Published:
Investors Real Estate Trust Announces Third Quarter Fiscal 2007 Financial Results
Investors Real Estate Trust's (NASDAQ: IRETS)
(NASDAQ: IRETP) financial results for the three and nine months ended
January 31, 2007 are summarized below. For the full report, please access
our website at www.iret.com to view the quarterly report on Form 10-Q filed
with the Securities and Exchange Commission for the quarter ended January
31, 2007 (click on "Investor Relations" and then on "SEC Filings").
During the third quarter of fiscal year 2007, IRET's revenues, funds from
operations and net income increased from the year-earlier period, due to
property acquisitions and improvements in occupancy levels and rental
rates. For the three month period ended January 31, 2007, as compared to
the same period of the prior fiscal year:
-- Revenues increased to $51.4 million from $42.7 million.
-- Funds From Operations increased to $15.6 million on approximately
67,471,000 weighted average shares and units outstanding, from $11.7
million on approximately 59,773,000 weighted average shares and units
outstanding ($.23 per share and unit compared to $.20 per share and unit).
-- Net Income Available to Common Shareholders, as computed under
generally accepted accounting principles, was $2.9 million, compared to
$1.7 million.
For the nine month period ended January 31, 2007, as compared to the same
period of the prior fiscal year:
-- Revenues increased to $144.9 million from $126.9 million.
-- Funds From Operations increased to $41.7 million on approximately
63,832,000 weighted average shares and units outstanding, from $34.5
million on approximately 59,154,000 weighted average shares and units
outstanding ($.65 per share and unit compared to $.58 per share and unit).
-- Net Income Available to Common Shareholders, as computed under
generally accepted accounting principles, was $8.3 million, compared to
$4.8 million.
Occupancy levels in our portfolio showed improvement during the three and
nine months ended January 31, 2007 compared to the three and nine months
ended January 31, 2006, in three out of five segments. Economic occupancy
rates on a stabilized property basis for the three and nine months ended
January 31, 2007, as compared to the three months and nine months ended
January 31, 2006, were as follows:
Three Months Ended January 31:
(in thousands)
--------------------
2007 2006 Change
--------- --------- --------
Multi-Family Residential 93.3% 92.1% 1.2%
Commercial-Office 89.9% 92.8% (2.9%)
Commercial-Medical 97.0% 95.7% 1.3%
Commercial-Industrial 96.4% 86.7% 9.7%
Commercial-Retail 89.4% 89.6% (0.2%)
Nine Months Ended January 31:
(in thousands)
--------------------
2007 2006 Change
--------- --------- --------
Multi-Family Residential 93.6% 91.7% 1.9%
Commercial-Office 90.6% 92.4% (1.8%)
Commercial-Medical 96.8% 95.1% 1.7%
Commercial-Industrial 93.9% 86.6% 7.3%
Commercial-Retail 89.4% 89.5% (0.1%)
Economic occupancy represents actual rental revenues recognized for the
period indicated as a percentage of scheduled rental revenues for the
period; percentage rents, tenant concessions, straight-line adjustments and
expense reimbursements are not considered in computing either actual
revenues or scheduled rent revenues. Stabilized properties are those
properties owned for the entirety of both periods being compared. While
results presented on a stabilized property basis are not determined in
accordance with GAAP, management believes that measuring performance on a
stabilized property basis is useful to investors and to management because
it enables evaluation of how the Company's properties are performing year
over year.
During the third quarter of fiscal year 2007, we have experienced continued
improvement in results at our multi-family residential properties. While
we have had limited success in increasing scheduled rental rates at our
apartment communities, the construction of competing apartment units,
single-family homes and condominium units has abated in most of our
markets. Combined with positive absorption of previously constructed
housing, this reduction in construction of competing product has allowed us
to reduce our levels of vacancy and tenant concessions in our multi-family
residential segment. We have also seen during this period an accelerating
demand for industrial space, although as in past periods rental rates in
this segment continue to remain at levels lower than in prior fiscal years.
We have yet to see any consistent sustained demand for commercial office
space or for existing smaller retail developments, which comprise a
majority of IRET's retail portfolio. Our expectation is that demand in
IRET's markets for our office and retail locations will strengthen through
the fourth quarter of fiscal year 2007.
Acquisitions and Dispositions for the Three and Nine Months Ended January
31, 2007:
During the three months ended January 31, 2007, IRET acquired an office
property and two industrial properties for a total purchase price of
approximately $29.3 million, excluding closing costs. The Company sold a
parcel of vacant land and five small retail properties for a total sale
price of approximately $2.7 million during the three months ended January
31, 2007.
During the first and second quarters of fiscal year 2007, the Company
acquired a small retail property, five parcels of vacant land, two
apartment complexes, and a senior housing complex with adjoining land.
Additionally, the Company completed the largest acquisition in its history
when it acquired in September 2006 a portfolio of nine office properties
from subsidiaries of Magnum Resources, Inc., an Omaha, Nebraska-based real
estate services and investment company. IRET has established an office in
Omaha and property management offices in Kansas City and St. Louis to
manage these new office properties. The Company also completed
construction on a commercial retail property. The Company disposed of a
parcel of vacant land, a small office building, an apartment complex, an
assisted living facility and five small retail properties during the first
and second quarters of fiscal year 2007.
The following table details the Company's acquisitions and dispositions
during the nine months ended January 31, 2007:
Acquisitions (in thousands)
---------------
Acquisition
Cost
---------------
Multi-Family Residential
Arbors Apartments - Sioux City, NE $ 7,000
Quarry Ridge Apartments - Rochester, MN 14,570
---------------
Commercial Property - Office
Pacific Hills - Omaha, NE 16,502
Corporate Center West - Omaha, NE 21,497
Farnam Executive Center - Omaha, NE 12,853
Miracle Hills One - Omaha, NE 11,950
Woodlands Plaza IV - Maryland Heights, MO 5,840
Riverport - Maryland Heights, MO 21,906
Timberlands - Leawood, KS 14,546
Flagship - Eden Prairie, MN 26,094
Gateway Corporate Center - Woodbury, MN 9,612
Highlands Ranch I - Highlands Ranch, CO 12,250
---------------
Commercial Property - Medical (including assisted living)
Fox River Cottages - Grand Chute, WI 3,200
---------------
Commercial Property - Industrial
Bloomington 2000 - Bloomington, MN 6,750
Roseville 2929 - Roseville, MN 10,300
---------------
Commercial Property - Retail
Dakota West Plaza - Minot, ND 625
Weston Walgreens - Weston, WI* 2,144
---------------
Undeveloped Property
Monticello Undeveloped Parcel (City) - Monticello, MN 5
St. Michaels Undeveloped - St. Michael, MN 320
Monticello Undeveloped Parcel (Other) - Monticello, MN 75
Weston Undeveloped - Weston, WI 800
Quarry Ridge Undeveloped - Rochester, MN 930
---------------
Total Property Acquisitions $ 199,769
===============
* Development property placed in service May 1, 2006.
Dispositions (in thousands)
-----------------------------
Book
Value
Sales and Sales
Price Cost Gain/Loss
--------- --------- ---------
Multi-Family Residential
Clearwater Apartments - Boise, ID $ 4,000 $ 3,382 $ 618
--------- --------- ---------
Commercial Property - Office
Greenwood Office - Greenwood, MN 1,500 961 539
--------- --------- ---------
Commercial Property - Medical (Assisted
Living)
Wedgewood Sweetwater - Lithia Springs, GA 4,550 3,836 714
--------- --------- ---------
Commercial Property - Retail
Moundsview Bakery - Mounds View, MN 380 287 93
Howard Lake C-Store - Winsted, MN 550 374 176
Wilmar Sam Goody - Wilmar, MN 450 409 41
Winsted C-Store - Winsted, MN 190 214 (24)
Buffalo Strip Center - Buffalo, MN 800 567 233
Long Prairie C-Store - Long Prairie, MN 302 304 (2)
Faribault Checkers Auto - Faribault, MN 525 337 188
Paynesville C-Store - Paynesville, MN 149 150 (1)
Prior Lake Strip Center I - Prior Lake, MN 1,105 993 112
Prior Lake Strip Center III - Prior Lake, MN 545 465 80
--------- --------- ---------
Undeveloped Property
IGH Land - Inver Grove Heights, MN 900 613 287
Long Prairie Vacant Land - Long Prairie, MN 59 60 (1)
--------- --------- ---------
Total Property Dispositions $ 16,005 $ 12,952 $ 3,053
========= ========= =========
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
for the three months and nine months ended
January 31, 2007 and 2006
Three Months Ended Nine Months Ended
January 31 January 31
-------------------- --------------------
(in thousands, except per share data)
------------------------------------------
2007 2006 2007 2006
--------- --------- --------- ---------
REVENUE
Real estate rentals $ 42,560 $ 36,332 $ 119,611 $ 105,935
Tenant reimbursement 8,812 6,403 25,261 20,975
--------- --------- --------- ---------
TOTAL REVENUE 51,372 42,735 144,872 126,910
--------- --------- --------- ---------
OPERATING EXPENSE
Interest 15,283 12,984 43,317 38,142
Depreciation/amortization
related to real estate
investments 11,756 9,204 32,778 27,608
Utilities 4,044 3,316 10,730 9,598
Maintenance 5,000 4,927 15,482 14,649
Real estate taxes 6,174 4,755 17,038 14,682
Insurance 620 697 1,780 2,021
Property management expenses 3,338 2,884 10,111 8,968
Administrative expense 1,169 957 3,066 2,786
Advisory and trustee
services 68 57 208 163
Other operating expenses 319 399 933 951
Amortization related to
non-real estate investments 261 202 720 512
Loss on impairment of real
estate investments 0 0 150 0
--------- --------- --------- ---------
TOTAL OPERATING EXPENSE 48,032 40,382 136,313 120,080
--------- --------- --------- ---------
Operating income 3,340 2,353 8,559 6,830
Non-operating income 1,008 404 1,970 857
--------- --------- --------- ---------
Income before minority interest
and discontinued operations
and (loss) gain on sale of
other investments 4,348 2,757 10,529 7,687
(Loss) gain on sale of other
investments 0 0 (36) 1
Minority interest portion of
operating partnership income (1,071) (476) (2,310) (1,271)
Minority interest portion of
other partnerships' loss
(income) 12 (73) (13) (256)
--------- --------- --------- ---------
Income from continuing
operations 3,289 2,208 8,170 6,161
Discontinued operations, net of
minority interest 165 113 1,905 405
--------- --------- --------- ---------
NET INCOME 3,454 2,321 10,075 6,566
Dividends to preferred
shareholders (593) (593) (1,779) (1,779)
--------- --------- --------- ---------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 2,861 $ 1,728 $ 8,296 $ 4,787
========= ========= ========= =========
Earnings per common share from
continuing operations $ .06 $ .04 $ .13 $ .09
Earnings per common share from
discontinued operations .00 .00 .04 .01
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE -
BASIC AND DILUTED $ .06 $ .04 $ .17 $ .10
========= ========= ========= =========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
(in thousands, except per share amounts)
Three Months -----------------------------------------------------------
Ended January 31, 2007 2006
-----------------------------------------------------------
Weighted Per Weighted Per
Avg Shares Share Avg Shares Share
and and and and
Amount Units(2) Unit(3) Amount Units(2) Unit(3)
-------- --------- --------- -------- --------- ---------
Net income $ 3,454 $ $ 2,321 $
Less dividends
to preferred
shareholders (593) (593)
-------- --------
Net income
available to
common
shareholders 2,861 47,895 .06 1,728 46,166 .04
Adjustments:
Minority
interest in
earnings of
Unitholders 1,139 19,576 509 13,607
Depreciation
and
amortization
(1) 11,971 9,475
Gains on
depreciable
property sales (349) 0
-------- --------- --------- -------- --------- ---------
Funds from
operations
applicable to
common shares
and Units $ 15,622 67,471 $ .23 $ 11,712 59,773 $ .20
======== ========= ========= ======== ========= =========
(in thousands, except per share amounts)
Nine Months -----------------------------------------------------------
Ended January 31, 2007 2006
-----------------------------------------------------------
Weighted Per Weighted Per
Avg Shares Share Avg Shares Share
and and and and
Amount Units(2) Unit(3) Amount Units(2) Unit(3)
-------- --------- --------- -------- --------- ---------
Net income $ 10,075 $ $ 6,566 $
Less dividends
to preferred
shareholders (1,779) (1,779)
-------- --------
Net income
available to
common
shareholders 8,296 47,466 .17 4,787 45,717 .10
Adjustments:
Minority
interest in
earnings of
Unitholders 2,909 16,366 1,421 13,437
Depreciation
and
amortization
(4) 33,439 28,325
Gains on
depreciable
property sales (2,986) (22)
-------- --------- --------- -------- --------- ---------
Funds from
operations
applicable to
common shares
and Units $ 41,658 63,832 $ .65 $ 34,511 59,154 $ .58
======== ========= ========= ======== ========= =========
(1) Real estate depreciation and amortization consists of the sum of
depreciation/amortization related to real estate investments and
amortization related to non-real estate investments from the Condensed
Consolidated Statements of Operations, totaling $12,017 and $9,406,
and depreciation/amortization from Discontinued Operations of $12 and
$126, less corporate-related depreciation and amortization on office
equipment and other assets of $58 and $57, for the three months ended
January 31, 2007 and 2006, respectively.
(2) UPREIT Units of the Operating Partnership are exchangeable for common
shares of beneficial interest on a one-for-one basis.
(3) Net income is calculated on a per share basis. FFO is calculated on a
per share and unit basis.
(4) Real estate depreciation and amortization consists of the sum of
depreciation/amortization related to real estate investments and
amortization related to non-real estate investments from the Condensed
Consolidated Statements of Operations, totaling $33,498 and $28,120,
and depreciation/amortization from Discontinued Operations of $116 and
$377, less corporate-related depreciation and amortization on office
equipment and other assets of $175 and $172, for the nine months ended
January 31, 2007 and 2006, respectively.
Certain statements in this press release are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements involve known and unknown risks, uncertainties and other
factors that may cause actual results to differ materially from projected
results. Such risk, uncertainties and other factors include, but are not
limited to: potential fluctuations in our operating results; the need for
additional capital; the direction of interest rates and their subsequent
effect on our business; competition; our ability to attract and retain
skilled personnel; and those risk and uncertainties discussed in filings
made by us with the Securities and Exchange Commission.
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