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Share Name | Share Symbol | Market | Type |
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Investors Real Estate Trust - Shares of Beneficial Interest (MM) | NASDAQ:IRETS | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 9.54 | 0 | 01:00:00 |
MINOT, ND (NASDAQ: IRETS) (NASDAQ: IRETP) financial and operating results for the three and six months ended October 31, 2007 are summarized below. For the full report, please access our website at www.iret.com to view the quarterly report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended October 31, 2007 (click on "Investor Relations" and then on "SEC Filings").
During the second quarter of fiscal year 2008, IRET's revenues and Funds From Operations(1) increased from the year-earlier period, primarily due to property acquisitions and a decrease in the level of tenant concessions. Net income declined from the year-earlier period, due in part to the effect of a gain on sale included within discontinued operations in the three and six months ended October 31, 2006. For the three-month period ended October 31, 2007, as compared to the same period of the prior fiscal year:
-- Revenues increased to $54.3 million from $48.6 million. -- Funds From Operations increased to $15.6 million on approximately 70.2 million weighted average shares and units outstanding, from $13.4 million on approximately 63.2 million weighted average shares and units outstanding ($.22 per share and unit compared to $.21 per share and unit). -- Net Income Available to Common Shareholders, as computed under generally accepted accounting principles, was $2.2 million, compared to $2.9 million.
For the six-month period ended October 31, 2007, as compared to the same period of the prior fiscal year:
-- Revenues increased to $107.9 million from $93.0 million. -- Funds From Operations increased to $31.4 million on approximately 69.6 million weighted average shares and units outstanding, from $26.0 million on approximately 62.0 million weighted average shares and units outstanding ($.45 per share and unit compared to $.42 per share and unit). -- Net Income Available to Common Shareholders, as computed under generally accepted accounting principles, was $4.6 million, compared to $5.4 million.
Operating Results:
Net Operating Income (NOI)(2) from stabilized properties(3) increased 1.0%, or $275,000, during the three months ended October 31, 2007, compared to the same period one year ago. The increase in NOI from stabilized properties came almost entirely from our Commercial Medical segment, and is due primarily to a reduction in operating expenses. Net Operating Income from stabilized properties increased 1.2%, or $670,000, in the six months ended October 31, 2007 compared to the six months ended October 31, 2006.
Economic occupancy(4) levels in our portfolio declined in three of our five reportable segments during the three and six months ended October 31, 2007 compared to the three and six months ended October 31, 2006. Economic occupancy rates on a stabilized property basis for the three and six months ended October 31, 2007, as compared to the three months and six months ended October 31, 2006, were as follows:
(in thousands) ------------- Three Months Ended October 31 2007 2006 Change ------------------------ Multi-Family Residential 94.1% 94.4% (0.3%) Commercial-Office 91.7% 90.4% 1.3% Commercial-Medical 95.5% 97.1% (1.6%) Commercial-Industrial 98.0% 93.5% 4.5% Commercial-Retail 86.6% 89.0% (2.4%) (in thousands) ------------- Six Months Ended October 31 2007 2006 Change ------------------------ Multi-Family Residential 93.3% 93.6% (0.3%) Commercial-Office 91.8% 91.2% 0.6% Commercial-Medical 95.7% 96.8% (1.1%) Commercial-Industrial 98.2% 92.7% 5.5% Commercial-Retail 86.6% 89.3% (2.7%)
Acquisitions for the Three and Six Months Ended October 31, 2007:
During the second quarter of fiscal year 2008, IRET completed no property acquisitions. During the first quarter of fiscal year 2008, the Company acquired four office/warehouse properties and a medical office building for a total purchase price of approximately $27.2 million, excluding closing costs.
The following table details the Company's acquisitions during the six months ended October 31, 2007:
Acquisitions (in thousands) ------------ Acquisition Cost ------------ Commercial Property - Office 20,528 sq. ft. Plymouth 5095 Nathan Lane Office Building - Plymouth, MN $ 2,000 ---------- Commercial Property - Medical (including senior housing/ assisted living) 18,502 sq. ft. Barry Pointe Medical Building - Kansas City, MO 3,200 ---------- Commercial Property - Industrial 50,400 sq. ft. Cedar Lake Business Center - St. Louis Park, MN 4,040 528,353 sq. ft. Urbandale Warehouse Building - Urbandale, IA 14,000 69,600 sq. ft. Woodbury 1865 Woodlane - Woodbury, MN 4,000 ---------- Total Property Acquisitions $ 27,240 ==========
Development Activity:
IRET has a number of development projects underway. As of October 31, 2007, the following projects are under construction:
Southdale Medical Building Expansion Project: In July 2007, the Company signed a lease with an anchor tenant committing the Company to construct an approximately 26,000 square foot addition to the Company's existing Southdale Medical Building located in Edina, Minnesota. The estimated cost of this expansion project is approximately $7.5 million, with an additional approximately $2.0 million in relocation, tenant improvement and leasing costs expected to be incurred to relocate tenants in the existing facility. Construction began in September 2007, and the expansion project is scheduled for completion in July 2008. As of October 31, 2007, the Company has funded approximately $770,000 in construction costs for this expansion project.
IRET Corporate Plaza: During fiscal year 2007, the Company purchased an unimproved parcel of land in Minot, North Dakota for approximately $1.8 million. The Company is in the preliminary stages of construction of a mixed-use project for this site, to consist of approximately 67 apartments and 60,100 rentable square feet of office and retail space. The Company currently expects that it will move its Minot, North Dakota offices to this location, occupying approximately one-third of the proposed office/retail space. Current estimates are that the project would be completed in the second quarter of the Company's fiscal year 2009, at a total cost of approximately $17.8 million. However, because further design changes to the project are possible, the cost estimates are not yet firm, and no assurances can be given that this project will be completed as currently proposed. As of October 31, 2007, the Company has funded approximately $3.3 million of the estimated construction cost of this project.
2828 Chicago Avenue Medical Building: In fiscal year 2006, IRET purchased an approximately 55,000-square-foot, five-story medical office building located in Minneapolis, Minnesota. During fiscal year 2007, IRET committed to construct an approximately 56,000-square-foot medical office building adjacent to the existing structure, and an adjoining parking ramp, with a planned project completion date of August 2008 and an estimated total project cost of $15.7 million. As of July 2007, approximately 60% of this new medical office building has been pre-leased to an anchor tenant. Construction on the project began in August 2007, and as of October 31, 2007, the Company has paid approximately $2.2 million in construction costs.
Cottonwood Apartments: During fiscal year 2007, the Company began construction of a multi-family residential property adjacent to three existing apartment buildings owned by the Company in Bismarck, North Dakota. The 67-unit Cottonwood IV apartment complex is expected to cost approximately $6.1 million to construct, and is targeted for completion in the third quarter of fiscal year 2008. As of October 31, 2007, the Company has funded approximately $4.4 million of the estimated construction cost of this project.
Shareholder Equity and Distributions:
During the second quarter of fiscal year 2008, IRET completed a public offering of 6.9 million common shares. The shares were sold at a public offering price of $10.20 per share, before underwriting discounts and commissions. Net proceeds of the offering (after deducting underwriting discounts and offering expenses) included in shareholders' equity totaled $66.4 million.
On October 1, 2007, IRET paid a quarterly distribution of $16.70 cents per share on its common shares and limited partnership units of IRET Properties. This was IRET's 146th consecutive distribution at equal or increasing rates. IRET also paid, on October 1, 2007, a quarterly distribution of $51.56 cents per share on its Series A preferred shares.
(1) The National Association of Real Estate Investment Trusts, Inc. ("NAREIT") defines funds from operations ("FFO") as net income (computed in accordance with generally accepted accounting principles, excluding gains (losses) from sales of property plus real estate depreciation and amortization We consider FFO to be a standard supplemental measure for equity real estate investment trusts because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assume that the value of real estate assets diminishes predictably over time. Since real estate values instead historically rise or fall with market conditions, we believe that FFO provides investors and management with a more accurate indication of our financial and operating results.
(2) We measure the performance of our segments based on NOI, which we define as total revenues less property operating expenses and real estate taxes. We believe that NOI is an important supplemental measure of operating performance for a REIT's operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing and general and administrative expense. NOI does not represent cash generated by operating activities in accordance with GAAP, and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance.
(3) Stabilized properties are those properties owned for the entirety of both periods being compared. While results presented on a stabilized property basis are not determined in accordance with GAAP, management believes that measuring performance on a stabilized property basis is useful to investors and to management because it enables evaluation of how the Company's properties are performing year over year.
(4) Economic occupancy represents actual rental revenues recognized for the period indicated as a percentage of scheduled rental revenues for the period; percentage rents, tenant concessions, straightline adjustments and expense reimbursements are not considered in computing either actual revenues or scheduled rent revenues.
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) for the three months and six months ended October 31, 2007 and 2006 Three Months Ended Six Months Ended October 31 October 31 ------------------ ------------------ (in thousands, except per share data) -------------------------------------- 2007 2006 2007 2006 -------- -------- -------- -------- REVENUE Real estate rentals $ 44,606 $ 40,184 $ 88,766 $ 76,535 Tenant reimbursement 9,668 8,454 19,150 16,445 -------- -------- -------- -------- TOTAL REVENUE 54,274 48,638 107,916 92,980 -------- -------- -------- -------- OPERATING EXPENSE Interest 15,687 14,975 31,129 27,906 Depreciation/amortization related to real estate investments 12,177 11,016 24,382 20,945 Utilities 4,306 3,754 8,262 6,631 Maintenance 6,026 5,463 12,037 10,437 Real estate taxes 6,471 5,498 12,910 10,813 Insurance 607 579 1,258 1,148 Property management expenses 3,675 3,469 7,523 6,720 Administrative expenses 1,101 989 2,223 1,897 Advisory and trustee services 166 68 240 140 Other operating expenses 457 335 710 615 Amortization related to non-real estate investments 340 241 683 458 -------- -------- -------- -------- TOTAL OPERATING EXPENSE 51,013 46,387 101,357 87,710 -------- -------- -------- -------- Operating income 3,261 2,251 6,559 5,270 Interest income 339 537 693 703 Other non-operating income 92 148 373 260 -------- -------- -------- -------- Income before minority interest and discontinued operations and gain (loss) on sale of other investments 3,692 2,936 7,625 6,233 Gain (loss) on sale of other investments 3 (36) 2 (36) Minority interest portion of operating partnership income (859) (636) (1,846) (1,248) Minority interest portion of other partnerships? (income) loss 0 (37) 36 (25) -------- -------- -------- -------- Income from continuing operations 2,836 2,227 5,817 4,924 Discontinued operations, net of minority interest 0 1,281 0 1,697 -------- -------- -------- -------- NET INCOME 2,836 3,508 5,817 6,621 Dividends to preferred shareholders (593) (593) (1,186) (1,186) -------- -------- -------- -------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 2,243 $ 2,915 $ 4,631 $ 5,435 ======== ======== ======== ======== Earnings per common share from continuing operations $ .04 $ .03 $ .09 $ .08 Earnings per common share from discontinued operations .00 .03 .00 .03 -------- -------- -------- -------- NET INCOME PER COMMON SHARE - BASIC AND DILUTED $ .04 $ .06 $ .09 $ .11 ======== ======== ======== ======== The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (in thousands, except per share amounts) -------------------------------------------------- Three Months Ended October 31, 2007 2006 ------------------------ ------------------------ Weighted Per Weighted Per Avg Shares Share Avg Shares Share and Units and Unit and Units and Unit Amount (2) (3) Amount (2) (3) ------------------------ ------------------------ Net income $ 2,836 $ 3,508 Less dividends to preferred shareholders (593) (593) -------- -------- Net income available to common shareholders 2,243 49,675 $ .04 2,915 47,408 $ .06 Adjustments: Minority interest in earnings of Unitholders 859 20,483 1,038 15,757 Depreciation and amortization(1) 12,452 11,262 (Gains)/loss on depreciable property sales (3) (1,817) -------- ------- ------- -------- ------- ------- Funds from operations applicable to common shares and Units $ 15,551 70,158 $ .22 $ 13,398 63,165 $ .21 ======== ======= ======= ======== ======= ======= (in thousands, except per share amounts) -------------------------------------------------- Six Months Ended October 31, 2007 2006 ------------------------ ------------------------ Weighted Per Weighted Per Avg Shares Share Avg Shares Share and Units and Unit and Units and Unit Amount (2) (3) Amount (2) (3) ------------------------ ------------------------ Net income $ 5,817 $ 6,621 Less dividends to preferred shareholders (1,186) (1,186) -------- -------- Net income available to common shareholders 4,631 49,169 $ .09 5,435 47,225 $ .11 Adjustments: Minority interest in earnings of Unitholders 1,846 20,383 1,771 14,760 Depreciation and amortization(4) 24,937 21,467 (Gains)/loss on depreciable property sales (2) (2,637) -------- ------- ------- -------- ------- ------- Funds from operations applicable to common shares and Units $ 31,412 69,552 $ .45 $ 26,036 61,985 $ .42 ======== ======= ======= ======== ======= ======= (1) Real estate depreciation and amortization consists of the sum of depreciation/amortization related to real estate investments and amortization related to non-real estate investments from the Condensed Consolidated Statements of Operations, totaling $12,517 and $11,252, and depreciation/amortization from Discontinued Operations of $0 and $67, less corporate-related depreciation and amortization on office equipment and other assets of $65 and $57, for the three months ended October 31, 2007 and 2006, respectively. (2) UPREIT Units of the Operating Partnership are exchangeable for common shares of beneficial interest on a one-for-one basis. (3) Net income is calculated on a per share basis. FFO is calculated on a per share and unit basis. (4) Real estate depreciation and amortization consists of the sum of depreciation/amortization related to real estate investments and amortization related to non-real estate investments from the Condensed Consolidated Statements of Operations, totaling $25,065 and $21,393, and depreciation/amortization from Discontinued Operations of $0 and $191, less corporate-related depreciation and amortization on office equipment and other assets of $128 and $117, for the six months ended October 31, 2007 and 2006, respectively. RECONCILIATION OF NET OPERATING INCOME TO INCOME BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS AND (LOSS) GAIN ON SALE OF OTHER INVESTMENTS (in thousands) -------------------------------------------------------- Three Months Multi- Ended Family Commercial Commercial Commercial Commercial October Residential -Office -Medical -Industrial -Retail Total 31, 2007 --------- ---------- --------- ---------- --------- ------ Real estate revenue $ 18,329 $ 20,613 $ 8,920 $ 3,027 $ 3,385 $54,274 Real estate expenses 8,706 8,723 2,043 626 987 21,085 --------- ---------- --------- ---------- --------- ------ Net operating income $ 9,623 $ 11,890 $ 6,877 $ 2,401 $ 2,398 33,189 ========= ========== ========= ========== ========= ------ Interest (15,687) Depreciation/ (12,517) amortization Administrative, advisory and trustee fees (1,267) Operating expenses (457) Non-operating income 431 --------- ---------- --------- ---------- --------- ------ Income before minority interest and discontinued operations and (loss) gain on sale of other investments $3,692 ========= ========== ========= ========== ========= ====== (in thousands) -------------------------------------------------------- Three Months Multi- Ended Family Commercial Commercial Commercial Commercial October Residential -Office -Medical -Industrial -Retail Total 31, 2006 --------- ---------- --------- ---------- --------- ------ Real estate revenue $ 16,883 $ 17,795 $ 8,638 $ 1,844 $ 3,478 $48,638 Real estate expenses 7,769 7,549 2,178 195 1,072 18,763 ---------- --------- ---------- --------- --------- ------- Net operating income $ 9,114 $ 10,246 $ 6,460 $ 1,649 $ 2,406 29,875 ========== ========= ========== ========= ========= ------- Interest (14,975) Depreciation/ (11,257) amortization Administrative, advisory and trustee fees (1,057) Operating expenses (335) Non-operating income 685 ---------- --------- ---------- --------- --------- ------ Income before minority interest and discontinued operations and (loss) gain on sale of other investments $2,936 ========== ========= ========== ========= ========= ====== (in thousands) ------------------------------------------------------------- Six Months Multi- Ended Family Commercial Commercial Commercial Commercial October Residential -Office -Medical -Industrial -Retail Total 31, 2007 ---------- --------- ---------- --------- --------- --------- Real estate revenue $ 36,110 $ 41,215 $ 17,885 $ 5,689 $ 7,017 $ 107,916 Real estate expenses 17,016 17,444 4,316 1,125 2,089 41,990 ---------- --------- ---------- --------- --------- --------- Net operating income $ 19,094 $ 23,771 $ 13,569 $ 4,564 $ 4,928 65,926 ========== ========= ========== ========= ========= --------- Interest (31,129) Depreciation/ amortization (25,065) Administrative, advisory and trustee fees (2,463) Operating expenses (710) Non- operating income 1,066 ---------- --------- ---------- --------- --------- --------- Income before minority interest and discontinued operations and (loss) gain on sale of other investments $ 7,625 ========== ========= ========== ========= ========= ========= (in thousands) ------------------------------------------------------------- Six Months Multi- Ended Family Commercial Commercial Commercial Commercial October Residential -Office -Medical -Industrial -Retail Total 31, 2006 ---------- --------- ---------- --------- --------- --------- Real estate revenue $ 32,865 $ 32,624 $ 17,088 $ 3,579 $ 6,824 $ 92,980 Real estate expenses 15,346 13,507 4,288 503 2,105 35,749 ---------- --------- ---------- --------- ---------- -------- Net operating income $ 17,519 $ 19,117 $ 12,800 $ 3,076 $ 4,719 57,231 ========== ========= ========== ========= ========== -------- Interest (27,906) Depreciation/ amortization (21,403) Administrative, advisory and trustee fees (2,037) Operating expenses (615) Non- operating income 963 ---------- --------- ---------- --------- ---------- -------- Income before minority interest and discontinued operations and (loss) gain on sale of other investments $ 6,233 ========== ========= ========== ========= ========== ========
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from projected results. Such risk, uncertainties and other factors include, but are not limited to: potential fluctuations in our operating results; the need for additional capital; the direction of interest rates and their subsequent effect on our business; competition; our ability to attract and retain skilled personnel; and those risk and uncertainties discussed in filings made by us with the Securities and Exchange Commission.
CONTACT: Michelle R. Saari Investors Real Estate Trust PO Box 1988 12 Main Street South Minot, North Dakota 58701 701.837.4738 phone 701.838.8875 fax info@iret.com email www.iret.com
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