy P. Mihalick
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
/s/ John D. Stewart
John D. Stewart
/s/ Timothy P. Mihalick
Timothy P. Mihalick
/s/ Thomas A. Wentz, Jr.
Thomas A. Wentz, Jr.
/s/ Diane K. Bryantt
Diane K. Bryantt
/s/ Linda J. Hall
Linda J. Hall
/s/ John T. Reed
John T. Reed
/s/ W. David Scott
W. David Scott
/s/ Stephen L. Stenehjem
Stephen L. Stenehjem
/s/ Jeffrey K. Woodbury
Jeffrey K. Woodbury
Title
Date
Trustee & Chairman
June 26, 2013
Trustee & Vice Chairman
June 26, 2013
President & Chief Executive Officer
(Principal Executive Officer); Trustee
June 26, 2013
Trustee, Executive Vice President & Chief
Operating Officer
June 26, 2013
Executive Vice President & Chief Financial
Officer (Principal Financial and Accounting
Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
June 26, 2013
June 26, 2013
June 26, 2013
June 26, 2013
June 26, 2013
June 26, 2013
2013 Annual Report 83
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF April 30, 2013 AND 2012,
AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,
EQUITY AND CASH FLOWS FOR EACH OF
THE FISCAL YEARS IN THE THREE YEARS ENDED April 30, 2013.
ADDITIONAL INFORMATION
FOR THE YEAR ENDED
April 30, 2013
and
REPORTS OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRMS
1400 31st Avenue SW, Suite 60
Post Office Box 1988
Minot, ND 58702-1988
701-837-4738
fax: 701-838-7785
info@iret.com
www.iret.com
2013 Annual Report
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS ................................
CONSOLIDATED FINANCIAL STATEMENTS
F-5
Consolidated Balance Sheets .....................................................................................................................
F-6
Consolidated Statements of Operations .....................................................................................................
Consolidated Statements of Equity ............................................................................................................
F-7
Consolidated Statements of Cash Flows .................................................................................................... F-8 – F-9
Notes to Consolidated Financial Statements.............................................................................................. F-10 – F-38
ADDITIONAL INFORMATION
Schedule III - Real Estate and Accumulated Depreciation........................................................................ F-39 – F49
F-2
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.
2013 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 sheet of Investors Real Estate Trust (a North Dakota real
estate investment trust) and subsidiaries (the “Company”) as of April 30, 2013, and the related consolidated
statements of operations, equity, and cash flows for the year ended April 30, 2013. Our audit of the basic
consolidated financial statements included the financial statement schedules listed in the index appearing under Item
15. These financial statements and financial statement schedules are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and financial statement
schedules 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Investors Real Estate Trust and subsidiaries as of April 30, 2013, and the results of their
operations and their cash flows for the year ended April 30, 2013, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of April 30, 2013, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated July 1, 2013, expressed an unqualified opinion thereon.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
July 1, 2013
2013 Annual Report F-2
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 internal control over financial reporting of Investors Real Estate Trust (a North Dakota real
estate investment trust) and subsidiaries (the “Company”) as of April 30, 2013, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). 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, included in
the accompanying Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”).
Our responsibility is to express an opinion on 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, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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 directors 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that 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, the Company maintained, in all material respects, effective internal control over financial reporting
as of April 30, 2013, based on criteria established in Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended April 30, 2013, and our
report dated July 1, 2013 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
July 1, 2013
2013 Annual Report F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Investors Real Estate Trust
Minot, North Dakota
We have audited the accompanying consolidated balance sheet of Investors Real Estate Trust and subsidiaries (the
"Company") as of April 30, 2012 and the related consolidated statements of operations, equity, and cash flows for
each of the two years in the period ended April 30, 2012. Our audits also included the consolidated financial
statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are
the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules 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 and subsidiaries as of April 30, 2012 and the results of their operations and their cash
flows for each of the two years in the period ended April 30, 2012, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such 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 16, 2012 (July 1, 2013, as to the effects of discontinued operations discussed in Note 12)
2013 Annual Report F-4
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 2013 and 2012
ASSETS
Real estate investments
Property owned
Less accumulated depreciation
Development in progress
Unimproved land
Total real estate investments
Real estate held for sale
Cash and cash equivalents
Other investments
Receivable arising from straight-lining of rents, net of allowance of $830 and
$1,209, respectively
Accounts receivable, net of allowance of $563 and $154, respectively
Real estate deposits
Prepaid and other assets
Intangible assets, net of accumulated amortization of $27,708 and $47,813,
respectively
Tax, insurance, and other escrow
Property and equipment, net of accumulated depreciation of $1,673 and $1,423,
respectively
Goodwill
Deferred charges and leasing costs, net of accumulated amortization of $18,714
and $16,244, respectively
TOTAL ASSETS
LIABILITIES AND EQUITY
LIABILITIES
Accounts payable and accrued expenses
Revolving line of credit
Mortgages payable
Other
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES (NOTE 15)
EQUITY
Investors Real Estate Trust shareholders’ equity
Series A Preferred Shares of Beneficial Interest (Cumulative redeemable
preferred shares, no par value, 1,150,000 shares issued and outstanding at
April 30, 2013 and April 30, 2012, aggregate liquidation preference of
$28,750,000)
Series B Preferred Shares of Beneficial Interest (Cumulative redeemable
preferred shares, no par value, 4,600,000 shares issued and outstanding at
April 30, 2013 and 0 shares issued and outstanding at April 30, 2012,
aggregate liquidation preference of $115,000,000)
Common Shares of Beneficial Interest (Unlimited authorization, no par value,
101,487,976 shares issued and outstanding at April 30, 2013, and 89,473,838
shares issued and outstanding at April 30, 2012)
Accumulated distributions in excess of net income
Total Investors Real Estate Trust shareholders’ equity
Noncontrolling interests – Operating Partnership (21,635,127 units at April 30,
2013 and 20,332,415 units at April 30, 2012)
Noncontrolling interests – consolidated real estate entities
Total equity
TOTAL LIABILITIES AND EQUITY
(in thousands)
April 30, 2013
April 30, 2012
$
$
$
2,032,970 $ 1,892,009
(420,421)
(373,490)
1,518,519
1,612,549
27,599
46,782
21,503
10,990
1,557,108
1,680,834
2,067
0
39,989
94,133
634
639
26,354
4,534
196
5,124
40,457
12,569
1,221
1,106
23,273
7,052
263
3,703
44,588
11,669
1,454
1,120
22,387
21,447
1,889,554 $ 1,714,367
50,797 $
10,000
1,049,206
18,170
1,128,173
47,403
39,000
1,048,689
14,012
1,149,104
27,317
27,317
111,357
0
784,454
(310,341)
612,787
684,049
(278,377)
432,989
122,539
26,055
761,381
118,710
13,564
565,263
1,889,554 $ 1,714,367
$
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2013 Annual Report F-5
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended April 30, 2013, 2012, and 2011
(in thousands, except per share data)
2013
2012
2011
REVENUE
Real estate rentals
Tenant reimbursement
TOTAL REVENUE
EXPENSES
Depreciation/amortization related to real estate investments
Utilities
Maintenance
Real estate taxes
Insurance
Property management expenses
Other property expenses
Administrative expenses
Advisory and trustee services
Other expenses
Amortization related to non-real estate investments
Impairment of real estate investments
TOTAL EXPENSES
Gain on involuntary conversion
Operating income
Interest expense
Interest income
Other income
Income from continuing operations
Income (loss) from discontinued operations
NET INCOME
Net income attributable to noncontrolling interests – Operating Partnership
Net (income) loss attributable to noncontrolling interests – consolidated real
estate entities
Net income attributable to Investors Real Estate Trust
Dividends to preferred shareholders
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
Earnings per common share from continuing operations – Investors Real
Estate Trust – basic and diluted
Earnings (loss) per common share from discontinued operations – Investors
Real Estate Trust – basic and diluted
NET INCOME PER COMMON SHARE – BASIC & DILUTED
$
$
$
$ 212,969 $ 196,149 $ 189,245
44,931
234,176
42,929
239,078
46,437
259,406
61,996
19,172
29,237
34,380
3,927
15,408
1,008
7,904
590
2,173
3,274
305
179,374
5,084
85,116
(62,900)
222
526
22,964
7,008
29,972
(3,633)
(809)
25,530
(9,229)
16,301 $
.11 $
.06
.17 $
56,426
17,442
26,354
31,581
3,502
18,651
(142)
6,694
687
1,898
3,216
0
166,309
274
73,043
(64,066)
148
638
9,763
(57)
9,706
(1,359)
55,080
18,020
28,955
30,637
2,256
20,348
665
6,617
605
1,747
2,679
0
167,609
0
66,567
(62,735)
259
282
4,373
19,978
24,351
(4,449)
(135)
8,212
(2,372)
5,840 $
180
20,082
(2,372)
17,710
.07 $
.00
.07 $
.02
.20
.22
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2013 Annual Report F-6
BALANCE APRIL 30, 2010
Net income attributable to
Investors Real Estate Trust
and nonredeemable
noncontrolling interests
Distributions - common
shares and units
Distributions - preferred
shares
Distribution reinvestment and
share purchase plan
Shares issued
Partnership units issued
Redemption of units for
common shares
Adjustments to redeemable
noncontrolling interests
Other
BALANCE APRIL 30, 2011
Net income attributable to
Investors Real Estate Trust
and nonredeemable
noncontrolling interests
Distributions - common
shares and units
Distributions - preferred
shares
Distribution reinvestment and
share purchase plan
Shares issued
Partnership units issued
Redemption of units for
common shares
Other
BALANCE APRIL 30, 2012
Net income attributable to
Investors Real Estate Trust
and noncontrolling interests
Distributions - common
shares and units
Distributions – Series A
preferred shares
Distributions – Series B
preferred shares
Distribution reinvestment and
share purchase plan
Shares issued
Series B preferred shares
issued
Partnership units issued
Redemption of units for
common shares
Contributions from
noncontrolling interests –
consolidated real estate
entities
Other
BALANCE APRIL 30, 2013
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
for the years ended April 30, 2013, 2012, and 2011
NUMBER OF
PREFERRED
SHARES
1,150
PREFERRED
SHARES
27,317
$
NUMBER OF
COMMON
SHARES
75,805
COMMON
SHARES
583,618
$
ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME
(201,412)
$
NONCONTROLLING
INTERESTS
145,592
$
TOTAL
EQUITY
555,115
$
(in thousands)
20,082
(53,861)
(2,372)
4,282
24,364
(13,803)
(67,664)
1,706
2,004
14,548
16,676
1,009
6,905
(1)
80,523
$
370
(181)
621,936
4,996
(6,905)
$
(237,563)
$
(1,562)
132,600
$
1,150
$
27,317
(2,372)
14,548
16,676
4,996
0
370
(1,743)
544,290
4,796
3,398
34,345
24,870
759
(2)
89,474
$
3,454
(556)
684,049
1,150
$
27,317
8,212
(46,654)
(2,372)
$
(278,377)
$
25,530
(48,265)
(2,372)
(6,857)
4,600
111,357
5,290
6,409
43,123
55,846
317
1,551
5,750
$
138,674
(2)
101,488
$
(115)
784,454
$
(310,341)
$
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1,482
9,694
(11,102)
(57,756)
(2,372)
34,345
24,870
8,055
0
4,137
565,263
8,055
(3,454)
4,693
132,274
$
4,442
29,972
(10,985)
(59,250)
(2,372)
(6,857)
43,123
55,846
111,357
12,632
0
12,632
(1,551)
12,415
(633)
148,594
12,415
(748)
761,381
$
2013 Annual Report F-7
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended April 30, 2013, 2012, and 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Gain on sale of real estate, land, other investments and discontinued operations
Gain on involuntary conversion
Impairment of real estate investments
Bad debt expense
Changes in other assets and liabilities:
Increase in receivable arising from straight-lining of rents
Decrease (increase) in accounts receivable
Increase in prepaid and other assets
(Increase) 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 real estate deposits
Payments for real estate deposits
Principal proceeds on mortgage loans receivable
Increase in other investments
Decrease in lender holdbacks for improvements
Increase in lender holdbacks for improvements
Proceeds from sale of discontinued operations
Proceeds from sale of real estate and other investments
Insurance proceeds received
Payments for acquisitions of real estate assets
Payments for development and re-development of real estate assets
Payments for improvements of real estate assets
Net cash (used) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages payable
Principal payments on mortgages payable
Proceeds from revolving lines of credit and other debt
Principal payments on revolving lines of credit and other debt
Proceeds from sale of common shares, net of issue costs
Proceeds from sale of common shares under distribution reinvestment and
share purchase program
Proceeds from underwritten Public Offering of Preferred Shares – Series B,
net of offering costs
Repurchase of fractional shares and partnership units
Proceeds from noncontrolling partner – consolidated real estate entities
Payments for acquisition of noncontrolling interests – consolidated real estate entities
Distributions paid to common shareholders, net of reinvestment of $11,802,
$10,177 and $10,627, respectively
Distributions paid to preferred shareholders
Distributions paid to noncontrolling interests – Unitholders of the Operating
Partnership, net reinvestment of $614, $657 and $746, respectively
Distributions paid to noncontrolling interests – consolidated real estate entities
Distributions paid to redeemable noncontrolling interests-consolidated real estate entities
Net cash provided (used) 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)
2013
2012
2011
$ 29,972 $
9,706 $
24,351
67,559
(6,885)
(5,084)
305
665
(2,733)
689
(693)
(325)
(5,946)
194
77,718
2,037
(1,970)
0
0
1,891
(2,466)
20,009
95
6,211
(76,020)
(57,649)
(26,280)
(134,142)
85,230
(104,976)
44,262
(55,411)
55,448
61,954
(349)
(274)
428
298
(4,831)
1,542
(1,361)
(353)
(6,145)
4,522
65,137
2,254
(2,188)
159
0
5,681
(1,730)
3,142
430
5,758
(61,661)
(37,777)
(42,333)
(128,265)
117,595
(77,089)
31,925
(10,060)
24,427
61,344
(19,365)
0
0
733
(1,732)
(914)
(1,162)
1,469
(6,501)
551
58,774
2,766
(2,579)
2
(205)
3,276
(10,712)
81,539
74
347
(26,541)
(10,799)
(25,484)
11,684
139,947
(213,658)
56,300
(25,650)
16,423
30,707
23,511
3,175
111,357
(15)
0
0
0
(14)
2,854
(1,289)
(36,463)
(8,467)
(36,477)
(2,372)
(10,371)
(733)
0
110,568
54,144
39,989
$ 94,133 $
(10,445)
(613)
(27)
61,926
(1,202)
41,191
39,989 $
0
(10)
0
(425)
(43,234)
(2,372)
(13,057)
(1,055)
(442)
(84,058)
(13,600)
54,791
41,191
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2013 Annual Report F-8
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended April 30, 2013, 2012, and 2011
(in thousands)
2012
2013
2011
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Distribution reinvestment plan
Operating partnership distribution reinvestment plan
Operating partnership units converted to shares
Shares issued under the Incentive Award Plan
Real estate assets acquired through the issuance of operating partnership
$
units
Real estate assets acquired through assumption of indebtedness and
accrued costs
Mortgages included in real estate dispositions
Increase (decrease) to accounts payable included within real estate
investments
Real estate assets contributed by noncontrolling interests – consolidated
real estate entities
Fair value adjustments to redeemable noncontrolling interests
Involuntary conversion of assets due to flood and fire damage
Construction debt reclassified to mortgages payable
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized of $742,$571 and $56,
$
10,177 $ 10,627
746
6,905
253
657
3,454
443
11,802
614
1,551
398
12,632
12,500
5,887
8,055
7,190
0
2,502
(5,445)
12,415
0
107
13,650
2,227
35
2,783
7,190
4,996
9,895
0
933
0
370
0
0
respectively
$
60,357
$
63,653 $ 64,562
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2013 Annual Report F-9
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2013, 2012, and 2011
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 residential 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,
except for taxes on undistributed REIT taxable 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, Missouri, Montana, Nebraska, South Dakota, Wisconsin and Wyoming. As of April 30, 2013, IRET
owned 87 multi-family residential properties with approximately 10,280 apartment units and 182 commercial
properties, consisting of commercial office, commercial healthcare, commercial industrial and commercial retail
properties, totaling approximately 12.4 million net rentable square feet. IRET conducts a majority of its business
activities through its consolidated operating partnership, IRET Properties, a North Dakota Limited Partnership (the
“Operating Partnership”), as well as through a number of other subsidiary entities.
All references to IRET or the Company refer to Investors Real Estate Trust and its consolidated subsidiaries.
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of IRET and all subsidiaries in which it
maintains a controlling interest. All 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 82.4% and 81.5%,
respectively, as of April 30, 2013 and 2012, 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 noncontrolling interests reflecting the noncontrolling partners’ share
of ownership and income and expenses.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2011-08, Testing Goodwill for Impairment. This standard gives entities testing goodwill for impairment the
option of performing a qualitative assessment before calculating the fair value of the reporting unit (step I of the
goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting
unit is more likely than not less than its carrying amount, the two-step impairment test would be required.
Otherwise, no further testing is required. The ASU does not change how goodwill is calculated or assigned to
reporting units, nor does it revise the requirement to test goodwill annually for impairment. The ASU is effective for
annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with
early adoption permitted. The Company’s adoption of this update for fiscal year 2013 did not have an impact on the
Company’s consolidated results of operations or financial condition.
2013 Annual Report F-10
NOTE 2 • continued
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) 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.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to the current financial statement
presentation. The Company reports, in discontinued operations, the results of operations and the related gains or
losses of a property that has either been disposed of or is classified as held for sale and otherwise meets the
classification of a discontinued operation. As a result of discontinued operations, retroactive reclassifications that
change prior period numbers have been made. See Note 12 for additional information. During fiscal year 2013, the
Company sold three multi-family residential properties and one commercial healthcare property. During fiscal year
2012, the Company sold two retail properties. Eight condominium units in Grand Chute, Wisconsin, and a retail
property in Kentwood, Michigan, were classified as held for sale at April 30, 2012. The results of operations for
these properties are included in income from discontinued operations in the Consolidated Statements of Operations.
The Company also reclassified bad debt provision expense from property management expenses to other property
expenses on the Consolidated Statements of Operations and reclassified amounts from payments for acquisitions and
improvements of real estate assets to payments for acquisitions of real estate assets and payments for development
and re-development of real estate assets on the Consolidated Statements of Cash Flows.
REAL ESTATE INVESTMENTS
Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any.
Acquisitions of real estate 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 based on the relative fair values 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
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.
Acquired above- and below-market lease values are recorded as the difference between the contractual amounts to
be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the
corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments
to rental revenue over the remaining terms of the respective leases, which includes fixed rate renewal options for
below-market leases if it is determined probable the tenant will execute a bargain renewal option.
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 the fair value analysis 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 relative
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.
2013 Annual Report F-11
NOTE 2 • continued
The Company follows the real estate project costs guidance in ASC 970, Real Estate – General, in accounting for
the costs of development and re-development projects. As real estate is undergoing development or redevelopment,
all project costs directly associated with and attributable to the development and construction of a project, including
interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period
begins when development activities and expenditures begin and ends upon completion, which is when the asset is
ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended
use upon completion of tenant improvements (in the case of commercial properties) or upon issuance of a certificate
of occupancy (in the case of multi-family residential properties). General and administrative costs are expensed as
incurred.
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.
The Company periodically evaluates its long-lived assets, including its real estate investments, 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. If our anticipated holding period for properties, the estimated fair value of properties or
other factors change based on market conditions or otherwise, our evaluation of impairment charges may be
different and such differences could be material to our consolidated financial statements. The evaluation of
anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates
and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods
decrease the likelihood of recording impairment losses.
During fiscal year 2013, the Company incurred a loss of approximately $305,000 due to impairment of one property.
The impairment of the Company’s Eagan, Minnesota, retail property was based on receipt of a market offer to
purchase and the Company’s intent to dispose of the property (a purchase agreement was signed by the Company in
the fourth quarter of fiscal year 2013). See Note 12 for additional information.
During fiscal year 2012, the Company incurred a loss of approximately $428,000 due to impairment of two
properties. The $128,000 impairment of the Company’s Kentwood, Michigan, retail property was based on receipt
of a market offer to purchase and the Company’s intention to dispose of the property (a purchase agreement was
signed by the Company in the fourth quarter of fiscal year 2012). A related impairment of $7,000 was recorded to
write-off goodwill assigned to the Kentwood property. This property was classified as held for sale at April 30,
2012, and the related impairment charge for fiscal year 2012 is in discontinued operations. Also during fiscal year
2012, the Company recognized a $293,000 impairment loss on eight condominium units in Grand Chute, Wisconsin.
The impairment of the condominiums was based on receipt of a market offer to purchase two of the units and the
Company’s intention to dispose of the units (a purchase agreement was signed by the Company in the fourth quarter
of fiscal year 2012). The condominiums were classified as held for sale at April 30, 2012, and the related
impairment charge for fiscal year 2012 is reported in discontinued operations. See Note 12 for additional
information. No impairment losses were recorded in fiscal year 2011.
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. The
Company’s determination of fair value is based on inputs management believes are consistent with those that market
participants would use. Estimates are significantly impacted by estimates of sales price, selling velocity, and other
factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. Depreciation
is not recorded on assets classified as held for sale.
2013 Annual Report F-12
NOTE 2 • continued
U.S. GAAP requires management to make certain significant judgments as to the classification of any of our
properties as held for sale on the balance sheet. The Company makes a determination as to the point in time that it is
probable that a sale will be consummated. It is not unusual for real estate sales contracts to allow potential buyers a
period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters
critical to the final sale, such as financing arrangements, often remain pending even upon contract acceptance. As a
result, properties under contract may not close within the expected time period, or may not close at all. Due to these
uncertainties, it is not likely that the Company can meet the criteria of the current accounting principles governing
the classification of properties as held for sale prior to a sale formally closing. Therefore, any properties categorized
as held for sale represent only those properties that management has determined are probable to close within the
requirements set forth in current accounting principles. No properties were classified as held for sale at April 30,
2013. Eight condominium units in Grand Chute, Wisconsin, and a retail property in Kentwood, Michigan, were
classified as held for sale at April 30, 2012.
The Company reports, in discontinued operations, the results of operations and the related gains or losses of a
property that has either been disposed of or is classified as held for sale and otherwise meets the classification of a
discontinued operation.
IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES AND GOODWILL
Upon acquisition of real estate, the Company records the intangible assets and liabilities 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 and liabilities that are determined to have finite lives based on the period over which the
assets and liabilities are expected to affect, directly or indirectly, the future cash flows of the real estate property
acquired (generally the life of the lease). In the twelve months ended April 30, 2013 and 2012, respectively, the
Company added $1.6 million and approximately $416,000 of new intangible assets and no new intangible liabilities.
The weighted average lives of the intangible assets acquired in the twelve months ended April 30, 2013 and 2012
are 0.5 years and 10.0 years, respectively. Amortization of intangibles related to above or below-market leases is
recorded in real estate rentals in the Consolidated Statements of Operations. Amortization of other intangibles is
recorded in depreciation/amortization related to real estate investments in the Consolidated Statements of
Operations. 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.
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. The Company’s goodwill has an
indeterminate life and 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 value as of April 30, 2013 and
2012 was $1.1 million. The annual reviews of goodwill compared the fair value of the business units that have been
assigned goodwill to their carrying value (investment cost less accumulated depreciation), with the results for these
periods indicating no impairment. In fiscal year 2013, the Company disposed of two multi-family residential
properties that had goodwill assigned, and as a result, approximately $14,000 of goodwill was derecognized. During
fiscal year 2012 the impairment of a Kentwood, Michigan, retail property indicated that goodwill assigned to the
property was also impaired. Accordingly, an approximately $7,000 impairment to goodwill was recognized. In fiscal
year 2011, the Company disposed of four multi-family residential properties that had goodwill assigned, and as a
result, approximately $261,000 of goodwill was derecognized.
PROPERTY AND EQUIPMENT
Property and equipment consists of the equipment contained at IRET’s headquarters in Minot, North Dakota,
corporate offices in Minneapolis and St. Cloud, Minnesota, and additional property management offices in Kansas,
Minnesota, Missouri, Montana, Nebraska, North Dakota and South Dakota. The balance sheet reflects these assets at
cost, net of accumulated depreciation. As of April 30, 2013 and 2012, property and equipment cost was $2.9 million.
Accumulated depreciation was $1.7 million and $1.4 million as of April 30, 2013 and 2012, respectively.
2013 Annual Report F-13
NOTE 2 • continued
MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable (which include contracts for deed) are stated at the outstanding principal balance, net of
an allowance for uncollectibility. Interest income is accrued and reflected in the balance sheet. Non-performing
loans are recognized as impaired. 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. At April 30, 2013 and 2012 the Company had no
mortgage loans receivable.
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. At times
these deposits may exceed the FDIC limit.
COMPENSATING BALANCES AND OTHER INVESTMENTS; LENDER HOLDBACKS
The Company maintains compensating balances, not restricted as to withdrawal, with several financial institutions in
connection with financing received from those institutions and/or to ensure future credit availability. At April 30,
2013, the Company’s compensating balances totaled $8.9 million and consisted of the following: Dacotah Bank,
Minot, North Dakota, deposit of $350,000; United Community Bank, Minot, North Dakota, deposit of $275,000;
Commerce Bank, A Minnesota Banking Corporation, deposit of $250,000; First International Bank, Watford City,
North Dakota, deposit of $6.1 million; Peoples State Bank of Velva, North Dakota, deposit of $225,000; Equity
Bank, Minnetonka, Minnesota, deposit of $300,000; Associated Bank, Green Bay, Wisconsin, deposit of $500,000;
Venture Bank, Eagan, Minnesota, deposit of $500,000; and American National Bank, Omaha, Nebraska, deposit of
$400,000. The deposits at United Community Bank and Equity Bank and a portion of the deposit at Dacotah Bank
are held as certificates of deposit and comprise the $639,000 in other investments on the Consolidated Balance
Sheets. The certificates of deposit have remaining terms of less than two years and the Company intends to hold
them to maturity.
The Company has a number of mortgage loans under which the lender retains a portion of the loan proceeds for the
payment of construction costs or tenant improvements. The decrease of $1.9 million in lender holdbacks for
improvements reflected in the Consolidated Statements of Cash Flows for the fiscal year ended April 30, 2013 is due
primarily to the release of loan proceeds to the Company upon completion of these construction milestones and
tenant improvement projects, while the increase of $2.5 million represents additional amounts retained by lenders.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Management evaluates the appropriate amount of the allowance for doubtful accounts by assessing the
recoverability of individual real estate mortgage loans and rent receivables, through a comparison of their carrying
amount with their estimated realizable value. Management considers tenant financial condition, credit history and
current economic conditions in establishing these allowances. Receivable balances are written off when deemed
uncollectible. Recoveries of receivables previously written off, if any, are recorded when received. A summary of
the changes in the allowance for doubtful accounts for fiscal years ended April 30, 2013, 2012 and 2011 is as
follows:
(in thousands)
Balance at beginning of year
Provision
Write-off
Balance at close of year
2013 Annual Report F-14
2012
2013
2011
$ 1,363 $ 1,316 $ 1,172
733
(589)
$ 1,393 $ 1,363 $ 1,316
298
(251)
665
(635)
NOTE 2 • continued
TAX, INSURANCE, AND OTHER ESCROW
Tax, insurance, and other escrow includes funds deposited with a lender for payment of real estate tax and insurance,
and reserves for funds to be used for replacement of structural elements and mechanical equipment of certain
projects. The funds are under the control of the lender. Disbursements are made after supplying written
documentation to the lender.
REAL ESTATE DEPOSITS
Real estate deposits include funds held by escrow agents to be applied toward the purchase of real estate or the
payment of loan costs associated with loan placement or refinancing.
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 using the straight-line method, which approximates the effective interest method.
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. For the fiscal years ended April
30, 2013, 2012 and 2011, the Company distributed in excess of 90% of its taxable income and realized capital gains
from property dispositions within the prescribed time limits; accordingly, no provision has been made for federal
income taxes in the accompanying consolidated financial statements. If the Company fails to qualify as a REIT in
any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates
(including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable
years. Even as a REIT, the Company may be subject to certain state and local income and property taxes, and to
federal income and excise taxes on undistributed taxable income. In general, however, if the Company qualifies as a
REIT, no provisions for federal income taxes are necessary except for taxes on undistributed REIT taxable income
and taxes on the income generated by a taxable REIT subsidiary (TRS). The Company currently has no TRS.
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.
Distributions for the calendar year ended December 31, 2012 were characterized, for federal income tax purposes, as
23.17% ordinary income, 2.41% capital gain and 74.42% return of capital. Distributions for the calendar year ended
December 31, 2011 were characterized, for federal income tax purposes, as 18.04% ordinary income, 37.48% capital
gain and 44.48% return of capital.
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 tenants at multi-tenant commercial properties throughout the year.
2013 Annual Report F-15
NOTE 2 • continued
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 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.
INVOLUNTARY CONVERSION OF ASSETS
As previously reported, Minot, North Dakota, where IRET’s corporate headquarters is located, experienced
significant flooding in June 2011, resulting in extensive damage to the Arrowhead Shopping Center and to the
Chateau Apartments property, which consisted of two 32-unit buildings. Additionally, on February 22, 2012, one of
the buildings of the Chateau Apartments property, which had been undergoing restoration work following the flood,
was completely destroyed by fire. The costs related to clean-up, redevelopment and loss of rents for these properties
are being reimbursed to the Company by its insurance carrier, less the Company’s deductible of $200,000 per event
under the policy. The Company expensed $400,000 in fiscal year 2012 for the flood and fire deductibles.
During fiscal year 2012, for the Arrowhead and Chateau flood loss, the Company received $5.7 million of insurance
proceeds for flood clean-up costs and redevelopment. In regard to Arrowhead Shopping Center, the total insurance
proceeds for redevelopment at April 30, 2012 exceeded the estimated basis in the assets requiring replacement,
resulting in the recognition of approximately $274,000 in gain from involuntary conversion in fiscal year 2012.
During fiscal year 2013, final settlement was reached for the Arrowhead and Chateau flood loss and the Company
received additional proceeds of $2.7 million resulting in the recognition of approximately $2.8 million in gain from
involuntary conversion in fiscal year 2013.
In fiscal year 2013, for the Chateau fire loss, the Company received $2.9 million of insurance proceeds for
redevelopment. The total insurance proceeds for redevelopment related to the Chateau fire exceeded the estimated
basis in the assets requiring replacement, resulting in the recognition of $2.3 million in gain from involuntary
conversion in fiscal year 2013. The Company expects to rebuild the destroyed building but has no firm estimates at
this time for costs or expected completion date of such rebuilding. IRET expects final settlement of the Chateau fire
insurance claim to occur when the property is rebuilt.
Final settlement was reached during fiscal year 2013 for business interruption from the flood and fire with proceeds
received during the year of $409,000. During fiscal year 2012, approximately $666,000 was received, for total
business interruption proceeds from the claims of $1.1 million. Reimbursement for business interruption is included
within real estate rentals in the Consolidated Statements of Operations.
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 (the “Bank”) with respect to
deposit accounts that exceed FDIC Insurance coverage. On a daily basis, account balances are swept into a
repurchase account. The Bank pledges fractional interests in US Government Securities owned by the Bank at an
amount equal to the excess over the uncollected balance in the repurchase account. The amounts deposited by IRET
pursuant to the repurchase agreement are not insured by FDIC. At April 30, 2013 and 2012, these amounts totaled
$29.6 million and $15.1 million, respectively.
2013 Annual Report F-16
NOTE 4 • PROPERTY OWNED
Property, consisting principally of real estate, is stated at cost less accumulated depreciation and totaled $1.6 billion
and $1.5 billion as of April 30, 2013, and 2012, respectively.
Construction period interest of approximately $742,000, $571,000, and $152,000 has been capitalized for the years
ended April 30, 2013, 2012, and 2011, respectively.
The future minimum lease receipts to be received under non-cancellable leases for commercial properties as of April
30, 2013, assuming that no options to renew or buy out the lease are exercised, are as follows:
Year Ended April 30,
2014
2015
2016
2017
2018
Thereafter
(in thousands)
$
114,118
102,967
92,131
77,193
61,744
195,986
644,139
$
See Real Estate Investments within Note 2 for information about impairment losses recorded during fiscal years
2013 and 2012.
NOTE 5 • IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES
The Company’s identified intangible assets and intangible liabilities at April 30, 2013 and 2012 were as follows:
Identified intangible assets (included in intangible assets):
Gross carrying amount
Accumulated amortization
Net carrying amount
Indentified intangible liabilities (included in other liabilities):
Gross carrying amount
Accumulated amortization
Net carrying amount
(in thousands)
April 30, 2013 April 30, 2012
$
$
$
$
68,165 $
(27,708)
40,457 $
92,401
(47,813)
44,588
391 $
(296)
95 $
1,104
(967)
137
The effect of amortization of acquired below-market leases and acquired above-market leases on rental income was
approximately $(29,000), $(45,000) and $(72,000) for the twelve months ended April 30, 2013, 2012 and 2011,
respectively. The estimated annual amortization of acquired below-market leases, net of acquired above-market
leases for each of the five succeeding fiscal years is as follows:
Year Ended April 30,
2014
2015
2016
2017
2018
(in thousands)
37
$
18
14
6
(5)
2013 Annual Report F-17
NOTE 5 • continued
Amortization of all other identified intangible assets (a component of depreciation/amortization related to real estate
investments) was $5.5 million, $5.5 million and $7.1 million for the twelve months ended April 30, 2013, 2012 and
2011, respectively. The estimated annual amortization of all other identified intangible assets for each of the five
succeeding fiscal years is as follows:
Year Ended April 30,
2014
2015
2016
2017
2018
(in thousands)
4,826
$
3,815
3,598
3,129
2,643
NOTE 6 • NONCONTROLLING 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 noncontrolling interests in
accordance with the terms of the Operating Partnership agreement.
IRET reflects noncontrolling interests in consolidated real estate entities 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 noncontrolling interests are reflected as net income attributable to noncontrolling interests –
consolidated real estate entities in the Consolidated Statements of Operations. The Company’s noncontrolling
interests – consolidated real estate entities at April 30, 2013 and 2012 were as follows:
Mendota Properties LLC
IRET-1715 YDR, LLC
IRET-Williston Garden Apartments, LLC
IRET - Jamestown Medical Building, LLC
WRH Holding, LLC
IRET-Cypress Court Apartments, LLC
IRET - Minot Apartments, LLC
IRET - WRH 1, LLC
Noncontrolling interests – consolidated real estate entities
(in thousands)
April 30, 2013 April 30, 2012
7,460
$
958
2,295
1,471
1,380
0
0
0
13,564
7,236 $
1,003
2,597
1,396
1,118
1,149
5,937
5,619
26,055 $
$
On November 27, 2012 the Company entered into a joint venture operating agreement with a real estate
development company to construct an apartment project in Minot, North Dakota as IRET – Minot Apartments,
LLC. The project is expected to be completed in two phases, with a total of approximately 341 units. Phase I, the
Landing at Southgate, consists of three approximately 36-unit buildings, and is expected to be completed in August
2013. Phase II, the Commons at Southgate, is currently expected to consist of an approximately 233-unit building to
be completed in June 2014. The Company currently estimates total costs for both phases of the project at $52.2
million, with approximately 69% of the project financed with third-party debt and approximately 7% financed with
debt from IRET to the joint venture entity. IRET is the 51% owner of the joint venture and will have management
and leasing responsibilities when the project is completed. The real estate development company owns 49% of the
joint venture and is responsible for the development and construction of the property. The Company has determined
that the joint venture is a variable interest entity (“VIE”), primarily based on the fact that the equity investment at
risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support.
The Company has also determined that IRET is the primary beneficiary of the VIE due to the fact that IRET is
providing 51% of the equity contributions, the subordinated debt and a guarantee on the third party debt and has the
power to direct the most significant activities that impact the entity’s economic performance.
2013 Annual Report F-18
NOTE 7 • LINE OF CREDIT
As of April 30, 2013, the Company had one secured line of credit with First International Bank and Trust, Watford
City, North Dakota, as lead bank. This line of credit matures on August 12, 2014, and had, as of April 30, 2013,
lending commitments of $60.0 million. Participants in this secured credit facility as of April 30, 2013 included, in
addition to First International Bank, the following financial institutions: The Bank of North Dakota; First Western
Bank and Trust; Dacotah Bank; United Community Bank of North Dakota; American State Bank & Trust Company
and Town & Country Credit Union. As of April 30, 2013, the Company had advanced $10.0 million under the line
of credit. The line of credit has a minimum outstanding principal balance requirement of $10.0 million. The interest
rate on borrowings under the facility is the Wall Street Journal Prime Rate +1.25%, with a floor of 5.15% and a cap
of 8.65%; interest-only payments are due monthly based on the total amount of advances outstanding. The line of
credit may be prepaid at par at any time. The facility includes covenants and restrictions requiring the Company to
achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the
aggregate and 1.00x on individual assets in the collateral pool, and the Company is also required to maintain
minimum depository account(s) totaling $6.0 million with First International, of which $1.5 million is to be held in a
non-interest bearing account. As of April 30, 2013, 23 properties with a total cost of $117.3 million collateralized
this line of credit. As of April 30, 2013, the Company believes it is in compliance with the facility covenants. This
credit facility is summarized in the following table:
(in thousands)
Amount
Outstanding as
of April 30,
2013
Amount
Outstanding
as of April
30, 2012
Applicable
Interest Rate
as of April 30,
2013
Amount
Available
Maturity
Date
Weighted
Average Int.
Rate on
Borrowings
during fiscal
year 2013
$
60,000 $
10,000 $
39,000
5.15% 8/12/14
5.17%
Financial Institution
First International Bank
& Trust
NOTE 8 • MORTGAGES PAYABLE
Most of the properties owned by the Company individually serve as collateral for separate mortgage loans on single
properties or groups of properties. The majority of these mortgages payable 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. As of April 30, 2013, the management of the Company believes there are no defaults or
material compliance issues in regard to any of these mortgages payable. Interest rates on mortgages payable range
from 2.57% to 8.25%, and the mortgages have varying maturity dates from June 30, 2013, through July 1, 2036.
Of the mortgages payable, the balance of fixed rate mortgages totaled $1.0 billion at April 30, 2013 and 2012, and
the balances of variable rate mortgages totaled $26.2 million and $16.2 million as of April 30, 2013, and 2012,
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, 2013,
the weighted-average rate of interest on the Company’s mortgage debt was 5.55%, compared to 5.78% on April 30,
2012. The aggregate amount of required future principal payments on mortgages payable as of April 30, 2013, is as
follows:
Year Ended April 30,
2014
2015
2016
2017
2018
Thereafter
Total payments
(in thousands)
64,923
110,972
92,336
219,315
66,944
494,716
1,049,206
$
$
In addition to the individual first mortgage loans comprising the Company’s $1.0 billion of mortgage indebtedness,
the Company also has a revolving, multi-bank secured line of credit which had, as of April 30, 2013, lending
commitments of $60.0 million and an outstanding balance of $10.0 million. This facility, which as of April 30, 2013
is secured by mortgages on 23 Company properties, is not included in the Company’s mortgage indebtedness total.
The Company currently has 35 unencumbered properties.
2013 Annual Report F-19
NOTE 9 • TRANSACTIONS WITH RELATED PARTIES
BANKING SERVICES
The Company has an ongoing banking relationship with First International Bank and Trust, Watford City, North
Dakota (“First International”). Stephen L. Stenehjem, a member of the Company’s Board of Trustees, is the
President and Chief Executive Officer of First International, and the bank is owned by Mr. Stenehjem and members
of his family. Currently, and during fiscal year 2013, the Company has one mortgage loan outstanding with First
International, with an original principal balance of $13.7 million (Williston Garden) bearing interest at 5.5% per
annum. In connection with this loan, the Company maintains a compensating balance of $50,000. For a portion of
fiscal year 2013, the Company had two other mortgage loans outstanding with First International, in the amount of
approximately $2.4 million (Georgetown Square) and $3.2 million (Grand Forks MedPark Mall), respectively,
bearing interest at 7.25% and 6.25% per annum; these loans were repaid in the first and second quarters of fiscal
year 2013, respectively. During fiscal year 2013, the Company entered into a construction loan with First
International for $43.7 million to finance the development of a residential property in Williston, North Dakota. At
April 30, 2013, the construction loan was not drawn on. The Company paid interest on these loans of approximately
$665,000, $0, $52,000 and $0, respectively, in fiscal year 2013, and paid approximately $258,000 in origination fees
and closing costs on the construction loan. The Company has a multi-bank line of credit with a capacity of $60.0
million, of which First International is the lead bank and a participant with a $12.0 million commitment. In fiscal
year 2013, the Company paid First International a total of approximately $196,000 in interest on First International’s
portion of the outstanding balance of this credit line, and paid fees of $40,000. In connection with this multi-bank
line of credit, the Company maintains compensating balances with First International totaling $6.0 million, of which
$1.5 million is held in a non-interest bearing account, and $4.5 million is held in an account that pays the Company
interest on the deposited amount of 0.25% per annum. The Company also maintains a number of checking accounts
with First International. In fiscal year 2013, the Company paid less than $500 in total in various bank service and
other fees charged on these checking accounts.
In fiscal years 2012 and 2011, respectively, the Company paid First International $531,000 and $212,000 in interest
on First International’s portion of the multi-bank line of credit and paid fees of $70,000 and $219,000. In fiscal year
2011, the Company paid interest of approximately $72,000 for borrowing under a $14.0 million line of credit that
was subsequently terminated in fiscal year 2011. In fiscal years 2012 and 2011, the Company paid interest and fees
on outstanding mortgage and construction loans of approximately $422,000 and $390,000, respectively. In both
fiscal years 2012 and 2011, the Company paid under $500 in total in various bank service and other fees charged on
checking accounts maintained with First International.
Total payments of interest and fees from the Company to First International Bank were approximately $1.2 million,
$1.1 million and $893,000 in fiscal years 2013, 2012 and 2011, respectively.
LEASE TRANSACTION
In the first quarter of fiscal year 2013, the Company entered into an agreement with First International to construct
an approximately 3,700 square-foot building on an outlot of the Company’s Arrowhead Shopping Center in Minot,
North Dakota, to be leased by First International under a 20-year lease for use as a branch bank location. The total
cost of the project is estimated to be approximately $1.7 million, with net rental payments under the lease currently
estimated at approximately $2.4 million in total over the 20-year lease term.
2013 Annual Report F-20
NOTE 10 • ACQUISITIONS AND DISPOSITIONS
PROPERTY ACQUISITIONS
IRET Properties added approximately $135.8 million of real estate properties to its portfolio during fiscal year 2013,
compared to $97.1 million in fiscal year 2012. Of the total property added during fiscal 2013, the Company paid
$128.7 million for real estate properties and $7.1 million of land was contributed by joint venture partners. The
$128.7 million paid for real estate properties added to the Company’s portfolio in fiscal year 2013 consisted of
limited partnership units of the Operating Partnership valued at issuance at $12.6 million and $12.5 million in
assumed mortgage debt, with the remainder paid in cash. The Company expensed approximately $434,000 of
transaction costs related to the acquisitions in fiscal year 2013. Of the $97.1 million paid in fiscal year 2012,
approximately $8.1 million was paid in the form of limited partnership units of the Operating Partnership and
approximately $7.2 million consisted of the assumption of mortgage debt, with the remainder paid in cash. The
Company expensed approximately $542,000 of transaction costs related to the acquisitions in fiscal year 2012. The
fiscal year 2013 and 2012 additions are detailed below.
Fiscal 2013 (May 1, 2012 to April 30, 2013)
Acquisitions
Multi-Family Residential
Date Acquired
Land
Building
Intangible
Assets
Acquisition
Cost
(in thousands)
308 unit - Villa West - Topeka, KS
232 unit - Colony - Lincoln, NE
208 unit - Lakeside Village - Lincoln, NE
58 unit - Ponds at Heritage Place - Sartell, MN
336 unit - Whispering Ridge - Omaha, NE
2012-05-08 $
2012-06-04
2012-06-04
2012-10-10
2013-04-24
1,590 $ 15,760 $
1,515
15,731
1,215 15,837
4,564
25,424
77,316
395
2,139
6,854
300 $ 17,650
254
17,500
17,250
198
5,020
61
28,314
751
85,734
1,564
Unimproved Land
2012-08-01
University Commons - Williston, ND
2012-08-10
Cypress Court - St. Cloud, MN
Cypress Court Apartment Development - St. Cloud, MN(1) 2012-08-10
Badger Hills - Rochester, MN(2)
2012-12-14
2012-12-31
Grand Forks - Grand Forks, ND
2013-01-11
Minot (Southgate Lot 4) - Minot, ND
Commons at Southgate - Minot, ND(3)
2013-01-22
Landing at Southgate - Minot, ND(3)
2013-01-22
2013-03-25
Grand Forks 2150 - Grand Forks, ND
2013-04-12
Bismarck 4916 - Bismarck, ND
2013-04-30
Arcata - Golden Valley, MN
823
447
1,136
1,050
4,278
1,882
3,691
2,262
1,600
3,250
2,088
22,507
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
823
447
1,136
1,050
4,278
1,882
3,691
2,262
1,600
3,250
2,088
22,507
Total Property Acquisitions
$ 29,361 $ 77,316 $ 1,564 $ 108,241
(1) Land is owned by a joint venture in which the Company has an approximately 79% interest. The joint venture is consolidated in IRET’s
financial statements.
(2) Acquisition of unimproved land consisted of two parcels acquired separately on December 14 and December 20, 2012, respectively.
(3) Land is owned by a joint venture entity in which the Company has an approximately 51% interest. The joint venture is consolidated in
IRET’s financial statements.
2013 Annual Report F-21
NOTE 10 • continued
Development Projects Placed in Service
Multi-Family Residential
Date Placed in
Service
Land
Building
Development
Cost
(in thousands)
159 unit - Quarry Ridge II - Rochester, MN(1)
73 unit - Williston Garden Buildings 3 and 4 - Williston, ND(2) 2012-07-31
20 unit - First Avenue - Minot, ND(3)
2013-04-15
2012-06-29 $
Commercial Healthcare
26,662 sq ft Spring Wind Expansion - Laramie, WY(4)
45,222 sq ft Jamestown Medical Office Building - Jamestown,
ND(5)
Commercial Industrial
27,698 sq ft Minot IPS - Minot, ND(6)
2012-11-16
2013-01-01
2012-12-17
Commercial Retail
3,702 sq ft Arrowhead First International Bank - Minot, ND(7)
2013-03-19
0 $
0
0
0
4,591 $
7,058
2,356
14,005
4,591
7,058
2,356
14,005
0
0
0
0
0
1,675
1,675
6,597
8,272
6,597
8,272
4,087
4,087
1,165
1,165
Total Development Projects Placed in Service
$
0 $
27,529 $ 27,529
(1) Development property placed in service June 29, 2012. Additional costs paid in fiscal years 2012 and 2011, and land acquired in fiscal
year 2007, totaled $13.0 million, for a total project cost at April 30, 2013 of $17.6 million.
(2) Development property placed in service July 31, 2012. Buildings 1 and 2 were placed in service in fiscal year 2012. Additional costs paid in
fiscal year 2012 totaled $12.0 million, for a total project cost at April 30, 2013 of $19.1 million.
(3) Redevelopment property placed in service April 15, 2013. Additional costs paid in fiscal years 2012 and 2011 totaled approximately
$321,000, for a total project cost at April 30, 2013 of $2.7 million.
(4) Expansion project placed in service November 16, 2012. Additional costs paid in fiscal year 2012 totaled $1.8 million, for a total project
cost at April 30, 2013 of $3.5 million.
(5) Development property placed in service January 1, 2013. Additional costs paid in fiscal year 2012 totaled $1.0 million, for a total project
cost at April 30, 2013 of $7.6 million.
(6) Development property placed in service December 17, 2012. Additional costs paid in fiscal year 2012 totaled $1.8 million, for a total
project cost at April 30, 2013 of $5.9 million.
(7) Development property placed in service March 19, 2013. Additional costs paid in fiscal year 2012 totaled approximately $75,000, for a
total project cost at April 30, 2013 of $1.2 million
2013 Annual Report F-22
NOTE 10 • continued
Fiscal 2012 (May 1, 2011 to April 30, 2012)
Acquisitions
Multi-Family Residential
Date
Acquired
Land
Building
Intangible
Assets
Acquisition
Cost
(in thousands)
147 unit - Regency Park Estates - St. Cloud, MN
50 unit - Cottage West Twin Homes - Sioux Falls, SD 2011-10-12
2011-10-12
24 unit - Gables Townhomes - Sioux Falls, SD
2011-11-01
36 unit - Evergreen II - Isanti, MN
2012-02-16
116 unit - Grand Gateway - St. Cloud MN
2012-03-16
84 unit - Ashland - Grand Forks, ND
2011-08-01 $
702 $ 10,198 $
968
349
691
814
741
4,265
3,762
1,921
2,784
7,086
7,569
33,320
0 $ 10,900
4,730
0
2,270
0
3,475
0
7,900
0
8,310
0
37,585
0
Commercial Healthcare
17,273 sq. ft Spring Creek American Falls - American
Falls, ID
2011-09-01
145
3,870
55
4,070
15,571 sq. ft Spring Creek Soda Springs - Soda
Springs, ID
15,559 sq. ft Spring Creek Eagle - Eagle, ID
31,820 sq. ft Spring Creek Meridian - Meridian, ID
26,605 sq. ft Spring Creek Overland - Boise, ID
16,311 sq. ft Spring Creek Boise - Boise, ID
26,605 sq. ft Spring Creek Ustick - Meridian, ID
Meadow Wind Land - Casper, WY
3,431 sq. ft Edina 6525 Drew Ave S - Edina, MN
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-09-01
2011-10-13
Unimproved Land
Industrial-Office Build-to-Suit - Minot, ND
Renaissance Heights - Williston, ND
2011-09-07
2012-04-11
66
263
424
687
708
467
50
388
3,198
416
4,600
5,016
2,134
3,775
6,724
5,941
4,296
3,833
0
117
30,690
0
0
0
30
62
102
97
71
0
0
0
417
0
0
0
2,230
4,100
7,250
6,725
5,075
4,300
50
505
34,305
416
4,600
5,016
Total Property Acquisitions
$ 12,479 $ 64,010 $
417 $ 76,906
2013 Annual Report F-23
NOTE 10 • continued
Development Projects Placed in Service
Multi-Family Residential
(in thousands)
Date Placed in
Service
Land
Building
Development
Cost
72 unit - Williston Garden Buildings 1 and 2 - Williston, ND(1)
2012-04-27$
700 $
8,978 $
9,678
Commercial Healthcare
24,795 sq. ft Trinity at Plaza 16 - Minot, ND(2)
22,193 sq. ft Meadow Winds Addition - Casper, WY(3)
2011-09-23
2011-12-30
Commercial Retail
19,037 sq. ft. Jamestown Buffalo Mall - Jamestown, ND(4)
2011-06-15
0
0
0
0
5,685
3,952
9,637
5,685
3,952
9,637
879
879
Total Development Projects Placed in Service
$
700 $ 19,494 $ 20,194
(1) Development property placed in service April 27, 2012. Buildings 3 and 4 of this project are expected to be placed in service during the
first quarter of fiscal year 2013.
(2) Development property placed in service September 23, 2011. Additional costs paid in fiscal year 2011 totaled $3.3 million, for a total
project cost at April 30, 2012 of $9.0 million.
(3) Expansion project placed in service December 30, 2011.
(4) Construction project placed in service June 15, 2011. Additional costs paid in fiscal year 2011 totaled $1.4 million, for a total project cost
at April 30, 2012 of $2.3 million.
Acquisitions in fiscal years 2013 and 2012 are immaterial to our real estate portfolio both individually and in the
aggregate, and consequently no proforma information is presented. The results of operations from acquired
properties are included in the Consolidated Statements of Operations as of their acquisition date. The revenue and
net income of our fiscal year 2013 and 2012 acquisitions (excluding development projects placed in service) are
detailed below.
Total revenue
Net income
(in thousands)
April 30, 2013 April 30, 2012
4,213
$
950
$
6,497 $
(66) $
2013 Annual Report F-24
NOTE 10 • continued
PROPERTY DISPOSITIONS
During fiscal year 2013, the Company disposed of three multi-family residential properties, one retail property, one
healthcare property and four condominium units for an aggregate sales price of $26.3 million, compared to
dispositions totaling $3.2 million in fiscal year 2012. The fiscal year 2013 and 2012 dispositions are detailed below.
Fiscal 2013 (May 1, 2012 to April 30, 2013)
Dispositions
Multi-Family Residential
116 unit - Terrace on the Green - Fargo, ND
85 unit - Prairiewood Meadows - Fargo, ND
66 unit - Candlelight - Fargo, ND
Date
Disposed
(in thousands)
Book Value
Sales Price
and Sales Cost Gain/(Loss)
2012-09-27 $
2012-09-27
2012-11-27
3,450 $
3,450
1,950
8,850
1,248 $
2,846
1,178
5,272
2,202
604
772
3,578
Commercial Retail
16,080 sq ft Kentwood Thomasville - Kentwood, MI
2012-06-20
625
692
(67)
Commercial Healthcare
47,950 sq ft Steven’s Pointe -Steven’s Point, WI
2013-04-25
16,100
12,667
3,433
Other
Georgetown Square Condominiums 5 and 6
Georgetown Square Condominiums 3 and 4
2012-06-21
2012-08-02
330
368
698
336
421
757
(6)
(53)
(59)
Total Property Dispositions
$
26,273 $
19,388 $
6,885
Fiscal 2012 (May 1, 2011 to April 30, 2012)
Dispositions
Commercial Retail
Date
Disposed
(in thousands)
Book Value
Sales Price
and Sales Cost Gain/(Loss)
41,200 sq ft. Livingstone Pamida - Livingston, MT
12,556 sq ft. East Grand Station – East Grand Forks, MN
2011-08-01 $
2012-03-03
2,175 $
1,062
1,586 $
1,302
589
(240)
Total Property Dispositions
$
3,237 $
2,888 $
349
2013 Annual Report F-25
NOTE 11 • OPERATING SEGMENTS
IRET reports its results in five reportable segments: multi-family residential; commercial office; commercial
healthcare, including senior housing (formerly referred to as the commercial medical segment; the composition of
this segment has not changed from prior periods); commercial industrial and commercial retail properties. The
Company’s reportable segments are aggregations of similar properties.
Segment information in this report is presented based on net operating income, which we define as total real estate
revenues and gain on involuntary conversion less real estate expenses (which consist of utilities, maintenance, real
estate taxes, insurance, property management expenses and other property expenses). 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 present real estate revenues and net operating
income for the fiscal years ended April 30, 2013, 2012 and 2011 from our five reportable segments, and reconcile
net operating income of reportable segments to net income as reported in the consolidated financial statements.
Segment assets are also reconciled to Total Assets as reported in the consolidated financial statements.
Multi-Family
Residential
Commercial
Office
Commercial
Healthcare
Commercial
Industrial
Commercial
Retail
Total
(in thousands)
$
$
90,759
38,716
3,852
55,895
$
$
77,162
37,946
0
39,216
$
$
61,975 $
16,779
0
45,196 $
14,911 $
4,255
0
10,656 $
14,599 $ 259,406
5,436 103,132
5,084
1,232
161,358
10,395
(65,270)
(8,494)
(2,173)
(305)
(62,900)
748
22,964
7,008
$ 29,972
Multi-Family
Residential
Commercial
Office
Commercial
Healthcare
Commercial
Industrial
Commercial
Retail
Total
(in thousands)
$
$
72,500
33,905
0
38,595
$
$
74,334
34,816
0
39,518
$
$
64,511 $
20,650
0
43,861 $
14,325 $
3,549
0
10,776 $
274
9,214
13,408 $ 239,078
4,468 97,388
274
141,964
(59,642)
(7,381)
(1,898)
(64,066)
786
9,763
(57)
9,706
$
Year Ended April 30, 2013
Real estate revenue
Real estate expenses
Gain on involuntary conversion
Net operating income
Depreciation/amortization
Administrative, advisory and trustee fees
Other expenses
Impairment of real estate investments
Interest expense
Interest and other income
Income from continuing operations
Income from discontinued operations
Net income
Year Ended April 30, 2012
Real estate revenue
Real estate expenses
Gain on involuntary conversion
Net operating income
Depreciation/amortization
Administrative, advisory and trustee fees
Other expenses
Interest expense
Interest and other income
Income from continuing operations
Loss from discontinued operations
Net income
2013 Annual Report F-26
NOTE 11 • continued
Year Ended April 30, 2011
Real estate revenue
Real estate expenses
Net operating income
Depreciation/amortization
Administrative, advisory and trustee services
Other expenses
Interest expense
Interest and other income
Income from continuing operations
Income from discontinued operations
Net income
Segment Assets and Accumulated Depreciation
Multi-Family
Residential
Commercial-
Office
Commercial-
Healthcare
Commercial-
Industrial
Commercial-
Retail
Total
(in thousands)
$
$
65,229
33,216
32,013
$
$
77,747
36,055
41,692
$
$
64,879
22,443
42,436
$
$
13,165
4,328
8,837
$
$
13,156 $ 234,176
100,881
4,839
133,295
8,317
(57,759)
(7,222)
(1,747)
(62,735)
541
4,373
19,978
24,351
$
As of April 30, 2013
Segment assets
Property owned
Less accumulated depreciation
Total property owned
Cash and cash equivalents
Other investments
Receivables and other assets
Development in progress
Unimproved land
Total Assets
As of April 30, 2012
Segment assets
Property owned
Less accumulated depreciation
Total property owned
Real estate held for sale
Cash and cash equivalents
Other investments
Receivables and other assets
Development in progress
Unimproved land
Total Assets
Multi-Family
Residential
Commercial
Office
Commercial
Healthcare
Commercial
Industrial
Commercial
Retail
Total
(in thousands)
$ 659,696
(140,354)
$ 519,342
$ 613,775
(138,270)
$ 475,505
$ 501,191
(90,891)
$ 410,300
$ 125,772
(23,688)
$ 102,084
(27,218)
$ 132,536 $ 2,032,970
(420,421)
$ 105,318 $ 1,612,549
94,133
639
113,948
46,782
21,503
$ 1,889,554
Multi-Family
Residential
Commercial
Office
Commercial
Healthcare
Commercial
Industrial
Commercial
Retail
Total
(in thousands)
$ 539,783
(128,834)
$ 410,949
$ 605,318
(121,422)
$ 483,896
$ 500,268
(78,744)
$ 421,524
$ 119,002
(20,693)
$ 98,309
(23,797)
$ 127,638 $ 1,892,009
(373,490)
$ 103,841 $ 1,518,519
2,067
39,989
634
114,569
27,599
10,990
$ 1,714,367
2013 Annual Report F-27
NOTE 12 • DISCONTINUED OPERATIONS
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. The Company also reports any gains or losses from the sale of a property in
discontinued operations. During fiscal year 2013, the Company disposed of three multi-family residential properties,
one retail property, one healthcare property and four condominium units. Eight condominium units in Grand Chute,
Wisconsin, and a retail property in Kentwood, Michigan, were classified as held for sale at April 30, 2012. There
were no properties classified as held for sale as of April 30, 2013 and 2011. The following information shows the
effect on net income and the gains or losses from the sale of properties classified as discontinued operations for the
fiscal years ended April 30, 2013, 2012 and 2011.
REVENUE
Real estate rentals
Tenant reimbursement
TOTAL REVENUE
EXPENSES
Depreciation/amortization related to real estate investments
Utilities
Maintenance
Real estate taxes
Insurance
Property management expenses
Other property expenses
Other expenses
Amortization related to non-real estate investments
Impairment of real estate investments
TOTAL EXPENSES
Operating income
Interest expense
Interest income
Other income
Income (loss) from discontinued operations before gain on sale
Gain on sale of discontinued operations
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Segment Data
Multi-Family Residential
Commercial Office
Commercial Healthcare
Commercial Industrial
Commercial Retail
Total
Property Sale Data
Sales price
Net book value and sales costs
Gain on sale of discontinued operations
2013
1,818
1
1,819
479
67
132
78
25
115
16
0
0
0
912
907
(786)
0
2
123
6,885
7,008
3,653
0
3,419
0
(64)
7,008
(in thousands)
2012
$
$
2,852
62
2,914
682
225
246
196
52
272
4
67
0
428
2,172
742
(1,164)
0
16
(406)
349
(57)
161
0
(465)
0
247
(57)
$
$
$
$
$
$
(in thousands)
2012
2013
26,273
(19,388)
6,885
$
$
3,237
(2,888)
349
$
$
$
$
$
$
$
$
2011
9,056
112
9,168
1,911
776
993
853
158
1,047
72
28
4
0
5,842
3,326
(2,718)
5
0
613
19,365
19,978
19,268
0
(84)
726
68
19,978
2011
83,330
(63,965)
19,365
2013 Annual Report F-28
NOTE 13 • EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding during the period. The Company has no outstanding options,
warrants, convertible stock or other contractual obligations requiring issuance of additional common shares that
would result in a dilution of earnings. Units can be exchanged for shares on a one-for-one basis after a minimum
holding period of one year. 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, 2013, 2012 and 2011:
NUMERATOR
Income from continuing operations – Investors Real Estate Trust
Income (loss) from discontinued operations – Investors Real Estate Trust
Net income attributable to Investors Real Estate Trust
Dividends to preferred shareholders
Numerator for basic earnings per share – net income available to common
shareholders
Noncontrolling interests – Operating Partnership
Numerator for diluted earnings per share
DENOMINATOR
Denominator for basic earnings per share weighted average shares
Effect of convertible operating partnership units
Denominator for diluted earnings per share
Earnings per common share from continuing operations – Investors Real
Estate Trust – basic and diluted
Earnings per common share from discontinued operations – Investors Real
Estate Trust – 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)
2013
2012
2011
$ 19,790
5,740
25,530
(9,229)
16,301
3,633
$ 19,934
93,344
21,191
114,535
$
$
.11
.06
.17
$
$
$
$
8,263 $
(51)
8,212
(2,372)
4,101
15,981
20,082
(2,372)
5,840
17,710
1,359
4,449
7,199 $ 22,159
83,557
19,875
103,432
78,628
20,154
98,782
.07 $
.00
.07 $
.02
.20
.22
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
1,000 hours within the plan year and are employed on the last day of the plan year. Participation in IRET’s defined
contribution 401(k) plan is available to employees over the age of 21 who have completed six months of service and
who work at least 1,000 hours per calendar year, 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 expects to contribute not more than 3.5% of the salary of each
employee participating in the profit sharing plan, and currently matches, dollar for dollar, employee contributions to
the 401(k) plan in an amount equal to up to 4.0% of the eligible salary of each employee participating in the 401(k)
plan, for a total expected contribution of not more than 7.5% of the salary of each of the employees participating in
both plans. Contributions by IRET to the profit sharing plan are subject to a vesting schedule; contributions by IRET
under the 401(k) plan are fully vested when made. IRET’s contributions to these plans on behalf of employees
totaled approximately $912,000, $871,000 and $598,000 in fiscal years 2013, 2012 and 2011, respectively. The
increase in cost from fiscal year 2011 to fiscal year 2013 was due to growth in the number of employees during
IRET’s transition to internal property management.
2013 Annual Report F-29
NOTE 15 • COMMITMENTS AND CONTINGENCIES
Ground Leases. As of April 30, 2013, the Company is a tenant under operating ground or air rights leases on twelve
of its properties. The Company pays a total of approximately $500,000 per year in rent under these ground leases,
which have remaining terms ranging from 2.5 to 88 years, and expiration dates ranging from October 2015 to
October 2100. The Company has renewal options for six of the twelve ground leases, and rights of first offer or first
refusal for the remainder.
The expected timing of ground and air rights lease payments as of April 30, 2013 is as follows:
Year Ended April 30,
2014
2015
2016
2017
2018
Thereafter
Total
(in thousands)
Lease Payments
504
$
506
478
449
449
21,667
24,053
$
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 consolidated 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 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 insufficient
information. IRET believes it does not have sufficient information to estimate the fair value of the asset retirement
obligations for these properties because a settlement date or range of potential settlement dates has not been
specified by others, and, additionally, there are currently no plans or expectation of plans to sell or to demolish these
properties, or to undertake major renovations that would require removal of the asbestos, lead and/or underground
storage tanks. These properties are expected to be maintained by repairs and maintenance activities that would not
involve the removal of the asbestos, lead and/or underground storage tanks. Also, a need for renovations caused by
tenant changes, technology changes or other factors has not been identified.
Tenant Improvements. In entering into leases with tenants, IRET may commit itself to fund improvements or build-
outs of the rented space to suit tenant requirements. These tenant improvements are typically funded at the
beginning of the lease term, and IRET is accordingly exposed to some risk of loss if a tenant defaults prior to the
expiration of the lease term, and the rental income that was expected to cover the cost of the tenant improvements is
not received. As of April 30, 2013, the Company is committed to fund approximately $7.5 million in tenant
improvements, within approximately the next 12 months.
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 a specified percentage of the initial
cost of the property to IRET. The property cost and gross rental revenue of these properties are as follows:
2013 Annual Report F-30
NOTE 15 • continued
Property
Billings 2300 Grant Road - Billings, MT
Fargo 1320 45th Street N - Fargo, ND
Healtheast St John & Woodwinds - Maplewood &
Woodbury, MN
Missoula 3050 Great Northern - Missoula, MT
Sartell 2000 23rd Street South - Sartell, MN
Spring Creek American Falls- American Falls, ID
Spring Creek Boise - Boise, ID
Spring Creek Eagle - Eagle, ID
Spring Creek Meridian - Meridian, ID
Spring Creek Overland - Overland, ID
Spring Creek Soda Springs - Soda Springs, ID
Spring Creek Ustick - Meridian, ID
St. Michael Clinic - St. Michael, MN
Urbandale - Urbandale, IA
Winsted Industrial Building - Winsted, MN
Total
Investment Cost
2,522
4,160
$
$
(in thousands)
Gross Rental Revenue
2013
299
400
$
2012
291
400
$
21,601
2,723
12,716
4,070
5,075
4,100
7,250
6,725
2,262
4,300
2,851
15,218
1,054
96,627
$
$
2,152
323
365
352
440
356
624
580
196
368
249
1,153
70
7,927
$
2,152
315
868
234
293
237
417
387
130
246
248
n/a
32
6,250
$
2011
226
333
2,152
243
1,209
n/a
n/a
n/a
n/a
n/a
n/a
n/a
244
n/a
n/a
4,407
Restrictions on Taxable Dispositions. Approximately 112 of the Company’s properties, consisting of approximately
6.2 million square feet of our combined commercial segment’s properties and 4,865 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 $855.3 million at April 30, 2013. 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. The
Company does not believe that the agreements materially affect the conduct of its business or its decisions whether
to dispose of restricted properties during the restriction period because the Company generally holds these and its
other properties for investment purposes, rather than for sale. Historically, however, where the Company has
deemed it to be in its shareholders’ best interests to dispose of restricted properties, the Company has done so
through transactions structured as tax-deferred transactions under Section 1031 of the Internal Revenue Code.
Redemption Value of UPREIT Units. The limited partnership units (“UPREIT Units”) of the Company’s operating
partnership, IRET Properties, are redeemable at the option of the holder for cash, or, at our option, for the
Company’s common shares of beneficial interest on a one-for-one basis, after a minimum one-year holding
period. All UPREIT Units receive the same cash distributions as those paid on common shares. UPREIT Units are
redeemable for an amount of cash per Unit equal to the average of the daily market price of an IRET common share
for the ten consecutive trading days immediately preceding the date of valuation of the Unit. As of April 30, 2013
and 2012, the aggregate redemption value of the then-outstanding UPREIT Units of the operating partnership owned
by limited partners was approximately $209.7 million and $147.8 million, respectively.
Joint Venture Buy/Sell Options. Certain of IRET’s 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 the Company buy its partners’ interests. During the third quarter of fiscal year 2012, IRET acquired, in
an equity transaction for $1.3 million, its joint venture partner’s interest in the Company’s only joint venture which
allowed IRET’s unaffiliated partner, at its election, to require that IRET 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. The
entity will continue to be consolidated in IRET’s financial statements. The Company currently has no joint ventures
in which its joint venture partner can require the Company to buy the partner’s interest.
Development, Expansion and Renovation Projects. The Company has various contracts outstanding with third
parties in connection with development, expansion and renovation projects that are underway or recently completed,
the costs for which have been capitalized. As of April 30, 2013, contractual commitments for these projects are as
follows:
2013 Annual Report F-31
NOTE 15 • continued
First Avenue Apartment Homes, Minot, North Dakota: In the fourth quarter of fiscal 2013, the Company
substantially completed the conversion of an existing approximately 15,000 square foot commercial office building
in Minot, North Dakota to a 20-unit multi-family residential property, for an estimated total cost of $3.0 million. As
of April 30, 2013, the Company had incurred approximately $2.9 million of these project costs.
Arrowhead First International Bank, Minot, North Dakota: During the first quarter of fiscal year 2013, the
Company entered into an agreement with First International Bank and Trust, Watford City, North Dakota (First
International) to construct an approximately 3,700 square-foot building on an outlot of the Company’s Arrowhead
Shopping Center in Minot, North Dakota, to be leased by First International under a 20-year lease for use as a
branch bank location. The total cost of the project is estimated to be approximately $1.7 million. The building was
substantially completed in the fourth quarter of fiscal year 2013. As of April 30, 2013, the Company had incurred
approximately $1.6 million of these estimated project costs. Stephen Stenehjem, a member of the Company’s Board
of Trustees, is the President and Chairman of First International, and accordingly this transaction was reviewed and
approved by the Company’s Audit Committee under the Company’s related party transactions approval policy, and
by the Company’s independent trustees.
River Ridge Apartment Homes, Bismarck, ND: During the second quarter of fiscal year 2013, the Company began
construction of its 146-unit River Ridge Apartments project in Bismarck, North Dakota. River Ridge is located near
IRET’s Cottonwood Apartments in Bismarck, and will offer amenities including a pool, exercise facility and
underground parking. The Company estimates that the total cost to construct the project will be approximately $25.8
million. Completion of the project is currently expected in the second quarter of the Company’s fiscal year 2014. As
of April 30, 2013, the Company had incurred approximately $13.2 million of the total estimated project costs.
Cypress Court Apartment Homes, St. Cloud, Minnesota: In August 2012, the Company entered into a joint venture
agreement with a real estate development and contracting company in St. Cloud, Minnesota, to construct a two-
building, 132-unit multi-family residential property in St. Cloud, Minnesota, for an estimated total project cost of
$14.3 million. The Company owns approximately 79% of the joint venture entity, and the Company consolidates the
joint venture’s results in its financial statements; the remaining approximately 21% interest is owned by its joint
venture partner. Completion of the apartment project is currently expected in the second quarter of the Company’s
fiscal year 2014. As of April 30, 2013, the Company had incurred approximately $6.5 million of the total estimated
project costs.
Southgate Apartments, Minot, North Dakota: In January 2013, the Company entered into a joint venture agreement
to construct an apartment project in Minot, North Dakota. The Company owns approximately 51% of the joint
venture entity, and the Company consolidates the joint venture’s results in its financial statements; the remaining
approximately 49% of the joint venture entity is owned by its joint venture partner. See Note 6 for additional
information on the joint venture. The project is expected to be completed in two phases, with a total of
approximately 341 units. Phase I, the Landing at Southgate, consists of three approximately 36-unit buildings, and is
expected to be completed in August 2013. Phase II, the Commons at Southgate, is currently expected to consist of
an approximately 233-unit building to be completed in June 2014. IRET currently estimates total costs for both
phases of the project at $52.2 million. As of April 30, 2013, the Company had incurred approximately $13.9 million
of the total estimated project costs. The development is located near IRET's Plaza 16 property (formerly IRET
Corporate Plaza) in southwest Minot.
Renaissance Heights I Apartments, Williston, North Dakota: In February 2013, the Company entered into a joint
venture agreement to construct the first phase of an apartment project in Williston, North Dakota. The Company’s
joint venture partner in the Renaissance Heights project is also the Company’s partner in its Williston Garden
Apartments Project. The Company will own approximately 70% of the project, subject to final project costs, and the
joint venture’s results are consolidated in the Company’s financial statements. The first phase of the Renaissance
Heights Apartments project, consisting of five buildings with a total of 288 units, commenced construction in April
2013, with construction completion expected in September 2014. The site of the first phase of this development
project is approximately 14.5 acres of an approximately 40-acre parcel of land purchased by the Company in April
2012. The total cost of this first phase of the Renaissance Heights project is estimated at $62.2 million, including the
purchase price of the land. The remaining two phases of the project are expected to consist of an additional total of
approximately 462 units, for a total of approximately 750 units in all three phases. This development project is
2013 Annual Report F-32
NOTE 15 • continued
subject to various contingencies, and no assurances can be given that the project will be completed in the time frame
or on the terms currently proposed, or at all.
Arcata Apartments, Golden Valley, Minnesota: In April 2013, the Company acquired approximately two acres of
vacant land in Golden Valley, Minnesota for a purchase price of approximately $2.1 million. The parcel of land is
located near the Company’s Golden Hills Office Center. The Company has signed a development services
agreement with Trammell Crow Company to develop on this parcel an approximately 165-unit apartment building.
Construction is currently expected to commence in August 2013 and conclude in approximately November 2014,
with a total project cost of approximately $33.4 million, including the purchase price of the land. However, the
Company has not yet finalized the construction contract for the project, and the project is subject to various
additional contingencies, and, accordingly, no assurances can be given that the project will be completed in the time
frame or on the terms currently proposed, or at all.
Bank Office Build-to-Suit, Minot, North Dakota: In June 2013, the Company signed a lease agreement with a
national bank committing the Company to develop and construct an approximately 5,000 square foot bank building
in Minot, North Dakota for lease by the bank, at a projected total cost of approximately $3 million, including the
cost of the land for the project, which is an approximately 1.1 acre parcel. Construction of the bank building is
currently planned to commence in August 2013, with completion expected in March 2014. However, the Company
is currently finalizing the construction contract for the project prior to obtaining construction bids, and the tenant in
the project may terminate the project if construction costs exceed the budget agreed in the lease. Accordingly, no
assurances can be given that this project will be completed in the time frame or on the terms currently proposed, or
at all.
NOTE 16 • FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurement and Disclosures defines and establishes a framework for measuring fair value.
The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).
ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair
value into three levels, as follows:
Level 1: Quoted prices in active markets for identical assets
Level 2: Significant other observable inputs
Level 3: Significant unobservable inputs
There were no transfers in and out of Level 1, Level 2 and Level 3 fair value measurements during fiscal years 2013
and 2012. Fair value estimates may be different than the amounts that may ultimately be realized upon sale or
disposition of the assets and liabilities.
Fair Value Measurements on a Recurring Basis
The Company had no assets or liabilities recorded at fair value on a recurring basis at April 30, 2013 and 2012.
Fair Value Measurements on a Nonrecurring Basis
Non-financial assets measured at fair value on a nonrecurring basis at April 30, 2013 consisted of real estate
investments that were written-down to estimated fair value during fiscal year 2013. Non-financial assets measured at
fair value on a nonrecurring basis at April 30, 2012 consisted of real estate held for sale that was written-down to
estimated fair value during fiscal year 2012. See Note 2 for additional information on impairment losses recognized
during fiscal years 2013 and 2012. The aggregate fair value of these assets by their levels in the fair value hierarchy
are as follows:
2013 Annual Report F-33
NOTE 16 • continued
Real estate investments
Real estate held for sale
Total
335 $
Total
2,067 $
$
$
(in thousands)
April 30, 2013
Level 1
0 $
(in thousands)
April 30, 2012
Level 1
0 $
Level 2
0 $
Level 3
335
Level 2
0 $
Level 3
2,067
Financial Assets and Liabilities Not Measured at Fair Value
The following methods and assumptions were used to estimate the fair value of each class of financial assets and
liabilities. The fair values of our financial instruments approximate their carrying amount in our consolidated
financial statements except for debt.
Mortgage Loans Receivable. Fair values are based on the discounted value of future cash flows expected to be
received for a loan using current rates at which similar loans would be made to borrowers with similar credit risk
and the same remaining maturities. Terms are short term in nature and carrying value approximates the estimated
fair value.
Cash and Cash Equivalents. The carrying amount approximates fair value because of the short maturity.
Other Investments. The carrying amount, or cost plus accrued interest, of the certificates of deposit approximates fair
value.
Other Debt. The fair value of other debt is estimated based on the discounted cash flows of the loan using current
market rates, which are estimated based on recent financing transactions (Level 3).
Lines of Credit. The carrying amount approximates fair value because the variable rate debt re-prices frequently.
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,
which are estimated based on recent financing transactions (Level 3).
The estimated fair values of the Company’s financial instruments as of April 30, 2013 and 2012 are as follows:
(in thousands)
2013
Carrying
Amount
Fair Value
2012
Carrying
Amount
94,133
639
94,133
639
39,989
634
Fair Value
39,989
634
18,076
10,000
1,049,206
18,156
10,000
1,160,190
13,875
39,000
1,048,689
13,973
39,000
1,087,082
FINANCIAL ASSETS
Cash and cash equivalents
Other investments
FINANCIAL LIABILITIES
Other debt
Lines of credit
Mortgages payable
2013 Annual Report F-34
NOTE 17 • COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST AND EQUITY
Distribution Reinvestment and Share Purchase Plan. During fiscal years 2013 and 2012, IRET issued 5.3 million
and 4.8 million common shares, respectively, pursuant to its distribution reinvestment and share purchase plan, at a
total value at issuance of $43.1 million and $34.3 million, respectively. The shares issued under the distribution
reinvestment and share purchase plan during fiscal year 2013 consisted of 1.5 million shares valued at issuance at
$12.4 million that were issued for reinvested distributions and approximately 3.8 million shares valued at $30.7
million at issuance that were sold for voluntary cash contributions. The shares issued under the distribution
reinvestment and share purchase plan during fiscal year 2012 consisted of 1.5 million shares valued at issuance at
$10.8 million that were issued for reinvested distributions and approximately 3.3 million shares valued at $23.5
million at issuance that were sold for voluntary cash contributions. 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, and may elect to make voluntary cash contributions for the purchase of
IRET common shares, at a discount (currently 3%) from the market price.
Conversion of Units to Common Shares. During fiscal years 2013 and 2012, respectively, approximately 317,000
and 759,000 Units were converted to common shares, with a total value of $1.6 million and $3.5 million included in
equity.
Issuance of Common and Preferred Shares. On April 5, 2013, the Company completed the public offering of
approximately 6.0 million common shares of beneficial interest at a public offering price of $9.25 per share, for net
proceeds of approximately $53.0 million after underwriting discounts and estimated offering expenses. The
Company contributed the net proceeds from the sale of common shares to the Operating Partnership for general
business purposes, including the acquisition and development of income-producing real estate properties and debt
repayment. The common shares were registered under a shelf registration statement declared effective on May 4,
2010, and which expired on May 4, 2013.
On August 7, 2012, the Company completed the public offering of 4.6 million Series B Cumulative Redeemable
Preferred Shares of Beneficial Interest (“Series B preferred shares”) at a price of $25.00 per share for net proceeds
of approximately $111.2 million after underwriting discounts and estimated offering expenses. These shares are
nonvoting and redeemable for cash at $25.00 per share at the Company’s option on or after August 7, 2017. Holders
of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of
Trustees). Distributions accrue at an annual rate of $1.9875 per share, which is equal to 7.95% of the $25.00 per
share liquidation preference ($115 million liquidation preference in the aggregate). The Company contributed the
net proceeds from the sale to the Operating Partnership for general business purposes, including the acquisition and
development of income-producing real estate properties and debt repayment, in exchange for 4.6 million Series B
preferred units, which carry terms that are substantially the same as the Series B preferred shares. On August 7,
2012, the Operating Partnership used a portion of the proceeds of the offering of Series B preferred shares to repay
$34.5 million in borrowings under its multi-bank line of credit, reducing outstanding borrowings under the line of
credit from $44.5 million to $10.0 million. The Series B preferred shares were registered under a shelf registration
statement declared effective on July 12, 2012. This currently-effective shelf has a remaining unused capacity of $35
million.
In addition to the 4.6 million Series B preferred shares outstanding, the Company also has outstanding
approximately 1.2 million shares of 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest,
issued during the Company’s fiscal year 2004 for total proceeds of $27.3 million, net of selling costs. Holders of the
Company’s Series A preferred shares 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, the Company, at its option, may redeem the shares at a
redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The
shares have no maturity date and will remain outstanding indefinitely unless redeemed by the Company.
During fiscal year 2013, IRET issued 300,000 common shares at a weighted average price per share of $7.24 under
its ATM equity program with BMO Capital Markets Corp. as sales agent, for net proceeds (before offering expenses
but after underwriting discounts and commissions) of $2.1 million, used for general corporate purposes including the
acquisition and development of investment properties. On April 1, 2013 the Company terminated this ATM equity
program, and the Company currently has no ATM equity program in place.
2013 Annual Report F-35
NOTE 18 • QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)
(in thousands, except per share data)
QUARTER ENDED
Revenues
Net income attributable to Investors Real Estate Trust
Net income available to common shareholders
Net income per common share - basic & diluted
QUARTER ENDED
Revenues
Net income attributable to Investors Real Estate Trust
Net income (loss) available to common shareholders
Net income (loss) per common share - basic & diluted
July 31, 2012 October 31, 2012 January 31, 2013 April 30, 2013
65,976 $ 67,011
$
5,324 $ 10,015
$
7,136
2,445 $
$
.07
.03 $
$
64,689
8,512
5,634
.06
61,730
1,679
1,086
.01
$
$
$
$
$
$
$
$
(in thousands, except per share data)
July 31, 2011 October 31, 2011 January 31, 2012 April 30, 2012
60,291 $ 59,932
$ 58,909
3,379
1,421
$
2,786
828
$
.03
.01
$
2,127 $
1,534 $
.02 $
59,946
1,285
692
.01
$
$
$
$
$
$
$
$
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 • REDEEMABLE NONCONTROLLING INTERESTS
Redeemable noncontrolling interests on our Consolidated Balance Sheets represent the noncontrolling interest in a
joint venture of the Company in which the Company’s unaffiliated partner, at its election, could require the
Company to 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. Redeemable noncontrolling interests are presented at the greater of
their carrying amount or redemption value at the end of each reporting period. Changes in the value from period to
period are charged to common shares of beneficial interest on our Consolidated Balance Sheets. The Company
acquired this interest from its joint venture partner in the third quarter of fiscal year 2012. The Company had no
redeemable noncontrolling interests during the fiscal year ended April 30, 2013. As of April 30, 2012 and 2011, the
estimated redemption value of the redeemable noncontrolling interests was $0 and $987,000, respectively. Below is
a table reflecting the activity of the redeemable noncontrolling interests.
Balance at beginning of fiscal year
Net income (loss)
Net distributions
Mark-to-market adjustments
Acquisition of joint venture partner’s interest
Balance at close of fiscal year
NOTE 20 • STOCK BASED COMPENSATION
(in thousands)
2012
2011
$
$
987
12
(27)
35
(1,007)
0
$
$
1,812
(13)
(442)
(370)
0
987
The Company maintains a long-term incentive plan that allows for stock-based awards to officer and non-officer
employees of the Company. Stock based awards are provided to officers, non-officer employees and trustees, under
the Company’s 2008 Incentive Award Plan approved by shareholders on September 16, 2008, which allows for
awards in the form of cash and awards of unrestricted and restricted common shares, up to an aggregate of
2,000,000 shares over the ten year period in which the plan will be in effect. Through April 30, 2013, awards under
the 2008 Incentive Award Plan have consisted of cash awards and grants of unrestricted common shares. No grants
of restricted shares have been made under the 2008 Incentive Award Plan.
In fiscal year 2012, the Company’s Compensation Committee conducted an extensive review of the Company’s
executive compensation philosophy, resulting in a new long-term incentive (“LTIP”) plan, which was approved by
the Compensation Committee and the Company’s independent trustees on June 1, 2012, effective as of May 1, 2012.
2013 Annual Report F-36
NOTE 20 • continued
Under the LTIP, executives are provided the opportunity to earn awards, payable 50% in unrestricted shares and
50% in restricted shares, based on achieving one or more performance objectives within a one-year performance
period (with the performance period for fiscal year 2013 commencing on May 1, 2012 and concluding on April 30,
2013). LTIP performance is evaluated based on the following objective performance goal: Three-Year Average
Annual Total Shareholder Return (“TSR”), which means the average of the Annual Total Shareholder Return for
common shares in each of the three consecutive fiscal years ending with and including the performance period.
“Annual Total Shareholder Return,” and “Three-Year Average Annual Total Shareholder Return,” have the
meanings set forth in the LTIP. The unrestricted shares vest immediately at the end of the one-year performance
period, and the restricted shares vest on the one year anniversary of the award date.
Trustee Awards
We award share based compensation to our trustees on an annual basis in the form of unrestricted shares which vest
immediately. The value of share-based compensation for each trustee was $15,975, $7,560 and $8,650 for each of
the years ended April 2013, 2012, and 2011, respectively.
Total Compensation Expense
Total compensation expense recognized in the consolidated financial statements for the three years ended April 30,
2013 for all share based awards, was as follows (in thousands):
Stock-based compensation expense
NOTE 21 • SUBSEQUENT EVENTS
Year Ended April 30,
2013
0 $
2012
332,000 $
2011
404,000
$
Common and Preferred Share Distributions. On July 1, 2013, 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 14, 2013. On July 1, 2013, the Company paid a distribution of 49.68 cents per share on the Company’s Series
B Cumulative Redeemable Preferred Shares, to preferred shareholders of record on June 14, 2013. On July 1, 2013,
the Company paid a distribution of 13.00 cents per share on the Company’s common shares of beneficial interest, to
common shareholders and UPREIT unitholders of record on June 14, 2013.
Completed Acquisitions and Dispositions. Subsequent to the end of fiscal year 2013, on May 1, 2013, the Company
closed on its acquisition of a 71-unit multi-family residential property in Rapid City, South Dakota, for a purchase
price totaling $6.2 million, of which approximately $2.9 million was paid in cash and the remainder in limited
partnership units of the Operating Partnership valued at approximately $3.3 million. On May 21, 2013, the Company
closed on its acquisition of an approximately 0.69-acre parcel of land in Minot, North Dakota for a purchase price of
approximately $171,000. The purchase price accounting is incomplete for the acquisitions that closed subsequent to
the end of fiscal year 2013.
On May 13, 2013, the Company sold four industrial properties: Bodycote Industrial Building in Eden Prairie,
Minnesota; Metal Improvement Company in New Brighton, Minnesota; Roseville 2929 Long Lake Road in
Roseville, Minnesota and Fargo 1320 45th Street N in Fargo, North Dakota for a total sale price of $19.5 million.
On May 14, 2013, the Company sold a retail property in Eagan, Minnesota, for a sale price of $2.3 million.
Pending Acquisitions. Subsequent to the end of fiscal year 2013, the Company signed purchase agreements to
acquire the following properties; all of these pending acquisitions are subject to various closing conditions and
contingencies, and no assurances can be given that any of these acquisitions will be completed:
• A multi-family residential property in Grand Forks, North Dakota with 96 units, for a purchase price of
$10.6 million, of which approximately $560,000 would be paid through the issuance of limited partnership
units of the Operating Partnership with the remainder in cash and
2013 Annual Report F-37
• An approximately 9-acre parcel of vacant land in Jamestown, North Dakota for a purchase of
approximately $700,000 to be paid in cash.
Pending Dispositions. The Company has signed agreements to sell the following properties; all of these pending
dispositions are subject to various closing conditions and contingencies, and no assurances can be given that any or
all of these transactions will be completed on the terms currently expected, or at all:
•
•
•
•
•
•
•
the Company’s 121,669-square foot Bloomington Business Plaza commercial office property in
Bloomington, Minnesota for a sale price of $4.5 million;
the 322,751-square foot Brooklyn Park 7401 Boone Avenue commercial industrial property in Brooklyn
Park, Minnesota for a sale price of $12.8 million;
the 50,400-square foot Cedar Lake Business Center commercial industrial property in St. Louis Park,
Minnesota for a sale price of $2.6 million;
the 118,125-square foot Nicollett VII commercial office property in Burnsville, Minnesota for a sale price
of $7.2 million;
the 42,929-square foot Pillsbury Business Center commercial office property in Bloomington, Minnesota
for a sale price of $1.3 million;
the 42,510-square foot Clive 2075 NW 94th Street commercial industrial property in Clive, Iowa for a sale
price of $2.7 million and
the 606,006-square foot Dixon Avenue Industrial Park commercial industrial property in Des Moines, Iowa
for a sale price of $14.7 million.
Registration Statement. On June 27, 2013, the Company filed a registration statement with the Securities and
Exchange Commission to enable the Company to offer and sell, from time to time, in one or more offerings, an
indeterminate amount of its common and preferred shares of beneficial interest and debt securities.
2013 Annual Report F-38
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Description
Encumbrances(a)
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
Initial Cost to Company
Gross amount at which carried at
close of period
Multi-Family Residential
11th Street 3 Plex - Minot, ND
4th Street 4 Plex - Minot, ND
Apartments on Main - Minot, ND
Arbors - S Sioux City, NE
Ashland - Grand Forks, ND
Boulder Court - Eagan, MN
Brookfield Village - Topeka, KS
Brooklyn Heights - Minot, ND
Campus Center - St. Cloud, MN
Campus Heights - St. Cloud, MN
Campus Knoll - St. Cloud, MN
Campus Plaza - St. Cloud, MN(1)
Campus Side - St. Cloud, MN(1)
Campus View - St. Cloud, MN(1)
Canyon Lake - Rapid City, SD
Castlerock - Billings, MT
Chateau I - Minot, ND
Cimarron Hills - Omaha, NE
Colonial Villa - Burnsville, MN
Colony - Lincoln, NE
Colton Heights - Minot, ND
Cornerstone - St. Cloud, MN(1)
Cottage West Twin Homes - Sioux Falls, SD
Cottonwood - Bismarck, ND
Country Meadows - Billings, MT
Crestview - Bismarck, ND
Crown - Rochester, MN
Crown Colony - Topeka, KS
East Park - Sioux Falls, SD
Evergreen - Isanti, MN
Evergreen II - Isanti, MN
Fairmont - Minot, ND
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
3
9
$
90 $
104
688
4,000
5,710
3,231
5,385
800
1,280
0
853
0
0
0
2,942
6,773
0
4,879
6,461
13,817
450
0
3,704
16,007
6,790
3,990
2,687
8,350
0
2,049
2,148
356
$
$
11
15
158
350
741
1,067
509
145
395
110
266
54
107
107
305
736
61
706
2,401
1,515
80
54
968
1,056
491
235
261
620
115
380
691
28
53
74
1,123
6,625
7,569
5,498
6,698
1,450
2,244
628
1,512
311
615
615
3,958
4,864
5,663
9,588
11,515
15,731
672
311
3,762
17,372
7,809
4,290
3,289
9,956
2,405
2,740
2,784
337
$
12 $
21
24
1,281
46
2,596
1,269
785
171
72
96
45
85
79
1,009
1,816
326
4,128
4,259
107
392
48
320
2,969
1,210
1,422
171
2,010
728
64
9
51
16
23
179
614
756
1,293
635
206
400
122
273
59
116
111
361
961
61
1,279
2,797
1,526
114
55
991
1,345
534
494
266
817
156
380
691
53
60 $
87
1,126
7,642
7,600
7,868
7,841
2,174
2,410
688
1,601
351
691
690
4,911
6,455
5,989
13,143
15,378
15,827
1,030
358
4,059
20,052
8,976
5,453
3,455
11,769
3,092
2,804
2,793
363
76 $
110
1,305
8,256
8,356
9,161
8,476
2,380
2,810
810
1,874
410
807
801
5,272
7,416
6,050
14,422
18,175
17,353
1,144
413
5,050
21,397
9,510
5,947
3,721
12,586
3,248
3,184
3,484
416
(8)
(11)
(164)
(1,522)
(247)
(2,007)
(1,957)
(804)
(388)
(113)
(263)
(59)
(115)
(112)
(1,357)
(2,267)
(359)
(3,948)
(3,941)
(365)
(697)
(60)
(155)
(5,812)
(3,241)
(2,571)
(270)
(3,897)
(921)
(324)
(117)
(48)
2008
2008
1987
2006
2012
2003
2003
1997
2007
2007
2007
2007
2007
2007
2001
1998
2013
2001
2003
2012
1984
2007
2011
1997
1995
1994
2010
1999
2002
2008
2011
2008
40 years
40 years
24-40 years
40 years
40 years
40 years
40 years
12-40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
33-40 years
24-40 years
40 years
40 years
40 years
40 years
40 years
40 years
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Initial Cost to Company
Gross amount at which carried at
close of period
Description
Encumbrances(a)
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
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
0
Multi-Family Residential - continued
First Avenue - Minot, ND
Forest Park - Grand Forks, ND
Gables Townhomes - Sioux Falls, SD
Grand Gateway - St. Cloud, MN
Greenfield - Omaha, NE
Heritage Manor - Rochester, MN
Indian Hills - Sioux City, IA(1)
Kirkwood Manor - Bismarck, ND
Lakeside Village - Lincoln, NE
Lancaster - St. Cloud, MN
Landmark - Grand Forks, ND
Legacy - Grand Forks, ND
Mariposa - Topeka, KS
Meadows - Jamestown, ND(1)
Monticello Village - Monticello, MN
North Pointe - Bismarck, ND
Northern Valley - Rochester, MN
Oakmont Estates - Sioux Falls, SD
Oakwood Estates - Sioux Falls, SD
Olympic Village - Billings, MT
Olympik Village - Rochester, MN
Oxbow Park - Sioux Falls, SD
Park Meadows - Waite Park, MN
Pebble Springs - Bismarck, ND
Pinehurst - Billings, MT
Pines - Minot, ND
Plaza - Minot, ND
Pointe West - Rapid City, SD
Ponds at Heritage Place - Sartell, MN
Prairie Winds - Sioux Falls, SD
Quarry Ridge - Rochester, MN
Quarry Ridge II - Rochester, MN
Regency Park Estates - St. Cloud, MN
Ridge Oaks - Sioux City, IA
$
0 $
7,816
1,499
5,580
3,642
4,198
0
3,361
13,625
762
1,700
16,222
3,022
0
2,886
3,478
0
2,524
4,107
10,955
4,610
4,011
8,581
792
279
128
5,602
2,731
4,045
1,464
11,599
0
6,966
3,466
$
0
810
349
814
578
403
294
449
1,215
289
184
1,362
399
590
490
303
110
423
543
1,164
1,034
404
1,143
7
72
35
867
240
395
144
1,312
942
702
178
2,677
5,579
1,921
7,086
4,122
6,968
2,921
2,725
15,837
2,899
1,514
21,727
5,110
4,519
3,756
3,957
610
4,838
2,784
10,441
6,109
3,152
9,099
748
687
215
12,784
3,538
4,564
1,816
13,362
16,677
10,198
4,073
$
232 $
6,554
134
353
586
2,422
3,309
1,443
88
981
904
5,870
392
1,200
435
469
64
450
4,134
2,563
1,493
2,468
4,406
132
229
181
2,246
1,453
105
436
964
19
638
2,017
0
1,365
366
909
775
480
375
546
1,216
451
277
2,080
422
653
621
336
119
515
767
1,624
1,154
563
1,545
44
77
49
986
363
395
226
1,347
942
723
272
$
2,909 $
2,909 $
11,578
2,038
7,344
4,511
9,313
6,149
4,071
15,924
3,718
2,325
26,879
5,479
5,656
4,060
4,393
665
5,196
6,694
12,544
7,482
5,461
13,103
843
911
382
14,911
4,868
4,669
2,170
14,291
16,696
10,815
5,996
12,943
2,404
8,253
5,286
9,793
6,524
4,617
17,140
4,169
2,602
28,959
5,901
6,309
4,681
4,729
784
5,711
7,461
14,168
8,636
6,024
14,648
887
988
431
15,897
5,231
5,064
2,396
15,638
17,638
11,538
6,268
(3)
(4,462)
(79)
(256)
(641)
(3,206)
(944)
(1,528)
(365)
(1,329)
(896)
(8,591)
(1,185)
(1,811)
(1,016)
(1,206)
(54)
(1,464)
(2,830)
(4,061)
(1,612)
(2,446)
(5,283)
(299)
(245)
(121)
(1,635)
(2,095)
(73)
(1,107)
(2,385)
(385)
(474)
(1,883)
2013
1993
2011
2012
2007
1998
2007
1997
2012
2000
1997
1995-2005
2004
1998
2004
1995-2011
2010
2002
1993
2000
2005
1994
1997
1999
2002
1997
2009
1994
2012
1993
2006
2012
2011
2001
40 years
24-40 years
40 years
40 years
40 years
40 years
40 years
12-40 years
40 years
40 years
40 years
24-40 years
40 years
40 years
40 years
24-40 years
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
40 years
24-40 years
40 years
40 years
40 years
40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Description
Encumbrances(a)
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
Initial Cost to Company
Gross amount at which carried at
close of period
Multi-Family Residential - continued
Rimrock West - Billings, MT
Rocky Meadows - Billings, MT
Rum River - Isanti, MN
Sherwood - Topeka, KS
Sierra Vista - Sioux Falls, SD
South Pointe - Minot, ND
Southview - Minot, ND
Southwind - Grand Forks, ND
Summit Park - Minot, ND
Sunset Trail - Rochester, MN
Sycamore Village - Sioux Falls, SD
Temple - Minot, ND
Terrace Heights - Minot, ND
Thomasbrook - Lincoln, NE
University Park Place - St. Cloud, MN(1)
Valley Park - Grand Forks, ND
Villa West - Topeka, KS
Village Green - Rochester, MN
West Stonehill - Waite Park, MN
Westridge - Minot, ND
Westwood Park - Bismarck, ND
Whispering Ridge - Omaha, NE
Williston Garden - Williston, ND
Winchester - Rochester, MN
Woodridge - Rochester, MN
Total Multi-Family Residential
$
$
3,392 $
5,260
3,677
12,534
1,450
8,954
1,082
5,719
1,110
8,259
0
81
185
6,076
0
3,946
12,446
1,237
8,783
1,716
2,012
22,000
13,523
3,028
6,560
330
656
843
1,142
241
550
185
400
161
336
101
0
29
600
78
294
1,590
234
939
68
116
2,139
1,400
748
370
376,225 $ 46,532
Commercial Office
1st Avenue Building - Minot, ND
2030 Cliff Road - Eagan, MN
610 Business Center IV - Brooklyn Park, MN
$
0 $
967
7,011
30
146
975
$
$
$
3,489
5,726
4,823
14,684
2,097
9,548
469
5,034
1,898
12,814
1,317
0
312
10,306
450
4,137
15,760
2,296
10,167
1,887
1,909
25,424
17,712
5,622
6,028
504,983
80
835
5,542
$
$
$
1,413 $
996
105
2,729
322
2,351
314
2,627
1,145
2,322
470
228
83
2,871
73
2,674
80
619
4,654
90
1,673
0
0
1,597
1,754
431
767
848
1,590
251
1,305
236
719
292
536
152
0
40
1,151
80
533
1,595
357
1,378
74
260
2,139
1,400
1,003
485
108,181 $ 57,889
(41) $
90
2,886
33
158
980
$
$
$
4,801 $
6,611
4,923
16,965
2,409
11,144
732
7,342
2,912
14,936
1,736
228
384
12,626
521
6,572
15,835
2,792
14,382
1,971
3,438
25,424
17,712
6,964
7,667
601,807 $
5,232 $
7,378
5,771
18,555
2,660
12,449
968
8,061
3,204
15,472
1,888
228
424
13,777
601
7,105
17,430
3,149
15,760
2,045
3,698
27,563
19,112
7,967
8,152
659,696 $
(1,483)
(2,756)
(749)
(5,699)
(129)
(4,802)
(313)
(3,037)
(1,064)
(4,572)
(536)
(42)
(153)
(3,943)
(81)
(2,178)
(393)
(728)
(6,424)
(250)
(1,204)
(82)
(704)
(1,839)
(3,103)
(140,354)
1999
1995
2007
1999
2011
1995
1994
1995
1997
1999
2002
2006
2006
1999
2007
1999
2012
2003
1995
2008
1998
2012
2012
2003
1997
40 years
40 years
40 years
40 years
40 years
24-40 years
24-40 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
40 years
40 years
40 years
40 years
40 years
40 years
40 years
36 $
69 $
913
8,423
1,071
9,403
245
(273)
(1,711)
1981
2001
2007
33-40 years
40 years
40 years
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
1
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
2
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Initial Cost to Company
Gross amount at which carried at
close of period
Description
Encumbrances(a)
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
Commercial Office - continued
7800 West Brown Deer Road - Milwaukee, WI
American Corporate Center - Mendota Heights, MN
Ameritrade - Omaha, NE
Benton Business Park - Sauk Rapids, MN
Bismarck 715 East Broadway - Bismarck, ND
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
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
Intertech Building - Fenton, MO
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
Minot 2505 16th Street SW - Minot, ND(1)
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
Omaha 10802 Farnam Dr - Omaha, NE
$
$
$
10,709 $
8,909
2,831
560
2,218
0
5,250
1,301
1,719
5,661
17,315
13,211
0
12,160
21,565
8,700
17,988
0
8,221
7,898
8,857
4,418
3,836
5,668
3,895
4,631
781
0
8,895
0
5,163
939
12,332
5,297
1,455
893
327
188
389
1,300
1,641
347
300
588
3,880
2,884
985
2,188
1,899
1,637
3,018
126
2,268
1,437
1,650
2,130
835
1,121
970
1,070
287
298
1,974
429
1,062
359
2,034
2,462
8,756
16,768
7,957
1,261
1,283
6,106
12,138
1,671
2,154
7,808
17,509
14,569
3,507
11,404
21,638
7,763
18,544
15,240
8,362
9,549
14,983
3,968
6,169
10,085
5,734
7,635
1,454
1,724
10,117
6,931
6,358
1,944
14,584
4,374
2,333 $
3,908
65
86
1,126
1,625
3,547
81
976
1,092
957
2,473
904
0
1,424
1,065
3,639
111
427
1,527
2,395
1,275
853
1,501
697
578
174
296
1,450
410
990
284
1,585
392
1,475 $
893
327
188
443
1,313
1,650
347
374
727
4,167
2,919
995
2,188
2,094
1,675
3,018
126
2,268
1,437
1,668
2,165
835
1,121
970
1,070
288
298
2,120
436
1,235
403
2,034
2,818
11,069 $
20,676
8,022
1,347
2,355
7,718
15,676
1,752
3,056
8,761
18,179
17,007
4,401
11,404
22,867
8,790
22,183
15,351
8,789
11,076
17,360
5,208
7,022
11,586
6,431
8,213
1,627
2,020
11,421
7,334
7,175
2,184
16,169
4,410
12,544 $
21,569
8,349
1,535
2,798
9,031
17,326
2,099
3,430
9,488
22,346
19,926
5,396
13,592
24,961
10,465
25,201
15,477
11,057
12,513
19,028
7,373
7,857
12,707
7,401
9,283
1,915
2,318
13,541
7,770
8,410
2,587
18,203
7,228
(3,233)
(7,763)
(2,813)
(359)
(287)
(2,357)
(4,964)
(355)
(1,236)
(2,913)
(2,975)
(3,660)
(1,643)
(1,889)
(4,125)
(1,453)
(7,236)
(5,232)
(1,549)
(2,659)
(4,990)
(696)
(2,161)
(4,185)
(1,888)
(2,716)
(352)
(164)
(2,446)
(2,181)
(1,637)
(744)
(3,104)
(269)
2003
2002
1999
2003
2008
2001
2002
2005
2001
2001
2006
2004
2000
2006
2006
2006
2003
1997
2006
2004
2001
2007
2002
2002
2002
2002
2004
2009
2006
2001
2004
1999
2006
2010
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Initial Cost to Company
Gross amount at which carried at
close of period
Description
Encumbrances(a)
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
Commercial Office - continued
Pacific Hills - Omaha, NE
Pillsbury Business Center - Bloomington, MN
Plaza 16 - Minot, ND
Plaza VII - Boise, ID
Plymouth 5095 Nathan Lane - Plymouth, MN
Plymouth I - Plymouth, MN
Plymouth II - Plymouth, MN
Plymouth III - Plymouth, MN
Plymouth IV & V - Plymouth, MN
Prairie Oak Business Center - Eden Prairie, MN
Rapid City 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(1)
Thresher Square - Minneapolis, MN
Timberlands - Leawood, KS
UHC Office - International Falls, MN
US Bank Financial Center - Bloomington, MN
Viromed - Eden Prairie, MN
Wells Fargo Center - St Cloud, MN
West River Business Park - Waite Park, MN
Westgate - Boise, ID
Whitewater Plaza - Minnetonka, MN
Wirth Corporate Center - Golden Valley, MN
Woodlands Plaza IV - Maryland Heights, MO
Total Commercial Office
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
3
$
$
16,770 $
0
7,434
993
1,215
1,157
1,157
1,425
6,875
3,304
1,171
19,690
1,691
775
852
790
775
1,174
7,080
0
0
13,155
995
13,425
324
6,206
560
4,125
3,830
3,539
4,360
4,220
284
389
300
604
530
367
507
1,336
531
285
1,891
560
178
212
180
143
336
627
1,261
1,094
2,375
119
3,117
666
869
235
1,000
530
970
771
343,753 $ 72,069
$
$
11,988
1,556
5,444
3,058
1,253
1,133
1,264
1,495
12,693
4,069
6,600
18,982
5,496
916
1,123
1,024
1,094
2,200
8,571
6,149
10,026
12,218
2,366
13,350
4,197
8,373
1,195
10,618
4,860
7,659
4,609
472,083
$
$
$
2,179 $
171
3,843
478
83
65
40
365
2,141
1,852
736
554
419
60
251
60
36
83
911
1,755
1,643
1,405
80
610
1
1,448
50
1,921
850
911
1,441
4,507
299
591
351
636
530
367
507
1,338
764
514
1,917
569
186
240
189
151
336
684
1,298
1,104
2,495
119
3,119
666
869
235
1,000
577
971
837
69,623 $ 75,222
13,880 $
1,712
9,085
3,485
1,304
1,198
1,304
1,860
14,832
5,688
7,107
19,510
5,906
968
1,346
1,075
1,122
2,283
9,425
7,867
11,659
13,503
2,446
13,958
4,198
9,821
1,245
12,539
5,663
8,569
5,984
18,387 $
2,011
9,676
3,836
1,940
1,728
1,671
2,367
16,170
6,452
7,621
21,427
6,475
1,154
1,586
1,264
1,273
2,619
10,109
9,165
12,763
15,998
2,565
17,077
4,864
10,690
1,480
13,539
6,240
9,540
6,821
538,553 $ 613,775 $
(2,604)
(551)
(1,291)
(1,027)
(190)
(274)
(305)
(490)
(4,771)
(1,904)
(2,275)
(3,285)
(2,133)
(212)
(295)
(212)
(218)
(526)
(2,616)
(2,539)
(3,648)
(2,603)
(586)
(2,894)
(1,491)
(2,087)
(322)
(3,573)
(1,774)
(2,568)
(1,033)
(138,270)
2006
2001
2009
2003
2007
2004
2004
2004
2001
2003
2000
2006
1999
2005
2005
2005
2005
2004
2003
2002
2002
2006
2004
2005
1999
2005
2003
2003
2002
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
40 years
40 years
40 years
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
4
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Initial Cost to Company
Gross amount at which carried at
close of period
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Description
Commercial Healthcare
2800 Medical Building - Minneapolis, MN
2828 Chicago Avenue - Minneapolis, MN
Airport Medical - Bloomington, MN
Barry Pointe Office Park - Kansas City, MO
Billings 2300 Grant Road - Billings, MT
Burnsville 303 Nicollet Medical (Ridgeview) -
Burnsville, MN
Burnsville 305 Nicollet Medical (Ridgeview South) -
Burnsville, MN
Casper 1930 E 12th Street (Park Place) - Casper,
WY(1)
Casper 3955 E 12th Street (Meadow Wind) - Casper,
WY(1)
Cheyenne 4010 N College Drive (Aspen Wind) -
Cheyenne, WY(1)
Cheyenne 4606 N College Drive (Sierra Hills) -
Cheyenne, WY(1)
Denfeld Clinic - Duluth, MN
Eagan 1440 Duckwood Medical - Eagan, MN
Edgewood Vista - Belgrade, MT
Edgewood Vista - Billings, MT
Edgewood Vista - Bismarck, ND
Edgewood Vista - Brainerd, MN
Edgewood Vista - Columbus, NE(1)
Edgewood Vista - East Grand Forks, MN
Edgewood Vista - Fargo, ND
Edgewood Vista - Fremont, NE
Edgewood Vista - Grand Island, NE(1)
Edgewood Vista - Hastings, NE
Edgewood Vista - Hermantown I, MN
Edgewood Vista - Hermantown II, MN
Edgewood Vista - Kalispell, MT
Edgewood Vista - Minot, ND
Edgewood Vista - Missoula, MT
Edgewood Vista - Norfolk, NE(1)
Edgewood Vista - Omaha, NE
Edgewood Vista - Sioux Falls, SD
Encumbrances(a)
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
$
$
5,399 $
8,379
1,083
1,435
1,645
204
726
0
384
649
8,445
1,071
5,287
0
0
0
0
1,656
1,811
0
1,905
0
0
0
2,902
12,877
593
0
611
16,382
0
613
9,470
870
0
387
1,091
189
439
388
628
695
501
521
35
115
511
587
43
290
775
56
33
49
288
719
70
1,045
109
42
89
314
7,135
11,319
4,678
2,366
1,216
6,842
5,127
5,780
10,494
10,272
7,455
2,597
1,547
779
1,767
9,193
8,999
824
1,352
20,870
490
773
517
9,871
10,517
502
11,590
854
722
547
974
$
2,191 $
5,627
0
103
0
229
729
0
392
649
1,523
1,071
768
162
25
260
40
1
519
5
7
114
54
3
15
9
42
30
44
1,514
33
603
70
72
7
42
12
189
439
388
629
695
501
521
35
115
511
587
44
290
775
56
39
50
288
719
70
1,047
116
42
89
314
$
9,301 $
9,530 $
16,943
4,678
2,461
1,216
8,365
5,895
5,942
17,672
4,678
2,853
1,865
9,436
6,084
6,381
10,519
10,907
10,531
11,160
7,495
2,598
2,066
784
1,774
9,307
9,053
826
1,367
20,879
532
797
560
11,385
10,550
1,105
11,658
919
729
589
986
8,190
3,099
2,587
819
1,889
9,818
9,640
870
1,657
21,654
588
836
610
11,673
11,269
1,175
12,705
1,035
771
678
1,300
(2,343)
(2,764)
(1,497)
(398)
(85)
(1,054)
(741)
(530)
(775)
(903)
(639)
(588)
(447)
(100)
(231)
(1,758)
(1,721)
(106)
(177)
(2,674)
(153)
(100)
(167)
(3,304)
(2,009)
(211)
(714)
(359)
(93)
(171)
(128)
2005
2007
2002
2007
2010
2008
2008
2009
2009
2009
2009
2004
2008
2008
2008
2005
2005
2008
2000
2008
2008
2008
2008
2000
2005
2001
2010
1996
2008
2001
2008
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Description
Commercial Healthcare - continued
Edgewood Vista - Spearfish, SD
Edgewood Vista - Virginia, MN
Edina 6363 France Medical - Edina, MN
Edina 6405 France Medical - Edina, MN
Edina 6517 Drew Avenue - Edina, MN
Edina 6525 Drew Avenue - Edina, MN
Edina 6525 France SMC II - Edina, MN
Edina 6545 France SMC I - Edina MN
Fresenius - Duluth, MN
Garden View - St. Paul, MN
Gateway Clinic - Sandstone, MN
Healtheast St John & Woodwinds - Maplewood &
Woodbury, MN
High Pointe Health Campus - Lake Elmo, MN
Jamestown Medical Office Building - Jamestown, ND
Laramie 1072 N 22nd Street (Spring Wind) - Laramie,
WY(1)
Mariner Clinic - Superior, WI
Minneapolis 701 25th Avenue Medical - Minneapolis,
MN
Missoula 3050 Great Northern - Missoula, MT
Nebraska Orthopedic Hospital - Omaha, NE
Park Dental - Brooklyn Center, MN
Pavilion I - Duluth, MN
Pavilion II - Duluth, MN
Ritchie Medical Plaza - St Paul, MN
Sartell 2000 23rd Street South - Sartell, MN
Spring Creek-American Falls - American Falls, ID
Spring Creek-Boise - Boise, ID
Spring Creek-Eagle - Eagle, ID
Spring Creek-Meridian - Meridian, ID
Spring Creek-Overland - Overland, ID
Spring Creek-Soda Springs - Soda Springs, ID
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
5
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances(a)
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 $
13,932
10,000
8,782
1,133
0
10,170
30,786
716
1,320
959
10,304
5,400
6,200
0
2,097
7,532
1,727
11,964
621
5,525
10,168
6,463
3,256
2,328
2,957
2,141
3,538
3,339
838
$
315
246
0
0
353
388
755
3,480
50
0
66
3,239
1,305
0
406
0
0
640
0
185
1,245
2,715
1,615
0
145
708
263
424
687
66
8,584
11,823
12,675
12,201
660
117
8,054
30,743
1,520
7,408
1,699
18,362
10,528
7,605
10,151
3,781
7,873
1,331
20,272
2,767
8,898
14,673
7,851
11,781
3,870
4,296
3,775
6,724
5,941
2,134
$
65 $
115
1,762
41
529
0
6,018
12,464
2
709
0
0
1,630
0
17
90
1,093
0
1,615
0
31
1,937
1,911
935
0
0
0
0
0
33
330
246
0
0
372
388
1,040
3,480
50
12
66
3,239
1,329
0
406
20
0
640
0
185
1,245
2,715
1,647
0
145
708
263
424
687
66
$
8,634 $
11,938
14,437
12,242
1,170
117
13,787
43,207
1,522
8,105
1,699
8,964 $
12,184
14,437
12,242
1,542
505
14,827
46,687
1,572
8,117
1,765
18,362
12,134
7,605
10,168
3,851
8,966
1,331
21,887
2,767
8,929
16,610
9,730
12,716
3,870
4,296
3,775
6,724
5,941
2,167
21,601
13,463
7,605
10,574
3,871
8,966
1,971
21,887
2,952
10,174
19,325
11,377
12,716
4,015
5,004
4,038
7,148
6,628
2,233
(1,271)
(3,056)
(2,458)
(2,097)
(460)
(4)
(5,226)
(14,411)
(344)
(2,217)
(384)
(5,948)
(2,888)
(76)
(631)
(871)
(1,133)
(93)
(4,764)
(735)
(1,993)
(4,739)
(1,952)
(3,458)
(180)
(214)
(176)
(310)
(286)
(101)
2005
2002
2008
2008
2002
2011
2003
2001
2004
2002
2004
2000
2004
2013
2009
2004
2008
2010
2004
2002
2004
2004
2005
2002
2011
2011
2011
2011
2011
2011
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
6
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances(a)
Land
Buildings &
Improvements
Costs capitalized
subsequent to
acquisition
Buildings &
Improvements
Land
$
$
$
Life on which
depreciation in
latest income
statement is
computed
Date of
Construction
or Acquisition
Accumulated
Depreciation
$
Description
Commercial Healthcare - continued
Spring Creek-Ustick - Meridian, ID
St Michael Clinic - St Michael, MN
Trinity at Plaza 16 - Minot, ND
Wells Clinic - Hibbing, MN
Total Commercial Healthcare
Commercial Industrial
API Building - Duluth, MN
Bloomington 2000 W 94th Street - Bloomington, MN(1)
Bodycote Industrial Building - Eden Prairie, MN
Brooklyn Park 7401 Boone Avenue - Brooklyn Park, MN
Cedar Lake Business Center - St. Louis Park, MN
Clive 2075 NW 94th Street - Clive, IA
Dixon Avenue Industrial Park - Des Moines, IA
Eagan 2785 & 2795 Highway 55 - Eagan, MN
Fargo 1320 45th Street N - Fargo, ND
Lexington Commerce Center - Eagan, MN
Lighthouse - Duluth, MN
Metal Improvement Company - New Brighton, MN
Minnetonka 13600 County Road 62 - Minnetonka, MN
Minot IPS - Minot, ND
Roseville 2929 Long Lake Road - Roseville, MN
Stone Container - Fargo, ND
Stone Container - Roseville, MN
Urbandale 3900 106th Street - Urbandale, IA
Winsted Industrial Building - Winsted, MN
Woodbury 1865 Woodlane - Woodbury, MN
$
$
$
$
$
$
$
$
$
$
0
1,902
4,984
1,463
467
328
568
162
255,386 $ 32,386
796 $
0
1,046
7,411
2,276
2,175
0
0
0
2,348
836
0
2,427
0
0
1,426
4,500
10,702
0
2,679
115
2,133
198
1,368
895
408
1,439
3,058
395
453
90
240
809
416
1,966
440
810
3,680
100
1,108
3,833
2,259
8,987
2,497
423,642
1,605
4,097
1,154
11,643
2,810
2,611
10,758
2,570
3,518
4,352
1,788
2,189
434
5,484
7,272
6,597
7,440
9,893
901
2,628
89,744
0
264
5
2
467
328
568
162
45,163 $ 32,847
$
3 $
1,185
800
2,121
68
47
1,609
0
247
1,982
7
78
2,459
62
1,729
104
254
1,215
53
1,884
115
2,172
198
1,368
895
408
1,439
3,058
395
480
90
240
809
416
2,000
440
882
3,721
100
1,123
Total
4,300
2,851
9,560
2,661
3,833
2,523
8,992
2,499
468,344 $ 501,191 $
1,608 $
5,243
1,954
13,764
2,878
2,658
12,367
2,570
3,765
6,307
1,795
2,267
2,893
5,546
8,967
6,701
7,622
11,067
954
4,497
1,723 $
7,415
2,152
15,132
3,773
3,066
13,806
5,628
4,160
6,787
1,885
2,507
3,702
5,962
10,967
7,141
8,504
14,788
1,054
5,620
(165)
(384)
(361)
(565)
(90,891)
(363)
(972)
(858)
(3,801)
(444)
(246)
(3,501)
(337)
(273)
(2,407)
(408)
(648)
(308)
(59)
(1,506)
(2,608)
(2,176)
(1,732)
(358)
(683)
2011
2007
2011
2004
2004
2006
1992
2002
2007
2002
2002
2008
2010
1999
2004
2002
2009
2012
2006
2001
2001
2007
2001
2007
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
Total Commercial Industrial
$
38,622 $ 20,121
$
$
15,907 $ 20,349
105,423 $ 125,772 $
(23,688)
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Description
Commercial Retail
17 South Main - Minot, ND
Anoka Strip Center - Anoka, MN
Arrowhead First International Bank - Minot, ND
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 4615 Grand - Duluth, MN
Duluth Denfeld Retail - Duluth, MN
Eagan Community - Eagan, MN
Fargo Express Community - Fargo, ND
Forest Lake Auto - Forest Lake, MN(1)
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
Lakeville Strip Center - Lakeville, MN
Minot 1400 31st Ave - Minot, ND(1)
Minot Arrowhead - Minot, ND(1)
Minot Plaza - Minot, ND
Monticello C Store - Monticello, MN(1)
Omaha Barnes & Noble - Omaha, NE
Pine City C-Store - Pine City, MN
Pine City Evergreen Square - Pine City, MN
Rochester Maplewood Square - Rochester, MN(1)
St. Cloud Westgate - St. Cloud, MN
Weston Retail - Weston, WI
Weston Walgreens - Weston, WI
Total Commercial Retail
Initial Cost to Company
Gross amount at which carried at
close of period
Encumbrances(a)
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
$
$
81 $
0
0
329
259
1,473
13,052
364
677
2,235
0
938
0
0
1,541
0
2,331
466
1,280
932
0
15
123
75
208
291
842
5,035
92
130
276
702
374
50
2,446
184
681
566
297
250
46
1,026
0
795
0
2,418
0
0
0
3,008
0
3,041
100
50
65
600
83
154
3,275
918
79
66
35,220 $ 19,099
$
$
75
602
1,165
773
469
2,703
14,665
493
1,800
4,699
1,243
1,420
446
5,304
2,360
4,808
5,551
1,023
2,250
1,142
6,143
3,007
453
770
3,099
357
2,646
8,610
5,535
1,575
1,718
86,904
$
$
$
197 $
25
360
205
214
69
1,987
30
4
160
800
777
13
487
2
251
3,036
1,332
973
852
4,352
17
134
75
208
294
866
5,606
106
131
297
703
386
50
2,480
184
722
1,114
333
253
94
1,038
5,272
147
37
0
12
606
1,966
1,669
27
671
116
80
97
600
83
385
3,652
941
80
67
26,533 $ 21,192
270 $
616
1,525
978
680
2,748
16,081
509
1,803
4,838
2,042
2,185
459
5,757
2,362
5,018
8,039
2,319
3,220
1,946
10,483
8,263
570
775
3,099
369
3,021
10,199
7,181
1,601
2,388
287 $
750
1,600
1,186
974
3,614
21,687
615
1,934
5,135
2,745
2,571
509
8,237
2,546
5,740
9,153
2,652
3,473
2,040
11,521
8,379
650
872
3,699
452
3,406
13,851
8,122
1,681
2,455
111,344 $ 132,536 $
(196)
(160)
(3)
(256)
(196)
(650)
(4,298)
(95)
(407)
(1,114)
(498)
(430)
(120)
(1,485)
(1,092)
(1,683)
(1,486)
(844)
(761)
(613)
(1,054)
(1,403)
(296)
(206)
(1,356)
(96)
(890)
(3,229)
(1,481)
(408)
(412)
(27,218)
2000
2003
2013
2003
2003
2004
2003
2006
2004
2004
2003
2003-2005
2003
2003
1994
2000
2003
2003
2003
2003
2010
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
1973
1993
2003
1995
2003
2003
1999
2004
2003
2006
15 1/2-40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
40 years
Subtotal
$ 1,049,206
$ 190,207
$ 1,577,356
$
265,407
$ 207,499
$ 1,825,471
$ 2,032,970
$
(420,421)
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
7
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Initial Cost to Company
Gross amount at which carried at
close of period
Description
Encumbrances(a)
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
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
F
-
4
8
Unimproved Land
Badger Hills - Rochester, MN
Bismarck 4916 - Bismarck, ND
Bismarck 700 E Main - Bismarck, ND
Cypress Court - St. Cloud, MN
Eagan - Eagan, MN
Georgetown Square - Grand Chute, WI
Grand Forks 2150 - Grand Forks, ND
Grand Forks - Grand Forks, ND
Kalispell - Kalispell, MT
Minot (Southgate Lot 4) - Minot, ND
Monticello - Monticello, MN
Renaissance Heights - Williston, ND
River Falls - River Falls, WI
Urbandale - Urbandale, IA
Weston - Weston, WI
Williston - Williston, ND
Total Unimproved Land
Development in Progress
Arcata
Chateau II - Minot, ND
Commons at Southgate - Minot, ND
Cypress Court - St. Cloud, MN
Landing at Southgate - Minot, ND
Renaissance Heights I - Williston, ND
River Ridge - Bismarck, ND
Total Development in Progress
$
$
$
$
$ 1,050
0
3,250
0
314
0
447
0
423
0
1,860
0
1,600
0
4,278
0
1,400
0
1,882
0
115
0
2,373
0
176
0
5
0
812
0
0
823
0 $ 20,808
$ 2,088
0
61
0
3,691
0
1,136
0
2,262
0
3,080
0
0
576
0 $ 12,894
$
$
$
$
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
569
189
2,180
4,610
4,054
5,895
9,526
27,023
$
$
$
$
0 $
0
558
0
0
0
0
0
23
0
2
0
3
109
0
0
1,050
3,250
872
447
423
1,860
1,600
4,278
1,423
1,882
117
2,373
179
114
812
823
695 $ 21,503
2,088
0 $
61
8
3,691
594 $
1,136
713 $
2,262
1,104 $
3,080
1,102 $
3,073
589
6,594 $ 12,907
$
$
$
$
0 $
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 $
1,050 $
3,250
872
447
423
1,860
1,600
4,278
1,423
1,882
117
2,373
179
114
812
823
21,503 $
569 $
197
2,774
5,323
5,158
6,997
12,586
33,604 $
2,657 $
258
6,465
6,459
7,420
10,077
13,175
46,511 $
2012
2013
2008
2012
2006
2006
2013
2012
2003
2013
2006
2012
2003
2009
2006
2012
2013
2013
2013
2012
2013
2013
2008
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Total
$ 1,049,206 $ 223,909
$ 1,604,379
272,696
241,909
1,859,075
2,100,984
(420,421)
(a) Amounts in this column are the mortgages payable balances as of April 30, 2013. These amounts do not include amounts owing under the Company’s multi-bank line of credit or under the Company’s
construction loans.
(1) As of April 30, 2013, this property was included in the collateral pool securing the Company’s $60.0 million multi-bank line of credit. The Company may add and remove eligible properties from the
collateral pool if certain minimum collateral requirements are satisfied. Advances under the facility may not exceed 60% of the value of properties provided as security.
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2013
Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Reconciliations of total real estate carrying value for the three years ended April 30, 2013, 2012, and 2011 are as
follows:
Balance at beginning of year
Additions during year
Multi-Family Residential
Commercial Office
Commercial Healthcare
Commercial Industrial
Commercial Retail
Improvements and Other
Deductions during year
Cost of real estate sold
Impairment charge
Other(A)
Balance at close of year(B)
(in thousands)
2013
2012
2011
$
1,892,009
$
1,770,798
$
1,800,519
113,859
0
11,122
5,900
1,240
36,375
2,060,505
(21,953)
(305)
(5,277)
2,032,970
$
$
47,433
0
47,408
0
2,316
35,176
1,903,131
(3,498)
(127)
(7,497)
1,892,009
$
4,210
6,836
19,249
3,914
7,169
23,183
1,865,080
(86,994)
0
(7,288)
1,770,798
Reconciliations of accumulated depreciation/amortization for the three years ended April 30, 2013, 2012, and 2011,
are as follows:
Balance at beginning of year
Additions during year
Provisions for depreciation
Deductions during year
Accumulated depreciation on real estate sold
Other(C)
Balance at close of year
(in thousands)
2013
2012
2011
$
373,490
$
328,952
$
308,626
56,611
(6,444)
(3,236)
420,421
$
51,093
(758)
(5,797)
373,490
$
49,375
(25,366)
(3,683)
328,952
$
(A) Consists of miscellaneous disposed assets and assets moved to Development in Progress.
(B) The net basis of the Company’s real estate investments for Federal Income Tax purposes was approximately $1.5 billion, $1.4 billion and
$1.2 billion at April 30, 2013, 2012 and 2011, respectively.
(C) Consists of miscellaneous disposed assets.
2013 Annual Report F-49
Exhibit Index
3.1
3.2
3.3
4.1
4.2
Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, as
amended, incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on
Form S-3 (Reg. No. 333-182451), filed with the SEC on June 29, 2012.
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.
Loan Agreement dated August 12, 2010 by and among IRET Properties, as borrower, the financial
institutions party thereto as lenders, and First International Bank & Trust as lender and lead bank,
incorporated herein by reference to the Company’s Current Report on Form 8-K, filed with the SEC on
August 18, 2010.
Third Amendment to Loan Agreement dated June 15, 2012 by and between IRET Properties, as
borrower, and First International Bank & Trust, as lender, incorporated herein by reference to the
Company’s Current Report on Form 8-K, filed with the SEC on June 22, 2012.
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
10.3
10.4
10.5
10.6
10.7
Letter Agreement dated January 31, 2003, filed as Exhibit 10(i) to the Company’s Form 8-K filed
February 27, 2003, and incorporated herein by reference.
Option Agreement dated January 31, 2003, filed as Exhibit 10(ii) to the Company’s Form 8-K filed
February 27, 2003, and incorporated herein by reference.
Financial Statements of T.F. James Company filed as Exhibit 10 to the Company’s Form 8-K filed
January 31, 2003, and incorporated herein by reference.
Agreement for Purchase and Sale of Property dated February 13, 2004, by and between IRET Properties
and the Sellers specified therein, filed as Exhibit 10.5 to the Company’s Form 10-K filed July 20, 2004, and
incorporated herein by reference.
Contribution Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2006, and
incorporated herein by reference.
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.
10.8* Short-Term Incentive Program, filed as Exhibit 10.1 to the Company’s Form 8-K filed June 4, 2012 and
incorporated herein by reference.
10.9* Long-Term Incentive Program, filed as Exhibit 10.2 to the Company’s Form 8-K filed June 4, 2012 and
incorporated herein by reference.
10.10* Description of Compensation of Trustees and Named Executive Officers, as described in 5.02 in the
Company’s Form 8-K filed June 4, 2012 and incorporated herein by reference.
10.11 Construction and Term Loan Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed March
21, 2013 and incorporated herein by reference.
12.1
Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Share Dividends, filed herewith.
2013 Annual Report
21.1
Subsidiaries of Investors Real Estate Trust, filed herewith.
23.1
Consent of Independent Registered Public Accounting Firm, filed herewith.
23.2
Consent of Independent Registered Public Accounting Firm, filed herewith
31.1
Section 302 Certification of President and Chief Executive Officer, filed herewith.
31.2
Section 302 Certification of Executive 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 Executive Vice President and Chief Financial Officer, filed herewith.
101
The following materials from our Annual Report on Form 10-K for the year ended April 30, 2013
formatted in eXtensible Business Reporting Language ("XBRL"): (i) the Consolidated Balance Sheets, (ii)
the Consolidated Statements of Operations, (iii) the Consolidated Statements of Equity, (iv) the
Consolidated Statements of Cash Flows, and (v) notes to these consolidated financial statements.(1)
Indicates management compensatory plan, contract or arrangement.
________________________
*
(1) Users of this data are advised pursuant to Rule 406T of Regulation S-T that these interactive data files are deemed not filed or part of a
registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, are deemed not filed for purposes of Section 18
of the Exchange Act, and otherwise are not subject to liability under these sections.
2013 Annual Report
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DISTRIBUTIONS
(Unaudited)
Exhibit 12.1
The following table sets forth our ratios of earnings to fixed charges and earnings to combined fixed charges and
preferred share dividends for the periods indicated. The ratio of earnings to fixed charges was computed by dividing
earnings by our fixed charges. The ratio of earnings to combined fixed charges and preferred share dividends was
computed by dividing earnings by our combined fixed charges and preferred share dividends. For purposes of
calculating these ratios, earnings consist of income from continuing operations plus fixed charges, less (income) loss
from non-controlling interests and interest capitalized. Fixed charges consist of interest charges on all indebtedness,
whether expensed or capitalized, the interest component of rental expense and the amortization of debt discounts and
issue costs, whether expensed or capitalized. Preferred share dividends consist of dividends on our Series A
preferred shares.
Earnings
Income from continuing operations
Add:
Combined fixed charges and preferred
distributions (see below)
Less:
(Income) loss noncontrolling interests –
consolidated real estate entities
Interest capitalized
Preferred distributions
Total earnings
Fixed charges
Interest expensed
Interest capitalized
Total fixed charges
Preferred distributions
Total combined fixed charges and preferred
distributions
(in thousands, except ratios)
Fiscal Year Ended April 30,
2013
2012
2011
2010
2009
$
22,964 $
9,763 $
4,373 $
5,534 $
9,512
73,657
68,172
64,954
71,497
72,027
(809)
(742)
(9,229)
(135)
(571)
(2,372)
180
(57)
(2,372)
(22)
(19)
(2,372)
40
(912)
(2,372)
$
85,841 $
74,857 $
67,078 $
74,618 $
78,295
$
$
$
63,686
742
65,229
571
62,525
57
69,106
19
64,428 $
9,229
65,800 $
2,372
62,582 $
2,372
69,125 $
2,372
68,743
912
69,655
2,372
73,657 $
68,172 $
64,954 $
71,497 $
72,027
Ratio of earnings to fixed charges
Ratio of earnings to combined fixed charges and
preferred distributions
1.33
1.17
1.14
1.10
1.07
1.03
1.08
1.04
1.12
1.09
2013 Annual Report
SUBSIDIARIES OF INVESTORS REAL ESTATE TRUST
Name of Subsidiary
DRF Omaha/NOH, LLC
EVI Billings, LLC
EVI Grand Cities, LLC
EVI Sioux Falls, LLC
Forest Park - IRET, Inc.
Forest Park Properties, a North Dakota Limited Partnership
Health Investors Business Trust
IRET-1715 YDR, LLC
IRET-3900 Urbandale, LLC
IRET - 6405 France Medical, LLC
IRET - Ashland Apartments, LLC
IRET - BD, LLC
IRET - Billings 2300 CBR, LLC
IRET - Brenwood, LLC
IRET - Candlelight, LLC
IRET - Canyon Lake, LLC
IRET - Chateau Apartments, LLC
IRET - Cimarron Hills, LLC
IRET - Colony Apartments (NE), LLC
IRET Corporate Plaza, LLC
IRET-Cottage Gables, LLC
IRET - Country Meadows 2, LLC
IRET-Cypress Court Apartments, LLC
IRET - DMS, LLC
IRET - Forest Park, LLC
IRET-Golden Jack, L.L.C.
IRET - Grand Gateway Apartments, LLC
IRET, Inc.
IRET - Indian Hills, LLC
IRET - Jamestown Medical Building, LLC
IRET - Kirkwood Apartments, LLC
IRET - Lakeside Apartments (NE), LLC
IRET - LEXCOM, LLC
IRET - Minot Apartments, LLC
IRET - Minot EV, LLC
IRET - Missoula 3050 CBR, LLC
IRET-MR9, LLC
IRET-MR9 Holding, LLC
IRET - North Pointe Apartments, LLC
IRET - Oakmont, LLC
IRET - Olympic Village (MT), LLC
IRET - Plymouth, LLC
IRET Properties, a North Dakota Limited Partnership
IRET-QR, LLC
IRET-Quarry Ridge, LLC
IRET - Regency Park, LLC
IRET - Ridge Oaks, LLC
IRET - Rimrock, LLC
IRET - River Ridge Apartments, LLC
IRET - Rochester Crown Apartments, LLC
IRET - Rocky Meadows, LLC
IRET - Southbrook & Mariposa, LLC
IRET - Sunset Trail, LLC
IRET - Thomasbrook Apartments, LLC
IRET - Valley Park Manor, LLC
IRET - Villa West Apartments, LLC
IRET - Westwood Park, LLC
IRET - Whispering Ridge Apartments, LLC
IRET-Williston Garden Apartments, LLC
IRET - WRH1, LLC
LSREF Golden Property 14 (WY), LLC
2013 Annual Report
Exhibit 21.1
State of
Incorporation or
Organization
Minnesota
North Dakota
North Dakota
North Dakota
North Dakota
North Dakota
Delaware
Minnesota
Delaware
North Dakota
Delaware
Minnesota
North Dakota
Minnesota
North Dakota
North Dakota
North Dakota
North Dakota
Delaware
North Dakota
North Dakota
North Dakota
North Dakota
Minnesota
Delaware
Delaware
Delaware
North Dakota
North Dakota
North Dakota
North Dakota
Delaware
North Dakota
North Dakota
North Dakota
North Dakota
Delaware
Delaware
North Dakota
South Dakota
North Dakota
Minnesota
North Dakota
Delaware
Delaware
North Dakota
Iowa
North Dakota
North Dakota
North Dakota
North Dakota
North Dakota
Delaware
North Dakota
North Dakota
North Dakota
North Dakota
Delaware
North Dakota
North Dakota
Delaware
continued
Name of Subsidiary
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 Operating Company LLC
WRH Holding, LLC
State of
Incorporation or
Organization
North Dakota
North Dakota
North Dakota
North Dakota
Minnesota
Minnesota
Minnesota
Delaware
Iowa
Delaware
North Dakota
2013 Annual Report
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.1
We have issued our reports dated July 1, 2013, with respect to the consolidated financial statements, financial
statement schedules, and internal control over financial reporting included in the Annual Report of Investors Real
Estate Trust and subsidiaries on Form 10-K for the year ended April 30, 2013. We hereby consent to the
incorporation by reference of said reports in the Registration Statements of Investors Real Estate Trust on Forms S-8
(File Nos. 333-173393, 333-155497, and 333-140176) and on Form S-3 (File Nos. 333-189637, 333-189554, 333-
187620, 333-182165, 333-177143, 333-173568, 333-169710, 333-166162, 333-163267, 333-162349, 333-160948,
333-158001, 333-153715, 333-153714, 333-149081, 333-148529, 333-145714, 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).
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
July 1, 2013
2013 Annual Report
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.2
We consent to the incorporation by reference in Registration Statement Nos. 333-189637, 333-189554, 333-187620,
333-182165, 333-177143, 333-173568, 333-169710, 333-166162, 333-163267, 333-162349, 333-160948, 333-
158001, 333-153715, 333-153714, 333-149081, 333-148529, 333-145714, 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 Nos. 333-173393, 333-140176 and 333-155497 on Form S-8 of our report, dated July
16, 2012 (July 1, 2013, as to the effects of discontinued operations as disclosed in Note 12), relating to the
consolidated financial statements and financial statement schedules of Investors Real Estate Trust and subsidiaries
appearing in this Annual Report on Form 10-K of Investors Real Estate Trust and subsidiaries for the year ended
April 30, 2013.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
July 1, 2013
2013 Annual Report
Certification
Exhibit 31.1
I, Timothy P. Mihalick, 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 1, 2013
By:
/s/ Timothy P. Mihalick
Timothy P. Mihalick, President & CEO
2013 Annual Report
Certification
I, Diane K. Bryantt, certify that:
Exhibit 31.2
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 1, 2013
By:
/s/ Diane K. Bryantt
Diane K. Bryantt, Executive Vice President & CFO
2013 Annual Report
Certification
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, 2013, as filed with the Securities and Exchange Commission on July 1, 2013, (the “Report”), I,
Timothy P. Mihalick, 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/ Timothy P. Mihalick
Timothy P. Mihalick
President and Chief Executive Officer
July 1, 2013
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.
2013 Annual Report
Certification
Exhibit 32.2
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.
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, 2013, as filed with the Securities and Exchange Commission on July 1, 2013, (the “Report”), I
Diane K. Bryantt, Executive 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
Executive Vice President and Chief Financial Officer
July 1, 2013
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.
2013 Annual Report
Shareholder Information
Trustees & Executive Officers
Jeffrey L. Miller, Chairman of the Board
Trustee; Private Investor
Managing Partner of Miller Properties, LLP;
Managing Partner of K&J Miller Holdings LLP
Linda Hall
Trustee; Entrepreneur-in-Residence, Carlson School of
Management, University of Minnesota; Consultant
John T. Reed
Trustee; Private Investor
W. David Scott
Trustee; Chief Executive Officer,
Tetrad Corporation (fka Magnum Resources, Inc.)
Annual Meeting
The Annual Meeting of Shareholders of the company will
be held at 7:00 p.m. CDT on September 17, 2013, at the
Grand Hotel, 1505 North Broadway, Minot, North Dakota.
Shares Listed
The company’s common shares of beneficial interest are
listed on the New York Stock Exchange (NYSE) under the
symbol “IRET.”
The company’s Series A and Series B cumulative preferred
shares of beneficial interest are listed on the NYSE under
the symbols “IRETP” and “IRETPB” respectively.
Stephen L. Stenehjem
Trustee; President & Chief Executive Officer of
Watford City BancShares, Inc., a bank holding company;
President & Chairman of First International Bank & Trust,
Watford City, North Dakota, a state banking and trust
association
John D. Stewart, Vice Chairman of the Board
Trustee; President of Glacial Holdings, Inc. and Glacial
Holdings LLC, multi-family residential and commercial
real estate holding companies;
President of Glacial Holdings Property Management, Inc.,
a property management company
Independent Accountants
Grant Thornton LLP
Minneapolis, Minnesota
Legal Counsel
Leonard Street and Deinard
Minneapolis, Minnesota
Hunton & Williams, LLP
Richmond, Virginia
Jeffrey K. Woodbury
Trustee; Vice President, Acquisitions and Development,
Woodbury Corporation
Timothy P. Mihalick
Trustee; President and Chief Executive Officer
Thomas A. Wentz, Jr.
Trustee; Executive Vice President and Chief Operating
Officer
Michael A. Bosh
Executive Vice President and General Counsel
Diane K. Bryantt
Executive Vice President and Chief Financial Officer
Mark W. Reiling
Executive Vice President of Asset Management
Charles A. Greenberg
Senior Vice President, Commercial Asset Management
Ted E. Holmes
Senior Vice President, Finance
Andrew Martin
Senior Vice President, Residential Property Management
Distribution Reinvestment and Share Purchase Plan
For information on the company’s distribution reinvestment
and share purchase plan, contact the Investor Relations
Department at 701-837-4738 or at info@iret.com.
Form 10-K
A copy of the annual report on Form 10-K for the
company’s fiscal year ended April 30, 2013, 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 Investors
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.
Registrar and Transfer Agent
American Stock Transfer & Trust Company, LLC
Attention: Investors Real Estate Trust
6201 15th Avenue
Brooklyn, New York 11219
888-200-3167