CENTERSPACE - FORM 10-Q - March 14, 2011

Attached files

file	filename
EX-10 - COMPENSATION TABLE - CENTERSPACE	iretexhibit10-03142011.htm
EX-31.1 - CERTIFICATION - TIMOTHY, P. MIHALICK - CENTERSPACE	iretexhibit311-03142011.htm
EX-12 - CALCULATION ON RATIO EARNINGS TO FIXED CHARGES - CENTERSPACE	iretexhibit12-03142011.htm
EX-32 - SECTION 906 OF THE SARBANES-OXLEY OF 2002 - CENTERSPACE	iretexhibit32-03142011.htm
EX-31.2 - CERTIFICATION - DIANE K. BRYANTT - CENTERSPACE	iretexhibit312-03142011.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For Quarter Ended January 31, 2011

Commission File Number 0-14851

INVESTORS REAL ESTATE TRUST

(Exact name of registrant as specified in its charter)

North Dakota	45-0311232
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
Post Office Box 1988
3015 16th Street SW, Suite 100
Minot, ND 58702-1988
(Address of principal executive offices) (Zip code)

(701) 837-4738

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report.)

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 the filing requirements for at least the past 90 days.

Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes £ No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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.

Large accelerated filer £ Accelerated filer R

Non-accelerated filer £ Smaller Reporting Company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No R

Registrant is a North Dakota Real Estate Investment Trust. As of March 7, 2011, it had 80,056,089 common shares of beneficial interest outstanding.

TABLE OF CONTENTS

	Page
Part I. Financial Information
Item 1. Financial Statements - Third Quarter - Fiscal 2011:	3
Condensed Consolidated Balance Sheets (unaudited)	3
January 31, 2011 and April 30, 2010
Condensed Consolidated Statements of Operations (unaudited)	4
For the Three and Nine Months ended January 31, 2011 and 2010
Condensed Consolidated Statements of Equity (unaudited)	5
For the Nine Months ended January 31, 2011 and 2010
Condensed Consolidated Statements of Cash Flows (unaudited)	6
For the Nine Months ended January 31, 2011 and 2010
Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	38
Item 4. Controls and Procedures	38

Part II. Other Information
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Reserved	39
Item 5. Other Information	39
Item 6. Exhibits	39
Signatures	40

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PART I

ITEM 1. FINANCIAL STATEMENTS - THIRD QUARTER - FISCAL 2011

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

	(in thousands, except share data)
	January 31, 2011			April 30, 2010
ASSETS
Real estate investments
Property owned	$	1,763,585		$	1,800,519
Less accumulated depreciation		(319,235	)		(308,626	)
		1,444,350			1,491,893
Development in progress		4,231			2,831
Unimproved land		7,470			6,007
Mortgage loans receivable, net of allowance of $3 and $3, respectively		157			158
Total real estate investments		1,456,208			1,500,889
Other assets
Cash and cash equivalents		30,907			54,791
Marketable securities – available-for-sale		325			420
Receivable arising from straight-lining of rents, net of allowance of $982 and $912, respectively		18,656			17,320
Accounts receivable, net of allowance of $272 and $257, respectively		8,864			4,916
Real estate deposits		254			516
Prepaid and other assets		2,852			1,189
Intangible assets, net of accumulated amortization of $45,218 and $39,571, respectively		51,543			50,700
Tax, insurance, and other escrow		18,467			9,301
Property and equipment, net of accumulated depreciation of $1,223 and $924, respectively		1,332			1,392
Goodwill		1,127			1,388
Deferred charges and leasing costs, net of accumulated amortization of $14,309 and $13,131, respectively		19,737			18,108
TOTAL ASSETS	$	1,610,272		$	1,660,930

LIABILITIES AND EQUITY
LIABILITIES
Accounts payable and accrued expenses	$	35,633		$	38,514
Revolving lines of credit		10,000			6,550
Mortgages payable		998,929			1,057,619
Other		8,423			1,320
TOTAL LIABILITIES		1,052,985			1,104,003
COMMITMENTS AND CONTINGENCIES (NOTE 6)
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES		1,237			1,812
EQUITY
Investors Real Estate Trust shareholders’ equity
Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 1,150,000 shares issued and outstanding at January 31, 2011 and April 30, 2010, aggregate liquidation preference of $28,750,000)		27,317			27,317
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 79,845,749 shares issued and outstanding at January 31, 2011, and 75,805,159 shares issued and outstanding at April 30, 2010)		616,701			583,618
Accumulated distributions in excess of net income		(223,684	)		(201,412	)
Total Investors Real Estate Trust shareholders’ equity		420,334			409,523
Noncontrolling interests – Operating Partnership (20,047,190 units at January 31, 2011 and 20,521,365 units at April 30, 2010)		126,335			134,970
Noncontrolling interests – consolidated real estate entities		9,381			10,622
Total equity		556,050			555,115
TOTAL LIABILITIES AND EQUITY	$	1,610,272		$	1,660,930

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

for the three and nine months ended January 31, 2011 and 2010

	Three Months Ended January 31						Nine Months Ended January 31
	(in thousands, except per share data)
	2011			2010			2011			2010
REVENUE
Real estate rentals	$	47,849		$	46,374		$	143,498		$	138,389
Tenant reimbursement		12,354			10,960			34,785			33,712
TOTAL REVENUE		60,203			57,334			178,283			172,101
EXPENSES
Depreciation/amortization related to real estate investments		13,902			13,907			41,603			41,254
Utilities		4,775			4,370			13,184			12,388
Maintenance		8,358			7,282			22,001			20,464
Real estate taxes		7,780			7,504			23,068			22,759
Insurance		646			910			1,866			2,692
Property management expenses		5,478			4,619			15,535			12,606
Administrative expenses		1,716			1,683			5,055			4,404
Advisory and trustee services		134			107			482			371
Other expenses		441			536			1,357			1,468
Amortization related to non-real estate investments		689			590			1,978			1,710
Impairment of real estate investments		0			0			0			708
TOTAL EXPENSES		43,919			41,508			126,129			120,824
Gain on involuntary conversion		0			1,660			0			1,660
Interest expense		(15,888	)		(16,534	)		(48,395	)		(49,306	)
Interest income		75			138			194			264
Other income		32			112			217			239
Income from continuing operations		503			1,202			4,170			4,134
Income (loss) from discontinued operations		14,085			(838	)		19,871			(1,001	)
NET INCOME		14,588			364			24,041			3,133
Net (income) loss attributable to noncontrolling interests – Operating Partnership		(2,793	)		39			(4,485	)		(381	)
Net loss attributable to noncontrolling interests – consolidated real estate entities		38			49			82			2
Net income attributable to Investors Real Estate Trust		11,833			452			19,638			2,754
Dividends to preferred shareholders		(593	)		(593	)		(1,779	)		(1,779	)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	11,240		$	(141	)	$	17,859		$	975
Earnings per common share from continuing operations – Investors Real Estate Trust – basic and diluted		.00			.01			.03			.03
Earnings per common share from discontinued operations – Investors Real Estate Trust – basic and diluted		.14			(.01	)		.20			(.01	)
NET INCOME PER COMMON SHARE – BASIC AND DILUTED	$	.14		$	.00		$	.23		$	.02
DIVIDENDS PER COMMON SHARE	$	.1715		$	.1715		$	.5145		$	.5130

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

for the nine months ended January 31, 2011 and 2010

	(in thousands)
	NUMBER OF PREFERRED SHARES		PREFERRED SHARES		NUMBER OF COMMON SHARES			COMMON SHARES			ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME			NONCONTROLLING INTERESTS			TOTAL EQUITY
Balance April 30, 2009		1,150	$	27,317		60,304		$	461,648		$	(155,956	)	$	160,398		$	493,407
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests												2,754			336			3,090
Distributions – common shares and units												(34,359	)		(10,720	)		(45,079	)
Distributions – preferred shares												(1,779	)					(1,779	)
Distribution reinvestment plan						923			7,821									7,821
Shares issued						12,463			99,022									99,022
Partnership units issued															2,888			2,888
Redemption of units for common shares						277			1,678						(1,678	)		0
Adjustments to redeemable noncontrolling interests									(134	)								(134	)
Other						(1	)		(596	)					(814	)		(1,410	)
Balance January 31, 2010		1,150	$	27,317		73,966		$	569,439		$	(189,340	)	$	150,410		$	557,826



Balance April 30, 2010		1,150	$	27,317		75,805		$	583,618		$	(201,412	)	$	145,592		$	555,115
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests												19,638			4,408			24,046
Distributions – common shares and units												(40,131	)		(10,365	)		(50,496	)
Distributions – preferred shares												(1,779	)					(1,779	)
Distribution reinvestment plan						998			8,356									8,356
Shares issued						2,213			18,411									18,411
Partnership units issued															3,252			3,252
Redemption of units for common shares						831			6,007						(6,007	)		0
Adjustments to redeemable noncontrolling interests									570									570
Other						(1	)		(261	)					(1,164	)		(1,425	)
Balance January 31, 2011		1,150	$	27,317		79,846		$	616,701		$	(223,684	)	$	135,716		$	556,050

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

for the nine months ended January 31, 2011 and 2010

	Nine Months Ended January 31 (in thousands)
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	24,041		$	3,133
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		45,951			45,754
Gain on sale of real estate, land and other investments		(19,365	)		0
Gain on involuntary conversion		0			(1,660	)
Impairment of real estate investments		0			1,678
Bad debt expense		487			1,078
Changes in other assets and liabilities:
Increase in receivable arising from straight-lining of rents		(1,441	)		(1,213	)
Increase in accounts receivable		(4,033	)		(2,765	)
Increase in prepaid and other assets		(1,663	)		(852	)
Decrease (increase) in tax, insurance and other escrow		630			(2,783	)
Increase in deferred charges and leasing costs		(5,015	)		(3,244	)
(Decrease) increase in accounts payable, accrued expenses, and other liabilities		(1,208	)		3,773
Net cash provided by operating activities		38,384			42,899
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from real estate deposits		2,297			1,612
Payments for real estate deposits		(2,035	)		(2,502	)
Principal proceeds on mortgage loans receivable		1			1
Proceeds from sale of marketable securities – available-for-sale		95			0
Increase in restricted cash		0			(36,500	)
Increase in restricted construction accounts		(9,796	)		0
Proceeds from sale of real estate - discontinued operations		81,539			103
Proceeds from sale of real estate and other investments		0			35
Insurance proceeds received		329			705
Payments for acquisitions and improvements of real estate investments		(55,437	)		(72,947	)
Net cash provided (used) by investing activities		16,993			(109,493	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages payable		97,654			122,265
Principal payments on mortgages payable		(160,632	)		(99,362	)
Principal payments on revolving lines of credit and other debt		(25,650	)		(15,538	)
Proceeds from revolving lines of credit and other debt		36,300			15,500
Proceeds from sale of common shares, net of issue costs		18,158			98,872
Repurchase of fractional shares and partnership units		(10	)		(10	)
Payments for acquisition of noncontrolling interests – consolidated real estate entities		(425	)		(475	)
Distributions paid to common shareholders, net of reinvestment of $7,831 and $7,242, respectively		(32,300	)		(27,117	)
Distributions paid to preferred shareholders		(1,779	)		(1,779	)
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership, net of reinvestment of $525 and $579, respectively		(9,840	)		(10,141	)
Distributions paid to noncontrolling interests – consolidated real estate entities		(737	)		(926	)
Distributions paid to redeemable noncontrolling interests – consolidated real estate entities		0			(149	)
Net cash (used) provided by financing activities		(79,261	)		81,140
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(23,884	)		14,546
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		54,791			33,244
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	30,907		$	47,790

(continued)

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, continued)

for the nine months ended January 31, 2011 and 2010

	Nine Months Ended January 31 (in thousands)
	2011			2010
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES FOR THE PERIOD
Distribution reinvestment plan	$	7,831		$	7,242
Operating partnership distribution reinvestment plan		525			579
Assets acquired through the issuance of operating partnership units		3,252			2,888
Operating partnership units converted to shares		6,007			1,678
Real estate investment acquired through assumption of indebtedness and accrued costs		4,288			0
Adjustments to accounts payable included within real estate investments		(1,421	)		418
Fair value adjustments to redeemable noncontrolling interests		(570	)		134

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on mortgages		48,340			50,560
Interest other		892			470
	$	49,232		$	51,030

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

for the nine months ended January 31, 2011 and 2009

NOTE 1 • ORGANIZATION

Investors Real Estate Trust (“IRET” or the “Company”) is a self-advised real estate investment trust engaged in acquiring, owning and leasing multi-family and commercial real estate. IRET has elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. As a REIT, we 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 and taxes on the income generated by our taxable REIT subsidiary (“TRS”). Our TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. We have considered estimated future taxable income and have determined that there were no material income tax provisions or material net deferred income tax items for our TRS for the quarters and periods ended January 31, 2011 and 2010. IRET’s multi-family residential properties and commercial properties are located mainly in the states of North Dakota and Minnesota, but also in the states of Colorado, Idaho, Iowa, Kansas, Montana, Missouri, Nebraska, South Dakota, Michigan, Wisconsin and Wyoming. As of January 31, 2011, IRET owned 74 multi-family residential properties with 8,593 apartment units and 176 commercial properties, consisting of office, medical, industrial and retail properties, totaling 12.2 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 consolidated 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 condensed 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 condensed consolidated financial statements include the accounts of IRET and its interest in the Operating Partnership. The Company’s interest in the Operating Partnership was 79.9% and 78.7%, respectively, as of January 31, 2011 and April 30, 2010. The limited partners in the Operating Partnership have a redemption option that they may exercise. Upon exercise of the redemption option by the limited partners, IRET has the choice of redeeming the limited partners’ interests (“Units”) for IRET common shares of beneficial interest, on a one-for-one basis, or making a 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 in general 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). The Operating Partnership and some limited partners have contractually agreed to a holding period of greater than one year and/or a greater number of redemptions during a calendar year.

The condensed 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.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim condensed consolidated financial statements of IRET have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America are omitted. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments,

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consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods have been included.

The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2010, as filed with the SEC on July 14, 2010, as amended by the Current Report on Form 8-K filed with the SEC on March 14, 2011.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the Financial Accounting Standards Board (“FASB”) issued an update to Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, adding new requirements for disclosures about transfers into and out of Levels 1 and 2 fair value measurements and additional disclosures about activity within Level 3 fair value measurements. To date, other than impairment, we have not had any transfers in and out of Level 1 fair value measurements, nor do we have any Level 2 or Level 3 fair value measurements. Therefore, the application of this update did not have any impact on the fair value disclosures included in our consolidated financial statements.

In July 2010, the FASB issued an update to existing guidance contained in ASC 310, Receivables. The new guidance requires companies to provide more information about the credit quality of their financing receivables in the disclosures to financial statements, including, but not limited to, significant purchases and sales of financing receivables, aging information and credit quality indicators. The adoption of this accounting guidance by the Company in the third quarter of fiscal year 2011 did not have a significant impact on the Company’s consolidated financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company periodically evaluates its long-lived assets, including its investments in real estate, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset and legal and environmental concerns. If indicators exist, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset. 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 the nine months ended January 31, 2011, the Company incurred no losses due to impairment. During the nine months ended January 31, 2010, the Company incurred a loss of approximately $1.7 million due to impairment of three properties. The Company recorded a charge for impairment of approximately $818,000 on a retail property in Ladysmith, Wisconsin, based upon receipt of a market offer to purchase and the Company’s probable intention to dispose of the property. The Company recorded a charge for impairment of approximately $152,000 on its former headquarters building in Minot, North Dakota, based upon receipt and acceptance of a market offer to purchase. These two properties were subsequently sold and the related impairment charges for fiscal year 2010 are reported in discontinued operations. See Note 7 for additional information. The Company also recorded an impairment charge of approximately $708,000 on a commercial retail property located in Kentwood, Michigan. This property’s tenant vacated the premises but continued to pay rent under a lease agreement that expired on October 29, 2010. Broker representations and market data for this commercial retail property provided the basis for the impairment charge.

COMPENSATING BALANCES AND LINE OF CREDIT

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, as follows: Dacotah Bank, Minot, North Dakota, a 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 $6.0 million, and Peoples State Bank of Velva, North Dakota, deposit of $150,000.

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As of January 31, 2011, 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 had, as of January 31, 2011, lending commitments of $50.0 million, with the capacity to grow to $60.0 million. Participants in the line of credit include several banks whose previous separate credit lines to the Company were terminated during the second quarter of fiscal year 2011 following their consolidation into the First International Bank-led facility. Participants in this secured credit facility as of January 31, 2011 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 January 31, 2011, 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 facility includes customary loan covenants including restrictions regarding minimum debt-service ratios to be maintained in the aggregate and individually on properties 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 January 31, 2011, the Company was in compliance with the facility covenants.

IDENTIFIED INTANGIBLE ASSETS AND INTANGIBLE 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 nine months ended January 31, 2011 and 2010, respectively, the Company added approximately $6.5 million and $7.5 million of new intangible assets and $32,000 and $20,000 of new intangible liabilities. The weighted average lives of the intangible assets and intangible liabilities acquired in the nine months ended January 31, 2011 and 2010 are 9.5 years and 17.4 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 Company’s identified intangible assets and intangible liabilities at January 31, 2011 and April 30, 2010 were as follows:

	(in thousands)
	January 31, 2011			April 30, 2010
Identified intangible assets (included in intangible assets):
Gross carrying amount	$	96,761		$	90,271
Accumulated amortization		(45,218	)		(39,571	)
Net carrying amount	$	51,543		$	50,700

Indentified intangible liabilities (included in other liabilities):
Gross carrying amount	$	1,292		$	1,260
Accumulated amortization		(1,069	)		(940	)
Net carrying amount	$	223		$	320

The effect of amortization of acquired below-market leases and acquired above-market leases on rental income was approximately $(19,000) and $(12,000) for the three months ended January 31, 2011 and 2010, respectively, and $(36,000) and $(38,000) for the nine months ended January 31, 2011 and 2010. 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,	(in thousands)
2012	$	45
2013		32
2014		35
2015		18
2016		14

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Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $1.7 million and $2.1 million for the three months ended January 31, 2011 and 2010, respectively, and $5.5 million and $6.7 million for the nine months ended January 31, 2011 and 2010. 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,	(in thousands)
2012	$	5,521
2013		4,546
2014		4,140
2015		3,783
2016		3,566

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 values as of January 31, 2011 and April 30, 2010 were $1.1 million and $1.4 million, respectively. The annual review at April 30, 2010 indicated no impairment and there was no indication of impairment at January 31, 2011. During the nine months ended January 31, 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.

MARKETABLE SECURITIES

IRET’s investments in marketable securities are classified as “available-for-sale.” The securities classified as “available-for-sale” represent investments in debt securities which the Company intends to hold for an indefinite period of time. These securities are valued at current fair value with the resulting unrealized gains and losses excluded from earnings and reported as a separate component of equity until realized. GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based upon our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. At January 31, 2011, our marketable securities are carried at fair value measured on a recurring basis. Fair values are determined through the use of unadjusted quoted prices in active markets, which are inputs that are classified as Level 1 in the valuation hierarchy. Gains or losses on these securities are computed based on the amortized cost of the specific securities when sold.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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 of a property that has either been disposed of or is classified as held for sale and the related gains or losses, and as a result of discontinued operations, retroactive reclassifications that change prior period numbers have been made. See Note 7 for additional information. During the third quarter of fiscal year 2011, the Company sold a small industrial property in Waconia, Minnesota and three multi-family residential properties in Colorado, the Pinecone and Miramont Apartments in Fort Collins, Colorado and the Neighborhood Apartments in Colorado Springs, Colorado. During the second quarter of fiscal year 2011 the Company sold three properties, a small retail property in Ladysmith, Wisconsin, a patio home property in Fargo, North Dakota, and its 504-unit Dakota Hill multi-family residential property in Irving, Texas. During fiscal year 2010, the Company sold its former headquarters property in Minot, North Dakota, and disposed of a small apartment property in Grafton, North Dakota. The results of operations for these properties are included in discontinued operations in the condensed consolidated statements of operations.

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NOTE 3 • 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. While Units can be exchanged for common shares on a one-for-one basis after a minimum holding period of one year, the exchange of Units for common shares has no effect on net income per share, as Unitholders and common shareholders effectively share equally in the net income of the Operating Partnership. The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the condensed consolidated financial statements for the three and nine months ended January 31, 2011 and 2010:

	Three Months Ended January 31						Nine Months Ended January 31
	(in thousands, except per share data)
	2011			2010			2011			2010
NUMERATOR
Income from continuing operations – Investors Real Estate Trust	$	552		$	1,106		$	3,742		$	3,536
Income (loss) from discontinued operations – Investors Real Estate Trust		11,281			(654	)		15,896			(782	)
Net income attributable to Investors Real Estate Trust		11,833			452			19,638			2,754
Dividends to preferred shareholders		(593	)		(593	)		(1,779	)		(1,779	)
Numerator for basic earnings per share – net income available to common shareholders		11,240			(141	)		17,859			975
Noncontrolling interests – Operating Partnership		2,793			(39	)		4,485			381
Numerator for diluted earnings per share	$	14,033		$	(180	)	$	22,344		$	1,356
DENOMINATOR
Denominator for basic earnings per share weighted average shares		79,398			73,607			78,140			67,375
Effect of convertible operating partnership units		19,957			20,909			20,171			20,909
Denominator for diluted earnings per share		99,355			94,516			98,311			88,284
Earnings per common share from continuing operations – Investors Real Estate Trust – basic and diluted	$	.00		$	.01		$	.03		$	.03
Earnings per common share from discontinued operations – Investors Real Estate Trust – basic and diluted		.14			(.01	)		.20			(.01	)
NET INCOME PER COMMON SHARE – BASIC & DILUTED	$	.14		$	.00		$	.23		$	.02

NOTE 4 • EQUITY

During the first quarter of fiscal year 2011, the Company sold 1.8 million common shares under its continuous offering program with Robert W. Baird & Co., Incorporated (“Baird”) as sales agent, for net proceeds of approximately $15.0 million, before offering expenses but after underwriting discounts. The Company sold no shares under this program during the second and third quarters of fiscal year 2011. As of January 31, 2011, the Company had available securities in the aggregate amount of approximately $18.2 million reserved for issuance under its continuous offering program with Baird. The Company sold no shares under this program during the nine months ended January 31, 2010.

During the nine months ended January 31, 2011 and 2010, respectively, approximately 831,000 Units and 277,000 Units were converted to common shares, with a total value of approximately $6.0 million and $1.7 million included in equity, and approximately 15,000 common shares and 9,000 common shares were issued under the Company’s 401(k) plan, with a total value of approximately $125,000 and $73,000 included in equity. Under the Company’s Distribution Reinvestment and Share Purchase Plan, approximately 1.2 million common shares and 1.0 million common shares were issued during the nine months ended January 31, 2011 and 2010, respectively, with a total value of $10.1 million and $8.8 million included in equity.

During the nine months ended January 31, 2011, the Company purchased the noncontrolling interests (i.e., the limited partnership interests) of certain of its joint venture partners (partners in the Company’s Brenwood office property, Dixon industrial property, and Candlelight apartments property); the purchase prices of those buyouts are included in the Condensed Consolidated Statements of Equity in the line labeled “Other”, along with amounts deducted for fractional shares repurchased and joint venture distributions. During the nine months ended January 31, 2010, the Company purchased the noncontrolling interests of one of its partners in the Company’s TCA office property; the purchase price of that buyout is included in the Condensed

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Consolidated Statements of Equity in the line labeled “Other”, along with amounts deducted for fractional shares repurchased and joint venture distributions.

NOTE 5 • SEGMENT REPORTING

IRET reports its results in five reportable segments: multi-family residential properties, commercial office, commercial medical (including senior housing), commercial industrial and commercial retail properties. The Company’s reportable segments are aggregations of similar properties. The accounting policies of each of these segments are the same as those described in Note 2.

IRET measures the performance of its segments based on net operating income (“NOI”), which the Company defines as total real estate revenues less real estate expenses (which consist of utilities, maintenance, real estate taxes, insurance and property management expenses). IRET believes 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 revenues and net operating income for these reportable segments are summarized as follows for the three and nine month periods ended January 31, 2011 and 2010, along with reconciliations to the condensed consolidated financial statements. Segment assets are also reconciled to Total Assets as reported in the condensed consolidated financial statements.

	(in thousands)
Three Months Ended January 31, 2011	Multi-Family Residential			Commercial- Office		Commercial- Medical		Commercial- Industrial		Commercial- Retail		Total

Real estate revenue		$	16,884	$	19,343	$	16,993	$	3,349	$	3,634	$	60,203
Real estate expenses			8,903		9,507		5,894		1,203		1,530		27,037
Net operating income		$	7,981	$	9,836	$	11,099	$	2,146	$	2,104		33,166
Depreciation/amortization													(14,591	)
Administrative, advisory and trustee services													(1,850	)
Other expenses													(441	)
Interest expense													(15,888	)
Interest and other income													107
Income from continuing operations													503
Income from discontinued operations													14,085
Net income												$	14,588

	(in thousands)
Three Months Ended January 31, 2010	Multi-Family Residential			Commercial- Office		Commercial- Medical		Commercial- Industrial		Commercial- Retail		Total

Real estate revenue		$	16,315	$	20,303	$	14,218	$	3,186	$	3,312	$	57,334
Real estate expenses			8,605		9,225		4,483		1,050		1,322		24,685
Gain on involuntary conversion			1,660		0		0		0		0		1,660
Net operating income		$	9,370	$	11,078	$	9,735	$	2,136	$	1,990		34,309
Depreciation/amortization													(14,497	)
Administrative, advisory and trustee services													(1,790	)
Other expenses													(536	)
Interest expense													(16,534	)
Interest and other income													250
Income from continuing operations													1,202
Loss from discontinued operations													(838	)
Net income												$	364

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	(in thousands)
Nine Months Ended January 31, 2011	Multi-Family Residential			Commercial- Office		Commercial- Medical		Commercial- Industrial		Commercial- Retail		Total

Real estate revenue		$	49,596	$	58,839	$	49,547	$	9,890	$	10,411	$	178,283
Real estate expenses			25,247		27,082		16,563		3,123		3,639		75,654
Net operating income		$	24,349	$	31,757	$	32,984	$	6,767	$	6,772		102,629
Depreciation/amortization													(43,581	)
Administrative, advisory and trustee services													(5,537	)
Other expenses													(1,357	)
Interest expense													(48,395	)
Interest and other income													411
Income from continuing operations													4,170
Income from discontinued operations													19,871
Net income												$	24,041

	(in thousands)
Nine Months Ended January 31, 2010	Multi-Family Residential			Commercial- Office		Commercial- Medical		Commercial- Industrial		Commercial- Retail		Total

Real estate revenue		$	49,210	$	61,952	$	41,157	$	9,806	$	9,976	$	172,101
Real estate expenses			24,354		27,751		12,137		3,161		3,506		70,909
Gain on involuntary conversion			1,660		0		0		0		0		1,660
Net operating income		$	26,516	$	34,201	$	29,020	$	6,645	$	6,470		102,852
Depreciation/amortization													(42,964	)
Administrative, advisory and trustee services													(4,775	)
Other expenses													(1,468	)
Impairment of real estate investment													(708	)
Interest expense													(49,306	)
Interest and other income													503
Income from continuing operations													4,134
Loss from discontinued operations													(1,001	)
Net income												$	3,133

Segment Assets and Accumulated Depreciation

Segment assets are summarized as follows as of January 31, 2011, and April 30, 2010, along with reconciliations to the condensed consolidated financial statements:

	(in thousands)
As of January 31, 2011	Multi-Family Residential			Commercial- Office			Commercial- Medical			Commercial- Industrial			Commercial- Retail			Total

Segment Assets
Property owned	$	480,827		$	594,335		$	447,011		$	116,919		$	124,493		$	1,763,585
Less accumulated depreciation/amortization		(116,632	)		(100,333	)		(62,402	)		(17,016	)		(22,852	)		(319,235	)
Total property owned	$	364,195		$	494,002		$	384,609		$	99,903		$	101,641			1,444,350
Cash and cash equivalents																	30,907
Marketable securities																	325
Receivables and other assets																	122,832
Development in progress																	4,231
Unimproved land																	7,470
Mortgage loans receivable, net of allowance																	157
Total Assets																$	1,610,272

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	(in thousands)
As of April 30, 2010	Multi-Family Residential			Commercial- Office			Commercial- Medical			Commercial- Industrial			Commercial- Retail			Total

Segment assets
Property owned	$	556,867		$	582,943		$	430,229		$	113,249		$	117,231		$	1,800,519
Less accumulated depreciation/amortization		(129,922	)		(88,656	)		(53,641	)		(15,481	)		(20,926	)		(308,626	)
Total property owned	$	426,945		$	494,287		$	376,588		$	97,768		$	96,305			1,491,893
Cash and cash equivalents																	54,791
Marketable securities																	420
Receivables and other assets																	104,830
Development in progress																	2,831
Unimproved land																	6,007
Mortgage loans receivable, net of allowance																	158
Total Assets																$	1,660,930

NOTE 6 • COMMITMENTS AND CONTINGENCIES

Litigation. 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 condensed consolidated financial statements.

Insurance. IRET carries insurance coverage on its properties in amounts and types that the Company believes are customarily obtained by owners of similar properties and are sufficient to achieve IRET’s risk management objectives.

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. As of January 31, 2011, the total property cost of the 28 properties subject to purchase options was approximately $209.0 million, and the total gross rental revenue from these properties was approximately $15.2 million for the nine months ended January 31, 2011.

Environmental Matters. Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around or under the property. While IRET currently has no knowledge of any material violation of environmental laws, ordinances or regulations at any of its properties, there can be no assurance that areas of contamination will not be identified at any of the Company’s properties, or that changes in environmental laws, regulations or cleanup requirements would not result in material costs to the Company.

Restrictions on Taxable Dispositions. Approximately 131 of IRET’s properties, consisting of approximately 7.5 million square feet of the Company’s combined commercial segments’ properties and 3,820 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 $850.3 million at January 31, 2011. The restrictions on taxable dispositions are effective for varying periods. The terms of these agreements generally prevent the Company from selling the properties in taxable transactions. The Company does not believe that the agreements materially affect the conduct of the Company’s business or decisions whether to dispose of restricted properties during the restriction period because the Company generally holds these and the Company's other properties for investment purposes, rather than for sale. Historically, however, where IRET has deemed it to be in the shareholders’ best interests to dispose of restricted properties, it has done so through transactions structured as tax-deferred transactions under Section 1031 of the Internal Revenue Code.

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. IRET has one joint venture which allows 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 Company is not aware of any intent on the part of this partner to exercise its option.

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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 January 31, 2011, the Company is committed to fund approximately $5.6 million in tenant improvements, within approximately the next 12 months.

Development, Expansion and Renovation Projects. The Company has several development, expansion and renovation projects currently underway, as follows:

Multi-Family Conversion, Minot, North Dakota: The Company is converting an existing approximately 15,000 square foot commercial office building in Minot, North Dakota to a 24-unit multi-family residential property, for an estimated total cost of $2.2 million and an expected completion date in the first quarter of the Company’s fiscal year 2012; as of January 31, 2011, the Company has incurred approximately $185,000 of these project costs.

Buffalo Mall Theaters, Jamestown, North Dakota: The Company has committed to fund the construction of six movie theaters at its existing Buffalo Mall property in Jamestown, North Dakota, for an estimated construction cost of $2.1 million and expected completion in the first quarter of fiscal year 2012. As of January 31, 2011, the Company had incurred approximately $746,000 of these construction costs.

Senior Housing Memory Care Conversion, Cheyenne, Wyoming: The Company has committed and funded construction and remodeling costs to convert a portion of the Company’s existing Wyoming senior housing facility at Cheyenne to incorporate a specialized memory care unit. As of January 31, 2011, the Company had incurred $309,000, the total expected cost of the memory-care conversion and is awaiting a certificate of occupancy.

Trinity Hospital Build-to-Suit, Minot, North Dakota: The Company has committed to construct an approximately 22,000 square-foot, one-story medical clinic for Trinity Health, a non-profit healthcare organization based in Minot, North Dakota, on land owned by the Company adjacent to the Company’s existing headquarters building in Minot. Construction of this build-to-suit facility began in the second quarter of fiscal year 2011, with completion and occupancy by Trinity expected in the first quarter of fiscal year 2012. Estimated total project costs (excluding the value of the land) are $6.2 million, of which, as of January 31, 2011, the Company had incurred $726,000.

Georgetown Square Condominiums, Grand Chute, Wisconsin: At the Company’s Georgetown Square Condominium project in Grand Chute, Wisconsin (formerly known as Fox River), IRET is currently renovating and upgrading the eight existing condominium units, and is evaluating the construction of additional units, based on market needs. The Company estimates total renovation costs for the existing eight units at a maximum of $280,000.

Construction interest capitalized for the three month periods ended January 31, 2011 and 2010, respectively, was approximately $52,000 and $0 for development projects completed and in progress. Construction interest capitalized for the nine month periods ended January 31, 2011 and 2010, respectively, was approximately $85,000 and $0 for development projects completed and in progress.

NOTE 7 • 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. During the third quarter of fiscal year 2011 the Company sold an industrial property in Waconia, Minnesota, and three multi-family residential properties (the Company’s Miramont, Neighborhood and Pinecone Apartment complexes) located in Fort Collins and Colorado Springs, Colorado. During the second quarter of fiscal year 2011 the Company sold three properties, a small retail property in Ladysmith, Wisconsin, a patio home property in Fargo, North Dakota, and its 504-unit Dakota Hill multi-family residential property in Irving, Texas. During fiscal year 2010, the Company sold its former headquarters property in Minot, North Dakota, and disposed of a small apartment property in Grafton, North Dakota. See Note 8 for additional information on the properties sold during fiscal year 2011. The Company also reports any gains or losses from the sale of a property in discontinued operations. There were no properties held for sale as of January 31, 2011 or 2010. 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 three months and nine months ended January 31, 2011 and 2010:

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	Three Months Ended January 31					Nine Months Ended January 31
	(in thousands)
	2011		2010			2011			2010
REVENUE
Real estate rentals	$	247	$	2,787		$	5,901		$	8,394
Tenant reimbursement		0		9			36			52
TOTAL REVENUE		247		2,796			5,937			8,446
EXPENSES
Depreciation/amortization related to real estate investments		41		579			1,142			1,732
Utilities		60		207			558			735
Maintenance		74		302			708			943
Real estate taxes		16		364			638			1,004
Insurance		0		72			110			218
Property management expenses		101		379			843			1,101
Other expenses		0		0			1			0
Amortization related to non-real estate investments		0		2			4			6
Impairment of real estate investments		0		818			0			970
TOTAL EXPENSES		292		2,723			4,004			6,709
Interest expense		169		(913	)		(1,432	)		(2,742	)
Interest income		0		2			5			4
Income (loss) from discontinued operations before gain on sale		124		(838	)		506			(1,001	)
Gain on sale of discontinued operations		13,961		0			19,365			0
INCOME (LOSS) FROM DISCONTINUED OPERATIONS	$	14,085	$	(838	)	$	19,871		$	(1,001	)

NOTE 8 • ACQUISITIONS AND DISPOSITIONS

PROPERTY ACQUISITIONS

During the third quarter of fiscal year 2011, the Company acquired three properties: on November 10, 2010, the Company acquired the approximately 108,503 square foot Edgewood Vista assisted living facility in Minot, North Dakota, for approximately $15.2 million, consisting of cash of approximately $9.6 million ($7.4 million of which was paid to the current tenant in the property to acquire the option to purchase the property) and the assumption of existing debt of approximately $5.6 million; on December 10, 2010, the Company acquired an approximately 47,709 square foot retail/office property in Minot, North Dakota, for a purchase price, paid in cash, of $8.3 million; and on December 16, 2010, the Company acquired an approximately 58,574 square foot office property in Omaha, Nebraska, for a purchase price of approximately $8.3 million, of which approximately $5.3 million was paid in cash, with the remainder paid in limited partnership units of the Company’s Operating Partnership valued at a total of $3.0 million. During the third quarter of fiscal year 2011, the Company substantially completed construction of an approximately 24,000 square foot expansion to its existing Edgewood Vista senior housing facility in Spearfish, South Dakota. The cost to construct the addition was approximately $2.7 million, of which $2.3 million has been paid as of January 31, 2011.

During the third quarter of fiscal year 2010, the Company, on December 30, 2009, acquired two limited liability companies that own and operate a portfolio of five assisted living facilities in three communities in Wyoming. The five facilities, located in Casper (two facilities), Cheyenne (two facilities) and Laramie (one facility), Wyoming, had a total of approximately 328 beds at the time of acquisition. IRET acquired 100% of the member interests in the owner and operator of these five facilities for a total purchase price of approximately $45.0 million. Also during the third quarter of fiscal year 2010, on November 13, 2009, the Company acquired an approximately 6.8 acre parcel of vacant land located in Fargo, North Dakota for a purchase price of approximately $395,000. The Company had no development projects placed in service during the third quarter of fiscal year 2010.

The Company had no acquisitions or development projects placed in service during the second quarter of fiscal year 2011. During the second quarter of fiscal year 2010, IRET acquired two properties: an approximately 42,180 square foot

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showroom/warehouse property located in a western suburb of Des Moines, Iowa, triple-net leased to a single tenant, for which the Company paid a total of approximately $3.4 million, a portion of which was paid in Units valued at a total of approximately $2.9 million, or $10.25 per unit, with the remainder paid in cash; and an approximately 15,000 square foot, 2-story office building on 1.5 acres located near IRET’s corporate headquarters building in Minot, North Dakota, for a total of $2.4 million, a portion of which the Company paid in Units valued at a total of approximately $90,000, with the remainder paid in cash. IRET had no development projects placed in service during the second quarter of fiscal year 2010.

During the first quarter of fiscal year 2011, IRET acquired, on July 15, 2010, two medical office buildings located in, respectively, Billings, Montana and Missoula, Montana, for a total purchase price of approximately $5.2 million, consisting of cash of approximately $957,000 and the assumption of existing debt with an interest rate of 7.06% and a maturity date of December 31, 2016 in the amount of approximately $4.3 million. The two medical office buildings were each constructed in 2001, and contain approximately 14,705 square feet and 14,640 square feet of leasable space, respectively. During the first quarter of fiscal year 2011, the Company completed construction of a single-tenant office/warehouse facility in Fargo, North Dakota. The cost to construct the facility was approximately $3.9 million, including the cost of the land plus imputed construction interest. During the first quarter of fiscal year 2010, IRET had no acquisitions or development projects placed in service.

The Company expensed approximately $142,000 and $201,000 of transaction costs related to acquisitions in the nine months ended January 31, 2011 and 2010, respectively. The Company’s acquisitions and development projects placed in service during the nine months ended January 31, 2011 and 2010 are detailed below:

Nine Months Ended January 31, 2011

	(in thousands)
Acquisitions and Development Projects Placed in Service	Land		Building		Intangible Assets		Acquisition Cost

Commercial Office
58,574 sq. ft. Omaha 10802 Farnam Dr - Omaha, NE	$	2,462	$	4,374	$	1,459	$	8,295

Commercial Medical
14,705 sq. ft. Billings 2300 Grant Road - Billings, MT		649		1,216		657		2,522
14,640 sq. ft. Missoula 3050 Great Northern - Missoula, MT		640		1,331		752		2,723
108,503 sq. ft. Edgewood Vista Minot - Minot, ND		1,046		11,590		2,545		15,181
23,965 sq. ft. Edgewood Vista Spearfish Expansion - Spearfish, SD1		0		2,280		0		2,280
		2,335		16,417		3,954		22,706