CENTERSPACE - Annual Report: 2014 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

R	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2014

or

£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 000-14851

North Dakota	45-0311232
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1400 31st Avenue SW, Suite 60
Post Office Box 1988
Minot, ND 58702-1988
(Address of principal executive offices) (Zip code)

Securities registered pursuant to Section 12(b) of the Act:

Common Shares of Beneficial Interest (no par value) - New York Stock Exchange

Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (no par value) -

New York Stock Exchange

Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (no par value) -

New York Stock Exchange

________________________________

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

þ

Yes

£

No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

£

Yes

þ

No

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ

Yes

£

No

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Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

þ

Yes

£

No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

þ Large accelerated filer		£ Accelerated filer
£  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

þ

No

The aggregate market value of the Registrant's outstanding common shares of beneficial interest held by non-affiliates of the Registrant as of October 31, 2013 was $898,050,172 based on the last reported sale price on the New York Stock Exchange on October 31, 2013. For purposes of this calculation, the Registrant has assumed that its trustees and executive officers are affiliates.

The number of common shares of beneficial interest outstanding as of June 2, 2014, was 109,374,477.

References in this Annual Report on Form 10-K to the "Company," "IRET," "we," "us," or "our" include consolidated subsidiaries, unless the context indicates otherwise.

Documents Incorporated by Reference: Portions of IRET's definitive Proxy Statement for its 2014 Annual Meeting of Shareholders to be held on September 16, 2014 are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) hereof.

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INVESTORS REAL ESTATE TRUST

INDEX

	PAGE
PART I
Item 1.    Business		5
Item 1A. Risk Factors		11
Item 1B. Unresolved Staff Comments		22
Item 2.    Properties		22
Item 3.    Legal Proceedings		33
Item 4.    Mine Safety Disclosures		35
PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		36
Item 6.    Selected Financial Data		38
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations		38
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		82
Item 8.    Financial Statements and Supplementary Data		83
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		83
Item 9A. Controls and Procedures		83
Item 9B. Other Information		85
PART III
Item 10.  Trustees, Executive Officers and Corporate Governance		85
Item 11.  Executive Compensation		85
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		85
Item 13.  Certain Relationships and Related Transactions, and Trustee Independence		85
Item 14.  Principal Accountant Fees and Services		85
PART IV
Item 15.  Exhibits, Financial Statement Schedules		86
Exhibit Index		86
Signatures		88
Reports of Independent Registered Public Accounting Firms and Financial Statements	F-1 to F-54

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Special Note Regarding Forward Looking Statements

Certain statements included in this Annual Report on Form 10-K and the documents incorporated into this document by reference are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements include statements about our belief that we have the liquidity and capital resources necessary to meet our known obligations and to make additional real estate acquisitions and capital improvements when appropriate to enhance long term growth; and other statements preceded by, followed by or otherwise including words such as "believe," "expect," "intend," "project," "plan," "anticipate," "potential," "may," "designed," "estimate," "should," "continue" and other similar expressions. These statements indicate that we have used assumptions that are subject to a number of risks and uncertainties that could cause our actual results or performance to differ materially from those projected.

Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:

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the economic health of the markets in which we own and operate multi-family and commercial properties, in particular the states of Minnesota and North Dakota, or other markets in which we may invest in the future;

•

the economic health of our commercial tenants;

•

market rental conditions, including occupancy levels and rental rates, for multi-family residential and commercial properties;

•

our ability to identify and secure additional multi-family residential and commercial properties that meet our criteria for investment;

•

our ability to complete construction and lease-up of our development projects on schedule and on budget;

•

the level and volatility of prevailing market interest rates and the pricing of our common shares of beneficial interest;

•

financing risks, such as our inability to obtain debt or equity financing on favorable terms, or at all;

•

compliance with applicable laws, including those concerning the environment and access by persons with disabilities; and

•

the availability and cost of casualty insurance for losses.

Readers should carefully review our financial statements and the notes thereto, as well as the section entitled "Risk Factors" in Item 1A of this Annual Report on Form 10-K and the other documents we file from time to time with the Securities and Exchange Commission ("SEC").

In light of these uncertainties, the events anticipated by our forward-looking statements might not occur. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause our actual results to differ materially from those contemplated in any forward-looking statements included in this Annual Report on Form 10-K should not be construed as exhaustive.

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PART I

Overview

Investors Real Estate Trust ("IRET" or the "Company") is a self-advised equity Real Estate Investment Trust ("REIT") organized under the laws of North Dakota. Since our formation in 1970, our business has consisted of owning and operating income-producing real estate properties. We are structured as an Umbrella Partnership Real Estate Investment Trust or UPREIT and we conduct our day-to-day business operations through our operating partnership, IRET Properties, a North Dakota Limited Partnership ("IRET Properties" or the "Operating Partnership"). Our investments consist of multi-family residential properties and commercial office, commercial healthcare, commercial industrial and commercial retail properties. These properties are located primarily in the upper Midwest states of Minnesota and North Dakota. For the fiscal year ended April 30, 2014, our real estate investments in these two states accounted for 69.1% of our total gross revenue. Our principal executive office is located in Minot, North Dakota. We also have corporate offices in Minneapolis and St. Cloud, Minnesota, and additional property management offices in Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota and South Dakota.

We seek to diversify our investments among multi-family residential, commercial office, commercial healthcare, commercial industrial and commercial retail properties. As of April 30, 2014, our real estate portfolio consisted of:

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93 multi-family residential properties containing 10,779 apartment units and having a total real estate investment amount net of accumulated depreciation of $595.6 million;

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65 commercial office properties containing approximately 4.8 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $422.7 million;

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67 commercial healthcare properties (including senior housing) containing approximately 3.1 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $419.2 million;

•

8 commercial industrial properties containing approximately 1.2 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $45.2 million; and

•

26 commercial retail properties containing approximately 1.3 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $89.0 million.

Our residential leases are generally for a one-year term. Our commercial properties are typically leased to tenants under long-term lease arrangements. As of April 30, 2014, no individual tenant accounted for more than 10% of our total real estate rentals, although affiliated entities of Edgewood Vista together accounted for approximately 14.4% of our total commercial segments' minimum rents.

Structure

We were organized as a REIT under the laws of North Dakota on July 31, 1970.

Since our formation, we have operated as a REIT under Sections 856-858 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and since February 1, 1997, we have been structured as an UPREIT. Since restructuring as an UPREIT, we have conducted our daily business operations primarily through IRET Properties. IRET Properties is organized under the laws of North Dakota pursuant to an Agreement of Limited Partnership dated January 31, 1997. IRET Properties is principally engaged in acquiring, owning, operating and leasing multi-family residential and commercial real estate. The sole general partner of IRET Properties is IRET, Inc., a North Dakota corporation and our wholly-owned subsidiary. All of our assets (except for qualified REIT subsidiaries) and liabilities were contributed to IRET Properties, through IRET, Inc., in exchange for the sole general partnership interest in IRET Properties. As of April 30, 2014, IRET, Inc. owned an 83.8% interest in IRET Properties. The remaining ownership of IRET Properties is held by individual limited partners.

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Investment Strategy and Policies

Our business objective is to increase shareholder value by employing a disciplined investment strategy. This strategy is focused on growing assets in desired geographical markets, achieving diversification by property type and location, and adhering to targeted returns in acquiring properties.

We generally use available cash or short-term floating rate debt to acquire real estate. We then replace such cash or short-term floating rate debt with fixed-rate secured debt. In appropriate circumstances, we also may acquire one or more properties in exchange for our common shares of beneficial interest ("common shares") or for limited partnership units of IRET Properties ("limited partnership units" or "UPREIT Units"), which are convertible, after the expiration of a minimum holding period of one year, into cash or, at our sole discretion, into our common shares on a one-to-one basis.

Our investment strategy is to invest in multi-family residential properties, and in commercial office, commercial healthcare, commercial industrial and commercial retail properties that are leased to single or multiple tenants, usually for five years or longer, and are located throughout the upper Midwest. We operate mainly within the states of North Dakota and Minnesota, although we also have real estate investments in Colorado, Idaho, Iowa, Kansas, Missouri, Montana, Nebraska, South Dakota, Wisconsin and Wyoming.

In order to implement our investment strategy we have certain investment policies. Our significant investment policies are as follows:

Investments in the securities of, or interests in, entities primarily engaged in real estate activities and other securities. While we are permitted to invest in the securities of other entities engaged in the ownership and operation of real estate, as well as other securities, we currently have no plans to make any investments in other securities.

Any policy, as it relates to investments in other securities, may be changed by a majority of the members of our Board of Trustees at any time without notice to or a vote of our shareholders.

Investments in real estate or interests in real estate. We currently own multi-family residential properties and/or commercial properties in 12 states. We may invest in real estate, or interests in real estate, located anywhere in the United States; however, we currently plan to focus our investments in those states in which we already have property, with specific concentration in Minnesota, North Dakota, Nebraska, Iowa, Colorado, Montana, South Dakota, and Kansas. Similarly, we may invest in any type of real estate or interest in real estate including, but not limited to, office buildings, apartment buildings, shopping centers, industrial and commercial properties, special purpose buildings and undeveloped acreage. Under our Third Restated Trustees' Regulations (Bylaws), however, we may not invest more than 10.0% of our total assets in unimproved real estate, excluding property being developed or property where development will be commenced within one year.

It is not our policy to acquire assets primarily for capital gain through sale in the short term. Rather, it is our policy to acquire assets with an intention to hold such assets for at least a 10-year period. During the holding period, it is our policy to seek current income and capital appreciation through an increase in value of our real estate portfolio, as well as increased revenue as a result of higher rents.

Any policy, as it relates to investments in real estate or interests in real estate may be changed by our Board of Trustees at any time without notice to or a vote of our shareholders.

Investments in real estate mortgages. While not our primary business focus, from time to time we make loans to others that are secured by mortgages, liens or deeds of trust covering real estate. We have no restrictions on the type of property that may be used as collateral for a mortgage loan; provided, however, that except for loans insured or guaranteed by a government or a governmental agency, we may not invest in or make a mortgage loan unless an appraisal is obtained concerning the value of the underlying property.  Unless otherwise approved by our Board of Trustees, it is our policy that we will not invest in mortgage loans on any one property if in the aggregate the total indebtedness on the property, including our mortgage, exceeds 85.0% of the property's appraised value.  We can invest in junior mortgages without notice to, or the approval of, our shareholders. As of April 30, 2014 and 2013, we had no junior mortgages outstanding. We had no investments in real estate mortgages at April 30, 2014 and 2013.

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Our policies relating to mortgage loans, including second mortgages, may be changed by our Board of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders.

Policies With Respect to Certain of Our Activities

Our current policies as they pertain to certain of our activities are described as follows:

Distributions to shareholders and holders of limited partnership units. One of the requirements of the Internal Revenue Code for a REIT is that it distribute 90% of its net taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our general policy has been to make cash distributions to our common shareholders and the holders of limited partnership units of approximately 65.0% to 90.0% of our funds from operations and to use the remaining funds for capital improvements or the purchase of additional properties. This policy may be changed at any time by our Board of Trustees without notice to, or approval of, our shareholders. Distributions to our common shareholders and unitholders in fiscal years 2014 and 2013 totaled approximately 82.5% and 75.4%, respectively, on a per share and unit basis of our funds from operations.

Issuing senior securities. On April 26, 2004, we issued 1,150,000 shares of 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (the "Series A preferred shares"), and on August 7, 2012 we issued 4,600,000 shares of 7.95% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the "Series B preferred shares"). Depending on future interest rate and market conditions, we may issue additional preferred shares or other senior securities which would have dividend and liquidation preference over our common shares.

Borrowing money. We rely on borrowed funds in pursuing our investment objectives and goals. It is generally our policy to seek to borrow up to 65.0% to 75.0% of the appraised value of all new real estate acquired or developed. This policy concerning borrowed funds is vested solely with our Board of Trustees and can be changed by our Board of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders. Such policy is subject, however, to the limitation in our Bylaws, which provides that unless approved by a majority of the independent members of our Board of Trustees and disclosed to our shareholders in our next quarterly report along with justification for such excess, we may not borrow in excess of 300.0% of our total Net Assets (as such term is used in our Bylaws, which usage is not in accordance with generally accepted accounting principles ("GAAP"), "Net Assets" means our total assets at cost before deducting depreciation or other non-cash reserves, less total liabilities). Our Bylaws do not impose any limitation on the amount that we may borrow against any one particular property.  As of April 30, 2014, our ratio of total indebtedness to total real estate investments was 63.3% while our ratio of total indebtedness as compared to our Net Assets (computed in accordance with our Bylaws) was 93.3%.

Offering securities in exchange for property. Our organizational structure allows us to issue shares and to offer limited partnership units of IRET Properties in exchange for real estate. The limited partnership units are convertible into cash, or, at our option, common shares on a one-for-one basis after a minimum one-year holding period. All limited partnership units receive the same cash distributions as those paid on common shares. Limited partners are not entitled to vote on any matters affecting us until they convert their limited partnership units to common shares.

Our declaration of trust, as amended (our "Declaration of Trust"), does not contain any restrictions on our ability to offer limited partnership units of IRET Properties in exchange for property. As a result, any decision to do so is vested solely in our Board of Trustees. This policy may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders. For the three most recent fiscal years ended April 30, we have issued the following limited partnership units of IRET Properties in exchange for properties:

	(in thousands)
		2014		2013		2012
Limited partnership units issued		361		1,620		1,024
Value at issuance, net of issue costs	$	3,480	$	12,632	$	8,055

Acquiring or repurchasing shares. As a REIT, it is our intention to invest only in real estate assets. Our Declaration of Trust does not prohibit the acquisition or repurchase of our common or preferred shares or other securities so long as such activity does not prohibit us from operating as a REIT under the Internal Revenue Code. Any policy regarding the acquisition or repurchase of shares or other securities is vested solely in our Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders.

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During fiscal year 2014, we did not repurchase any of our outstanding common shares, preferred shares or limited partnership units.

To make loans to other persons. Our organizational structure allows us to make loans to other persons, subject to certain conditions and subject to our election to be taxed as a REIT. All loans must be secured by real property or limited partnership units of IRET Properties. We had no investments in real estate mortgages at April 30, 2014 and 2013.

To invest in the securities of other issuers for the purpose of exercising control. We have not, for the past three years, engaged in, and we are not currently engaging in, investment in the securities of other issuers for the purpose of exercising control. Our Declaration of Trust does not impose any limitation on our ability to invest in the securities of other issuers for the purpose of exercising control. Any decision to do so is vested solely in our Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders.

Information about Segments

We currently operate in five reportable real estate segments: multi-family residential; commercial office; commercial healthcare, including senior housing (formerly referred to as the commercial medical segment; the composition of this segment has not changed from prior periods); commercial industrial and commercial retail. For further information on these segments and other related information, see Note 11 of our consolidated financial statements, and Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K.

Executive Officers of the Company

Set forth below are the names, ages, titles and biographies of each of our executive officers as of July 1, 2014.

Name	Age	Title
Timothy P. Mihalick	55	President and Chief Executive Officer
Thomas A. Wentz, Jr.	48	Executive Vice President and Chief Operating Officer
Diane K. Bryantt	50	Executive Vice President and Chief Financial Officer
Michael A. Bosh	43	Executive Vice President and General Counsel
Mark W. Reiling	56	Executive Vice President of Asset Management
Charles A. Greenberg	55	Senior Vice President, Commercial Asset Management
Ted E. Holmes	43	Senior Vice President, Finance
Andrew Martin	41	Senior Vice President, Residential Property Management

Timothy P. Mihalick joined us as a financial officer in May 1981, after graduating from Minot State University. He has served in various capacities with us over the years and was named Vice President in 1992. Mr. Mihalick served as the Chief Operating Officer from 1997 to 2009, as a Senior Vice President from 2002 to 2009, and as a member of our Board of Trustees since 1999. In September 2009, Mr. Mihalick was named President and Chief Executive Officer.

Thomas A. Wentz, Jr. is a graduate of Harvard College and the University of North Dakota School of Law, and joined us as General Counsel and Vice President in January 2000. He served as Senior Vice President of Asset Management and Finance from 2002 to 2009 and as a member of our Board of Trustees since 1996. In September 2009, Mr. Wentz was named Senior Vice President and Chief Operating Officer, and in June 2012 Mr. Wentz was named Executive Vice President and Chief Operating Officer. Prior to 2000, Mr. Wentz was a shareholder in the law firm of Pringle & Herigstad, P.C. from 1992 to 1999. Mr. Wentz is a member of the American Bar Association and the North Dakota Bar Association, and he is a Director of SRT Communications, Inc.

Diane K. Bryantt is a graduate of Minot State University. Ms. Bryantt joined us in June 1996, and served as our Controller and Corporate Secretary before being appointed to the positions of Senior Vice President and Chief Financial Officer in 2002 and Executive Vice President and Chief Financial Officer in June 2012. Prior to joining us, Ms. Bryantt was employed by First American Bank, Minot, North Dakota.

Michael A. Bosh joined us as Associate General Counsel and Secretary in September 2002, and was named General Counsel in September 2003 and Executive Vice President and General Counsel in June 2012. Prior to 2002, Mr. Bosh was a shareholder in the law firm of Pringle & Herigstad, P.C. Mr. Bosh graduated from Jamestown College in 1992 and from Washington & Lee University School of Law in 1995. Mr. Bosh is a member of the American Bar Association and the North Dakota Bar Association.

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Mark W. Reiling joined IRET in June 2012 as Executive Vice President of Asset Management.  Mr. Reiling holds a Bachelor's degree in Business Administration (Finance) from the University of Notre Dame and has over 30 years of commercial real estate experience.  He was associated with the Towle Real Estate Company and its successors (now Cassidy Turley) for 29 years, 17 as president and 9 as the owner, providing appraisal, brokerage, consulting, mortgage banking and property management services.  During the same time, as owner of Towle Properties, Inc., he acquired and developed real estate properties and provided third party asset management services.  Previously, he was a senior account officer with Citicorp Real Estate, Inc.  Mr. Reiling holds the CRE designation from the Counselors of Real Estate and the SIOR designation from the Society of Industrial and Office Realtors. He is a director of Sunrise Banks.

Charles A. Greenberg joined IRET in August 2005 as Director of Commercial Asset Management, and was named Senior Vice President, Commercial Asset Management in November 2008. He is a graduate of the University of Wisconsin-Madison and has over 27 years of experience in both asset and property management of institutional-grade real estate investments. From 1989 to 2005, Mr. Greenberg was General Manager at Northco Corporation, a Minneapolis-based real estate investment firm.

Ted E. Holmes joined us in 2009 as Vice President of Finance, and was promoted to Senior Vice President of Finance in December 2010.  Mr. Holmes has over 18 years of experience in the finance industry, including the placement of debt and equity as a commercial and multi-family mortgage banker. From 1994 to 2002 Mr. Holmes was an Analyst and Assistant Vice President with Towle Financial Services/Midwest, a privately held mortgage banking company in Minneapolis, and he served as Director with Wells Fargo Bank, NA from 2003 to 2009. He holds a Bachelor of Arts degree in Economics from St. Cloud State University and is a licensed Minnesota Broker.

Andrew Martin joined IRET in December 2009 to lead the Company's Residential Property Management division. In May 2011 Mr. Martin was promoted to Senior Vice President of Residential Property Management.   He has over 18 years of experience in the commercial and multi-family property management industry.  Prior to his employment with IRET, Mr. Martin was a partner with INH Companies, a property management firm based in St. Cloud, Minnesota, and also worked in Minneapolis, Minnesota for United Properties as a regional property manager.  Mr. Martin holds a bachelor's degree in Real Estate and a Master's degree in Business Administration from St. Cloud State University, and has earned the designation of Certified Property Manager from the Institute of Real Estate Management.

Employees

As of April 30, 2014, we had 445 employees, of whom 387 were full-time and 58 part-time employees. Of these 445 employees, 63 are corporate staff in our Minot, North Dakota and Minneapolis, Minnesota offices, and 382 are property management employees based at our properties or in local property management offices.

Environmental Matters and Government Regulation

Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred in connection with any contamination. In addition, some environmental laws create a lien on a contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. These laws often impose liability without regard to whether the current owner was responsible for, or even knew of, the presence of such substances. It is generally our policy to obtain from independent environmental consultants a "Phase I" environmental audit (which involves visual inspection but not soil or groundwater analysis) on all properties that we seek to acquire. We do not believe that any of our properties are subject to any material environmental contamination. However, no assurances can be given that:

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a prior owner, operator or occupant of the properties we own or the properties we intend to acquire did not create a material environmental condition not known to us, which might have been revealed by more in-depth study of the properties; and

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future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations) will not result in the imposition of environmental liability upon us.

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In addition to laws and regulations relating to the protection of the environment, many other laws and governmental regulations are applicable to our properties, and changes in the laws and regulations, or in their interpretation by agencies and the courts, occur frequently. Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. In addition, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment communities first occupied after March 13, 1990, to be accessible to the handicapped. Non-compliance with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants. We believe that those of our properties to which the ADA and/or FHAA apply are substantially in compliance with present ADA and FHAA requirements.

Competition

Investing in and operating real estate is a very competitive business. We compete with other owners and developers of multi-family and commercial properties to attract tenants to our properties. Ownership of competing properties is diversified among other REITs, financial institutions, individuals and public and private companies who are actively engaged in this business. Our multi-family properties compete directly with other rental apartments, as well as with condominiums and single-family homes that are available for rent or purchase in the areas in which our properties are located. Our commercial properties compete with other commercial properties for tenants. Additionally, we compete with other real estate investors, including other REITs, pension and investment funds, partnerships and investment companies, to acquire properties. This competition affects our ability to acquire properties we want to add to our portfolio and the price we pay for acquisitions. We do not believe we have a dominant position in any of the geographic markets in which we operate, but some of our competitors may be dominant in selected markets. Many of our competitors have greater financial and management resources than we have. We believe, however, that the geographic diversity of our investments, the experience and abilities of our management, the quality of our assets and the financial strength of many of our commercial tenants affords us some competitive advantages that have in the past and will in the future allow us to operate our business successfully despite the competitive nature of our business.

Corporate Governance

Our Board of Trustees has adopted various policies and initiatives to strengthen the Company's corporate governance and increase the transparency of financial reporting.  Each of the committees of the Board of Trustees operates under written charters, and the Company's independent trustees meet regularly in executive sessions at which only the independent trustees are present.  The Board of Trustees has also adopted a Code of Conduct applicable to trustees, officers and employees, and a Code of Ethics for Senior Financial Officers, and has established processes for shareholders and all interested parties to communicate with the Board of Trustees.

Additionally, the Company's Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by Company employees of concerns regarding accounting or auditing matters. The Audit Committee also maintains a policy requiring Audit Committee approval of all audit and non-audit services provided to the Company by the Company's independent registered public accounting firm.

The Company will disclose any amendment to its Code of Ethics for Senior Financial officers on its website. In the event the Company waives compliance by any of its trustees or officers subject to the Code of Ethics or Code of Conduct, the Company will disclose such waiver in a Form 8-K filed within four business days.

Website and Available Information

Our internet address is www.iret.com. We make available, free of charge, through the "SEC filings" tab under the Investors/Financial Reporting section of our website, our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such forms are filed with or furnished to the SEC. Current copies of our Code of Conduct, Code of Ethics for Senior Financial Officers, and Charters for the Audit, Compensation, Executive and Nominating and Governance Committees of our Board of Trustees are also available on our website under the heading "Corporate Governance" in the Investors/Corporate Overview section of our website. Copies of these documents are also available to shareholders upon request addressed to the Secretary at Investors Real Estate Trust, P.O. Box 1988, Minot, North Dakota 58702-1988. Information on our internet website does not constitute part of this Annual Report on Form 10-K.

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Item 1A.  Risk Factors

Risks Related to Our Properties and Business

Our performance and share value are subject to risks associated with the real estate industry.  Our results of operations and financial condition, the value of our real estate assets, and the value of an investment in us are subject to the risks normally associated with the ownership and operation of real estate properties.  These risks include, but are not limited to, the following factors which, among others, may adversely affect the income generated by our properties:

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downturns in national, regional and local economic conditions (particularly increases in unemployment);

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competition from other commercial and multi-family residential properties;

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local real estate market conditions, such as oversupply or reduction in demand for commercial and multi-family residential space;

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changes in interest rates and availability of attractive financing;

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declines in the economic health and financial condition of our tenants and our ability to collect rents from our tenants;

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vacancies, changes in market rental rates and the need periodically to repair, renovate and re-lease space;

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increased operating costs, including real estate taxes, state and local taxes, insurance expense, utilities, and security costs;

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significant expenditures associated with each investment, such as debt service payments, real estate taxes and insurance and maintenance costs, which are generally not reduced when circumstances cause a reduction in revenues from a property;

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weather conditions, civil disturbances, natural disasters, terrorist acts or acts of war which may result in uninsured or underinsured losses;  and

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decreases in the underlying value of our real estate.

The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. Government, may adversely affect our business.  We depend on the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) for financing for the majority of our multi-family residential properties.  Fannie Mae and Freddie Mac are U.S. Government-sponsored entities, or GSEs, but their guarantees are not backed by the full faith and credit of the United States. In September 2008 Fannie Mae and Freddie Mac were placed in federal conservatorship. The problems faced by Fannie Mae and Freddie Mac resulting in their being placed into federal conservatorship stirred debate among some federal policy makers regarding the continued role of the U.S. Government in providing liquidity for the residential mortgage market. It is unclear how future legislation may impact Fannie Mae and Freddie Mac's involvement in multi-family residential financing.  The scope and nature of the actions that the U.S. Government may undertake with respect to the future of Fannie Mae and Freddie Mac are unknown and will continue to evolve. It is possible that each of Fannie Mae and Freddie Mac could be dissolved and the U.S. Government could decide to stop providing liquidity support of any kind to the multi-family residential mortgage market.  Future legislation could further change the relationship between Fannie Mae and Freddie Mac and the U.S. Government, and could also nationalize or eliminate such GSEs entirely. Any law affecting these GSEs may create market uncertainty and have the effect of reducing the credit available for financing multi-family residential properties. The loss or reduction of this important source of credit would be likely to result in higher loan costs for us, and could result in inability to borrow or refinance maturing debt, all of which could materially adversely affect our business, operations and financial condition.

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Our property acquisition activities subject us to various risks which could adversely affect our operating results. We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including large portfolios that could increase our size and result in alterations to our capital structure. Our acquisition activities and their success are subject to numerous risks, including, but not limited to:

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even if we enter into an acquisition agreement for a property, it is subject to customary closing conditions, including completion of due diligence investigations, and we may be unable to complete that acquisition after making a non-refundable deposit and incurring other acquisition-related costs;

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we may be unable to obtain financing for acquisitions on favorable terms or at all;

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acquired properties may fail to perform as expected;

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the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates; and

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we may be unable to quickly and efficiently integrate new acquisitions into our existing operations.

These risks could have an adverse effect on our results of operations and financial condition and the amount of cash available for payment of distributions.

Acquired properties may subject us to unknown liabilities which could adversely affect our operating results. We may acquire properties subject to liabilities and without any recourse, or with only limited recourse against prior owners or other third parties, with respect to unknown liabilities. As a result, if liability were asserted against us based upon ownership of these properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flows. Unknown liabilities with respect to acquired properties might include liabilities for clean-up of undisclosed environmental contamination; claims by tenants, vendors or other persons against the former owners of the properties; liabilities incurred in the ordinary course of business; and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

Our geographic concentration in Minnesota and North Dakota may result in losses due to our significant exposure to the effects of economic and real estate conditions in those markets.  For the fiscal year ended April 30, 2014, we received approximately 69.1% of our gross revenue from properties in Minnesota and North Dakota.  As a result of this concentration, we are subject to substantially greater risk than if our investments were more geographically dispersed. Specifically, we are more significantly exposed to the effects of economic and real estate conditions in those particular markets, such as building by competitors, local vacancy and rental rates and general levels of employment and economic activity.  To the extent that weak economic or real estate conditions affect Minnesota and/or North Dakota more severely than other areas of the country, our financial performance could be negatively impacted.

If we are not able to renew leases or enter into new leases on favorable terms or at all as our existing leases expire, our revenue, operating results and cash flows will be reduced.  We may be unable to renew leases with our existing tenants or enter into new leases with new tenants due to economic and other factors as our existing leases expire or are terminated prior to the expiration of their current terms.  As a result, we could lose a significant source of revenue while remaining responsible for the payment of our obligations.  In addition, even if we were able to renew existing leases or enter into new leases in a timely manner, the terms of those leases may be less favorable to us than the terms of expiring leases, because the rental rates of the renewal or new leases may be significantly lower than those of the expiring leases, or tenant installation costs, including the cost of required renovations or concessions to tenants, may be significant.  If we are unable to enter into lease renewals or new leases on favorable terms or in a timely manner for all or a substantial portion of space that is subject to expiring leases, our revenue, operating results and cash flows will be adversely affected. As a result, our ability to make distributions to the holders of our shares of beneficial interest may be adversely affected. As of April 30, 2014, approximately 1.4 million square feet, or 13.0% of our total commercial property square footage, was vacant. Approximately 760 of our 10,779 apartment units, or 7.0%, were vacant. As of April 30, 2014, leases covering approximately 11.9% of our total commercial segments net rentable square footage will expire in fiscal year 2015, 12.1% in fiscal year 2016, 11.3% in fiscal year 2017, 6.7% in fiscal year 2018, and 12.6% in fiscal year 2019, assuming that none of the tenants exercise future renewal options, and excluding the effect of early renewals completed on existing leases.

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We face potential adverse effects from commercial tenant bankruptcies or insolvencies.  The bankruptcy or insolvency of our commercial tenants may adversely affect the income produced by our properties.  If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord.  If a tenant files for bankruptcy, we cannot evict the tenant solely because of such bankruptcy.  A court, however, may authorize the tenant to reject and terminate its lease with us.  In such a case, our claim against the tenant for unpaid future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and it is unlikely that a bankrupt tenant would pay in full amounts it owes us under a lease.  This shortfall could adversely affect our cash flow and results of operations.  If a tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely rental payments.  Under some circumstances, we may agree to partially or wholly terminate the lease in advance of the termination date in consideration for a lease termination fee that is less than the agreed rental amount.  Additionally, without regard to the manner in which a lease termination occurs, we are likely to incur additional costs in the form of tenant improvements and leasing commissions in our efforts to lease the space to a new tenant, as well as possibly lower rental rates reflective of declines in market rents.

Because real estate investments are generally illiquid, and various factors limit our ability to dispose of assets, we may not be able to sell properties when appropriate.  Real estate investments are relatively illiquid and, therefore, we have limited ability to vary our portfolio quickly in response to changes in economic or other conditions. In addition, the prohibitions under the federal income tax laws on REITs holding property for sale and related regulations may affect our ability to sell properties. Our ability to dispose of assets may also be limited by constraints on our ability to utilize disposition proceeds to make acquisitions on financially attractive terms, and the requirement that we take additional impairment charges on certain assets. More specifically, we are required to distribute or pay tax on all capital gains generated from the sale of assets, and, in addition, a significant number of our properties were acquired using limited partnership units of IRET Properties, our operating partnership, and are subject to certain agreements which restrict our ability to sell such properties in transactions that would create current taxable income to the former owners. As a result, we are motivated to structure the sale of these assets as tax-free exchanges. To accomplish this we must identify attractive re-investment opportunities. These considerations impact our decisions on whether or not to dispose of certain of our assets.

Capital markets and economic conditions can materially affect our financial condition and results of operations, the value of our equity securities, and our ability to sustain payment of our distribution at current levels. Many factors affect the value of our equity securities and our ability to make or maintain at current levels distributions to the holders of our shares of beneficial interest, including the state of the capital markets and the economy, which in recent years have negatively affected substantially all businesses, including ours. Demand for office, industrial, and retail space has declined nationwide due to bankruptcies, downsizing, layoffs and cost cutting. The availability of credit has been and may in the future again be adversely affected by illiquid credit markets. Regulatory pressures and the burden of troubled and uncollectible loans led some lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers. If these market conditions recur, they may limit our ability and the ability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs, which may materially affect our financial condition and results of operations and the value of our equity securities.  Declining rental revenues from our properties due to persistent negative economic conditions may have a material adverse effect on our ability to make distributions to the holders of our shares of beneficial interest.  In fiscal years 2014 and 2013, distributions to our common shareholders and unitholders of the Operating Partnership in cash and common shares pursuant to our Distribution Reinvestment and Share Purchase Plan (DRIP) totaled approximately 71.4% and 76.2%, respectively, of our net cash provided by operating activities.

Inability to manage rapid growth effectively may adversely affect our operating results. We have experienced significant growth at various times in the past; principally through the acquisition of additional real estate properties. Subject to our continued ability to raise equity capital and issue limited partnership units of IRET Properties and identify suitable investment properties, we intend to continue our acquisition of real estate properties. Effective management of rapid growth presents challenges, including:

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the need to expand our management team and staff;

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the need to enhance internal operating systems and controls; and

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the ability to consistently achieve targeted returns on individual properties.

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We may not be able to maintain similar rates of growth in the future, or manage our growth effectively. Additionally, an inability to make accretive property acquisitions may adversely affect our ability to increase our net income. The acquisition of additional real estate properties is critical to our ability to increase our net income.  If we are unable to make real estate acquisitions on terms that meet our financial and strategic objectives, whether due to market conditions, a changed competitive environment or unavailability of capital, our ability to increase our net income may be materially and adversely affected. Our failure to do so may have a material adverse effect on our financial condition and results of operations and ability to make distributions to the holders of our shares of beneficial interest.

Competition may negatively impact our earnings. We compete with many kinds of institutions, including other REITs, private partnerships, individuals, pension funds and banks, for tenants and investment opportunities. Many of these institutions are active in the markets in which we invest and have greater financial and other resources that may be used to compete against us. With respect to tenants, this competition may affect our ability to lease our properties, the price at which we are able to lease our properties and the cost of required renovations or tenant improvements. With respect to acquisition and development investment opportunities, this competition may cause us to pay higher prices for new properties than we otherwise would have paid, or may prevent us from purchasing a desired property at all.

High leverage on our overall portfolio may result in losses. As of April 30, 2014, our ratio of total indebtedness to total Net Assets (as that term is used in our Bylaws, which usage is not in accordance with GAAP, "Net Assets" means our total assets at cost before deducting depreciation or other non-cash reserves, less total liabilities) was approximately 93.3%. As of April 30, 2013 and 2012, our percentage of total indebtedness to total Net Assets was approximately 91.0% and 117.2%, respectively. Under our Bylaws we may increase our total indebtedness up to 300.0% of our Net Assets, or by an additional approximately $2.4 billion. There is no limitation on the increase that may be permitted if approved by a majority of the independent members of our Board of Trustees and disclosed to the holders of our securities in the next quarterly report, along with justification for any excess.

This amount of leverage may expose us to cash flow problems if rental income decreases. Under those circumstances, in order to pay our debt obligations we might be required to sell properties at a loss or be unable to make distributions to the holders of our shares of beneficial interest. A failure to pay amounts due may result in a default on our obligations and the loss of the property through foreclosure. Additionally, our degree of leverage could adversely affect our ability to obtain additional financing and may have an adverse effect on the market price of our common shares.

Our inability to renew, repay or refinance our debt may result in losses. We incur a significant amount of debt in the ordinary course of our business and in connection with acquisitions of real properties. In addition, because we have a limited ability to retain earnings as a result of the REIT distribution requirements, we will generally be required to refinance debt that matures with additional debt or equity.  We are subject to the normal risks associated with debt financing, including the risk that:

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our cash flow will be insufficient to meet required payments of principal and interest;

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we will not be able to renew, refinance or repay our indebtedness when due; and

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the terms of any renewal or refinancing will be less favorable than the terms of our current indebtedness.

These risks increase when credit markets are tight; in general, when the credit markets are constrained, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to be less favorable to us than the terms of our current indebtedness.

We anticipate that only a small portion of the principal of our debt will be repaid prior to maturity.  Therefore, we are likely to need to refinance a significant portion of our outstanding debt as it matures.  We cannot guarantee that any refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us.  If we cannot refinance, extend or pay principal payments due at maturity with the proceeds of other capital transactions, such as new equity capital, our cash flows may not be sufficient in all years to repay debt as it matures.  Additionally, if we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more of our properties on disadvantageous terms, which may result in losses to us. These losses could have a material adverse effect on us, our

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federal and state authorities. Sources of revenue for our commercial healthcare property tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants.  These factors may adversely affect the economic performance of some or all of our commercial healthcare services tenants and, in turn, our lease revenues. In addition, if we or our tenants terminate the leases for these properties, or our tenants lose their regulatory authority to operate such properties, we may not be able to locate suitable replacement tenants to lease the properties for their specialized uses. Alternatively, we may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues and/or additional capital expenditures occurring as a result could hinder our ability to make distributions to the holders of our shares of beneficial interest.

New federal healthcare reform laws may adversely affect the operators and tenants of our commercial healthcare (including senior housing) properties.  In March 2010, the President signed into law The Patient Protection and Affordable Care Act ("PPACA") and The Health Care and Education and Reconciliation Act of 2010 (the "Reconciliation Act"), which amends the PPACA (collectively, the "Health Reform Acts").  The Health Reform Acts contain various provisions that may affect us directly as an employer, and that may affect the operators and tenants of commercial healthcare (including senior housing) properties.  While some of the provisions of these laws may have a positive impact on operators' or tenants' revenues, by increasing coverage of uninsured individuals, other provisions may have a negative effect on operator or tenant reimbursements, for example by changing the "market basket" adjustments for certain types of healthcare facilities.  The Health Reform Acts also enhance certain fraud and abuse penalty provisions that could apply to our operators and tenants in the event of one or more violations of complex federal healthcare laws.  Additionally, provisions in the Health Reform Acts may affect the health coverage that we and our operators and tenants provide to our respective employees.  We currently cannot predict the impact that this far-reaching, landmark legislation will have on our business and the businesses and operations of our tenants. Any loss of revenues and/or additional expenditures incurred by us or by operators and tenants of our properties as a result of the Health Reform Acts could adversely affect our cash flow and results of operations and have a material adverse effect on our ability to make distributions to the holders of our shares of beneficial interest.

Adverse changes in applicable laws may affect our potential liabilities relating to our properties and operations. Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to all tenants in the form of higher rents. As a result, any increase may adversely affect our cash available for distribution, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. Similarly, changes in laws that increase the potential liability for environmental conditions existing on properties, that increase the restrictions on discharges or other conditions or that affect development, construction and safety requirements may result in significant unanticipated expenditures that could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In addition, future enactment of rent control or rent stabilization laws or other laws regulating multi-family residential properties may reduce rental revenues or increase operating costs.

Complying with laws benefiting disabled persons or other safety regulations and requirements may affect our costs and investment strategies. Federal, state and local laws and regulations designed to improve disabled persons' access to and use of buildings, including the Americans with Disabilities Act of 1990, may require modifications to, or restrict renovations of, existing buildings. Additionally, these laws and regulations may require that structural features be added to buildings under construction.  Legislation or regulations that may be adopted in the future may impose further burdens or restrictions on us with respect to improved access to, and use of these buildings by, disabled persons. Noncompliance could result in the imposition of fines by government authorities or the award of damages to private litigants.  The costs of complying with these laws and regulations may be substantial, and limits or restrictions on construction, or the completion of required renovations, may limit the implementation of our investment strategy or reduce overall returns on our investments. This could have an adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt.  Our properties are also subject to various other federal, state and local regulatory requirements, such as state and local fire and life safety requirements.  If we fail to comply with these requirements, we could incur fines or private damage awards.  Additionally, in the event that existing requirements change, compliance with future requirements may require significant unanticipated expenditures that may adversely affect our cash flow and results of operations.

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We may be responsible for potential liabilities under environmental laws. Under various federal, state and local laws, ordinances and regulations, we, as a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, hazardous or toxic substances in, on, around or under that property. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. The presence of these substances, or the failure to properly remediate any property containing these substances, may adversely affect our ability to sell or rent the affected property or to borrow funds using the property as collateral. In arranging for the disposal or treatment of hazardous or toxic substances, we may also be liable for the costs of removal of, or remediation of, these substances at that disposal or treatment facility, whether or not we own or operate the facility. In connection with our current or former ownership (direct or indirect), operation, management, development and/or control of real properties, we may be potentially liable for removal or remediation costs with respect to hazardous or toxic substances at those properties, as well as certain other costs, including governmental fines and claims for injuries to persons and property. A finding of liability for an environmental condition as to any one or more properties could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt.

Environmental laws also govern the presence, maintenance and removal of asbestos, and require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos; notify and train those who may come into contact with asbestos; and undertake special precautions if asbestos would be disturbed during renovation or demolition of a building.  Indoor air quality issues may also necessitate special investigation and remediation.  These air quality issues can result from inadequate ventilation, chemical contaminants from indoor or outdoor sources, or biological contaminants such as molds, pollen, viruses and bacteria.  Such asbestos or air quality remediation programs could be costly, necessitate the temporary relocation of some or all of the property's tenants or require rehabilitation of an affected property.

It is generally our policy to obtain a Phase I environmental study on each property that we seek to acquire.  A Phase I environmental study generally includes a visual inspection of the property and the surrounding areas, an examination of current and historical uses of the property and the surrounding areas and a review of relevant state and federal documents, but does not involve invasive techniques such as soil and ground water sampling. If the Phase I indicates any possible environmental problems, our policy is to order a Phase II study, which involves testing the soil and ground water for actual hazardous substances. However, Phase I and Phase II environmental studies, or any other environmental studies undertaken with respect to any of our current or future properties, may not reveal the full extent of potential environmental liabilities. We currently do not carry insurance for environmental liabilities.

We may be unable to retain or attract qualified management. We are dependent upon our senior officers for essentially all aspects of our business operations. Our senior officers have experience in the specialized business segments in which we operate, and the loss of them would likely have a material adverse effect on our operations, and could adversely impact our relationships with lenders, industry personnel and potential tenants.  We do not have employment contracts with any of our senior officers. As a result, any senior officer may terminate his or her relationship with us at any time, without providing advance notice. If we fail to manage effectively a transition to new personnel, or if we fail to attract and retain qualified and experienced personnel on acceptable terms, our business and prospects could be harmed. The location of our company headquarters in Minot, North Dakota, may make it more difficult and expensive to attract, relocate and retain current and future officers and employees.

If the level of drilling and production in the Bakken Shale Formation declines substantially near our North Dakota real estate assets, our physical occupancy levels and revenues could decline. We have significant existing real estate assets in our home market of North Dakota, and we are committing additional resources to the development of multi-family residential and commercial real estate in North Dakota in a response to unprecedented demand for office and residential space resulting from the development of the Bakken Shale Formation. We believe that our ability to maintain or increase physical occupancy levels and rental revenues at our commercial and multi-family residential properties in North Dakota will be significantly affected by the level of drilling and production by third parties in the Bakken Shale Formation.  Drilling and production are impacted by factors beyond our control, including:  the demand for and prices of crude oil and natural gas; environmental regulation and enforcement; producers' finding and development costs of reserves; producers' desire and ability to obtain necessary permits in a timely and economic manner; oil and natural gas field characteristics and production performance; and transportation and capacity constraints on natural gas, crude oil and natural gas liquids pipelines from the producing areas. Oil field activity could decline precipitously and substantially in North Dakota as a result of any or all of these

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 factors, which could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest, and our ability to pay amounts due on our debt.

Risks related to properties under construction or development may adversely affect our financial performance. Our development and construction activities involve significant risks that may adversely affect our cash flow and results of operations, and consequently our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In connection with our renovation, redevelopment, development and related construction activities, we may be unable to obtain, or may suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations. These denials or delays could result in increased costs or our abandonment of projects. In addition, we may not be able to obtain financing on favorable terms, which may prevent us from proceeding with our development activities, and we may not be able to complete construction and lease-up of a property on schedule, which could result in increased debt service expense or construction costs. Additionally, the time required for development, construction and lease-up means that we may have to wait years for significant cash returns. Because we are required to make cash distributions to our shareholders, if our cash flow from operations or refinancings is not sufficient, we may be forced to borrow additional money to fund such distributions. Newly developed properties may not produce the cash flow that we expect, which could adversely affect our overall financial performance. In deciding whether to develop a particular property, we make assumptions regarding the expected future performance of that property. In particular, we estimate the return on our investment based on expected occupancy and rental rates. If our financial projections with respect to a new property are inaccurate, and the property is unable to achieve the expected occupancy and rental rates, it may fail to perform as we had expected. Our estimate of the costs of repositioning or redeveloping an acquired property may also prove to be inaccurate, which may result in our failure to meet our profitability goals.

Risks related to joint ventures may adversely affect our financial performance and results of operations. We have entered into, and may continue in the future to enter into, partnerships or joint ventures with other persons or entities. Joint venture investments involve risks that may not be present with other methods of ownership, including the possibility:  that our partner might become insolvent, refuse to make capital contributions when due or otherwise fail to meet its obligations, which may result in certain liabilities to us for guarantees and other commitments; that our partner might at any time have economic or other business interests or goals that are or become inconsistent with our interests or goals; that we could become engaged in a dispute with our partner, which could require us to expend additional resources to resolve such disputes and could have an adverse impact on the operations and profitability of the joint venture; and that our partner may be in a position to take action or withhold consent contrary to our instructions or requests. In addition, our ability to transfer our interest in a joint venture to a third party may be restricted. In some instances, we and/or our partner may have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner's interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partner's interest may be limited if we do not have sufficient cash, available borrowing capacity or other capital resources. In such event, we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it. Joint ventures may require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition or financing of a property.

Risks Related to Our Structure and Organization

We may incur tax liabilities as a consequence of failing to qualify as a REIT. Although our management believes that we are organized and have operated and are operating in such a manner to qualify as a "real estate investment trust," as that term is defined under the Internal Revenue Code, we may not in fact have operated, or may not be able to continue to operate, in a manner to qualify or remain so qualified. Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations.  Even a technical or inadvertent mistake could endanger our REIT status.  The determination that we qualify as a REIT requires an ongoing analysis of various factual matters and circumstances, some of which may not be within our control. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must come from certain passive sources that are itemized in the REIT tax laws, and we are prohibited from owning specified amounts of debt or equity securities of some issuers.  Thus, to the extent revenues from non-qualifying sources, such as income from third-party management services, represent more than five percent of our gross income in any taxable year, we will not satisfy the 95% income test and may fail to qualify as a REIT, unless certain relief provisions contained in the Internal Revenue Code apply. Even if relief provisions apply, however, a tax would be imposed with respect to excess net income. We are also required to make

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distributions to the holders of our securities of at least 90% of our REIT taxable income, excluding net capital gains.  The fact that we hold substantially all of our assets (except for qualified REIT subsidiaries) through IRET Properties, our operating partnership, and its subsidiaries, and our ongoing reliance on factual determinations, such as determinations related to the valuation of our assets, further complicates the application of the REIT requirements for us.  Additionally, if IRET Properties, our operating partnership, or one or more of our subsidiaries is determined to be taxable as a corporation, we may fail to qualify as a REIT. Either our failure to qualify as a REIT, for any reason, or the imposition of taxes on excess net income from non-qualifying sources, could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. Furthermore, new legislation, regulations, administrative interpretations or court decisions could change the tax laws with respect to our qualification as a REIT or the federal income tax consequences of our qualification.

If we failed to qualify as a REIT, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates, which would likely have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In addition, we could be subject to increased state and local taxes, and, unless entitled to relief under applicable statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification. This treatment would reduce funds available for investment or distributions to the holders of our securities because of the additional tax liability to us for the year or years involved. In addition, we would no longer be able to deduct, and would not be required to make, distributions to holders of our securities. To the extent that distributions to the holders of our securities had been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain investments to pay the applicable tax.

Failure of our operating partnership to qualify as a partnership would have a material adverse effect on us.  We believe that IRET Properties, our operating partnership, qualifies as a partnership for federal income tax purposes.  No assurance can be given, however, that the Internal Revenue Service will not challenge its status as a partnership for federal income tax purposes, or that a court would not sustain such a challenge.  If the Internal Revenue Service were to be successful in treating IRET Properties as an entity that is taxable as a corporation (such as a publicly-traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in IRET Properties would exceed 5% of our assets, and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation.  Also, the imposition of a corporate tax on IRET Properties would reduce significantly the amount of cash available for distribution by it.

Certain provisions of our Declaration of Trust may limit a change in control and deter a takeover. In order to maintain our qualification as a REIT, our Declaration of Trust provides that any transaction, other than a transaction entered into through the NASDAQ National Market or other similar exchange, that would result in our disqualification as a REIT under Section 856 of the Internal Revenue Code, including any transaction that would result in (i) a person owning in excess of the ownership limit of 9.8%, in number or value, of our outstanding securities, (ii) less than 100 people owning our securities, (iii) our being "closely held" within the meaning of Section 856(h) of the Internal Revenue Code, or (iv) 50% or more of the fair market value of our securities being held by persons other than "United States persons," as defined in Section 7701(a)(30) of the Internal Revenue Code, will be void ab initio. If the transaction is not void ab initio, then the securities in excess of the ownership limit, that would cause us to be closely held, that would result in 50% or more of the fair market value of our securities to be held by persons other than United States persons or that otherwise would result in our disqualification as a REIT, will automatically be exchanged for an equal number of excess shares, and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable beneficiaries named by our Board of Trustees. These limitations may have the effect of preventing a change in control or takeover of us by a third party, even if the change in control or takeover would be in the best interests of the holders of our securities.

In order to maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions.  In order to maintain our REIT status, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements, even if the then-prevailing market conditions are not favorable for these borrowings.  To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our net taxable income each year, excluding net capital gains.  In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions made by us with respect to the calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income for that year, and any undistributed taxable income from prior periods. 

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We intend to make distributions to our shareholders to comply with the 90% distribution requirement and to avoid the nondeductible excise tax and will rely for this purpose on distributions from our operating partnership.  However, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.  The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.

Complying with REIT requirements may force us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.  To qualify and maintain our status as a REIT, we must satisfy certain requirements with respect to the character of our assets.  If we fail to comply with these requirements at the end of any quarter, we must correct such failure within 30 days after the end of the quarter (by, possibly, selling assets notwithstanding their prospects as an investment) to avoid losing our REIT status.  If we fail to comply with these requirements at the end of any quarter, and the failure exceeds a minimum threshold, we may be able to preserve our REIT status if (a) the failure was due to reasonable cause and not to willful neglect, (b) we dispose of the assets causing the failure within six months after the last day of the quarter in which we identified the failure, (c) we file a schedule with the IRS describing each asset that caused the failure, and (d) we pay an additional tax of the greater of $50,000 or the product of the highest applicable tax rate multiplied by the net income generated on those assets.  As a result, compliance with the REIT requirements may require us to liquidate or forego otherwise attractive investments.  These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.  Even if we qualify for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted a result of a foreclosure, and state or local income, property and transfer taxes, such as mortgage recording taxes.  Any of these taxes would decrease cash available for distribution to our shareholders.  In addition, in order to meet the REIT qualification requirements, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold some of our assets through a taxable REIT subsidiary ("TRS"). While the TRS structure would allow the economic benefits of ownership to flow to us, a TRS is subject to tax on its income from the operations of the assisted living facilities at the federal and state level. In addition, a TRS is subject to detailed tax regulations that affect how it may be capitalized and operated. We currently have one TRS, to which we lease our Legends at Heritage Place assisted living facility, located in Sartell, Minnesota.

Because of the ownership structure of our Sartell, Minnesota assisted living facility, we face potential adverse effects from changes to the applicable tax laws. Under the Internal Revenue Code, REITs are not allowed to operate assisted living facilities directly or indirectly. Accordingly, we lease our Sartell, Minnesota assisted living facility to our TRS. While the TRS structure allows the economic benefits of ownership to flow to us, the TRS is subject to tax on its income from the operations of the assisted living facilities at the federal and state level. In addition, the TRS is subject to detailed tax regulations that affect how it may be capitalized and operated. If the tax laws applicable to a TRS are modified, we may be forced to modify the structure for owning these assisted living facilities, and such changes may adversely affect the cash flows from the facilities. In addition, the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, and we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such actions may prospectively or retroactively modify the tax treatment of the TRS and, therefore, may adversely affect our after-tax returns from our Sartell, Minnesota assisted living facility.

The lease of qualified health care properties to a taxable REIT subsidiary is subject to special requirements.  We currently lease our Sartell, Minnesota assisted living facility to a TRS, and we may in future lease other qualified health care properties we acquire from operators to a TRS (or a limited liability company of which the TRS is a member), which lessee will contract with such operators (or a related party) to operate the health care operations at these properties. The rents from this TRS lessee structure will be treated as qualifying rents from real property if (1) they are paid pursuant to an arms-length lease of a qualified health care property with a TRS and (2) the operator qualifies as an eligible independent contractor. If any of these conditions are not satisfied, then the rents will not be qualifying rents, which could have a material adverse effect on us and our qualification as a REIT.

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We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares.  At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended.  Any of those new laws or interpretations may take effect retroactively and could adversely affect us or the market price of our common shares of beneficial interest.

The U.S. federal income tax laws governing REITs are complex.  We intend to operate in a manner that will qualify us as a REIT under the U.S. federal income tax laws.  The REIT qualification requirements are extremely complex, however, and interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that we will be successful in operating so we can continue to qualify as a REIT.  At any time, new laws, interpretations, or court decisions may change the federal tax laws or the U.S. federal income tax consequences of our qualification as a REIT.

Our Board of Trustees may make changes to our major policies without approval of the holders of our shares of beneficial interest. Our operating and financial policies, including policies relating to development and acquisition of real estate, financing, growth, operations, indebtedness, capitalization and distributions, are exclusively determined by our Board of Trustees. Our Board of Trustees may amend or revoke those policies, and other policies, without advance notice to, or the approval of, the holders of our shares of beneficial interest.  Accordingly, our shareholders do not control these policies, and policy changes could adversely affect our financial condition and results of operations.

Risks Related to the Purchase of our Shares of Beneficial Interest

Our future growth depends, in part, on our ability to raise additional equity capital, which will have the effect of diluting the interests of the holders of our common shares. Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of IRET Properties. The issuance of additional common shares, and of limited partnership units for which we subsequently issue common shares upon the redemption of the limited partnership units, will dilute the interests of the current holders of our common shares.  Additionally, sales of substantial amounts of our common shares or preferred shares in the public market, or issuances of our common shares upon redemption of limited partnership units in our operating partnership, or the perception that such sales or issuances might occur, could adversely affect the market price of our common shares.

We may issue additional classes or series of our shares of beneficial interest with rights and preferences that are superior to the rights and preferences of our common shares. Without the approval of the holders of our common shares, our Board of Trustees may establish additional classes or series of our shares of beneficial interest, and such classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights and preferences that are superior to the rights of the holders of our common shares.

Payment of distributions on our shares of beneficial interest is not guaranteed. Our Board of Trustees must approve our payment of distributions and may elect at any time, or from time to time, and for an indefinite duration, to reduce the distributions payable on our shares of beneficial interest or to not pay distributions on our shares of beneficial interest. Our Board of Trustees may reduce distributions for a variety of reasons, including, but not limited to, the following:

•

operating and financial results below expectations that cannot support the current distribution payment;

•

unanticipated costs or cash requirements; or

•

a conclusion that the payment of distributions would cause us to breach the terms of certain agreements or contracts, such as financial ratio covenants in our debt financing documents.

Our distributions are not eligible for the lower tax rate on dividends except in limited situations. The tax rate applicable to qualifying corporate dividends received by shareholders taxed at individual rates has been reduced to a maximum rate of 15% if a taxpayer is in the 25%, 28%, 33% or 35% tax brackets and 20% if a taxpayer is in the 39.6% tax bracket.  This special tax rate is generally not applicable to distributions paid by a REIT, unless such distributions represent earnings on which the REIT itself had been taxed. As a result, distributions (other than capital gain distributions) paid by us to shareholders taxed at individual rates will generally be subject to the tax rates that are otherwise applicable to ordinary income which, currently, are as high as 39.6%.  Although the earnings of a REIT that are distributed to its shareholders are still generally subject to less federal income taxation than earnings

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of a non-REIT C corporation that are distributed to its shareholders net of corporate-level income tax, this law change may make an investment in our securities comparatively less attractive relative to an investment in the shares of other entities which pay dividends but are not formed as REITs.

Changes in market conditions could adversely affect the price of our securities. As is the case with any publicly-traded securities, certain factors outside of our control could influence the value of our common shares, Series A preferred shares, Series B preferred shares and any other securities to be issued in the future. These conditions include, but are not limited to:

•

market perception of REITs in general;

•

market perception of REITs relative to other investment opportunities;

•

market perception of our financial condition, performance, distributions and growth potential;

•

prevailing interest rates;

•

general economic and business conditions;

•

government action or regulation, including changes in the tax laws; and

•

relatively low trading volumes in securities of REITS.

Higher market interest rates may adversely affect the market price of our securities, and low trading volume on the New York Stock Exchange may prevent the timely resale of our securities. One of the factors that investors may consider important in deciding whether to buy or sell shares of a REIT is the distribution with respect to such REIT's shares as a percentage of the price of those shares, relative to market interest rates.  If market interest rates rise, prospective purchasers of REIT shares may expect a higher distribution rate in order to maintain their investment.  Higher market interest rates would likely increase our borrowing costs and might decrease funds available for distribution.  Thus, higher market interest rates could cause the market price of our common shares to decline.  In addition, although our common shares of beneficial interest are listed on the New York Stock Exchange, the daily trading volume of our shares may be lower than the trading volume for other companies.  The average daily trading volume for the period of May 1, 2013 through April 30, 2014 was 380,799 shares and the average monthly trading volume for the period of May 1, 2013 through April 30, 2014 was 7,965,040 shares.  As a result of this trading volume, an owner of our common shares may encounter difficulty in selling our shares in a timely manner and may incur a substantial loss.

None.

IRET is organized as a REIT under Section 856-858 of the Internal Revenue Code, and is in the business of owning, leasing, developing and acquiring real estate properties. These real estate investments are managed by our own employees and by third-party professional real estate management companies on our behalf.

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Total Real Estate Rental Revenue

As of April 30, 2014, our real estate portfolio consisted of 93 multi-family residential properties and 166 commercial properties, consisting of commercial office, commercial healthcare, commercial industrial and commercial retail properties, comprising 37.9%, 26.9%, 26.7%, 2.9%, and 5.6%, respectively, of our total real estate portfolio, based on the dollar amount of our original investment plus capital improvements, net of accumulated depreciation, through April 30, 2014. Gross annual rental revenue and percentages of total annual real estate rental revenue by property type for each of the three most recent fiscal years ended April 30, are as follows:

		Gross Revenue (in thousands)
Fiscal Year Ended April 30,		Multi- Family Residential			%	Commercial Office			%	Commercial Healthcare			%	Commercial Industrial			%	Commercial Retail			%		All Segments
2014		$	102,059		38.4%	$	77,440		29.2%	$	65,258		24.6%	$	6,894		2.6%	$	13,831		5.2%	$	265,482
2013		$	89,923		36.3%	$	75,962		30.6%	$	61,975		25.0%	$	6,700		2.7%	$	13,498		5.4%	$	248,058
2012		$	71,728		31.4%	$	73,493		32.1%	$	64,511		28.2%	$	6,613		2.9%	$	12,326		5.4%	$	228,671

Average Effective Annual Rent

The table below sets out the average effective annual rent per square foot or unit at same-store properties for each of the last five fiscal years in each of our five segments. Same-store properties (formerly referred to as "stabilized properties" our method of determining the properties included in this category has not changed from prior periods, only the name of the category has changed) are properties owned or in service for the entirety of the periods being compared, and, in the case of development or re-development properties, which have achieved a target level of occupancy of 90% for multi-family residential properties and 85% for commercial office, healthcare, industrial and retail properties.

	Average Effective Annual Rent per square foot or unit(1)
As of April 30		Multi-family Residential(2)		Commercial Office(3)		Commercial Healthcare(3)		Commercial Industrial(3)		Commercial Retail(3)
2014	$	783	$	13	$	17	$	4	$	8
2013	$	744	$	14	$	16	$	4	$	9
2012	$	719	$	13	$	16	$	4	$	8
2011	$	691	$	13	$	19	$	4	$	8
2010	$	684	$	13	$	18	$	4	$	9

(1)	Previously reported amounts are not revised for discontinued operations or changes in the composition of the same-store properties pool.

(2)	Monthly rent per unit, calculated as annualized rental revenue, net of free rent, including rent abatements and rent credits, divided by the occupied units as of April 30.

(3)	Monthly rental rate per square foot calculated as annualized contractual base rental income, net of free rent and excluding operating expense reimbursements, divided by the leased square feet as of April 30.

Physical Occupancy Rates

Physical occupancy represents the actual number of units or square footage leased divided by the total number of units or square footage at the end of the period. Physical occupancy levels on a same-store property and all-property basis are shown below for each property type in each of the three most recent fiscal years ended April 30. In the case of multi-family residential properties, lease arrangements with individual tenants vary from month-to-month to one-year leases. Leases on commercial properties generally vary from month-to-month to 20 years.

Segments	Same-Store Properties				All Properties
	Fiscal Year Ended April 30,				Fiscal Year Ended April 30,
	2014	2013	2012		2014	2013	2012
Multi-Family Residential	94.5%	95.3%	94.1%		93.0%	94.6%	93.6%
Commercial Office	81.4%	81.5%	79.2%		80.7%	80.8%	79.2%
Commercial Healthcare	96.2%	94.9%	94.0%		96.3%	94.7%	94.4%
Commercial Industrial	87.3%	95.7%	94.3%		87.8%	96.4%	94.3%
Commercial Retail	87.3%	86.9%	87.4%		87.4%	87.0%	87.4%

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Certain Lending Requirements

In certain instances, in connection with the acquisition of investment properties, the lender financing such properties may require, as a condition of the loan, that the properties be owned by a "single asset entity." Accordingly, we have organized a number of wholly-owned subsidiary corporations, and IRET Properties has organized several limited liability companies, for the purpose of holding title in an entity that complies with such lending conditions. All financial statements of these subsidiaries are consolidated into our financial statements.

Management and Leasing of Our Real Estate Assets

We conduct our corporate operations from offices in Minot, North Dakota and Minneapolis and St. Cloud, Minnesota.  We also have property management offices in Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, and South Dakota. The day-to-day management of our properties is carried out by our own employees and in certain cases by third-party property management companies. In markets where the amount of rentable square footage we own does not justify self-management, when properties acquired have effective pre-existing property management in place, or when for other reasons particular properties are in our judgment not attractive candidates for self-management, we utilize third-party professional management companies for day-to-day management.  However, all decisions relating to purchase, sale, insurance coverage, capital improvements, approval of commercial leases, annual operating budgets and major renovations are made exclusively by our employees and implemented by the third-party management companies. Generally, our management contracts provide for compensation ranging from 2.5% to 6.0% of gross rent collections and, typically, we may terminate these contracts in 60 days or less or upon the property manager's failure to meet certain specified financial performance goals. With respect to multi-tenant commercial properties, we rely almost exclusively on third-party brokers to locate potential tenants. As compensation, brokers may receive a commission that is generally calculated as a percentage of the net rent to be paid over the term of the lease. We believe that the broker commissions paid by us conform to market and industry standards, and accordingly are commercially reasonable.

Summary of Real Estate Investment Portfolio

	(in thousands, except percentages)
As of April 30,	2014		%		2013		%		2012		%
Real estate investments
Property owned	$	1,996,031			$	2,032,970			$	1,892,009
Less accumulated depreciation		(424,288)				(420,421)				(373,490)
	$	1,571,743		92.5%	$	1,612,549		95.9%	$	1,518,519		97.5%
Development in progress		104,609		6.2%		46,782		2.8%		27,599		1.8%
Unimproved land		22,864		1.3%		21,503		1.3%		10,990		0.7%
Total real estate investments	$	1,699,216		100.0%	$	1,680,834		100.0%	$	1,557,108		100.0%

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Summary of Individual Properties Owned as of April 30, 2014

The following table presents information regarding our 259 residential and commercial properties as well as unimproved land and development properties owned as of April 30, 2014. We own the following interests in real estate either through our wholly-owned subsidiaries or by ownership of a controlling interest in an entity owning the real estate. We account for these interests on a consolidated basis. Additional information is included in Schedule III to our financial statements included in the Annual Report on Form 10-K.

* = Real estate not owned in fee; all or a portion is leased under a ground or air rights lease.

Property Name and Location	Units	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
MULTI-FAMILY RESIDENTIAL
11th Street 3 Plex - Minot, ND	3	$	81	100.0%
4th Street 4 Plex - Minot, ND	4		116	100.0%
Alps Park - Rapid City, SD	71		5,922	100.0%
Apartments on Main - Minot, ND	10		1,312	100.0%
Arbors - S Sioux City, NE	192		8,585	89.6%
Ashland - Grand Forks, ND	84		8,400	100.0%
Boulder Court - Eagan, MN	115		9,418	94.8%
Brookfield Village - Topeka, KS	160		8,600	98.8%
Brooklyn Heights - Minot, ND	72		2,429	100.0%
Campus Center - St. Cloud, MN	92		2,847	83.7%
Campus Heights - St. Cloud, MN	49		831	73.5%
Campus Knoll - St. Cloud, MN	71		1,898	90.1%
Campus Plaza - St. Cloud, MN	24		434	54.2%
Campus Side - St. Cloud, MN	48		863	45.8%
Campus View - St. Cloud, MN	48		843	47.9%
Canyon Lake - Rapid City, SD	109		5,842	96.3%
Castlerock - Billings, MT	166		7,582	94.6%
Chateau I - Minot, ND	32		6,285	100.0%
Cimarron Hills - Omaha, NE	234		14,493	91.5%
Colonial Villa - Burnsville, MN	240		20,332	76.7%
Colony - Lincoln, NE	232		17,634	84.9%
Colton Heights - Minot, ND	18		1,166	100.0%
Cornerstone - St. Cloud, MN	24		436	66.7%
Cottage West Twin Homes - Sioux Falls, SD	50		5,103	100.0%
Cottonwood - Bismarck, ND	268		21,574	100.0%
Country Meadows - Billings, MT	133		9,644	97.7%
Crestview - Bismarck, ND	152		6,101	99.3%
Crown - Rochester, MN	48		3,744	100.0%
Crown Colony - Topeka, KS	220		12,796	95.9%
Cypress Court - St. Cloud, MN	132		13,666	78.8%
Evergreen - Isanti, MN	36		3,204	100.0%
Evergreen II - Isanti, MN	36		3,498	91.7%
Fairmont - Minot, ND	12		435	100.0%
First Avenue - Minot, ND	20		3,051	95.0%
Forest Park - Grand Forks, ND	269		13,420	99.3%
Gables Townhomes - Sioux Falls, SD	24		2,430	100.0%

 

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Property Name and Location	Units	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
MULTI-FAMILY RESIDENTIAL - continued
Grand Gateway - St. Cloud, MN	116	$	8,480	87.9%
Greenfield - Omaha, NE	96		5,363	96.9%
Heritage Manor - Rochester, MN	182		10,003	87.4%
Indian Hills - Sioux City, IA	120		6,617	98.3%
Kirkwood Manor - Bismarck, ND	108		4,753	100.0%
Lakeside Village - Lincoln, NE	208		17,314	87.5%
Lancaster - St. Cloud, MN	83		4,267	90.4%
Landing at Southgate - Minot, ND	108		15,151	100.0%
Landmark - Grand Forks, ND	90		2,720	100.0%
Legacy - Grand Forks, ND	361		29,377	98.3%
Mariposa - Topeka, KS	54		5,996	100.0%
Meadows - Jamestown, ND	81		6,365	100.0%
Monticello Village - Monticello, MN	60		4,693	91.7%
Northern Valley - Rochester, MN	16		828	100.0%
North Pointe - Bismarck, ND	73		4,792	100.0%
Oakmont Estates - Sioux Falls, SD	79		5,778	98.7%
Oakwood Estates - Sioux Falls, SD	160		7,592	98.1%
Olympic Village - Billings, MT	274		14,466	96.7%
Olympik Village - Rochester, MN	140		8,854	89.3%
Oxbow Park - Sioux Falls, SD	120		6,214	98.3%
Park Meadows - Waite Park, MN	360		15,665	92.2%
Pebble Springs - Bismarck, ND	16		904	100.0%
Pinehurst - Billings, MT	21		998	90.5%
Pinecone Villas - Sartell, MN	24		2,783	95.8%
Pines - Minot, ND	16		434	93.8%
Plaza - Minot, ND	71		15,986	100.0%
Pointe West - Rapid City, SD	90		5,263	94.4%
Ponds at Heritage Place - Sartell, MN	58		5,191	98.3%
Prairie Winds - Sioux Falls, SD	48		2,426	100.0%
Quarry Ridge - Rochester, MN	154		15,803	90.9%
Quarry Ridge II - Rochester, MN	159		17,642	89.3%
Regency Park Estates - St. Cloud, MN	145		12,144	92.4%
Renaissance Heights I - Williston, ND	54		11,513	70.4%
Ridge Oaks - Sioux City, IA	132		6,338	100.0%
Rimrock West - Billings, MT	78		5,272	88.5%
River Ridge - Bismarck, ND	146		25,086	100.0%
Rocky Meadows - Billings, MT	98		7,467	100.0%
Rum River - Isanti, MN	72		5,812	100.0%
Sherwood - Topeka, KS	300		18,696	98.7%
Sierra Vista - Sioux Falls, SD	44		2,723	100.0%
South Pointe - Minot, ND	196		12,701	99.5%
Southpoint - Grand Forks, ND	96		10,485	97.9%
Southview - Minot, ND	24		1,009	100.0%
Southwind - Grand Forks, ND	164		8,148	99.4%
Summit Park - Minot, ND	95		3,397	96.8%
Sunset Trail - Rochester, MN	146		15,640	89.0%

 

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Property Name and Location	Units	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
MULTI-FAMILY RESIDENTIAL - continued
Temple - Minot, ND	4	$	229	100.0%
Terrace Heights - Minot, ND	16		429	100.0%
Thomasbrook - Lincoln, NE	264		14,095	98.1%
University Park Place - St. Cloud, MN	35		628	31.4%
Valley Park - Grand Forks, ND	168		7,735	99.4%
Villa West - Topeka, KS	308		17,863	81.2%
Village Green - Rochester, MN	36		3,330	88.9%
West Stonehill - Waite Park, MN	312		15,923	85.9%
Westridge - Minot, ND	33		2,120	100.0%
Westwood Park - Bismarck, ND	65		3,731	96.9%
Whispering Ridge - Omaha, NE	336		27,959	88.4%
Williston Garden - Williston, ND	145		19,132	89.7%
Winchester - Rochester, MN	115		8,070	91.3%
Woodridge - Rochester, MN	108		8,323	95.4%
TOTAL MULTI-FAMILY RESIDENTIAL	10,779	$	753,731	93.0%
Property Name and Location	Approximate Net Rentable Square Footage	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
COMMERCIAL OFFICE
1st Avenue Building - Minot, ND	4,427	$	367	100.0%
2030 Cliff Road - Eagan, MN	13,374		1,071	100.0%
610 Business Center IV - Brooklyn Park, MN	78,190		9,403	100.0%
7800 West Brown Deer Road - Milwaukee, WI	175,610		12,544	98.0%
American Corporate Center - Mendota Heights, MN	138,959		21,723	87.4%
Ameritrade - Omaha, NE	73,742		8,349	100.0%
Benton Business Park - Sauk Rapids, MN	30,464		1,538	88.1%
Bismarck 715 East Broadway - Bismarck, ND	22,187		2,798	100.0%
Brenwood - Minnetonka, MN	176,296		16,983	41.7%
Brook Valley I - La Vista, NE	30,000		2,147	83.3%
Burnsville Bluffs II - Burnsville, MN	45,019		3,440	45.3%
Corporate Center West - Omaha, NE	141,724		9,133	100.0%
Crosstown Centre - Eden Prairie, MN	181,224		20,016	68.5%
Eden Prairie 6101 Blue Circle Drive - Eden Prairie, MN	48,700		4,864	0.0%
Farnam Executive Center - Omaha, NE	95,216		10,100	63.9%
Flagship - Eden Prairie, MN	138,825		17,417	92.3%
Gateway Corporate Center - Woodbury, MN	59,827		8,300	100.0%
Golden Hills Office Center - Golden Valley, MN	190,758		25,414	93.0%
Granite Corporate Center - St. Cloud, MN	78,086		9,764	75.0%
Great Plains - Fargo, ND	122,040		16,084	100.0%
Highlands Ranch I - Highlands Ranch, CO	71,430		11,057	100.0%
Highlands Ranch II - Highlands Ranch, CO	81,173		12,679	86.3%
Interlachen Corporate Center - Edina, MN	105,084		19,092	92.0%
Intertech Building - Fenton, MO	65,320		7,366	85.2%

 

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Property Name and Location	Approximate Net Rentable Square Footage	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
COMMERCIAL OFFICE - continued
Mendota Office Center I - Mendota Heights, MN	59,852	$	7,893	51.7%
Mendota Office Center II - Mendota Heights, MN	88,398		12,918	51.5%
Mendota Office Center III - Mendota Heights, MN	60,776		7,585	100.0%
Mendota Office Center IV - Mendota Heights, MN	72,231		9,992	100.0%
Minnesota National Bank - Duluth, MN	18,869		1,965	100.0%
Minot 1400 31st Ave - Minot, ND	48,960		11,573	91.2%
Minot 2505 16th Street SW - Minot, ND	15,000		2,318	100.0%
Miracle Hills One - Omaha, NE	84,445		7,700	85.4%
Northgate I - Maple Grove, MN	79,297		8,410	100.0%
Northgate II - Maple Grove, MN	26,000		2,587	100.0%
Northpark Corporate Center - Arden Hills, MN	145,439		19,031	50.2%
Omaha 10802 Farnam Dr - Omaha, NE	58,574		7,228	98.6%
Pacific Hills - Omaha, NE	143,075		10,533	81.4%
Plaza 16 - Minot, ND	50,610		9,693	100.0%
Plaza VII - Boise, ID	28,994		3,829	35.5%
Plymouth 5095 Nathan Lane - Plymouth, MN	20,528		1,939	100.0%
Plymouth I - Plymouth, MN	26,186		1,728	100.0%
Plymouth II - Plymouth, MN	26,186		1,671	100.0%
Plymouth III - Plymouth, MN	26,186		2,367	100.0%
Plymouth IV & V - Plymouth, MN	126,930		16,114	100.0%
Prairie Oak Business Center - Eden Prairie, MN	36,421		6,816	100.0%
Rapid City 900 Concourse Drive - Rapid City, SD	75,815		7,913	99.9%
Riverport - Maryland Heights, MO	121,316		8,107	100.0%
Southeast Tech Center - Eagan, MN	58,300		6,475	30.4%
Spring Valley IV - Omaha, NE	18,055		1,154	0.0%
Spring Valley V - Omaha, NE	24,171		1,586	100.0%
Spring Valley X - Omaha, NE	24,000		1,284	55.0%
Spring Valley XI - Omaha, NE	24,000		1,273	100.0%
Superior Office Building - Duluth, MN	20,000		2,619	100.0%
TCA Building - Eagan, MN	103,640		9,907	98.5%
Three Paramount Plaza - Bloomington, MN	75,526		9,382	66.9%
Thresher Square - Minneapolis, MN	117,144		12,813	27.7%
Timberlands - Leawood, KS	90,153		12,012	92.1%
UHC Office - International Falls, MN	30,000		2,565	100.0%
US Bank Financial Center - Bloomington, MN	153,311		18,053	82.8%
Wells Fargo Center - St Cloud, MN	86,477		10,690	91.7%
West River Business Park - Waite Park, MN	24,075		1,671	87.5%
Westgate - Boise, ID	103,342		13,551	100.0%
Whitewater Plaza - Minnetonka, MN	61,138		6,458	62.0%
Wirth Corporate Center - Golden Valley, MN	74,568		4,730	20.1%
Woodlands Plaza IV - Maryland Heights, MO	61,820		6,846	100.0%
TOTAL COMMERCIAL OFFICE	4,757,483	$	544,628	80.7%

 

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Property Name and Location	Approximate Net Rentable Square Footage	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
COMMERCIAL HEALTHCARE
2800 Medical Building - Minneapolis, MN	53,750	$	9,585	82.4%
2828 Chicago Avenue - Minneapolis, MN	56,239		17,672	100.0%
Airport Medical - Bloomington, MN*	24,218		4,678	100.0%
Barry Pointe Office Park - Kansas City, MO	18,502		2,893	80.0%
Billings 2300 Grant Road - Billings, MT	14,705		1,865	100.0%
Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN	53,896		9,515	100.0%
Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN	36,199		6,272	100.0%
Casper 1930 E 12th Street (Park Place) - Casper, WY	65,160		6,381	100.0%
Casper 3955 E 12th Street (Meadow Wind) - Casper, WY	57,822		11,063	100.0%
Cheyenne 4010 N College Drive (Aspen Wind) - Cheyenne, WY	47,509		11,160	100.0%
Cheyenne 4606 N College Drive (Sierra Hills) - Cheyenne, WY	54,072		8,190	100.0%
Denfeld Clinic - Duluth, MN	20,512		3,099	100.0%
Eagan 1440 Duckwood Medical - Eagan, MN	17,640		2,587	100.0%
Edgewood Vista - Belgrade, MT	5,192		820	100.0%
Edgewood Vista - Billings, MT	11,800		1,892	100.0%
Edgewood Vista - Bismarck, ND	74,112		9,843	100.0%
Edgewood Vista - Brainerd, MN	82,535		9,665	100.0%
Edgewood Vista - Columbus, NE	5,194		870	100.0%
Edgewood Vista - East Grand Forks, MN	18,488		1,666	100.0%
Edgewood Vista - Fargo, ND	167,391		21,658	100.0%
Edgewood Vista - Fremont, NE	6,042		589	100.0%
Edgewood Vista - Grand Island, NE	5,185		837	100.0%
Edgewood Vista - Hastings, NE	6,042		612	100.0%
Edgewood Vista - Hermantown I, MN	119,349		11,679	100.0%
Edgewood Vista - Hermantown II, MN	160,485		11,269	100.0%
Edgewood Vista - Kalispell, MT	10,295		1,187	100.0%
Edgewood Vista - Minot, ND	108,503		12,712	100.0%
Edgewood Vista - Missoula, MT	10,150		1,037	100.0%
Edgewood Vista - Norfolk, NE	5,135		773	100.0%
Edgewood Vista - Omaha, NE	6,042		681	100.0%
Edgewood Vista - Sioux Falls, SD	11,800		1,328	100.0%
Edgewood Vista - Spearfish, SD	84,126		8,968	100.0%
Edgewood Vista - Virginia, MN	147,183		12,206	100.0%
Edina 6363 France Medical - Edina, MN*	70,934		15,175	98.3%
Edina 6405 France Medical  - Edina, MN*	55,478		12,242	100.0%
Edina 6517 Drew Avenue - Edina, MN	12,140		1,542	100.0%
Edina 6525 Drew Avenue - Edina, MN	3,431		505	86.9%
Edina 6525 France SMC II - Edina, MN	67,409		14,791	95.1%
Edina 6545 France SMC I - Edina MN*	227,626		48,981	94.5%
Fresenius - Duluth, MN	9,052		1,572	100.0%
Garden View - St. Paul, MN*	43,404		8,052	82.6%
Gateway Clinic - Sandstone, MN*	12,444		1,766	100.0%
Healtheast St John & Woodwinds - Maplewood & Woodbury, MN	114,316		21,601	100.0%
High Pointe Health Campus - Lake Elmo, MN	60,558		13,511	65.0%
Jamestown Medical Office Building - Jamestown, ND*	45,222		7,622	91.7%
Laramie 1072 N 22nd Street (Spring Wind) - Laramie, WY	62,291		10,574	100.0%

 

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Property Name and Location	Approximate Net Rentable Square Footage	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
COMMERCIAL HEALTHCARE - continued
Legends at Heritage Place - Sartell, MN	98,174	$	10,890	100.0%
Mariner Clinic - Superior, WI*	28,928		3,871	100.0%
Minneapolis 701 25th Avenue Medical - Minneapolis, MN*	57,212		9,424	100.0%
Missoula 3050 Great Northern - Missoula, MT	14,640		1,971	100.0%
Nebraska Orthopaedic Hospital - Omaha, NE*	61,758		21,887	100.0%
Park Dental - Brooklyn Center, MN	9,998		2,952	100.0%
Pavilion I - Duluth, MN*	45,081		10,174	100.0%
Pavilion II - Duluth, MN	73,000		19,325	100.0%
Ritchie Medical Plaza - St Paul, MN	52,116		12,947	89.3%
Sartell 2000 23rd Street South - Sartell, MN*	59,760		12,715	25.7%
Spring Creek-American Falls - American Falls, ID	17,273		4,015	100.0%
Spring Creek-Boise - Boise, ID	16,311		5,004	100.0%
Spring Creek-Eagle - Eagle, ID	15,559		4,038	100.0%
Spring Creek-Fruitland - Fruitland, ID	39,500		7,115	100.0%
Spring Creek-Meridian - Meridian, ID	31,820		7,148	100.0%
Spring Creek-Overland - Overland, ID	26,605		6,629	100.0%
Spring Creek-Soda Springs - Soda Springs, ID	15,571		2,223	100.0%
Spring Creek-Ustick - Meridian, ID	26,605		4,300	100.0%
St Michael Clinic - St Michael, MN	10,796		2,851	100.0%
Trinity at Plaza 16 - Minot, ND	24,795		9,702	100.0%
Wells Clinic - Hibbing, MN	18,810		2,661	100.0%
TOTAL COMMERCIAL HEALTHCARE	3,093,890	$	525,028	96.3%

 

Property Name and Location	Approximate Net Rentable Square Footage	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
COMMERCIAL INDUSTRIAL
Bloomington 2000 W 94th Street - Bloomington, MN	101,567	$	7,430	100.0%
Eagan 2785 & 2795 Highway 55 - Eagan, MN	198,600		5,648	25.2%
Lexington Commerce Center - Eagan, MN	90,260		6,787	100.0%
Minot IPS - Minot, ND	27,698		6,051	100.0%
Stone Container - Fargo, ND	195,075		7,141	100.0%
Roseville 3075 Long Lake Road - Roseville, MN	17,750		1,442	100.0%
Urbandale 3900 106th Street - Urbandale, IA	518,161		15,256	100.0%
Woodbury 1865 Woodlane - Woodbury, MN	69,600		5,620	100.0%
TOTAL COMMERCIAL INDUSTRIAL	1,218,711	$	55,375	87.8%

 

 

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Property Name and Location	Approximate Net Rentable Square Footage	(in thousands) Investment (initial cost plus improvements less impairment)		Physical Occupancy as of April 30, 2014
COMMERCIAL RETAIL
17 South Main - Minot, ND	2,454	$	287	100.0%
Arrowhead First International Bank - Minot, ND	3,702		1,306	100.0%
Burnsville 1 Strip Center - Burnsville, MN	8,526		1,186	100.0%
Champlin South Pond - Champlin, MN	26,020		3,640	75.6%
Chan West Village - Chanhassen, MN	137,572		21,725	99.2%
Dakota West Plaza - Minot , ND	16,921		615	94.9%
Duluth 4615 Grand - Duluth, MN	15,582		1,934	30.5%
Duluth Denfeld Retail - Duluth, MN	37,770		5,137	78.4%
Fargo Express Community - Fargo, ND	34,226		2,571	100.0%
Forest Lake Auto - Forest Lake, MN	6,836		509	100.0%
Forest Lake Westlake Center - Forest Lake, MN	100,570		8,849	52.6%
Grand Forks Carmike - Grand Forks, ND	28,528		2,546	100.0%
Grand Forks Medpark Mall - Grand Forks, ND	59,117		5,720	98.0%
Jamestown Buffalo Mall - Jamestown, ND	213,271		8,965	86.4%
Jamestown Business Center - Jamestown, ND	100,249		2,650	83.9%
Kalispell Retail Center - Kalispell, MT	52,000		3,473	100.0%
Lakeville Strip Center - Lakeville, MN	9,488		2,040	100.0%
Minot Arrowhead - Minot, ND	81,594		8,778	100.0%
Minot Plaza - Minot, ND	11,003		650	100.0%
Monticello C Store - Monticello, MN	3,575		872	100.0%
Omaha Barnes & Noble - Omaha, NE	26,985		3,699	100.0%
Pine City C-Store - Pine City, MN	4,800		452	100.0%
Pine City Evergreen Square - Pine City, MN	63,225		3,397	75.2%
Rochester Maplewood Square - Rochester, MN	118,398		13,974	97.9%
St. Cloud Westgate - St. Cloud, MN	105,446		8,158	100.0%
Weston Retail - Weston, WI	25,644		1,681	0.0%
Weston Walgreens - Weston, WI	14,820		2,455	100.0%
TOTAL COMMERCIAL RETAIL	1,308,322	$	117,269	87.4%
SUBTOTAL	10,378,406	$	1,996,031

 

 

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Property Name and Location		(in thousands) Investment (initial cost plus improvements less impairment)
UNIMPROVED LAND
Badger Hills - Rochester, MN		$	1,050
Bismarck 4916 - Bismarck, ND			3,250
Bismarck 700 E Main - Bismarck, ND			876
Deer Ridge- Jamestown, ND			711
Eagan - Eagan, MN			423
Georgetown Square - Grand Chute, WI			1,860
Grand Forks - Grand Forks, ND			4,278
Isanti Unimproved - Isanti, MN			58
Kalispell - Kalispell, MT			1,424
Legends at Heritage Place - Sartell, MN			537
Minot (Southgate) - Minot, ND			890
Minot Wells Fargo Bank - Minot, ND			992
Monticello - Monticello, MN			117
Rapid City Unimproved- Rapid City, SD			1,376
Renaissance Heights - Williston, ND			3,577
River Falls - River Falls, WI			180
Spring Creek Fruitland - Fruitland, IA			339
Urbandale - Urbandale, IA			114
Weston - Weston, WI			812
TOTAL UNIMPROVED LAND		$	22,864
DEVELOPMENT IN PROGRESS
Arcata - Golden Valley, MN		$	13,018
Cardinal Point - Grand Forks, ND			6,829
Chateau II - Minot, ND			2,098
Commons at Southgate - Minot, ND			28,065
Cypress Court II - St. Cloud, MN			1,580
Dakota Commons - Williston, ND			9,014
Red 20 - Minneapolis, MN			13,980
Renaissance Heights I - Williston, ND			27,529
Other			2,496
TOTAL DEVELOPMENT IN PROGRESS		$	104,609
TOTAL UNITS - RESIDENTIAL SEGMENT	10,779
TOTAL SQUARE FOOTAGE - COMMERCIAL SEGMENTS(1)	10,378,406
TOTAL REAL ESTATE		$	2,123,504

(1)	Excludes property classified as held for sale at April 30, 2014 (Dewey Hill Business Center, 73,338 sq ft).

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Mortgages Payable and Line of Credit

As of April 30, 2014, individual first mortgage loans on the above properties totaled $985.9 million. Of the $997.7 million total of mortgage indebtedness on April 30, 2014, $20.5 million, or 2.1%, is represented by variable rate mortgages on which the future interest rate will vary based on changes in the interest rate index for each respective loan. Principal payments due on our mortgage indebtedness are as follows:

	(in thousands)
Year Ended April 30,	Mortgage Principal
2015	$	80,140
2016		92,888
2017		207,890
2018		91,657
2019		136,884
Thereafter		388,230
Total	$	997,689

In addition to the individual first mortgage loans included in the Company's $997.7 million of mortgage indebtedness, the Company also has a revolving, multi-bank line of credit with First International Bank and Trust, Watford City, North Dakota, as lead bank. This line of credit had, as of April 30, 2014, lending commitments of $72.0 million.  The facility has a maturity date of December 1, 2016, and is secured by mortgages on 14 properties; under the terms of the line of credit, properties may be added and removed from the collateral pool with the agreement of the lenders. Participants in this credit facility as of April 30, 2014 included, in addition to First International Bank, the following financial institutions:  The Bank of North Dakota; First Western Bank and Trust; Dacotah Bank; United Community Bank; American State Bank & Trust Company; Town & Country Credit Union; Highland Bank and MidCountry Bank. The line of credit has a current interest rate of 4.75% and a minimum outstanding principal balance requirement of $12.5 million, and as of April 30, 2014, the Company had borrowed $22.5 million. The facility includes covenants and restrictions requiring the Company to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and the Company is also required to maintain minimum depository account(s) totaling $6.0 million with First International, of which $1.5 million is to be held in a non-interest bearing account. As of April 30, 2014, the Company believes it is in compliance with the facility covenants.

Future Minimum Lease Receipts

The future minimum lease receipts to be received under leases for commercial properties in place as of April 30, 2014, assuming that no options to renew or buy out the leases are exercised, are as follows:

		(in thousands)
Year Ended April 30,		Lease Payments
2015	$	110,080
2016		101,673
2017		87,405
2018		73,163
2019		60,348
Thereafter		136,292
Total	$	568,961

Each year we review the physical condition of each property we own. In order for our properties to remain competitive, attract new tenants, and retain existing tenants, we plan for a reasonable amount of capital improvements. For the year ended April 30, 2014, we spent approximately $34.6 million on capital improvements, tenant improvements and other capital expenditures.

The following table shows total and weighted average per square foot/unit recurring and non-recurring capital expenditures (excluding capital expenditures recoverable from tenants and capital expenditures at properties sold during the period), and, for our same-store commercial segment properties, tenant improvements (excluding tenant-funded tenant improvements) and leasing costs for the three years ended April 30, 2014, 2013 and 2012. We define

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recurring capital expenditures as those made on a regular or recurring basis to maintain a property's competitive position within its market, generally with a depreciable life of 5 to 12 years, but excluding (a) capital expenditures made in the year of acquisition and in subsequent periods until the property is classified as same-store (i.e., excluding capital expenditures on non-same-store properties), (b) improvements associated with the expansion or re-development of a building, (c) renovations to a building which change the underlying classification of the building (for example, from industrial to office or Class C office to Class A office) or (d) capital improvements that represent the addition of something new to a property, rather than the replacement of an existing item.  We believe that recurring capital expenditures is a useful measure of performance because it provides an indication of the expenses that we can expect to incur on an on-going basis. Non-recurring capital expenditures correspond to major capital expenditures for items such as roof replacements or items that result in something new being added to the property (for example, the addition of a new heating and air conditioning unit that is not replacing one previously there), generally with a depreciable life of 20 to 40 years, and include expenditures completed in the year of acquisition and in subsequent periods until the property is classified as same-store (i.e., including capital expenditures on non-same-store properties).

	(in thousands except per SF or Unit data)
	Years Ended April 30,
	2014			2013			2012
	Amount		Rate/SF or Unit	Amount		Rate/SF or Unit	Amount		Rate/SF or Unit
Commercial Office Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures	$	0	0.00	$	0	0.00	$	148	0.03
Non-recurring capital expenditures	$	1,813	0.38	$	754	0.15	$	992	0.20
Tenant improvements at same-store properties	$	6,238	1.31	$	6,154	1.22	$	5,179	1.02
Leasing costs at same-store properties	$	2,549	0.54	$	3,411	0.67	$	1,683	0.33
Commercial Healthcare Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures	$	0	0.00	$	49	0.02	$	86	0.03
Non-recurring capital expenditures	$	612	0.20	$	356	0.12	$	562	0.19
Tenant improvements at same-store properties	$	3,235	1.11	$	1,573	0.58	$	3,736	1.28
Leasing costs at same-store properties	$	518	0.18	$	784	0.29	$	557	0.19
Commercial Industrial Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures	$	0	0.00	$	0	0.00	$	5	0.00
Non-recurring capital expenditures	$	127	0.10	$	0	0.00	$	256	0.09
Tenant improvements at same-store properties	$	320	0.27	$	777	0.26	$	1,179	0.40
Leasing costs at same-store properties	$	160	0.14	$	658	0.22	$	317	0.11
Commercial Retail Properties:
Non-Recoverable Capital Expenditures
Recurring capital expenditures	$	0	0.00	$	0	0.00	$	49	0.04
Non-recurring capital expenditures	$	635	0.49	$	678	0.48	$	1,062	0.76
Tenant improvements at same-store properties	$	144	0.11	$	1,335	0.96	$	214	0.15
Leasing costs at same-store properties	$	570	0.44	$	275	0.20	$	215	0.15
Multi-Family Residential Properties:
Recurring Capital Expenditures	$	4,956	589	$	5,941	713	$	6,416	752
Non-Recurring Capital Expenditures	$	11,355	1,053	$	6,737	655	$	5,001	546

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Contracts or Options to Purchase

We have granted options to purchase certain of our properties to tenants in these properties, under lease agreements with the tenant. In general, these options grant the tenant the right to purchase the property at the greater of such property's appraised value or an annual compounded increase of a specified percentage of the initial cost to us. As of April 30, 2014, 15 of our properties were subject to purchase options, and the total investment cost, plus improvements, of all such properties was $120.5 million with total gross rental revenues in fiscal year 2014 of $9.8 million.

Properties by State

The following table presents, as of April 30, 2014, the total amount of property owned, net of accumulated depreciation, by state of each of the five major segments of properties owned by us - multi-family residential, commercial office, commercial healthcare, commercial industrial and commercial retail:

	(in thousands)
State	Multi-Family  Residential		Commercial  Office		Commercial  Healthcare		Commercial  Industrial		Commercial  Retail		All Segments		% of All Segments
Minnesota	$	179,083	$	256,441	$	242,771	$	21,851	$	55,324	$	755,470		48.1%
North Dakota		199,350		33,238		54,288		10,205		25,575		322,656		20.5%
Nebraska		91,724		55,598		20,003		0		2,266		169,591		10.8%
Kansas		49,233		12,012		0		0		0		61,245		3.9%
South Dakota		36,356		5,329		8,652		0		0		50,337		3.2%
Idaho		0		12,212		38,089		0		0		50,301		3.2%
Wyoming		0		0		42,596		0		0		42,596		2.7%
Montana		30,116		0		7,464		0		2,633		40,213		2.6%
Iowa		9,769		0		0		13,121		0		22,890		1.4%
Missouri		0		20,087		2,425		0		0		22,512		1.4%
Colorado		0		18,896		0		0		0		18,896		1.2%
Wisconsin		0		8,923		2,897		0		3,216		15,036		1.0%
Total	$	595,631	$	422,736	$	419,185	$	45,177	$	89,014	$	1,571,743		100.0%

In the ordinary course of our operations, we become involved in litigation. At this time, we know of no material pending or threatened legal proceedings, or other proceedings contemplated by governmental authorities, that would have a material impact upon us.

Item 4. Mine Safety Disclosures

Not Applicable

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PART II

Quarterly Share and Distribution Data

Prior to December 18, 2012, our common shares traded on the Nasdaq Global Select Market under the symbol "IRET." On December 18, 2012, our common shares began trading on the New York Stock Exchange ("NYSE") under the symbol "IRET." The following table shows the high and low sales prices for our common shares for the periods indicated, as reported by the Nasdaq Global Select Market through December 17, 2012 and the NYSE thereafter, and the distributions per common share and limited partnership unit declared with respect to each period. On June 2, 2014, the last reported sales price per share of our common shares on the NYSE was $8.93.

Quarter Ended	High		Low		Distributions Declared (per share and unit)
Fiscal Year 2014
April 30, 2014	$	9.06	$	8.34	$	0.1300
January 31, 2014		8.94		8.24		0.1300
October 31, 2013		9.03		8.05		0.1300
July 31, 2013		9.77		8.09		0.1300

Quarter Ended	High		Low		Distributions Declared (per share and unit)
Fiscal Year 2013
April 30, 2013	$	10.00	$	9.20	$	0.1300
January 31, 2013		9.40		7.73		0.1300
October 31, 2012		8.49		7.92		0.1300
July 31, 2012		8.31		7.05		0.1300

It is IRET's policy to pay quarterly distributions to our common shareholders and unitholders, at the discretion of our Board of Trustees, based on our funds from operations, financial condition and capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board of Trustees deems relevant. Since July 1, 1971, IRET has paid quarterly cash distributions in the months of January, April, July and October.

Shareholders

As of June 2, 2014, the Company had 3,912 common shareholders of record, and 109,374,477 common shares of beneficial interest (plus 21,073,161 limited partnership units potentially convertible into 21,073,161 common shares) were outstanding.

Unregistered Sales of Shares

Sales of Unregistered Securities. During the fiscal years ended April 30, 2014, 2013 and 2012, respectively, we issued an aggregate of 254,948, 180,935 and 518,019 unregistered common shares to holders of limited partnership units of IRET Properties upon redemption and conversion of an aggregate of 254,948, 180,935 and 518,019 limited partnership units of IRET Properties on a one-for-one basis. All such issuances of our common shares were exempt from registration as private placements under Section 4(2) of the Securities Act, including Regulation D promulgated thereunder. We have registered the re-sale of such common shares under the Securities Act.

Issuer Purchases of Equity Securities. The Company did not repurchase any of its equity securities during fiscal year 2014.

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	FY09	FY10	FY11	FY12	FY13	FY14
Investors Real Estate Trust	100.00	101.79	118.53	97.50	139.77	133.21
S&P 500	100.00	138.84	162.75	170.49	199.29	240.02
FTSE NAREIT Equity REITs	100.00	168.70	206.23	226.47	270.74	273.10

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	(in thousands, except per share data)
	2014		2013		2012		2011		2010
Consolidated Income Statement Data
Revenue	$	265,482	$	248,058	$	228,671	$	224,773	$	218,364
Impairment of real estate investments in continuing and discontinued operations	$	44,426	$	305	$	428	$	0	$	1,678
Gain on sale of discontinued operations and  real estate and other investments	$	6,948	$	6,885	$	349	$	19,365	$	68
(Loss) income from continuing operations	$	(23,390)	$	20,677	$	8,644	$	4,679	$	5,710
Income (loss) from discontinued operations	$	6,450	$	9,295	$	1,062	$	19,672	$	(1,125)
Net (loss) income	$	(16,940)	$	29,972	$	9,706	$	24,351	$	4,585
Net loss (income) attributable to noncontrolling interests – Operating Partnership	$	4,676	$	(3,633)	$	(1,359)	$	(4,449)	$	(562)
Net (loss) income attributable to Investors Real Estate Trust	$	(13,174)	$	25,530	$	8,212	$	20,082	$	4,001
Consolidated Balance Sheet Data
Total real estate investments	$	1,696,720	$	1,680,834	$	1,557,108	$	1,458,245	$	1,500,889
Total assets	$	1,869,221	$	1,889,554	$	1,714,367	$	1,615,363	$	1,660,930
Mortgages payable	$	997,689	$	1,049,206	$	1,048,689	$	993,803	$	1,057,619
Revolving lines of credit	$	22,500	$	10,000	$	39,000	$	30,000	$	6,550
Total Investors Real Estate Trust shareholders' equity	$	592,184	$	612,787	$	432,989	$	411,690	$	409,523
Consolidated Per Common Share Data (basic and diluted)
Income from continuing operations - Investors Real Estate Trust	$	(.28)	$	.09	$	.06	$	.02	$	.04
Income (loss) from discontinued operations - Investors Real Estate Trust	$	.05	$	.08	$	.01	$	.20	$	(.01)
Net income	$	(.23)	$	.17	$	.07	$	.22	$	.03
Distributions	$	.52	$	.52	$	.56	$	.69	$	.68