EX-99.3 5 a16-10796_1ex99d3.htm EX-99.3

EXHIBIT 99.3

Part II

Item 8. Financial Statements and Supplementary Data

Our consolidated financial statements and related notes, together with the Report of the Independent Registered Public Accounting Firm, are set forth below.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial Statements

See the “Table of Contents” to our consolidated financial statements on page F-1 of this Annual Report on Form 10-K.

2. Financial Statement Schedules

See the “Table of Contents” to our consolidated financial statements on page F-1 of this Annual Report on Form 10-K.

The following financial statement schedules should be read in conjunction with the financial statements referenced in Part II, Item 8 of this Annual Report on Form 10-K: Schedule III Real Estate and Accumulated Depreciation

1

INVESTORS REAL ESTATE TRUST

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF April 30, 2015 AND 2014,

AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,

EQUITY AND CASH FLOWS FOR EACH OF

THE FISCAL YEARS IN THE THREE YEARS ENDED April 30, 2015.

ADDITIONAL INFORMATION

FOR THE YEAR ENDED

April 30, 2015

and

REPORTS OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

1400 31st Avenue SW, Suite 60

Post Office Box 1988

Minot, ND 58702-1988

701-837-4738

fax: 701-838-7785

info@iret.com

www.iret.com

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

TABLE OF CONTENTS

	PAGE
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Equity	F-6
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-10
ADDITIONAL INFORMATION
Schedule III - Real Estate and Accumulated Depreciation	F-43

Schedules other than those listed above are omitted since they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereon.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Trustees and Shareholders

Investors Real Estate Trust

We have audited the accompanying consolidated balance sheets of Investors Real Estate Trust (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of April 30, 2015 and 2014, and the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended April 30, 2015. Our audit of the basic consolidated financial statements included the financial statement schedules listed in the index appearing under Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Investors Real Estate Trust and subsidiaries as of April 30, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 2015 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of April 30, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 29, 2015 expressed an unqualified opinion thereon.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota

June 29, 2015 (except for the effects of retrospective adjustments for reportable segments discussed in Note 11 and the effects of discontinued operations discussed in Note 12, as to which the date is May 12, 2016)

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Trustees and Shareholders of

Investors Real Estate Trust

We have audited the internal control over financial reporting of Investors Real Estate Trust (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of April 30, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended April 30, 2015, and our report dated June 29, 2015 (except for the effects of retrospective adjustments for reportable segments discussed in Note 11 and the effects of discontinued operations discussed in Note 12, as to which the date is May 12, 2016) expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota

June 29, 2015

F-3

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		(in thousands)
		April 30, 2015			April 30, 2014
ASSETS
Real estate investments
Property owned		$	1,546,367		$	1,450,216
Less accumulated depreciation		(313,308		)	(302,405		)
		1,233,059			1,147,811
Development in progress		153,994			104,609
Unimproved land		25,827			22,864
Total real estate investments		1,412,880			1,275,284
Assets held for sale and assets of discontinued operations		463,103			457,307
Cash and cash equivalents		48,970			47,267
Other investments		329			329
Receivable arising from straight-lining of rents, net of allowance of $718 and $796, respectively		15,617			16,009
Accounts receivable, net of allowance of $438 and $248, respectively		2,865			8,454
Real estate deposits		2,489			145
Prepaid and other assets		3,174			3,948
Intangible assets, net of accumulated amortization of $19,610 and $17,286, respectively		26,213			30,895
Tax, insurance, and other escrow		10,073			16,225
Property and equipment, net of accumulated depreciation of $1,464 and $2,041, respectively		1,542			1,674
Goodwill		1,718			1,100
Deferred charges and leasing costs, net of accumulated amortization of $8,077 and $8,892, respectively		8,864			10,584
TOTAL ASSETS		$	1,997,837		$	1,869,221
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
LIABILITIES
Liabilities held for sale and liabilities of discontinued operations		$	321,393		$	332,731
Accounts payable and accrued expenses		56,399			45,117
Revolving line of credit		60,500			22,500
Mortgages payable		668,112			678,955
Construction debt and other		144,111			63,169
TOTAL LIABILITIES		1,250,515			1,142,472
COMMITMENTS AND CONTINGENCIES (NOTE 15)
REDEEMABLE NONCONTROLLING INTERESTS — CONSOLIDATED REAL ESTATE ENTITIES		6,368			6,203
EQUITY
Investors Real Estate Trust shareholders’ equity
Series A Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 1,150,000 shares issued and outstanding at April 30, 2015 and April 30, 2014, aggregate liquidation preference of $28,750,000)		27,317			27,317
Series B Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 4,600,000 shares issued and outstanding at April 30, 2015 and April 30, 2014, aggregate liquidation preference of $115,000,000)		111,357			111,357
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 124,455,624 shares issued and outstanding at April 30, 2015, and 109,019,341 shares issued and outstanding at April 30, 2014)		951,868			843,268
Accumulated distributions in excess of net income		(438,432		)	(389,758		)
Total Investors Real Estate Trust shareholders’ equity		652,110			592,184
Noncontrolling interests — Operating Partnership (13,999,725 units at April 30, 2015 and 21,093,445 units at April 30, 2014)		58,325			105,724
Noncontrolling interests — consolidated real estate entities		30,519			22,638
Total equity		740,954			720,546
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY		$	1,997,837		$	1,869,221

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		(in thousands, except per share data)
		Years Ended April 30,
		2015			2014			2013
REVENUE
Real estate rentals		$	181,261		$	165,465		$	151,083
Tenant reimbursement		19,734			19,914			18,650
TRS senior housing revenue		3,520			1,627			0
TOTAL REVENUE		204,515			187,006			169,733
EXPENSES
Depreciation/amortization related to real estate investments		50,886			49,153			41,602
Utilities		13,388			13,605			11,363
Maintenance		20,063			19,435			17,062
Real estate taxes		20,039			19,035			18,223
Insurance		4,760			4,090			2,801
Property management expenses		14,707			13,526			11,713
Other property expenses		876			114			1,008
TRS senior housing expenses		2,997			1,331			0
Administrative expenses		11,824			10,743			8,494
Other expenses		2,010			2,129			2,171
Amortization related to non-real estate investments		889			916			828
Impairment of real estate investments		4,663			7,700			0
TOTAL EXPENSES		147,102			141,777			115,265
Gain on involuntary conversion		0			2,480			5,084
Operating income		57,413			47,709			59,552
Interest expense		(40,071		)	(39,619		)	(40,441		)
Interest income		2,238			1,906			220
Other income		718			242			512
Income (loss) before gain (loss) on sale of real estate and other investments and income from discontinued operations		20,298			10,238			19,843
Gain (loss) on sale of real estate and other investments		6,093			(51		)	0
Income (loss) from continuing operations		26,391			10,187			19,843
Income from discontinued operations		2,293			(27,127		)	10,129
NET INCOME (LOSS)		28,684			(16,940		)	29,972
Net (income) loss attributable to noncontrolling interests — Operating Partnership		(1,526		)	4,676			(3,633		)
Net income attributable to noncontrolling interests — consolidated real estate entities		(3,071		)	(910		)	(809		)
Net income (loss) attributable to Investors Real Estate Trust		24,087			(13,174		)	25,530
Dividends to preferred shareholders		(11,514		)	(11,514		)	(9,229		)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS		$	12,573		$	(24,688	)	$	16,301
Earnings (loss) per common share from continuing operations — Investors Real Estate Trust — basic and diluted		$	.09		$	(.01	)	$	.08
Earnings per common share from discontinued operations — Investors Real Estate Trust — basic and diluted		.02			(.22		)	.09
NET INCOME (LOSS) PER COMMON SHARE — BASIC & DILUTED		$	.11		$	(.23	)	$	.17

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

		(in thousands)
		NUMBER OF PREFERRED SHARES		PREFERRED SHARES			NUMBER OF COMMON SHARES		COMMON SHARES			ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME			NONREDEEMABLE NONCONTROLLING INTERESTS			TOTAL EQUITY
BALANCE APRIL 30, 2013		5,750		$	138,674		101,488		$	784,454		$	(310,341	)	$	142,657		$	755,444
Net income attributable to Investors Real Estate Trust and noncontrolling interests												(13,174		)	(4,033		)	(17,207		)
Distributions - common shares and units												(54,729		)	(11,283		)	(66,012		)
Distributions — Series A preferred shares												(2,372		)				(2,372		)
Distributions — Series B preferred shares												(9,142		)				(9,142		)
Distribution reinvestment and share purchase plan							6,615		55,793									55,793
Shares issued and share-based compensation							13		112									112
Partnership units issued															3,480			3,480
Redemption of units for common shares							903		4,353						(4,353		)	0
Contributions from nonredeemable noncontrolling interests — consolidated real estate entities															3,895			3,895
Other									(1,444		)				(2,001		)	(3,445		)
BALANCE APRIL 30, 2014		5,750		$	138,674		109,019		$	843,268		$	(389,758	)	$	128,362		$	720,546
Net income attributable to Investors Real Estate Trust and noncontrolling interests												24,087			4,432			28,519
Distributions - common shares and units												(61,247		)	(8,607		)	(69,854		)
Distributions — Series A preferred shares												(2,372		)				(2,372		)
Distributions — Series B preferred shares												(9,142		)				(9,142		)
Distribution reinvestment and share purchase plan							8,102		64,856									64,856
Shares issued and share-based compensation							151		2,626									2,626
Partnership units issued															800			800
Redemption of units for common shares							7,183		41,264						(41,264		)	0
Contributions from nonredeemable noncontrolling interests — consolidated real estate entities															8,909			8,909
Distributions to nonredeemable noncontrolling interests — consolidated real estate entities															(3,926		)	(3,926		)
Other									(146		)				138			(8		)
BALANCE APRIL 30, 2015		5,750		$	138,674		124,455		$	951, 868		$	(438,432	)	$	88,844		$	740,954

F-6

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (continued)

		(in thousands)
		NUMBER OF PREFERRED SHARES		PREFERRED SHARES			NUMBER OF COMMON SHARES		COMMON SHARES			ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME			NONREDEEMABLE NONCONTROLLING INTERESTS			TOTAL EQUITY
BALANCE APRIL 30, 2012		1,150		$	27,317		89,474		$	684,049		$	(278,377	)	$	132,274		$	565,263
Net income attributable to Investors Real Estate Trust and noncontrolling interests												25,530			4,437			29,967
Distributions - common shares and units												(48,265		)	(10,985		)	(59,250		)
Distributions — Series A preferred shares												(2,372		)				(2,372		)
Distributions — Series B preferred shares												(6,857		)				(6,857		)
Distribution reinvestment and share purchase plan							5,290		43,123									43,123
Shares issued and share-based compensation							6,409		55,846									55,846
Series B preferred shares issued		4,600		111,357														111,357
Partnership units issued															12,632			12,632
Redemption of units for common shares							317		1,551						(1,551		)	0
Contributions from nonredeemable noncontrolling interests — consolidated real estate entities															6,483			6,483
Other							(2	)	(115		)				(633		)	(748		)
BALANCE APRIL 30, 2013		5,750		$	138,674		101,488		$	784,454		$	(310,341	)	$	142,657		$	755,444

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-7

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		(in thousands)
		Years Ended April 30,
		2015			2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	28,684		$	(16,940	)	$	29,972
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		52,872			52,441			47,283
Depreciation and amortization from discontinued operations		19,206			21,282			20,276
Gain on sale of real estate, land, other investments and discontinued operations		(6,093		)	(6,948		)	(6,885		)
Gain on involuntary conversion		0			(2,480		)	(5,084		)
Impairment of real estate investments		6,105			44,426			305
Share-based compensation expense		2,215			0			0
Bad debt expense		967			434			665
Changes in other assets and liabilities:
Increase in receivable arising from straight-lining of rents		(64		)	(2,293		)	(2,733		)
Decrease in accounts receivable		4,058			1,880			689
Increase in prepaid and other assets		(150		)	(555		)	(693		)
Decrease (increase) in tax, insurance and other escrow		1,445			(1,046		)	(325		)
Increase in deferred charges and leasing costs		(2,300		)	(4,708		)	(5,946		)
Increase in accounts payable, accrued expenses and other liabilities		7,234			7,021			194
Net cash provided by operating activities		114,179			92,514			77,718
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from real estate deposits		1,168			991			2,037
Payments for real estate deposits		(3,512		)	(940		)	(1,970		)
Decrease in other investments		0			314			0
Decrease in lender holdbacks for improvements		10,738			3,780			1,891
Increase in lender holdbacks for improvements		(1,204		)	(11,045		)	(2,466		)
Proceeds from sale of discontinued operations		0			78,879			20,009
Proceeds from sale of real estate and other investments		73,835			682			95
Insurance proceeds received		2,678			2,491			6,211
Payments for acquisitions of real estate assets		(38,704		)	(38,283		)	(76,020		)
Payments for development and re-development of real estate assets		(189,091		)	(123,744		)	(57,649		)
Payments for improvements of real estate assets		(22,986		)	(26,814		)	(17,331		)
Payments for improvements of real estate assets from discontinued operations		(9,329		)	(8,145		)	(8,949		)
Net cash used by investing activities		(176,407		)	(121,834		)	(134,142		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages payable		90,749			50,333			85,230
Principal payments on mortgages payable		(127,622		)	(101,867		)	(104,976		)
Proceeds from revolving lines of credit and other debt		55,000			12,500			20,500
Principal payments on revolving lines of credit and other debt		(17,000		)	0			(49,500		)
Proceeds from construction debt		93,643			55,199			23,762
Principal payments on construction debt		(12,685		)	(17,443		)	(5,911		)
Proceeds from financing liability		0			7,900			0
Proceeds from sale of common shares, net of issue costs		0			0			55,433
Proceeds from sale of common shares under distribution reinvestment and share purchase program		48,701			41,194			30,707
Proceeds from underwritten Public Offering of Preferred Shares — Series B, net of offering costs		0			0			111,357
Proceeds from noncontrolling partner — consolidated real estate entities		2,284			994			0
Payments for acquisition of noncontrolling interests — consolidated real estate entities		0			(2,505		)	0
Distributions paid to common shareholders, net of reinvestment of $15,519, $13,965 and $11,802, respectively		(45,728		)	(40,764		)	(36,463		)
Distributions paid to preferred shareholders		(11,514		)	(11,514		)	(8,467		)
Distributions paid to noncontrolling interests — Unitholders of the Operating Partnership, net of reinvestment of $636, $634 and $614, respectively		(7,971		)	(10,649		)	(10,371		)
Distributions paid to noncontrolling interests — consolidated real estate entities		(3,926		)	(924		)	(733		)
Net cash provided (used) by financing activities		63,931			(17,546		)	110,568
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,703			(46,866		)	54,144
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		47,267			94,133			39,989
CASH AND CASH EQUIVALENTS AT END OF YEAR		$	48,970		$	47,267		$	94,133

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-8

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

		(in thousands)
		Years Ended April 30,
		2015			2014			2013
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Distribution reinvestment plan		$	15,519		$	13,965		$	11,802
Operating partnership distribution reinvestment plan		636			634			614
Operating partnership units converted to shares		41,264			4,353			1,551
Real estate assets acquired through the issuance of operating partnership units		800			3,480			12,632
Real estate assets acquired through assumption of indebtedness and accrued costs		12,169			0			12,500
Mortgages included in real estate dispositions		0			0			5,887
Increase (decrease) to accounts payable included within real estate investments		5,116			1,767			2,502
Real estate assets contributed by noncontrolling interests — consolidated real estate entities		6,624			2,901			12,415
Involuntary conversion of assets due to flood and fire damage		0			7,052			107
Construction debt reclassified to mortgages payable		0			0			13,650
Forfeiture of note payable in conjunction with sale of property		0			600			0
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized of $4,903, $2,855 and $742, respectively		$	51,283		$	54,071		$	60,357

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-9

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2015, 2014, and 2013

NOTE 1 · ORGANIZATION

Investors Real Estate Trust (“IRET” or the “Company”) is a self-advised real estate investment trust engaged in acquiring, owning and leasing multifamily residential and commercial real estate. IRET has elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. REITs are subject to a number of organizational and operational requirements, including a requirement to distribute 90% of ordinary taxable income to shareholders, and, generally, are not subject to federal income tax on net income, except for taxes on undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiary (“TRS”). Our TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. We have considered estimated future taxable income and have determined that there were no material income tax provisions or material net deferred income tax items for our TRS for the years ended April 30, 2015 and 2014. IRET’s multifamily properties and commercial properties are located mainly in the states of North Dakota and Minnesota, but also in the states of Colorado, Idaho, Iowa, Kansas, Missouri, Montana, Nebraska, South Dakota, Wisconsin and Wyoming. As of April 30, 2015, IRET owned 100 multifamily properties with approximately 11,844 apartment units and 149 commercial properties, consisting of healthcare, industrial and other commercial properties, totaling approximately 9.6 million net rentable square feet. Of the commercial properties, 66 properties containing approximately 5.0 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $416.0 million were classified as both held for sale and discontinued operations in fiscal year 2016. IRET conducts a majority of its business activities through its consolidated operating partnership, IRET Properties, a North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other subsidiary entities.

All references to IRET or the Company refer to Investors Real Estate Trust and its consolidated subsidiaries.

NOTE 2 · BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of IRET and all subsidiaries in which it maintains a controlling interest. All intercompany balances and transactions are eliminated in consolidation. The Company’s fiscal year ends April 30th.

The accompanying consolidated financial statements include the accounts of IRET and its general partnership interest in the Operating Partnership. The Company’s interest in the Operating Partnership was 89.9% and 83.8%, respectively, as of April 30, 2015 and 2014, which includes 100% of the general partnership interest. The limited partners have a redemption option that they may exercise. Upon exercise of the redemption option by the limited partners, IRET has the option of redeeming the limited partners’ interests (“Units”) for IRET common shares of beneficial interest, on a one-for-one basis, or for cash payment to the unitholder. The redemption generally may be exercised by the limited partners at any time after the first anniversary of the date of the acquisition of the Units (provided, however, that not more than two redemptions by a limited partner may occur during each calendar year, and each limited partner may not exercise the redemption for less than 1,000 Units, or, if such limited partner holds less than 1,000 Units, for all of the Units held by such limited partner). Some limited partners have contractually agreed to a holding period of greater than one year.

The consolidated financial statements also reflect the ownership by the Operating Partnership of certain joint venture entities in which the Operating Partnership has a controlling interest. These entities are consolidated into IRET’s other operations with noncontrolling interests reflecting the noncontrolling partners’ share of ownership and income and expenses.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for

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determining revenue recognition. ASU 2014-09 does not apply to lease contracts accounted for under ASC 840, Leases. The ASU is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2016. The Company does not expect adoption of this update to have a material impact on the Company’s operating results or financial position.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis. ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidated analysis of reporting entities that are involved with variable interest entities, and (iv) provide a scope exception for certain entities.  The ASU is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2015. The Company does not expect adoption of this update to have a material impact on the Company’s operating results or financial position.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability to which they relate, consistent with debt discounts, as opposed to being presented as assets. The ASU is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2015. The Company does not expect adoption of this update to have a material impact on the Company’s operating results or financial position.

In April 2015, the FASB issued ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. Under ASU 2015-05, if a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The ASU is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2015. The Company does not expect adoption of this update to have a material impact on the Company’s operating results or financial position.

USE OF ESTIMATES

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

RECLASSIFICATIONS

Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. On the Consolidated Statements of Operations, the Company reclassified advisory and trustee services to administrative expenses and also reclassified TRS senior housing revenue and TRS senior housing expenses from other income to TRS senior housing revenue and TRS senior housing expenses, respectively.

The Company reports, in discontinued operations, the results of operations and any gain or loss on sale of a property or group of properties that has either been disposed of or is classified as held for sale and for which the disposition represents a strategic shift that has or will have a major effect on the Company’s operations and financial results.  As a result of discontinued operations, retroactive reclassifications that change prior period numbers have been made. See Note 12 for additional information. During fiscal year 2016, the Company classified as held for sale and discontinued operations 48 office properties, 17 retail properties and 1 healthcare property. These properties were subsequently sold during fiscal year 2016. The results of operations for these properties are included in income from discontinued operations in the Consolidated Statements of Operations. The assets and liabilities associated with these properties are included in assets held for sale and liabilities held for sale, respectively, in the Consolidated Balance Sheets.

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During fiscal year 2016, the Company reduced its number of reportable segments from five to three when its office and retail segments fell below the quantitative thresholds for reporting as reportable segments.  Historical segment information has been reclassified in accordance with the Company’s current segment structure.

REAL ESTATE INVESTMENTS

Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any. Acquisitions of real estate are recorded based upon preliminary allocations of the purchase price which are subject to adjustment as additional information is obtained, but in no case more than one year after the date of acquisition. The Company allocates the purchase price based on the relative fair values of the tangible and intangible assets of an acquired property (which includes the land, building, and personal property) which are determined by valuing the property as if it were vacant and to fair value of the intangible assets (which include in-place leases.) The as-if-vacant value is allocated to land, buildings, and personal property based on management’s determination of the relative fair values of these assets. The estimated fair value of the property is the amount that would be recoverable upon the disposition of the property. Techniques used to estimate fair value include discounted cash flow analysis and reference to recent sales of comparables. A land value is assigned based on the purchase price if land is acquired separately or based on estimated fair value if acquired in a merger or in a single or portfolio acquisition.

Acquired above- and below-market lease values are recorded as the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments to rental revenue over the remaining terms of the respective leases, which includes fixed rate renewal options for below-market leases if it is determined probable the tenant will execute a bargain renewal option.

Other intangible assets acquired include amounts for in-place lease values that are based upon the Company’s evaluation of the specific characteristics of the leases. Factors considered in the fair value analysis include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. The Company also considers information about each property obtained during its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The Company uses a 20-40 year estimated life for buildings and improvements and a 5-12 year estimated life for furniture, fixtures and equipment.

The Company follows the real estate project costs guidance in ASC 970, Real Estate — General, in accounting for the costs of development and re-development projects. As real estate is undergoing development or redevelopment, all project costs directly associated with and attributable to the development and construction of a project, including interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period begins when development activities and expenditures begin and are identifiable to a specific property and ends upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use upon completion of tenant improvements (in the case of commercial properties) or upon issuance of a certificate of occupancy (in the case of multifamily properties). General and administrative costs are expensed as incurred.

Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful life, generally five to ten years. Property sales or dispositions are recorded when title transfers and sufficient consideration has been received by the Company and the Company has no significant involvement with the property sold.

The Company periodically evaluates its long-lived assets, including its real estate investments, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset group and legal and environmental concerns. If indicators exist, the Company compares the expected future undiscounted cash flows for the long-lived asset group against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset group. If our anticipated holding period for properties, the estimated fair value of

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properties or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

During fiscal year 2015, the Company incurred a non-cash loss of $6.1 million due to impairment of four commercial properties and two parcels of unimproved land of which $1.4 million is reflected in discontinued operations. The Company recognized impairments of $2.1 million on a retail property in Kalispell, Montana, approximately $183,000 on an office property in Golden Valley, Minnesota, $1.8 million on an office property in Minneapolis, Minnesota, $1.4 million on an office property in Boise, Idaho, approximately $98,000 on unimproved land in Eagan, Minnesota, and approximately $442,000 on unimproved land in Weston, Wisconsin. These properties were written-down to estimated fair value during fiscal year 2015 based on receipt of individual market offers to purchase and the Company’s intent to dispose of the properties or, in the case of the Boise and Weston properties, an independent appraisal. The Kalispell and Golden Valley properties were sold in the second quarter of fiscal year 2015. The Minneapolis property is classified as held for sale at April 30, 2015.

During fiscal year 2014, the Company incurred a non-cash loss of $44.4 million due to impairment of 15 properties, of which $36.7 million is reflected in discontinued operations. See Note 12 for additional information on discontinued operations. The Company recognized impairments of approximately $864,000 on an industrial property in St. Louis Park, Minnesota; $329,000 on an office property in Bloomington, Minnesota; $265,000 on a retail property in Anoka, Minnesota; $402,000 on an industrial property in Clive, Iowa and $4.8 million on an industrial property in Roseville, Minnesota. These properties were written-down to estimated fair value based on receipt of individual market offers to purchase and the Company’s intent to dispose of the properties or, in the case of the Roseville, Minnesota property, a commitment to dispose of a significant portion of the property due to planned redevelopment. The approximately $835,000 impairment of the Company’s Edina, Minnesota, office property was based on receipt of a market offer to purchase and the Company’s intent to dispose of the property (a purchase agreement was signed by the Company in the fourth quarter of fiscal year 2014). This property was classified as held for sale at April 30, 2014. An impairment loss of $2.1 million was recognized during fiscal year 2014 for the Company’s Golden Valley, Minnesota, office property based on receipt of a market offer to purchase and the Company’s intent to dispose of the property (a purchase agreement was signed by the Company in the first quarter of fiscal year 2015).

The Company recognized in the fourth quarter of fiscal year 2014 a $34.9 million impairment loss on eight office properties located in four states. These properties are part of a portfolio of nine office properties securing a $122.6 million non-recourse CMBS loan with a maturity date of October 6, 2016.  Due to concerns over the borrower’s ability to refinance the portfolio at loan maturity, the Company revised its assumptions regarding the holding period of these properties. The Company commissioned a third-party appraisal of the properties, the result of which indicated a fair value of the portfolio below net book value, and, accordingly, an impairment loss was recorded for the difference. Because the loan amount significantly exceeded the Company’s estimate of the fair value of this nine-property portfolio, the Company initiated discussions with the special servicer to discuss various alternatives with regard to the loan. On April 14, 2015, the Company received a default notice regarding the $122.6 million non-recourse loan between a Company subsidiary as borrower and Citigroup Global Markets Realty Corp as lender due to a nonpayment on April 6, 2015. The Company cannot predict the outcome of the discussions with the special servicer on this loan.

During fiscal year 2013, the Company incurred a loss of approximately $305,000 due to impairment of one property. The impairment of the Company’s Eagan, Minnesota, retail property was based on receipt of a market offer to purchase and the Company’s intent to dispose of the property (a purchase agreement was signed by the Company in the fourth quarter of fiscal year 2013). The impairment charge for fiscal year 2013 is reported in discontinued operations. See Note 12 for additional information.

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REAL ESTATE HELD FOR SALE

Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. The Company’s determination of fair value is based on inputs management believes are consistent with those that market participants would use.  Estimates are significantly impacted by estimates of sales price, selling velocity, and other factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. Depreciation is not recorded on assets classified as held for sale.

Properties are classified as held for sale when they meet the necessary criteria, which include:  (a) management, having the authority to approve the action, commits to a plan to sell the asset and (b) the sale of the asset is probable and expected to be completed within one year.  The Company generally considers these criteria met when the transaction has been approved by our Board of Directors, there are no known significant contingencies related to the sale and management believes it is probable that the sale will be completed within one year. During fiscal year 2016, the Company classified as held for sale and discontinued operations 48 office properties, 17 retail properties and 1 healthcare property. One office property and one medical property were classified as held for sale at April 30, 2015, with assets of $22.9 million and liabilities of $138.8 million. An office property was classified as held for sale at April 30, 2014.

Prior to February 1, 2014, the Company reported, in discontinued operations, the results of operations and the related gains or losses of properties that had either been disposed of or classified as held for sale and otherwise met the classification of a discontinued operation. Effective February 1, 2014 the Company adopted ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):  Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this standard, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

As a result of the adoption of ASU 2014-08, results of operations and gains or losses on sale for properties that are disposed or classified as held for sale in the ordinary course of business on or subsequent to February 1, 2014 would generally be included in continuing operations on the Company’s consolidated statements of operations, to the extent such disposals did not meet the criteria for classification as a discontinued operation described above.

IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES AND GOODWILL

Upon acquisition of real estate, the Company records the intangible assets and liabilities acquired (for example, if the leases in place for the real estate property acquired carry rents above the market rent, the difference is classified as an intangible asset) at their estimated fair value separate and apart from goodwill.  The Company amortizes identified intangible assets and liabilities that are determined to have finite lives based on the period over which the assets and liabilities are expected to affect, directly or indirectly, the future cash flows of the real estate property acquired (generally the life of the lease).  In the twelve months ended April 30, 2015 and 2014, respectively, the Company added approximately $416,000 and $900,000 of new intangible assets and no new intangible liabilities. The weighted average lives of the intangible assets acquired in the twelve months ended April 30, 2015 and 2014 are 0.5 years and 0.7 years, respectively.  Amortization of intangibles related to above or below-market leases is recorded in real estate rentals in the Consolidated Statements of Operations. Amortization of other intangibles is recorded in depreciation/amortization related to real estate investments in the Consolidated Statements of Operations. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.

The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill book value as of April 30, 2015 and 2014 was $1.9 million and $1.1 million, respectively. The annual reviews of goodwill compared the fair value of the

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reporting units that have been assigned goodwill to their carrying value (investment cost less accumulated depreciation), with the results for these periods indicating no impairment. In fiscal year 2015, the Company recognized approximately $852,000 of goodwill from the acquisition of the Homestead Garden residential property and disposed of one residential property and two commercial properties to which goodwill had been assigned, and as a result, approximately $40,000 of goodwill was derecognized. In fiscal years 2014 and 2013, the Company disposed of property that had goodwill assigned, and as a result, approximately $7,000 and $14,000, respectively, of goodwill was derecognized.

PROPERTY AND EQUIPMENT

Property and equipment consists of the equipment contained at IRET’s headquarters in Minot, North Dakota, corporate offices in Minneapolis and St. Cloud, Minnesota, and additional property management offices located in the states where we own properties. The balance sheet reflects these assets at cost, net of accumulated depreciation. As of April 30, 2015 and 2014, property and equipment cost was $3.0 million and $3.7 million, respectively. Accumulated depreciation was $1.5 million and $2.0 million as of April 30, 2015 and 2014, respectively.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three months or less. Cash and cash equivalents consist of the Company’s bank deposits and short-term investment certificates acquired subject to repurchase agreements, and the Company’s deposits in a money market mutual fund. At times these deposits may exceed the FDIC limit.

COMPENSATING BALANCES AND OTHER INVESTMENTS; LENDER HOLDBACKS

The Company maintains compensating balances, not restricted as to withdrawal, with several financial institutions in connection with financing received from those institutions and/or to ensure future credit availability. At April 30, 2015 the Company’s compensating balances totaled $14.3 million and consisted of the following: First International Bank, Watford City, North Dakota, deposit of $6.1 million; Private Bank, Minneapolis, Minnesota, deposit of $2.0 million; Associated Bank, Green Bay, Wisconsin, deposit of $3.6 million; American National Bank, Omaha, Nebraska, deposit of $400,000; Dacotah Bank, Minot, North Dakota, deposit of $350,000; United Community Bank, Minot, North Dakota, deposit of $275,000; Peoples State Bank of Velva, North Dakota, deposit of $225,000; Commerce Bank, a Minnesota Banking Corporation, deposit of $100,000; and Bremer Bank, Saint Paul, Minnesota, deposit of $1.3 million. The deposit at United Community Bank and a portion of the deposit at Dacotah Bank are held as certificates of deposit and comprise the approximately $329,000 in other investments on the Consolidated Balance Sheets. The certificates of deposit have remaining terms of six months and two years and the Company intends to hold them to maturity.

The Company has a number of mortgage loans under which the lender retains a portion of the loan proceeds for the payment of construction costs or tenant improvements. The decrease of $10.7 million in lender holdbacks for improvements reflected in the Consolidated Statements of Cash Flows for the fiscal year ended April 30, 2015 is due primarily to the release of loan proceeds to the Company upon completion of these construction milestones and tenant improvement projects, while the increase of $1.2 million represents additional amounts retained by lenders for new projects.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Management evaluates the appropriate amount of the allowance for doubtful accounts by assessing the recoverability of individual real estate mortgage loans and rent receivables, through a comparison of their carrying amount with their estimated realizable value. Management considers tenant financial condition, credit history and current economic conditions in establishing these allowances. Receivable balances are written off when deemed uncollectible. Recoveries of receivables previously written off, if any, are recorded when received.

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A summary of the changes in the allowance for doubtful accounts for fiscal years ended April 30, 2015, 2014 and 2013 is as follows:

		(in thousands)
		2015			2014			2013
Balance at beginning of year		$	1,044		$	1,393		$	1,363
Provision		967			434			665
Write-off		(855		)	(783		)	(635		)
Balance at close of year		$	1,156		$	1,044		$	1,393

TAX, INSURANCE, AND OTHER ESCROW

Tax, insurance, and other escrow includes funds deposited with a lender for payment of real estate tax and insurance, and reserves for funds to be used for replacement of structural elements and mechanical equipment of certain projects. The funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender.

REAL ESTATE DEPOSITS

Real estate deposits include funds held by escrow agents to be applied toward the purchase of real estate or the payment of loan costs associated with loan placement or refinancing.

DEFERRED CHARGES AND LEASING COSTS

Costs and commissions incurred in obtaining tenant leases are amortized on the straight-line method over the terms of the related leases. Costs incurred in obtaining long-term financing are amortized to interest expense over the life of the loan using the straight-line method, which approximates the effective interest method.

INCOME TAXES

IRET operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended.  Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to shareholders. For the fiscal years ended April 30, 2015, 2014 and 2013, the Company distributed in excess of 90% of its taxable income and realized capital gains from property dispositions within the prescribed time limits; accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years.  Even as a REIT, the Company may be subject to certain state and local income and property taxes, and to federal income and excise taxes on undistributed taxable income.  In general, however, if the Company qualifies as a REIT, no provisions for federal income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by a taxable REIT subsidiary (TRS).

The Company has one TRS, acquired during the second quarter of fiscal year 2014, which is subject to corporate federal and state income taxes on its taxable income at regular statutory rates.  For fiscal year 2015, the Company estimates that the TRS will have no taxable income. There were no income tax provisions or material deferred income tax items for our TRS for the fiscal years ended April 30, 2015 and 2014.  The Company’s TRS is the tenant in the Company’s Legends at Heritage Place senior housing facility.

IRET conducts its business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) through its Operating Partnership. UPREIT status allows IRET to accept the contribution of real estate in exchange for Units. Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated real estate.

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Distributions for the calendar year ended December 31, 2014 were characterized, for federal income tax purposes, as 25.74% ordinary income, 23.09% capital gain and 51.17% return of capital. Distributions for the calendar year ended December 31, 2013 were characterized, for federal income tax purposes, as 28.41% ordinary income, 3.09% capital gain and 68.50% return of capital.

REVENUE RECOGNITION

Residential rental properties are leased under operating leases with terms generally of one year or less. Commercial properties are leased under operating leases to tenants for various terms generally exceeding one year. Lease terms often include renewal options. Rental revenue is recognized on the straight-line basis, which averages minimum required rents over the terms of the leases. Rents recognized in advance of collection are reflected as receivable

arising from straight-lining of rents, net of allowance for doubtful accounts.  Rent concessions, including free rent, are amortized on a straight-line basis over the terms of the related leases.

Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenditures are incurred. IRET receives payments for these reimbursements from substantially all of its tenants at multi-tenant commercial properties throughout the year. A number of the commercial leases provide for a base rent plus a percentage rent based on gross sales in excess of a stipulated amount. These percentage rents are recorded once the required sales level is achieved.

NET INCOME PER SHARE

Basic net income per share is computed as net income available to common shareholders divided by the weighted average number of common shares outstanding for the period. The Company has no potentially dilutive financial interests; the potential exchange of Units for common shares will have no effect on net income per share because Unitholders and common shareholders effectively share equally in the net income of the Operating Partnership.

PROCEEDS FROM FINANCING LIABILITY

During the first quarter of fiscal year 2014, the Company sold a non-core assisted living property in exchange for $7.9 million in cash and a $29.0 million contract for deed which matures August 1, 2018. The buyer leased the property back to the Company, and also granted an option to the Company to repurchase the property at a specified price at or prior to July 31, 2018. IRET accounted for the transaction as a financing due to the Company’s continuing involvement with the property and recorded the $7.9 million in sales proceeds within other liabilities on the Consolidated Balance Sheets.  The balance of the liability as of April 30, 2015 is $7.9 million.

VARIABLE INTEREST ENTITY

On November 27, 2012, the Company entered into a joint venture operating agreement with a real estate development company to construct an apartment project in Minot, North Dakota as IRET — Minot Apartments, LLC. The Company estimated total costs for the project at $52.2 million, with approximately 69% of the project financed with third-party debt and approximately 7% financed with debt from IRET to the joint venture entity. The first phase of the project, Landing at Southgate, was substantially completed in the second quarter of fiscal year 2014. The second phase of the project, Commons at Southgate, was substantially completed in the third quarter of fiscal year 2015. As of April 30, 2015, IRET is the approximately 52.9% owner of the joint venture and has management and leasing responsibilities; the real estate development company owns approximately 47.1% of the joint venture and was responsible for the development and construction of the property. The Company has determined that the joint venture is a variable interest entity (“VIE”), primarily based on the fact that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support. The Company has also determined that IRET is the primary beneficiary of the VIE due to the fact that IRET is providing more than 50% of the equity contributions, the subordinated debt and a guarantee on the third party debt and has the power to direct the most significant activities that impact the entity’s economic performance.

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On June 12, 2014, the Company entered into a joint venture operating agreement with a real estate development company and two other partners to construct a three-phase apartment and retail project in Edina, Minnesota as IRET — 71 France, LLC. The Company estimates total costs for the project at $73.3 million, with approximately 69% of the project financed with third-party debt and approximately 7% financed with debt from IRET to the joint venture entity. The first and second phases of the project are expected to be completed in the second and third quarters of fiscal year 2016, respectively. Construction of the third phase is expected to be completed in the first quarter of fiscal year 2017. See Development, Expansion and Renovation Projects in Note 15 for additional information. As of April 30, 2015, IRET is the approximately 52.6% owner of the joint venture and will have management and leasing responsibilities after the project has been in service for 24 months; the real estate development company and the other two partners own approximately 47.4% of the joint venture and are responsible for the development, construction and initial leasing of the property. The Company has determined that the joint venture is a variable interest entity (“VIE”), primarily based on the fact that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support. The Company has also determined that IRET is the primary beneficiary of the VIE due to the fact that IRET is providing more than 50% of the equity contributions, the subordinated debt and a guarantee on the third party debt and has the power to direct the most significant activities that impact the entity’s economic performance.

INVOLUNTARY CONVERSION OF ASSETS

In June 2011, both the Company’s Minot Arrowhead retail property and Chateau Apartments property, which at that time consisted of two 32-unit buildings, were extensively damaged by a flood. In February 2012, one of the buildings of the Chateau Apartments property, which had been undergoing restoration work following the flood, was completely destroyed by fire (the “2012 Fire”). Final settlement of the flood insurance claim was reached in fiscal year 2013 with total proceeds received of $8.5 million for flood clean-up costs and redevelopment.  Final settlement of the 2012 Fire insurance claim was reached in fiscal year 2014 with total proceeds received of $5.1 million for redevelopment. Insurance proceeds for these events exceeded the basis in the assets requiring replacement, resulting in recognition of the following gains from involuntary conversion in fiscal years 2014 and 2013:

		(in thousands)
Year Ended April 30,		2014			2013
Gain on involuntary conversion
Flood		$	0		$	2,821
2012 Fire		2,480			2,263
Total gain on involuntary conversion		$	2,480		$	5,084

Final settlement was reached during fiscal year 2013 for business interruption claims from the flood and 2012 Fire with proceeds received during fiscal years 2013 of approximately $409,000. Reimbursement for business interruption is included within real estate rentals in the Consolidated Statements of Operations.

In December 2013, 15-unit and 57-unit buildings at the Chateau Apartments property were destroyed by fire (the “2013 Fire”). Both buildings were under construction and were unoccupied. The Company is rebuilding both buildings, and expects them to be completed in the first quarter of fiscal year 2016. The Company received proceeds for the 2013 Fire claim of $1.0 million in fiscal year 2014 and $6.0 million fiscal 2015, which reduced to zero the accounts receivable recorded at the time of the fire for expected proceeds. No gain or loss on involuntary conversion was recorded due to the settlement of the claim.

NOTE 3 · CREDIT RISK

The Company is potentially exposed to credit risk for cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

IRET has entered into a cash management arrangement with First Western Bank (the “Bank”) with respect to deposit accounts that exceed FDIC Insurance coverage. On a daily basis, account balances are swept into a repurchase account.  The Bank pledges fractional interests in US Government Securities owned by the Bank at an amount equal to the excess over the uncollected balance in the repurchase account. The amounts deposited by IRET pursuant to the repurchase agreement are not insured by FDIC. At April 30, 2015 and 2014, these amounts totaled $9.7 million and $14.4 million, respectively.

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NOTE 4 · PROPERTY OWNED

Property, consisting principally of real estate, is stated at cost less accumulated depreciation and totaled $1.4 billion and $1.3 billion as of April 30, 2015, and 2014, respectively.

Construction period interest of approximately $4.9 million, $2.9 million, and $742,000 has been capitalized for the years ended April 30, 2015, 2014, and 2013, respectively.

The future minimum lease receipts to be received under non-cancellable leases for commercial properties, including those held for sale, as of April 30, 2015, assuming that no options to renew or buy out the lease are exercised, are as follows:

Year Ended April 30,		(in thousands)
2016		$	112,320
2017		99,963
2018		84,455
2019		70,049
2020		52,576
Thereafter		130,313
		$	549,676

See Real Estate Investments within Note 2 for information about impairment losses recorded during fiscal years 2015 and 2014.

NOTE 5 · IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES

The Company’s identified intangible assets and intangible liabilities at April 30, 2015 and 2014 were as follows:

		(in thousands)
		April 30, 2015			April 30, 2014
Identified intangible assets (included in intangible assets):
Gross carrying amount		$	45,823		$	48,181
Accumulated amortization		(19,610		)	(17,286		)
Net carrying amount		$	26,213		$	30,895
Identified intangible liabilities (included in other liabilities):
Gross carrying amount		$	82		$	127
Accumulated amortization		(61		)	(90		)
Net carrying amount		$	21		$	37

The effect of amortization of acquired below-market leases and acquired above-market leases reduced rental income by approximately $24,000, $25,000 and $29,000 for the twelve months ended April 30, 2015, 2014 and 2013, respectively. The estimated annual amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding fiscal years is as follows:

Year Ended April 30,		(in thousands)
2016		$	22
2017		11
2018		(3		)
2019		(3		)
2020		(1		)

F-19

NOTE 5 · continued

Amortization of all other identified intangible assets (a component of depreciation/amortization related to real estate investments) was $5.0 million, $7.4 million and $4.2 million for the twelve months ended April 30, 2015, 2014 and 2013, respectively. The estimated annual amortization of all other identified intangible assets for each of the five succeeding fiscal years is as follows:

Year Ended April 30,		(in thousands)
2016		$	4,000
2017		3,698
2018		3,469
2019		3,433
2020		3,390

NOTE 6 · NONCONTROLLING INTERESTS

Interests in the Operating Partnership held by limited partners are represented by Units. The Operating Partnership’s income is allocated to holders of Units based upon the ratio of their holdings to the total Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the Operating Partnership agreement.

IRET reflects noncontrolling interests in consolidated real estate entities on the balance sheet for the portion of properties consolidated by IRET that are not wholly owned by IRET. The earnings or losses from these properties attributable to the noncontrolling interests are reflected as net income attributable to noncontrolling interests — consolidated real estate entities in the Consolidated Statements of Operations. During the fourth quarter of fiscal year 2015, IRET - Jamestown Medical Building, LLC disposed of the sole property held by the entity. The Company’s noncontrolling interests — consolidated real estate entities at April 30, 2015 and 2014 were as follows:

		(in thousands)
		April 30, 2015			April 30, 2014
IRET-71 France, LLC		$	8,630		$	0
IRET-Cypress Court Apartments, LLC		1,089			1,127
IRET-RED 20, LLC		3,072			3,277
IRET-Williston Garden Apartments, LLC		3,090			2,804
IRET - Jamestown Medical Building, LLC		0			1,219
IRET - WRH 1, LLC		6,138			5,672
Mendota Properties LLC		7,294			7,333
WRH Holding, LLC		1,206			1,206
Noncontrolling interests — consolidated real estate entities		$	30,519		$	22,638

F-20

NOTE 7 · LINE OF CREDIT

As of April 30, 2015, the Company, through its Operating Partnership as Borrower, had one secured line of credit with First International Bank and Trust, Watford City, North Dakota, as lead bank. This line of credit matures on September 1, 2017. The facility had, as of April 30, 2015, lending commitments of $90.0 million. Participants in this secured credit facility as of April 30, 2015 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 United Bankers’ Bank. As of April 30, 2015, the Company had advanced $60.5 million under the line of credit. The line of credit has a minimum outstanding principal balance requirement of $17.5 million. The interest rate on borrowings under the facility is the Wall Street Journal Prime Rate +1.25%, with a floor of 4.75% and a cap of 8.65% during the initial term of the facility; interest-only payments are due monthly based on the total amount of advances outstanding. The line of credit may be prepaid at par at any time. The facility includes covenants and restrictions requiring the Company to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and the Company is also required to maintain minimum depository account(s) totaling $6.0 million with First International, of which $1.5 million is to be held in a non-interest bearing account. As of April 30, 2015, 15 properties with a total cost of $136.1 million collateralized this line of credit. As of April 30, 2015, the Company believes it is in compliance with the facility covenants. This credit facility is summarized in the following table:

															Weighted
		(in thousands)													Average Int.
Financial Institution		Amount Available			Amount Outstanding as of April 30, 2015			Amount Outstanding as of April 30, 2014			Applicable Interest Rate as of April 30, 2015		Maturity Date		Rate on Borrowings during fiscal year 2015
First International Bank & Trust		$	90,000		$	60,500		$	22,500		4.75	%	9/1/17		4.75	%

NOTE 8 · MORTGAGES PAYABLE AND CONSTRUCTION DEBT

Most of the properties owned by the Company individually serve as collateral for separate mortgage loans on single properties or groups of properties. The majority of these mortgages payable are non-recourse to the Company, other than for standard carve-out obligations such as fraud, waste, failure to insure, environmental conditions and failure to pay real estate taxes. Interest rates on mortgages payable range from 2.68% to 8.25%, and the mortgages have varying maturity dates from June 1, 2015, through July 1, 2036. As of April 30, 2015, the management of the Company believes there are no defaults or material compliance issues in regards to any of these mortgages payable other than one $122.6 million non-recourse loan by a Company subsidiary, for which we’ve received a default notice from the special servicer on April 14, 2015 due to nonpayment on April 6, 2015. The aggregate estimated fair value of the assets securing this loan is less than the outstanding loan balance of $122.6 million. This loan matures in October 2016 and has an interest rate of 5.93%. The Company cannot predict the outcome of the discussions with the special servicer on this loan.

Of the mortgages payable, the balance of fixed rate mortgages totaled $629.8 million and $666.0 million at April 30, 2015 and 2014, respectively, and the balances of variable rate mortgages totaled $38.3 million and $13.0 million as of April 30, 2015, and 2014, respectively. The Company does not utilize derivative financial instruments to mitigate its exposure to changes in market interest rates. Most of the fixed rate mortgages have substantial pre-payment penalties. As of April 30, 2015, the weighted-average rate of interest on the Company’s mortgage debt, excluding mortgages on properties held for sale, was 4.95%, compared to 5.16% on April 30, 2014. The aggregate amount of required future principal payments on mortgages payable as of April 30, 2015, excluding $11.5 million in outstanding mortgage indebtedness related to assets held for sale, is as follows:

F-21

NOTE 8 · continued

Year Ended April 30,		(in thousands)
2016		$	95,870
2017		41,549
2018		51,984
2019		90,716
2020		72,060
Thereafter		315,933
Total payments		$	668,112

In addition to the individual first mortgage loans comprising the Company’s $668.1 million of mortgage indebtedness, the Company’s revolving, multi-bank secured line of credit discussed in Note 7 is secured as of April 30, 2015, by mortgages on 15 Company properties. This line of credit is not included in the Company’s mortgage indebtedness total. The Company currently has 48 unencumbered properties.

The Company’s construction debt totaled $136.2 million and $63.1 million on April 30 2015 and 2014, respectively.  The weighted average rate of interest on the construction debt as of April 30, 2015 was 3.38%, compared to 3.08% as of April 30, 2014. The total available to be drawn on the construction loans was $102.7 million at April 30, 2015.

NOTE 9 · TRANSACTIONS WITH RELATED PARTIES

BANKING SERVICES — FIRST INTERNATIONAL BANK AND TRUST

The Company has an ongoing banking relationship with First International Bank and Trust, Watford City, North Dakota (“First International”). Stephen L. Stenehjem, a member of the Company’s Board of Trustees, is the President and Chairman of First International and the Chief Executive Officer of Watford City BancShares, Inc., its bank holding company, and the bank holding company is owned by Mr. Stenehjem and members of his family. For a portion of fiscal year 2015, the Company had one mortgage loan outstanding with First International, with an original principal balance of $13.7 million (Williston Garden) bearing interest at 5.5% per annum; this loan was repaid in the second quarter of fiscal year 2015. The Company also has a construction loan with First International for $43.7 million to finance the development of the Renaissance Heights I residential property in Williston, North Dakota. At April 30, 2015, the construction loan had a balance of $37.7 million bearing interest at 5.0% per annum. The Company paid interest on these loans of approximately $325,000 and $1.4 million, respectively, in fiscal year 2015. The Company has a multi-bank line of credit with a capacity of $90.0 million, of which First International is the lead bank and a participant with an $11.0 million commitment. In fiscal year 2015, the Company paid First International a total of approximately $245,000 in interest on First International’s portion of the outstanding balance of this credit line, and paid fees of $40,000. In connection with this multi-bank line of credit, the Company maintains compensating balances with First International totaling $6.0 million, of which $1.5 million is held in a non-interest bearing account, and $4.5 million is held in an account that pays the Company interest on the deposited amount of 0.20% per annum. The Company also maintains checking accounts with First International. In fiscal year 2015, the Company paid less than $500 in total in various bank service and other fees charged on these checking accounts.

In fiscal years 2014 and 2013, the Company paid interest and fees on outstanding mortgage and construction loans of approximately $1.0 million and $975,000, respectively. In fiscal years 2014 and 2013, respectively, the Company paid First International $125,000 and $196,000 in interest on First International’s portion of the multi-bank line of credit and paid fees of $40,000 in both years. Also in both fiscal years 2014 and 2013, the Company paid under $500 in total in various bank service and other fees charged on checking accounts maintained with First International. Total payments of interest and fees from the Company to First International Bank were approximately $2.0 million, $1.2 million and $1.2 million in fiscal years 2015, 2014 and 2013, respectively.

F-22

NOTE 9 · continued

LEASE TRANSACTION

In fiscal year 2013, the Company entered into an agreement with First International to construct an approximately 3,700 square-foot building on an outlot of the Company’s Arrowhead Shopping Center in Minot, North Dakota, to be leased by First International under a 20-year lease for use as a branch bank location. The project was completed in fiscal year 2013 at a cost of $1.3 million. Net rental payments under the lease are estimated to be approximately $2.4 million in total over the 20-year lease term. Net rental payments received in fiscal years 2015, 2014 and 2013 totaled $109,000, $109,000 and $11,000, respectively.

SALES AGREEMENT

The Company has an investment banking relationship with Robert W. Baird & Co. Incorporated (“Baird”). Terrance P. Maxwell, a member of the Company’s Board of Trustees, was appointed the Chief Financial Officer of Baird in March 2015 and has served as a Managing Director and member of the Executive Committee since May 2014. On August 30, 2013, the Company and its Operating Partnership entered into an at-the-market, or ATM, sales agreement with Baird as sales agent. Under the terms of this agreement, the Company may from time to time issue and sell through Baird the Company’s common shares having an aggregate offering price of up to $75.0 million. Baird will be entitled to compensation of up to 2.0% of the gross sales price per share for common shares sold under the agreement. The agreement remains in force until terminated pursuant to its terms, including automatic termination upon the sale of all such shares through Baird. The Company has not issued any common shares under this program during fiscal years 2015 and 2014.

F-23

NOTE 10 · ACQUISITIONS, DEVELOPMENT PROJECTS PLACED IN SERVICE AND DISPOSITIONS

PROPERTY ACQUISITIONS

IRET Properties added approximately $56.3 million of real estate properties to its portfolio through property acquisitions during fiscal year 2015, compared to $43.6 million in fiscal year 2014. The Company expensed approximately $216,000 and $176,000 of transaction costs related to the acquisitions in fiscal years 2015 and 2014, respectively. The fiscal year 2015 and 2014 acquisitions are detailed below.

Fiscal 2015 (May 1, 2014 to April 30, 2015)

				(in thousands)
				Total				Form of Consideration										Investment Allocation
				Acquisition																				Intangible
Acquisitions		Date Acquired		Cost				Cash			Units(1)			Other(2)				Land			Building			Assets
Multifamily
152 unit - Homestead Garden - Rapid City, SD(3)		2014-06-02		$	15,000			$	5,092		$	0		$	9,908			$	655		$	14,139		$	206
52 unit - Silver Springs - Rapid City, SD		2014-06-02		3,280				1,019			0			2,261				215			3,006			59
68 unit - Northridge - Bismarck, ND		2014-09-12		8,500				8,400			100			0				884			7,516			100
119 unit - Legacy Heights - Bismarck, ND(4)		2015-03-19		15,000				14,300			700			0				1,207			13,742			51
				41,780				28,811			800			12,169				2,961			38,403			416
Unimproved Land
Creekside Crossing - Bismarck, ND		2014-05-22		4,269				4,269			0			0				4,269			0			0
PrairieCare Medical - Brooklyn Park, MN		2014-06-05		2,616				2,616			0			0				2,616			0			0
71 France Phase I - Edina, MN(5)		2014-06-12		1,413				0			0			1,413				1,413			0			0
Monticello 7th Addition - Monticello, MN		2014-10-09		1,660				1,660			0			0				1,660			0			0
71 France Phase II & III - Edina, MN(5)		2014-11-04		3,309				0			0			3,309				3,309			0			0
Minot 1525 24th Ave SW - Minot, ND		2014-12-23		1,250				1,250			0			0				1,250			0			0
				14,517				9,795			0			4,722				14,517			0			0
Total Property Acquisitions				$	56,297			$	38,606		$	800		$	16,891			$	17,478		$	38,403		$	416

(1) Value of limited partnership units of the Operating Partnership at the acquisition date.

(2) Consists of assumed debt (Homestead Garden I: $9.9 million, Silver Springs: $2.3 million) and value of land contributed by the joint venture partner (71 France: $4.7 million).

(3) At acquisition the Company adjusted the assumed debt to fair value and recognized approximately $852,000 of goodwill.

(4) At acquisition, the purchase price included assets in development (land: $804,000, building: $7.8 million, escrow $1.3 million).

(5) Land was contributed to a joint venture in which the Company has an approximately 52.6% interest. The joint venture is consolidated in IRET’s financial statements.

F-24

NOTE 10 · continued

Fiscal 2014 (May 1, 2013 to April 30, 2014)

				(in thousands)
				Total				Form of Consideration										Investment Allocation
				Acquisition																				Intangible
Acquisitions		Date Acquired		Cost				Cash			Units(1)			Other(2)				Land			Building			Assets
Multifamily
71 unit - Alps Park - Rapid City, SD		2013-05-01		$	6,200			$	2,920		$	3,280		$	0			$	287		$	5,551		$	362
96 unit - Southpoint - Grand Forks, ND		2013-09-05		10,600				10,400			200			0				576			9,893			131
24 unit - Pinecone Villas - Sartell, MN		2013-10-31		2,800				2,800			0			0				584			2,191			25
				19,600				16,120			3,480			0				1,447			17,635			518
Healthcare
98,174 sq ft Legends at Heritage Place - Sartell, MN		2013-10-31		11,863				11,863			0			0				970			10,511			382
39,500 sq ft Spring Creek Fruitland - Fruitland, ID		2014-02-05		7,050				7,050			0			0				550			6,500			0
				18,913				18,913			0			0				1,520			17,011			382
Unimproved Land
Chateau II - Minot, ND		2013-05-21		179				179			0			0				179			0			0
Jamestown Unimproved - Jamestown, ND		2013-08-09		700				700			0			0				700			0			0
Red 20 - Minneapolis, MN(3)		2013-08-20		1,900				0			0			1,900				1,900			0			0
Legends at Heritage Place - Sartell, MN		2013-10-31		537				537			0			0				537			0			0
Spring Creek Fruitland - Fruitland, ID		2014-01-21		335				335			0			0				335			0			0
Isanti Unimproved - Isanti, MN		2014-02-04		50				50			0			0				50			0			0
Rapid City Unimproved - Rapid City, SD		2014-03-25		1,366				1,366			0			0				1,366			0			0
				5,067				3,167			0			1,900				5,067			0			0
Total Property Acquisitions				$	43,580			$	38,200		$	3,480		$	1,900			$	8,034		$	34,646		$	900

(1) Value of limited partnership units of the Operating Partnership at the acquisition date.

(2) Consists of value of land contributed by the joint venture partner.

(3) Land is owned by a joint venture in which the Company has an approximately 58.6% interest. The joint venture is consolidated in IRET’s financial statements.

F-25

NOTE 10 · continued

Acquisitions in fiscal years 2015 and 2014 are immaterial to our real estate portfolio both individually and in the aggregate, and consequently no proforma information is presented. The results of operations from acquired properties are included in the Consolidated Statements of Operations as of their acquisition date. The revenue and net income of our fiscal year 2015 and 2014 acquisitions (excluding development projects placed in service) are detailed below.

		(in thousands)
Year Ended April 30,		2015			2014
Total revenue		$	2,565		$	1,897
Net loss		$	(1	)	$	(82	)

DEVELOPMENT PROJECTS PLACED IN SERVICE

IRET Properties placed approximately $124.5 million of development projects in service during fiscal year 2015, compared to $53.5 million in fiscal year 2014. The fiscal year 2015 and 2014 development projects placed in service are detailed below.

Fiscal 2015 (May 1, 2014 to April 30, 2015)

				(in thousands)
Development Projects Placed in Service (1)		Date Placed in Service		Land			Building			Development Cost
Multifamily
44 unit - Dakota Commons - Williston, ND(2)		2014-07-15		$	823		$	9,596		$	10,419
130 unit - Red 20 - Minneapolis, MN(3)		2014-11-21		1,900			26,412			28,312
233 unit - Commons at Southgate - Minot, ND(4)		2014-12-09		3,691			31,351			35,042
64 unit - Cypress Court II - St. Cloud, MN(5)		2015-01-01		447			6,320			6,767
165 unit - Arcata - Golden Valley, MN(6)		2015-01-01		2,088			29,640			31,728
				8,949			103,319			112,268
Industrial
202,807 sq ft Roseville 3075 Long Lake Road - Roseville, MN		2014-11-10		0			9,036			9,036
Other
4,998 sq ft Minot Southgate Wells Fargo Bank - Minot, ND(7)		2014-11-10		992			2,193			3,185
Total Development Projects Placed in Service				$	9,941		$	114,548		$	124,489

(1) Development projects that are placed in service in phases are excluded from this table until the entire project has been placed in service. See Note 6 for additional information on the Renaissance Heights project, which was partially placed in service during fiscal years 2014 and 2015.

(2) Costs paid in prior fiscal years totaled $8.1 million. Additional costs paid in fiscal year 2015 totaled $2.3 million, for a total project cost at April 30, 2015 of $10.4 million.

(3) Costs paid in prior fiscal years totaled $12.2 million. Additional costs paid in fiscal year 2015 totaled $16.1 million, for a total project cost at April 30, 2015 of $28.3 million. The project is owned by a joint venture entity in which the Company has an approximately 58.6% interest. The joint venture is consolidated in IRET’s financial statements.

(4) Costs paid in prior fiscal years totaled $26.5 million, respectively. Additional costs paid in fiscal year 2015 totaled $8.5 million, for a total project cost at April 30, 2015 of $35.0 million. The project is owned by a joint venture entity in which the Company has an approximately 52.9% interest. The joint venture is consolidated in IRET’s financial statements.

(5) Costs paid in prior fiscal years totaled $1.2 million. Additional costs paid in fiscal year 2015 totaled $5.6 million, for a total project cost at April 30, 2015 of $6.8 million. The project is owned by a joint venture entity in which the Company has an approximately 86.1% interest. The joint venture is consolidated in IRET’s financial statements.

(6) Costs paid in prior fiscal years totaled $11.3 million, respectively. Additional costs paid in fiscal year 2015 totaled $20.4 million, for a total project cost at April 30, 2015 of $31.7 million.

(7) Costs paid in fiscal year 2015 totaled $3.2 million, including land acquired in fiscal year 2013.

F-26

NOTE 10 · continued

Fiscal 2014 (May 1, 2013 to April 30, 2014)

				(in thousands)
Development Projects Placed in Service (1)		Date Placed in Service		Land			Building			Development Cost
Multifamily
108 unit - Landing at Southgate - Minot, ND(2)		2013-09-04		$	2,262		$	12,864		$	15,126
132 unit - Cypress Court - St. Cloud, MN(3)		2013-11-01		1,136			12,428			13,564
146 unit - River Ridge - Bismarck, ND(4)		2013-12-02		589			24,268			24,857
Total Development Projects Placed in Service				$	3,987		$	49,560		$	53,547

(1) Development projects that are placed in service in phases are excluded from this table until the entire project has been placed in service. See Note 15 for additional information on the Renaissance Heights I project, which was partially placed in service during the three months ended April 30, 2014.

(2) Costs paid in prior fiscal years totaled $6.3 million. Costs paid in fiscal year 2014 totaled $8.8 million for a total project cost at April 30, 2014 of $15.1 million. The project is owned by a joint venture entity in which the Company has an approximately 52.9% interest.

(3) Costs paid in prior fiscal years totaled $5.8 million. Costs paid in fiscal year 2014 totaled $7.8 million for a total project cost at April 30, 2014 of $13.6 million. The project is owned by a joint venture entity in which the Company has an approximately 86.1% interest.

(4) Costs paid in prior fiscal years totaled $10.1 million. Costs paid in fiscal year 2014 totaled $14.7 million for a total project cost at April 30, 2014 of $24.9 million.

F-27

NOTE 10 · continued

PROPERTY DISPOSITIONS

During fiscal year 2015, the Company disposed of one multifamily property, one healthcare property, one industrial property, fifteen other commercial properties, and two unimproved properties for an aggregate sales price of $76.0 million, compared to dispositions totaling $80.9 million in fiscal year 2014. The fiscal year 2015 and 2014 dispositions are detailed below.

Fiscal 2015 (May 1, 2014 to April 30, 2015)

				(in thousands)
Dispositions		Date Disposed		Sales Price			Book Value and Sales Cost			Gain/(Loss)
Multifamily
83 unit - Lancaster - St. Cloud, MN		2014-09-22		$	4,451		$	3,033		$	1,418
Healthcare
45,222 sq ft Jamestown Medical Office Building - Jamestown, MN		2015-02-05		12,819			8,710			4,109
Industrial
198,600 sq ft Eagan 2785 & 2795 - Eagan, MN		2014-07-15		3,600			5,393			(1,793		)
Other
73,338 sq ft Dewey Hill - Edina, MN		2014-05-19		3,100			3,124			(24		)
25,644 sq ft Weston Retail - Weston, WI		2014-07-28		n/a			1,176			(1,176		)
74,568 sq ft Wirth Corporate Center - Golden Valley, MN		2014-08-29		4,525			4,695			(170		)
52,000 sq ft Kalispell Retail - Kalispell, MT		2014-10-15		1,230			1,229			1
34,226 sq ft Fargo Express Center & SC Pad - Fargo, ND		2014-11-18		2,843			2,211			632
79,297 sq ft Northgate I — Maple Grove, MN		2014-12-01		7,200			6,881			319
14,820 sq ft Weston Walgreens — Weston, WI		2015-02-27		5,177			2,152			3,025
26,000 sq ft Northgate II - Maple Grove, MN		2015-03-02		2,725			1,727			998
45,019 sq ft Burnsville Bluffs II - Burnsville, MN		2015-03-25		1,245			2,245			(1,000		)
26,186 sq ft Plymouth I - Plymouth, MN		2015-03-25		1,985			1,492			493
26,186 sq ft Plymouth II - Plymouth, MN		2015-03-25		1,625			1,356			269
26,186 sq ft Plymouth III - Plymouth, MN		2015-03-25		2,500			1,977			523
126,936 sq ft Plymouth IV & V - Plymouth, MN		2015-03-25		12,910			11,706			1,204
58,300 sq ft Southeast Tech Center - Eagan, MN		2015-03-25		3,300			4,196			(896		)
61,138 sq ft Whitewater Plaza - Minnetonka, MN		2015-03-25		3,035			4,625			(1,590		)
13,374 sq ft 2030 Cliff Road - Eagan, MN		2015-04-21		950			834			116
				54,350			51,626			2,724
Unimproved Land
Kalispell Unimproved - Kalispell, MT		2014-10-15		670			670			0
Weston — Weston, WI		2015-02-17		158			158			0
				828			828			0
Total Property Dispositions				$	76,048		$	69,590		$	6,458

F-28

NOTE 10 · continued

Fiscal 2014 (May 1, 2013 to April 30, 2014)

				(in thousands)
Dispositions		Date Disposed		Sales Price			Book Value and Sales Cost			Gain/(Loss)
Multifamily
84 unit - East Park - Sioux Falls, SD		2013-12-18		$	2,214		$	2,358		$	(144	)
48 unit - Sycamore Village - Sioux Falls, SD		2013-12-18		1,296			1,380			(84		)
				3,510			3,738			(228		)
Industrial
41,880 sq ft Bodycote Industrial Building- Eden Prairie, MN		2013-05-13		3,150			1,375			1,775
42,244 sq ft Fargo 1320 45th Street N - Fargo, ND		2013-05-13		4,700			4,100			600
49,620 sq ft Metal Improvement Company - New Brighton, MN		2013-05-13		2,350			1,949			401
172,057 sq ft Roseville 2929 Long Lake Road - Roseville, MN		2013-05-13		9,275			9,998			(723		)
322,751 sq ft Brooklyn Park 7401 Boone Ave - Brooklyn Park, MN		2013-09-12		12,800			12,181			619
50,400 sq ft Cedar Lake Business Center - St. Louis Park, MN		2013-09-12		2,550			2,607			(57		)
35,000 sq ft API Building - Duluth, MN		2013-09-24		2,553			1,488			1,065
59,292 sq ft Lighthouse - Duluth, MN		2013-10-08		1,825			1,547			278
606,006 sq ft Dixon Avenue Industrial Park - Des Moines, IA		2013-10-31		14,675			10,328			4,347
41,685 sq ft Winsted Industrial Building - Winsted, MN		2014-01-17		725			747			(22		)
69,984 sq ft Minnetonka 13600 County Road 62 - Minnetonka, MN		2014-01-30		3,800			3,084			716
42,510 sq ft Clive 2075NW 94th Street - Clive, IA		2014-01-30		2,735			2,675			60
				61,138			52,079			9,059
Other
23,187 sq ft Eagan Community - Eagan, MN		2013-05-14		2,310			2,420			(110		)
121,669 sq ft Bloomington Business Plaza - Bloomington, MN		2013-09-12		4,500			7,339			(2,839		)
118,125 sq ft Nicollet VII - Burnsville, MN		2013-09-12		7,290			6,001			1,289
42,929 sq ft Pillsbury Business Center - Bloomington, MN		2013-09-12		1,160			1,164			(4		)
10,625 sq ft Anoka Strip Center- Anoka, MN		2013-12-23		325			347			(22		)
8,400 sq ft Burnsville 2 Strip Center - Burnsville, MN		2014-01-08		650			796			(146		)
				16,235			18,067			(1,832		)
Total Property Dispositions				$	80,883		$	73,884		$	6,999

NOTE 11 · OPERATING SEGMENTS

IRET reports its results in three reportable segments: multifamily; healthcare, including senior housing; and industrial properties. During fiscal year 2016, the Company reduced its number of reportable segments from five to three when its office and retail segments fell below the quantitative thresholds for reporting as reportable segments.  Historical segment information has been reclassified in accordance with the Company’s current segment structure. The Company’s reportable segments are aggregations of similar properties.

F-29

NOTE 11 · continued

Segment information in this report is presented based on net operating income (“NOI”), which we define as total real estate revenues and gain on involuntary conversion less real estate expenses (which consist of utilities, maintenance, real estate taxes, insurance, property management expenses and other property expenses). We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing and general and administrative expense.  NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance. The following tables present real estate revenues and net operating income for the fiscal years ended April 30, 2015, 2014 and 2013 from our three reportable segments, and reconcile net operating income of reportable segments to net income as reported in the consolidated financial statements. Segment assets are also reconciled to Total Assets as reported in the consolidated financial statements.

		(in thousands)
Year Ended April 30, 2015		Multifamily			Healthcare			Industrial			All Other			Total
Real estate revenue		$	118,526		$	65,828		$	6,491		$	10,150		$	200,995
Real estate expenses		51,172			16,937			1,536			4,188			73,833
Net operating income		$	67,354		$	48,891		$	4,955		$	5,962		127,162
TRS senior housing revenue, net of expenses														523
Depreciation/amortization														(51,775		)
Administrative expenses														(11,824		)
Other expenses														(2,010		)
Impairment of real estate investments														(4,663		)
Interest expense														(40,071		)
Interest and other income														2,956
Income before gain on sale of real estate and other investments and income from discontinued operations														20,298
Gain on sale of real estate and other investments														6,093
Income from continuing operations														26,391
Income from discontinued operations														2,293
Net income														$	28,684
		(in thousands)
Year Ended April 30, 2014		Multifamily			Healthcare			Industrial			All Other			Total
Real estate revenue		$	102,059		$	64,887		$	6,894		$	11,539		$	185,379
Real estate expenses		46,138			16,899			2,043			4,725			69,805
Gain on involuntary conversion		2,480			0			0			0			2,480
Net operating income		$	58,401		$	47,988		$	4,851		$	6,814		118,054
TRS senior housing revenue, net of expenses														296
Depreciation/amortization														(50,069		)
Administrative expenses														(10,743		)
Other expenses														(2,129		)
Impairment of real estate investments														(7,700		)
Interest expense														(39,619		)
Interest and other income														2,148
Income before gain on sale of real estate and other investments and income from discontinued operations														10,238
Loss on sale of real estate and other investments														(51		)
Income from continuing operations														10,187
Loss from discontinued operations														(27,127		)
Net loss														$	(16,940	)

F-30

NOTE 11 · continued

		(in thousands)
Year Ended April 30, 2013		Multifamily			Healthcare			Industrial			All Other			Total
Real estate revenue		$	89,923		$	61,625		$	6,700		$	11,485		$	169,733
Real estate expenses		38,223			16,529			1,871			5,547			62,170
Gain on involuntary conversion		3,852			0			0			1,232			5,084
Net operating income		$	55,552		$	45,096		$	4,829		$	7,170		112,647
Depreciation/amortization														(42,430		)
Administrative expenses														(8,494		)
Other expenses														(2,171		)
Interest expense														(40,441		)
Interest and other income														732
Income before gain on sale of real estate and other investments and income from discontinued operations														19,843
Gain on sale of real estate and other investments														0
Income from continuing operations														19,843
Income from discontinued operations														10,129
Net income														$	29,972

Segment Assets and Accumulated Depreciation

		(in thousands)
As of April 30, 2015		Multifamily			Healthcare			Industrial			All Other			Total
Segment Assets
Property owned		$	946,520		$	495,021		$	60,611		$	44,215		$	1,546,367
Less accumulated depreciation		(180,414		)	(112,515		)	(11,256		)	(9,123		)	(313,308		)
Net property owned		$	766,106		$	382,506		$	49,355		$	35,092		1,233,059
Assets held for sale														463,103
Cash and cash equivalents														48,970
Other investments														329
Receivables and other assets														72,555
Development in progress														153,994
Unimproved land														25,827
Total assets														$	1,997,837

		(in thousands)
As of April 30, 2014		Multifamily			Healthcare			Industrial			All Other			Total
Segment Assets
Property owned		$	753,731		$	522,135		$	55,375		$	118,975		$	1,450,216
Less accumulated depreciation		(158,100		)	(105,376		)	(10,198		)	(28,731		)	302,405
Net property owned		$	595,631		$	416,759		$	45,177		$	90,244		1,147,811
Assets held for sale														457,307
Cash and cash equivalents														47,267
Other investments														329
Receivables and other assets														89,034
Development in progress														104,609
Unimproved land														22,864
Total assets														$	1,869,221

F-31

NOTE 12 · DISCONTINUED OPERATIONS

Prior to February 1, 2014, the Company reported, in discontinued operations, the results of operations and the related gains or losses of properties that had either been disposed of or classified as held for sale and otherwise met the classification of a discontinued operation. As a result of the adoption of ASU 2014-08, results of operations and gains or losses on sale for properties that are disposed or classified as held for sale in the ordinary course of business on or subsequent to February 1, 2014 would generally be included in continuing operations on the Company’s consolidated statements of operations, to the extent such disposals did not meet the criteria for classification as a discontinued operation described in Note 2.

During fiscal year 2016, the Company classified as held for sale and discontinued operations 48 office properties, 17 retail properties and 1 healthcare property. The Company classified no properties as discontinued operations during fiscal year 2015. During the first three quarters of fiscal year 2014, the Company disposed of two multifamily properties, three office properties, twelve industrial properties and three retail properties that were classified as discontinued operations. During the quarter ended April 30, 2014, the Company applied ASU 2014-08 to one property that was classified as held for sale and did not record any discontinued operations. During fiscal year 2013, the Company disposed of three multifamily properties, one retail property, one healthcare property and four condominium units that were classified as discontinued operations. Eight condominium units and a retail property were classified as held for sale and also classified as discontinued operations at April 30, 2012. The following information shows the effect on net income and the gains or losses from the sale of properties classified as discontinued operations for the fiscal years ended April 30, 2015, 2014 and 2013.

		(in thousands)
		2015			2014			2013
REVENUE
Real estate rentals		$	54,591		$	57,629		$	63,704
Tenant reimbursement		24,084			26,949			27,788
TOTAL REVENUE		78,675			84,578			91,492
EXPENSES
Depreciation/amortization related to real estate investments		16,226			19,359			20,873
Utilities		7,493			8,423			7,876
Maintenance		10,861			12,022			12,307
Real estate taxes		13,906			14,898			16,235
Insurance		1,079			1,172			1,151
Property management expenses		3,795			3,657			3,810
Other property expenses		30			243			16
Other expenses		0			3			2
Amortization related to non-real estate investments		2,606			2,500			2,446
Impairment of real estate investments		1,442			36,726			305
TOTAL EXPENSES		57,438			99,003			65,021
Operating income (loss)		21,237			(14,425		)	26,471
Interest expense		(18,949		)	(19,944		)	(23,425		)
Interest income		0			2			2
Other income		5			241			16
Income (loss) income from discontinued operations before gain on sale		2,293			(34,126		)	3,244
Gain on sale of discontinued operations		0			6,999			6,885
INCOME FROM DISCONTINUED OPERATIONS		2,293			$	(27,127	)	$	10,129
Segment Data
Multifamily		0			$	(99	)	$	3,712
Healthcare		(55		)	(68		)	3,307
Industrial		0			8,923			2,118
Other		2,348			(35,883		)	992
Total		2,293			$	(27,127	)	$	10,129
					(in thousands)
					2014			2013
Property Sale Data
Sales price					$	80,883		$	26,273
Net book value and sales costs					(73,884		)	(19,388		)
Gain on sale of discontinued operations					$	6,999		$	6,885

F-32

NOTE 12 · continued

The following information reconciles the carrying amounts of major classes of assets and liabilities of the discontinued operations to assets and liabilities held for sale that are presented separately on the Consolidated Balance Sheets:

		(in thousands)
		April 30, 2015			April 30, 2014
Carrying amounts of major classes of assets included as part of discontinued operations
Property owned and intangible assets, net of accumulated depreciation and amortization		$	417,045		$	425,676
Receivable arising from straight-lining of rents		10,078			11,087
Accounts receivable		566			1,752
Prepaid and other assets		699			691
Tax, insurance and other escrow		1,176			4,655
Property and equipment		0			7
Goodwill		193			0
Deferred charges and leasing costs		9,606			10,488
Total major classes of assets of the discontinued operations		439,363			454,356
Other assets included in the disposal group classified as held for sale		23,740			2,951
Total assets of the disposal group classified as held for sale on the balance sheet		$	463,103		$	457,307
Carrying amounts of major classes of liabilities included as part of discontinued operations
Accounts payable and accrued expenses		$	13,952		$	13,988
Mortgages payable		295,677			318,734
Other		4			9
Total major classes of liabilities of the discontinued operations		309,633			332,731
Other liabilities included in the disposal group classified as held for sale		11,760			0
Total liabilities of the disposal group classified as held for sale on the balance sheet		$	321,393		$	332,731

F-33

NOTE 13 · EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. The Company has no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings. Units can be exchanged for shares on a one-for-one basis after a minimum holding period of one year. The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the consolidated financial statements for the fiscal years ended April 30, 2015, 2014 and 2013:

		For Years Ended April 30,
		(in thousands, except per share data)
		2015			2014			2013
NUMERATOR
Income (loss) from continuing operations — Investors Real Estate Trust		$	22,076		$	9,633		$	17,247
Income (loss) from discontinued operations — Investors Real Estate Trust		2,011			(22,807		)	8,283
Net income (loss) attributable to Investors Real Estate Trust		24,087			(13,174		)	25,530
Dividends to preferred shareholders		(11,514		)	(11,514		)	(9,229		)
Numerator for basic earnings per share — net income (loss) available to common shareholders		12,573			(24,688		)	16,301
Noncontrolling interests — Operating Partnership		1,526			(4,676		)	3,633
Numerator for diluted earnings per share		$	14,099		$	(29,364	)	$	19,934
DENOMINATOR
Denominator for basic earnings per share weighted average shares		118,004			105,331			93,344
Effect of convertible operating partnership units		16,594			21,697			21,191
Denominator for diluted earnings per share		134,598			127,028			114,535
Earnings (loss) per common share from continuing operations — Investors Real Estate Trust — basic and diluted		$	.09		$	(.01	)	$	.08
Earnings (loss) per common share from discontinued operations — Investors Real Estate Trust — basic and diluted		.02			(.22		)	.09
NET INCOME (LOSS) PER COMMON SHARE — BASIC & DILUTED		$	.11		$	(.23	)	$	.17

NOTE 14 · RETIREMENT PLANS

IRET sponsors a defined contribution 401(k) retirement plan.  There are three types of contributions to the plan: 401(k) Safe Harbor employer matching contributions; discretionary non-elective employer contributions; and employee deferrals or contributions. Participation in IRET’s defined contribution 401(k) plan is available to employees over the age of 21, except that collectively bargained employees, non-resident alien employees, and part-time/temporary/seasonal employees scheduled to work less than 1000 hours of service within the plan year are excluded from participation. Employees can contribute immediately upon hire; however, they are not eligible for the employer match until they have completed six months of service and worked at least 1,000 hours per calendar year.  Employees participating in the 401(k) plan may contribute up to maximum levels established by the IRS. Employer contributions to the plan are at the discretion of the Company’s management. Employees are eligible to receive discretionary employer contributions if they are over the age of 21, have completed 1,000 hours of service within the plan year, and are employed on the last day of the plan year. IRET currently expects to make discretionary employer contributions of not more than 3.5% of the eligible wages of each participating employee, and currently matches, dollar for dollar, employee contributions to the 401(k) plan in an amount equal to up to 4.0% of the eligible wages of each participating employee, for a total expected contribution of not more than 7.5% of the eligible wages of each participating employee. Discretionary employer contributions are subject to a vesting schedule; 401(k) matching contributions by IRET are fully vested when made. IRET’s contributions to these plans on behalf of employees totaled approximately $1.0 million, $1.1 million and $912,000 in fiscal years 2015, 2014 and 2013, respectively.

F-34

NOTE 15 · COMMITMENTS AND CONTINGENCIES

Ground Leases. As of April 30, 2015, the Company is a tenant under operating ground or air rights leases on eleven of its properties. The Company pays a total of approximately $500,000 per year in rent under these ground leases, which have remaining terms ranging from 0.5 to 86 years, and expiration dates ranging from October 2015 to October 2100. The Company has renewal options for six of the eleven ground leases, and rights of first offer or first refusal for the remainder.

The expected timing of ground and air rights lease payments as of April 30, 2015 is as follows:

		(in thousands)
Fiscal Year Ended April 30,		Lease Payments
2016		$	478
2017		449
2018		449
2019		449
2020		449
Thereafter		20,764
Total		$	23,038

Legal Proceedings. IRET is involved in various lawsuits arising in the normal course of business. Management believes that such matters will not have a material effect on the Company’s consolidated financial statements.

Environmental Matters. It is generally IRET’s policy to obtain a Phase I environmental assessment of each property that the Company seeks to acquire.  Such assessments have not revealed, nor is the Company aware of, any environmental liabilities that IRET believes would have a material adverse effect on IRET’s financial position or results of operations. IRET owns properties that contain or potentially contain (based on the age of the property) asbestos or lead, or have underground fuel storage tanks. For certain of these properties, the Company estimated the fair value of the conditional asset retirement obligation and chose not to book a liability, because the amounts involved were immaterial. With respect to certain other properties, the Company has not recorded any related asset retirement obligation, as the fair value of the liability cannot be reasonably estimated, due to insufficient information. IRET believes it does not have sufficient information to estimate the fair value of the asset retirement obligations for these properties because a settlement date or range of potential settlement dates has not been specified by others, and, additionally, there are currently no plans or expectation of plans to demolish these properties or to undertake major renovations that would require removal of the asbestos, lead and/or underground storage tanks.  These properties are expected to be maintained by repairs and maintenance activities that would not involve the removal of the asbestos, lead and/or underground storage tanks.  Also, a need for renovations caused by tenant changes, technology changes or other factors has not been identified.

Tenant Improvements.  In entering into leases with tenants, IRET may commit itself to fund improvements or build-outs of the rented space to suit tenant requirements.  These tenant improvements are typically funded at the beginning of the lease term, and IRET is accordingly exposed to some risk of loss if a tenant defaults prior to the expiration of the lease term, and the rental income that was expected to cover the cost of the tenant improvements is not received.  As of April 30, 2015, the Company is committed to fund $7.2 million in tenant improvements, within approximately the next 12 months.

Purchase Options.  The Company has granted options to purchase certain of IRET properties to tenants in these properties, under lease agreements. 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, 2015, 15 of our properties were subject to purchase options, and the total investment cost, plus improvements, of all such properties was $114.9 million with total gross rental revenues in fiscal year 2015 of $10.2 million. The tenant in the Company’s Nebraska Orthopaedic Hospital property has exercised its option to purchase the property. The Company and its tenant are currently engaged in an arbitration proceeding pursuant to the lease agreement to determine the purchase price. The Company currently can give no assurance that the sale of the property pursuant to the purchase option will be completed.

F-35

NOTE 15 · continued

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

Restrictions on Taxable Dispositions.  Approximately 94 of the Company’s properties, consisting of approximately 4.3 million square feet of our combined commercial segment’s properties and 4,910 apartment units, including discontinued operations held for sale, are subject to restrictions on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties. The real estate investment amount of these properties (net of accumulated depreciation) was approximately $738.7 million at April 30, 2015. The restrictions on taxable dispositions are effective for varying periods. The terms of these agreements generally prevent us from selling the properties in taxable transactions.  The Company does not believe that the agreements materially affect the conduct of its business or its decisions whether to dispose of restricted properties during the restriction period because the Company generally holds these and its other properties for investment purposes, rather than for sale. Historically, however, where the Company has deemed it to be in its shareholders’ best interests to dispose of restricted properties, the Company has done so through transactions structured as tax-deferred transactions under Section 1031 of the Internal Revenue Code.

Redemption Value of Units.  The limited partnership units of the Company’s operating partnership, IRET Properties, are redeemable at the option of the holder for cash, or, at our option, for the Company’s common shares of beneficial interest on a one-for-one basis, after a minimum one-year holding period.  All Units receive the same cash distributions as those paid on common shares.  Units are redeemable for an amount of cash per Unit equal to the average of the daily market price of an IRET common share for the ten consecutive trading days immediately preceding the date of valuation of the Unit.  As of April 30, 2015 and 2014, the aggregate redemption value of the then-outstanding Units of the operating partnership owned by limited partners was approximately $102.4 million and $185.7 million, respectively.

Joint Venture Buy/Sell Options.  Several of IRET’s joint venture agreements contain buy/sell options in which each party under certain circumstances has the option to acquire the interest of the other party, but do not generally require that the Company buy its partners’ interests. However, from time to time, the Company has entered into joint venture agreements which contain options compelling the Company to acquire the interest of the other parties. The Company currently has one such joint venture, the Company’s Southgate apartment project in Minot, North Dakota, in which the Company’s joint venture partner can, for the four-year period from February 6, 2016 through February 5, 2020, compel the Company to acquire the partner’s interest, for a price to be determined in accordance with the provisions of the joint venture agreement. The joint venture partner’s interest is reflected as a redeemable noncontrolling interest on the Consolidated Balance Sheets.

Development, Expansion and Renovation Projects.  The Company has various contracts outstanding with third parties in connection with development, expansion and renovation projects that are underway or placed in service during the quarter, the costs for which have been capitalized. As of April 30, 2015, contractual commitments for these projects are as follows:

F-36

NOTE 15 · continued

(in thousands)

(in fiscal years)

Project Name and Location

Planned Segment

Rentable Square Feet or Number of Units

Anticipated Total Cost

Costs as of April 30, 2015(1)

Anticipated Construction Completion

Roseville 3075 Long Lake Rd - Roseville, MN

Other

202,807 sq ft

13,915

9,036

In Service

Chateau II - Minot, ND

Multifamily

72 units

14,711

13,129

1Q 2016

Edina 6565 France SMC III - Edina, MN

Healthcare

57,479 sq ft

36,752

22,549

1Q 2016

Minot Southgate Retail - Minot, ND

Other

7,963 sq ft

2,923

2,164

1Q 2016

Renaissance Heights - Williston, ND(2)

Multifamily

288 units

62,362

59,087

1Q 2016

Deer Ridge — Jamestown, ND

Multifamily

163 units

24,519

15,355

2Q 2016

PrairieCare Medical - Brooklyn Park, MN

Healthcare

72,895 sq ft

24,251

19,457

2Q 2016

Cardinal Point - Grand Forks, ND

Multifamily

251 units

40,042

26,450

3Q 2016

71 France Phase I, II, III - Edina, MN(3)

Multifamily

241 units

73,290

35,137

1Q 2017

Other

n/a

n/a

n/a

6,618

n/a

$

292,765

$

208,982

(1) Includes costs related to development projects that are placed in service in phases (Renaissance Heights - $46.0 million).

(2) The Company is an approximately 70% partner in the joint venture entity constructing this project; the anticipated total cost amount given is the total cost to the joint venture entity.

(3) The project will be constructed in three phases by a joint venture entity in which the Company has an approximately 52.6% interest. The anticipated total cost amount given in the table above is the total cost to the joint venture entity. The anticipated total cost includes approximately 21,772 square feet of retail space.

These development projects are subject to various contingencies, and no assurances can be given that they will be completed within the time frames or on the terms currently expected.

NOTE 16 · FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurement and Disclosures defines and establishes a framework for measuring fair value.  The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels, as follows:

Level 1:  Quoted prices in active markets for identical assets

Level 2:  Significant other observable inputs

Level 3:  Significant unobservable inputs

There were no transfers in and out of Level 1, Level 2 and Level 3 fair value measurements during fiscal years 2015 and 2014. Fair value estimates may be different than the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities.

Fair Value Measurements on a Recurring Basis

The Company had no assets or liabilities recorded at fair value on a recurring basis at April 30, 2015 and 2014.

F-37

NOTE 16 · continued

Fair Value Measurements on a Nonrecurring Basis

Non-financial assets measured at fair value on a nonrecurring basis at April 30, 2015 consisted of real estate held for sale that was written-down to estimated fair value during fiscal year 2015. Non-financial assets measured at fair value on a nonrecurring basis at April 30, 2014 consisted of real estate investments and real estate held for sale that were written-down to estimated fair value during fiscal year 2014. The aggregate fair value of these assets by their levels in the fair value hierarchy are as follows:

		(in thousands)
		Total			Level 1			Level 2			Level 3
April 30, 2015
Real estate held for sale		$	7,100		$	0		$	0		$	7,100
April 30, 2014
Real estate investments		89,537			0			0			89,537
Real estate held for sale		2,951			0			0			2,951

Financial Assets and Liabilities Not Measured at Fair Value

The following methods and assumptions were used to estimate the fair value of each class of financial assets and liabilities. The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt.

Cash and Cash Equivalents. The carrying amount approximates fair value because of the short maturity.

Other Investments. The carrying amount, or cost plus accrued interest, of the certificates of deposit approximates fair value.

Other Debt. For variable rate loans that re-price frequently, fair values are based on carrying values. The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using relevant treasury interest rates plus credit spreads (Level 2).

Lines of Credit.  The carrying amount approximates fair value because the variable rate debt re-prices frequently.

Mortgages Payable. For variable rate loans that re-price frequently, fair values are based on carrying values. The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using relevant treasury interest rates plus credit spreads (Level 2).

The estimated fair values of the Company’s financial instruments as of April 30, 2015 and 2014 are as follows:

		(in thousands)
		2015						2014
		Carrying Amount			Fair Value			Carrying Amount			Fair Value
FINANCIAL ASSETS
Cash and cash equivalents		$	48,970		$	48,970		$	47,267		$	47,267
Other investments		329			329			329			329
FINANCIAL LIABILITIES
Other debt		144,090			143,749			63,132			63,250
Lines of credit		60,500			60,500			22,500			22,500
Mortgages payable		668,112			749,604			678,955			751,117

F-38

NOTE 17 · COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST AND EQUITY

Distribution Reinvestment and Share Purchase Plan.  During fiscal years 2015 and 2014, IRET issued 8.1 million and 6.6 million common shares, respectively, pursuant to its distribution reinvestment and share purchase plan, at a total value at issuance of $64.9 million and $55.8 million, respectively. The shares issued under the distribution reinvestment and share purchase plan during fiscal year 2015 consisted of 2.1 million shares valued at issuance at $16.2 million that were issued for reinvested distributions, and approximately 6.0 million shares valued at $48.7 million at issuance that were issued in exchange for voluntary cash contributions under the plan. The shares issued under the distribution reinvestment and share purchase plan during fiscal year 2014 consisted of 1.8 million shares valued at issuance at $14.6 million that were issued for reinvested distributions, and approximately 4.8 million shares valued at $41.2 million at issuance that were issued in exchange for voluntary cash contributions under the plan. IRET’s distribution reinvestment plan is available to common shareholders of IRET and all limited partners of IRET Properties. Under the distribution reinvestment plan, shareholders or limited partners may elect to invest their cash distributions in common shares of the Company, currently at a discount of 3% from the market price, and to purchase additional shares through voluntary cash contributions at market price.

Exchange of Units for Common Shares.  During fiscal years 2015 and 2014, respectively, 7.2 million and approximately 903,000 Units were exchanged for common shares pursuant to the Agreement of Limited Partnership of the Operating Partnership, with a total value of $41.3 million and $4.4 million included in equity.

Issuance of Preferred Shares.  On August 7, 2012, the Company completed the public offering of 4.6 million Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series B preferred shares”) at a price of $25.00 per share for net proceeds of approximately $111.2 million after underwriting discounts and estimated offering expenses.  These shares are nonvoting and redeemable for cash at $25.00 per share at the Company’s option on or after August 7, 2017. Holders of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of Trustees). Distributions accrue at an annual rate of $1.9875 per share, which is equal to 7.95% of the $25.00 per share liquidation preference ($115 million liquidation preference in the aggregate).The Company contributed the net proceeds from the sale to the Operating Partnership for general business purposes, including the acquisition and development of income-producing real estate properties and debt repayment, in exchange for 4.6 million Series B preferred units, which carry terms that are substantially the same as the Series B preferred shares. The Series B preferred shares were registered under a shelf registration statement declared effective on July 12, 2012. This shelf registration statement was terminated in June 2013 upon the filing of the Company’s currently-effective shelf registration statement on Form S-3ASR, which shelf registration statement expires June 27, 2016.

In addition to the 4.6 million Series B preferred shares outstanding, the Company also has outstanding approximately 1.2 million shares of 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, issued during the Company’s fiscal year 2004 for total proceeds of $27.3 million, net of selling costs. Holders of the Company’s Series A preferred shares are entitled to receive dividends at an annual rate of 8.25% of the liquidation preference of $25 per share, or $2.0625 per share per annum. These dividends are cumulative and payable quarterly in arrears. The shares are not convertible into or exchangeable for any other property or any other securities of the Company at the election of the holders. However, the Company, at its option, may redeem the shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The shares have no maturity date and will remain outstanding indefinitely unless redeemed by the Company.

During the second quarter of fiscal year 2014, the Company and its Operating Partnership entered into an ATM sales agreement with Robert W. Baird & Co. Incorporated as sales agent, pursuant to which the Company may from time to time sell the Company’s common shares of beneficial interest having an aggregate offering price of up to $75 million. The shares would be issued pursuant to the Company’s currently-effective shelf registration statement on Form S-3ASR. The Company issued no common shares under this program during fiscal years 2015 and 2014.

F-39

NOTE 18 · QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)

		(in thousands, except per share data)
QUARTER ENDED		July 31, 2014			October 31, 2014			January 31, 2015			April 30, 2015
Revenues		$	49,214		$	51,189		$	52,939		$	51,173
Net (loss) income attributable to Investors Real Estate Trust		$	(151	)	$	5,114		$	8,371		$	10,753
Net (loss) income available to common shareholders		$	(3,030	)	$	2,236		$	5,492		$	7,875
Net (loss) income per common share - basic & diluted		$	(.03	)	$	.02		$	.05		$	.07

		(in thousands, except per share data)
QUARTER ENDED		July 31, 2013			October 31, 2013			January 31, 2014			April 30, 2014
Revenues		$	45,287		$	45,896		$	48,383		$	47,440
Net income (loss) attributable to Investors Real Estate Trust		$	3,078		$	8,787		$	3,503		$	(28,542	)
Net income (loss) available to common shareholders		$	199		$	5,909		$	624		$	(31,420	)
Net income (loss) per common share - basic & diluted		$	.00		$	.06		$	.00		$	(.29	)

The above financial information is unaudited. In the opinion of management, all adjustments (which are of a normal recurring nature) have been included for a fair presentation.

NOTE 19 · REDEEMABLE NONCONTROLLING INTERESTS

Redeemable noncontrolling interests on our Consolidated Balance Sheets represent the noncontrolling interest in a joint venture of the Company in which the Company’s unaffiliated partner, at its election, could require the Company to buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price. Redeemable noncontrolling interests are presented at the greater of their carrying amount or redemption value at the end of each reporting period. Changes in the value from period to period are charged to common shares of beneficial interest on our Consolidated Balance Sheets. The Company currently has one joint venture, the Company’s Southgate apartment project in Minot, North Dakota, in which the Company’s joint venture partner can, for the four-year period from February 6, 2016 through February 5, 2020, compel the Company to acquire the partner’s interest, for a price to be determined in accordance with the provisions of the joint venture agreement.

As of April 30, 2015 and 2014, the estimated redemption value of the redeemable noncontrolling interests was $6.4 million and $6.2 million, respectively. Below is a table reflecting the activity of the redeemable noncontrolling interests.

		(in thousands)
		2015			2014			2013
Balance at beginning of fiscal year		$	6,203		$	5,937		$	0
Contributions		0			0			5,932
Net income		165			266			5
Balance at close of fiscal year		$	6,368		$	6,203		$	5,937

NOTE 20 · SHARE BASED COMPENSATION

Share based awards are provided to officers, non-officer employees and trustees, under the Company’s 2008 Incentive Award Plan approved by shareholders on September 16, 2008, which allows for awards in the form of cash and awards of unrestricted and restricted common shares, up to an aggregate of 2,000,000 shares over the ten year period in which the plan will be in effect. Through April 30, 2015, awards under the 2008 Incentive Award Plan consisted of cash awards and grants of restricted and unrestricted common shares.

F-40

NOTE 20 · continued

Long-Term Incentive Plan

The Company maintains a long-term incentive plan (“LTIP”) that allows for share based awards to officer and non-officer employees of the Company. Under the LTIP, executives are provided the opportunity to earn awards, payable 50% in unrestricted shares and 50% in restricted shares, based on achieving one or more performance objectives within a one-year performance period (for example, the performance period for fiscal year 2015 commenced on May 1, 2014 and concluded on April 30, 2015). LTIP performance is evaluated based on the following objective performance goal: Three-Year Average Annual Total Shareholder Return (“TSR”), which means the average of the Annual Total Shareholder Return for the Company’s common shares in each of the three consecutive fiscal years ending with and including the performance period. TSR is considered a market condition. “Annual Total Shareholder Return,” and “Three-Year Average Annual Total Shareholder Return,” have the meanings set forth in the LTIP. The unrestricted shares vest immediately at the end of the one-year performance period, and the restricted shares vest on the one year anniversary of the award date based on service during that year.

With respect to the performance period of the LTIP subject to market conditions, we recognize compensation expense ratably (over one year for the 50% unrestricted shares and over two years for the 50% restricted shares) based on the service inception date fair value, as determined using a Monte Carlo simulation. The market condition performance measurement is the three-year average annual total shareholder return. The model evaluates the awards for changing total shareholder return over the term of the vesting, and uses random simulations that are based on past IRET stock characteristics. We based the expected volatility of 15-20% upon the historical volatility of our daily closing share price. Dividend yield of 6.1% was calculated as the estimated annual dividend for the fiscal year divided by the average price of the previous fiscal year. We based the risk-free interest rate of 0.03-0.09% on U.S. treasury bonds with a maturity equal to the remaining market condition performance period. The officers’ total award opportunity under the LTIP stated as a percentage of base salary ranges from 50% to 100% at target level. The calculated grant date fair value as a percentage of base salary for the officers ranged from 47% to 94% for LTIP subject to market conditions as of the grant date of April 30, 2015.  The grant date is the end of the performance period, when the executive has risk in the shares that were earned as of that date. The service inception date precedes the grant date because a mutual understanding was achieved between the Company and the executives at the beginning of the performance period.

Share-based compensation expense for the 2015 performance period was $1.3 million for the fiscal year ended April 30, 2015.  Share-based compensation expense for the 2014 performance period was approximately $690,000 and $914,000 for the fiscal years ended April 30, 2015 and 2014.  The TSR threshold was not reached in fiscal year 2013; consequently there was no LTIP expense for the fiscal year ended April 30, 2013.

Trustee Awards

We award share-based compensation to our non-management trustees on an annual basis in the form of unrestricted shares which vest immediately. The value of share-based compensation at grant date for each non-management trustee was $39,139, $28,976, and $15,975 for each of the fiscal years ended April 2015, 2014, and 2013, respectively.

Total Compensation Expense

Total share-based compensation expense recognized in the consolidated financial statements for the three years ended April 30, 2015 for all share-based awards was as follows (in thousands):

		Year Ended April 30,
		2015			2014			2013
Share based compensation expense		$	2,215		$	1,162		$	45

F-41

NOTE 20 · continued

Restricted Share Awards

The activity for the two years ended April 30, 2015 related to the Company’s restricted share awards was as follows.  There was no activity related to restricted shares in fiscal year 2013.

		Shares		Wtd Avg Grant- Date Fair Value
Unvested at April 30, 2013		0		$	n/a
Granted		104,855		8.72
Unvested at April 30, 2014		104,855		8.72
Granted		107,536		7.17
Vested during year		(79,181	)	8.72
Forfeited		(25,674	)	8.72
Unvested at April 30, 2015		107,536		7.17

The total fair value of share grants vested during the fiscal year ended April 30, 2015 was approximately $568,000.  No share grants vested during the fiscal years ended April 30, 2014 and 2013.

As of April 30, 2015, the total compensation cost related to non-vested share awards not yet recognized was approximately $771,000, which the Company expects to recognize during fiscal year 2016.

NOTE 21 · SUBSEQUENT EVENTS

Common and Preferred Share Distributions. On June 2, 2015, the Company’s Board of Trustees declared the following distributions:

Class of shares/units		Quarterly Amount per Share or Unit			Record Date		Payment Date
Common shares and limited partnership units		$	0.1300		June 15, 2015		July 1, 2015
Preferred shares:
Series A		$	0.5156		June 15, 2015		June 30, 2015
Series B		$	0.4968		June 15, 2015		June 30, 2015

Pending Acquisition.  Subsequent to the end of fiscal year 2015, the Company signed a purchase agreement to acquire an approximately 28,000-square foot medical office property in Omaha, Nebraska for a purchase price of $6.5 million to be paid in cash.  This pending acquisition is subject to various closing conditions and contingencies, and no assurances can be given that it will be completed on the terms currently expected or at all.

Completed Disposition.  On May 18, 2015, the Company sold Thresher Square, an office property in Minneapolis, Minnesota, for a sale price of $7.0 million.

Pending Dispositions.  On June 12, 2015, the Company signed an agreement to sell 34 office properties located in 8 states for a sale price of $250.0 million. Also on June 12, 2015, a joint venture in which the Company has a 51% interest signed an agreement to sell five office properties in Mendota Heights, Minnesota, for a sale price of $40.0 million. On June 25, 2015, the Company signed an agreement to sell 17 retail properties and one parcel of unimproved land located in Minnesota, North Dakota and Nebraska for a sale price of $81.5 million. These pending dispositions are part of the Company’s previously announced strategic plan to explore the sale of its office and retail portfolios and the sales are expected to be completed in the second or third quarter of fiscal year 2016. These pending dispositions are subject to various closing conditions and contingencies, and no assurances can be given that the transaction will be completed on the terms currently expected, or at all.

Commitment Increase to Credit Facility: Under the terms of the First Amendment to Amended and Restated Loan Agreement with First International Bank & Trust as lead bank, the commitment amount may be increased from $90.0 million up to $100.0 million upon meeting various conditions. Subsequent to the end of fiscal year 2015, the Company met such conditions, including providing additional collateral, and the total commitment amount was increased to $100.0 million.

F-42

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Multifamily
11th Street 3 Plex - Minot, ND		$	84		$	11		$	53		$	19		$	20		$	63		$	83		$	(12	)	2008		40 years
4th Street 4 Plex - Minot, ND		98			15			74			34			23			100			123			(19		)	2008		40 years
Alps Park - Rapid City, SD		3,934			287			5,551			165			293			5,710			6,003			(299		)	2013		40 years
Apartments on Main - Minot, ND		642			158			1,123			53			193			1,141			1,334			(235		)	1987		24-40 years
Arbors - S Sioux City, NE		3,840			350			6,625			1,923			980			7,918			8,898			(2,115		)	2006		40 years
Arcata - Golden Valley, MN		0			2,088			29,640			95			2,088			29,735			31,823			(380		)	2013		40 years
Ashland - Grand Forks, ND		5,517			741			7,569			163			774			7,699			8,473			(678		)	2012		40 years
Boulder Court - Eagan, MN		2,736			1,067			5,498			3,005			1,324			8,246			9,570			(2,539		)	2003		40 years
Brookfield Village - Topeka, KS		5,216			509			6,698			1,539			756			7,990			8,746			(2,348		)	2003		40 years
Brooklyn Heights - Minot, ND		694			145			1,450			879			219			2,255			2,474			(949		)	1997		12-40 years
Campus Center - St. Cloud, MN		1,127			395			2,244			243			407			2,475			2,882			(534		)	2007		40 years
Campus Heights - St. Cloud, MN		0			110			628			157			124			771			895			(163		)	2007		40 years
Campus Knoll - St. Cloud, MN		752			266			1,512			180			305			1,653			1,958			(364		)	2007		40 years
Campus Plaza - St. Cloud, MN		0			54			311			85			60			390			450			(87		)	2007		40 years
Campus Side - St. Cloud, MN		0			107			615			161			118			765			883			(170		)	2007		40 years
Campus View - St. Cloud, MN		0			107			615			156			113			765			878			(164		)	2007		40 years
Canyon Lake - Rapid City, SD		2,843			305			3,958			1,652			376			5,539			5,915			(1,739		)	2001		40 years
Castlerock - Billings, MT		6,574			736			4,864			2,165			994			6,771			7,765			(2,726		)	1998		40 years
Chateau I - Minot, ND		0			61			5,663			683			71			6,336			6,407			(786		)	2013		40 years
Cimarron Hills - Omaha, NE		4,729			706			9,588			4,346			1,334			13,306			14,640			(4,723		)	2001		40 years
Colonial Villa - Burnsville, MN		5,473			2,401			11,515			7,471			2,844			18,543			21,387			(5,255		)	2003		40 years
Colony - Lincoln, NE		13,303			1,515			15,730			671			1,574			16,342			17,916			(1,316		)	2012		40 years
Colton Heights - Minot, ND		391			80			672			421			123			1,050			1,173			(769		)	1984		40 years
Commons at Southgate - Minot, ND		0			3,691			31,351			580			3,703			31,919			35,622			(993		)	2013		40 years
Cornerstone - St. Cloud, MN		0			54			311			88			57			396			453			(89		)	2007		40 years
Cottage West Twin Homes - Sioux Falls, SD		3,586			968			3,762			432			1,022			4,140			5,162			(378		)	2011		40 years
Cottonwood - Bismarck, ND		15,586			1,056			17,372			3,294			1,383			20,339			21,722			(6,904		)	1997		40 years
Country Meadows - Billings, MT		6,560			491			7,809			1,486			538			9,248			9,786			(3,797		)	1995		33-40 years
Crestview - Bismarck, ND		3,839			235			4,290			1,682			515			5,692			6,207			(2,915		)	1994		24-40 years
Crown - Rochester, MN		2,571			261			3,289			246			269			3,527			3,796			(470		)	2010		40 years
Crown Colony - Topeka, KS		8,081			620			9,956			2,388			898			12,066			12,964			(4,531		)	1999		40 years

F-43

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Multifamily - continued
Cypress Court - St. Cloud, MN		$	13,150		$	1,583		$	18,874		$	148		$	1,583		$	19,022		$	20,605		$	(652	)	2012		40 years
Dakota Commons - Williston, ND(2)		0			823			9,596			25			824			9,620			10,444			(236		)	2012		40 years
Evergreen - Isanti, MN		1,986			380			2,740			116			385			2,851			3,236			(474		)	2008		40 years
Evergreen II - Isanti, MN		2,066			691			2,784			55			698			2,832			3,530			(277		)	2011		40 years
Fairmont - Minot, ND		332			28			337			117			55			427			482			(76		)	2008		40 years
First Avenue - Minot, ND		0			0			3,046			11			0			3,057			3,057			(155		)	2013		40 years
Forest Park - Grand Forks, ND		7,560			810			5,579			7,407			1,426			12,370			13,796			(5,333		)	1993		24-40 years
Gables Townhomes - Sioux Falls, SD		1,452			349			1,921			173			374			2,069			2,443			(189		)	2011		40 years
Grand Gateway - St. Cloud, MN		5,345			814			7,086			805			934			7,771			8,705			(746		)	2012		40 years
Greenfield - Omaha, NE		3,552			578			4,122			769			803			4,666			5,469			(932		)	2007		40 years
Heritage Manor - Rochester, MN		3,895			403			6,968			2,796			580			9,587			10,167			(3,751		)	1998		40 years
Homestead Garden - Rapid City, SD		9,761			655			14,139			156			658			14,292			14,950			(329		)	2014		40 years
Indian Hills - Sioux City, IA(2)		0			294			2,921			3,709			397			6,527			6,924			(1,353		)	2007		40 years
Kirkwood Manor - Bismarck, ND		3,259			449			2,725			1,676			553			4,297			4,850			(1,786		)	1997		12-40 years
Lakeside Village - Lincoln, NE		13,129			1,215			15,837			442			1,263			16,231			17,494			(1,294		)	2012		40 years
Landing at Southgate - Minot, ND		0			2,254			12,955			93			2,294			13,008			15,302			(546		)	2013		40 years
Landmark - Grand Forks, ND		1,573			184			1,514			1,093			331			2,460			2,791			(1,070		)	1997		40 years
Legacy - Grand Forks, ND		15,528			1,362			21,727			6,665			2,133			27,621			29,754			(10,186		)	1995-2005		24-40 years
Legacy Heights - Bismarck, ND		0			804			9,162			73			804			9,235			10,039			(21		)	2015		40 years
Mariposa - Topeka, KS		2,925			399			5,110			535			427			5,617			6,044			(1,498		)	2004		40 years
Meadows - Jamestown, ND(2)		0			590			4,519			1,355			669			5,795			6,464			(2,135		)	1998		40 years
Monticello Village - Monticello, MN		2,956			490			3,756			491			621			4,116			4,737			(1,257		)	2004		40 years
Northern Valley - Rochester, MN		0			110			610			129			119			730			849			(100		)	2010		40 years
North Pointe - Bismarck, ND		3,382			303			3,957			622			354			4,528			4,882			(1,474		)	1995-2011		24-40 years
Northridge - Bismarck, ND		6,322			884			7,516			26			888			7,538			8,426			(126		)	2014		40 years
Oakmont Estates - Sioux Falls, SD		2,418			422			4,838			638			627			5,271			5,898			(1,746		)	2002		40 years
Oakwood Estates - Sioux Falls, SD		3,939			543			2,784			4,336			777			6,886			7,663			(3,214		)	1993		40 years
Olympic Village - Billings, MT		10,575			1,164			10,441			3,086			1,785			12,906			14,691			(4,881		)	2000		40 years
Olympik Village - Rochester, MN		4,382			1,034			6,109			1,968			1,183			7,928			9,111			(2,127		)	2005		40 years
Oxbow Park - Sioux Falls, SD		3,846			404			3,152			2,894			824			5,626			6,450			(2,808		)	1994		24-40 years
Park Meadows - Waite Park, MN		8,482			1,143			9,099			5,792			1,629			14,405			16,034			(5,939		)	1997		40 years

F-44

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Multifamily - continued
Pebble Springs - Bismarck, ND		$	757		$	7		$	748		$	165		$	54		$	866		$	920		$	(349	)	1999		40 years
Pinehurst - Billings, MT		205			72			687			251			81			929			1,010			(305		)	2002		40 years
Pinecone Villas - Sartell, MN		0			584			2,191			27			585			2,217			2,802			(95		)	2013		40 years
Pines - Minot, ND		111			35			215			185			49			386			435			(141		)	1997		40 years
Plaza - Minot, ND		5,348			867			12,784			2,455			995			15,111			16,106			(2,433		)	2009		40 years
Pointe West - Rapid City, SD		2,624			240			3,538			1,527			368			4,937			5,305			(2,379		)	1994		24-40 years
Ponds at Heritage Place - Sartell, MN		3,852			395			4,564			320			404			4,875			5,279			(363		)	2012		40 years
Prairie Winds - Sioux Falls, SD		1,410			144			1,816			487			235			2,212			2,447			(1,228		)	1993		24-40 years
Quarry Ridge - Rochester, MN		27,268			2,254			30,024			1,392			2,307			31,363			33,670			(4,533		)	2006		40 years
Red 20 - Minneapolis, MN		0			1,900			26,412			4			1,900			26,416			28,316			(445		)	2013		40 years
Regency Park Estates - St. Cloud, MN		6,680			702			10,198			1,465			811			11,554			12,365			(1,162		)	2011		40 years
Renaissance Heights - Williston, ND		0			2,464			43,488			123			2,467			43,608			46,075			(848		)	2013		40 years
Ridge Oaks - Sioux City, IA		3,359			178			4,073			2,437			288			6,400			6,688			(2,205		)	2001		40 years
Rimrock West - Billings, MT		3,282			330			3,489			1,510			435			4,894			5,329			(1,765		)	1999		40 years
River Ridge - Bismarck, ND		13,200			576			23,826			998			1,438			23,962			25,400			(1,290		)	2008		40 years
Rocky Meadows - Billings, MT		5,089			656			5,726			1,201			772			6,811			7,583			(3,129		)	1995		40 years
Rum River - Isanti, MN		3,536			843			4,823			215			862			5,019			5,881			(1,020		)	2007		40 years
Sherwood - Topeka, KS		12,134			1,142			14,684			3,064			1,694			17,196			18,890			(6,619		)	1999		40 years
Sierra Vista - Sioux Falls, SD		1,390			241			2,097			435			265			2,508			2,773			(273		)	2011		40 years
Silver Springs - Rapid City, SD		2,230			215			3,006			48			215			3,054			3,269			(68		)	2014		40 years
South Pointe - Minot, ND		8,613			550			9,548			2,847			1,343			11,602			12,945			(5,494		)	1995		24-40 years
Southpoint - Grand Forks, ND(2)		0			576			9,893			48			591			9,926			10,517			(414		)	2013		40 years
Southview - Minot, ND		1,035			185			469			410			240			824			1,064			(371		)	1994		40 years
Southwind - Grand Forks, ND		5,503			400			5,034			2,974			765			7,643			8,408			(3,486		)	1995		24-40 years
Summit Park - Minot, ND		963			161			1,898			1,550			560			3,049			3,609			(1,249		)	1997		24-40 years
Sunset Trail - Rochester, MN		8,009			336			12,814			2,652			581			15,221			15,802			(5,453		)	1999		40 years
Temple - Minot, ND		75			0			0			231			0			231			231			(57		)	2006		40 years
Terrace Heights - Minot, ND		160			29			312			142			40			443			483			(172		)	2006		40 years
Thomasbrook - Lincoln, NE		5,893			600			10,306			3,336			1,403			12,839			14,242			(4,680		)	1999		40 years
University Park Place - St. Cloud, MN		0			78			450			115			83			560			643			(118		)	2007		40 years
Valley Park - Grand Forks, ND		3,822			294			4,137			3,508			1,115			6,824			7,939			(2,599		)	1999		40 years

F-45

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Multifamily - continued
Villa West - Topeka, KS		$	12,106		$	1,590		$	15,760		$	923		$	1,876		$	16,397		$	18,273		$	(1,331	)	2012		40 years
Village Green - Rochester, MN		1,047			234			2,296			962			359			3,133			3,492			(935		)	2003		40 years
West Stonehill - Waite Park, MN		8,448			939			10,167			5,224			1,533			14,797			16,330			(6,896		)	1995		40 years
Westridge - Minot, ND		1,604			68			1,887			263			77			2,141			2,218			(377		)	2008		40 years
Westwood Park - Bismarck, ND		1,950			116			1,909			1,784			284			3,525			3,809			(1,425		)	1998		40 years
Whispering Ridge - Omaha, NE		22,000			2,139			25,424			732			2,276			26,019			28,295			(1,563		)	2012		40 years
Williston Garden - Williston, ND		10,870			1,400			17,696			85			1,421			17,760			19,181			(2,132		)	2012		40 years
Winchester - Rochester, MN		2,564			748			5,622			1,846			1,009			7,207			8,216			(2,297		)	2003		40 years
Woodridge - Rochester, MN		6,257			370			6,028			2,207			642			7,963			8,605			(3,557		)	1997		40 years
Total Multifamily		$	423,385		$	65,410		$	746,299		$	134,811		$	81,919		$	864,601		$	946,520		$	(180,414	)
Healthcare
2800 Medical Building - Minneapolis, MN		$	7,740		$	204		$	7,135		$	2,492		$	229		$	9,602		$	9,831		$	(3,037	)	2005		40 years
2828 Chicago Avenue - Minneapolis, MN		12,105			726			11,319			5,627			729			16,943			17,672			(4,011		)	2007		40 years
Airport Medical - Bloomington, MN		431			0			4,678			0			0			4,678			4,678			(1,730		)	2002		40 years
Billings 2300 Grant Road - Billings, MT		1,226			649			1,216			0			649			1,216			1,865			(146		)	2010		40 years
Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN		8,092			1,071			6,842			1,968			1,092			8,789			9,881			(1,612		)	2008		40 years
Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN		5,066			189			5,127			971			203			6,084			6,287			(1,078		)	2008		40 years
Casper 1930 E 12th Street (Park Place) - Casper, WY(2)		0			439			5,780			172			439			5,952			6,391			(855		)	2009		40 years
Casper 3955 E 12th Street (Meadow Wind) - Casper, WY(2)		0			388			10,494			576			459			10,999			11,458			(1,510		)	2009		40 years
Cheyenne 4010 N College Drive (Aspen Wind) - Cheyenne, WY(2)		0			628			10,272			270			629			10,541			11,170			(1,457		)	2009		40 years
Cheyenne 4606 N College Drive (Sierra Hills) - Cheyenne, WY(2)		0			695			7,455			50			695			7,505			8,200			(1,020		)	2009		40 years
Denfeld Clinic - Duluth, MN		1,430			501			2,597			1			501			2,598			3,099			(718		)	2004		40 years
Eagan 1440 Duckwood Medical - Eagan, MN		0			521			1,547			556			521			2,103			2,624			(635		)	2008		40 years
Edgewood Vista - Belgrade, MT		0			35			779			21			35			800			835			(140		)	2008		40 years
Edgewood Vista - Billings, MT		1,785			115			1,767			66			115			1,833			1,948			(323		)	2008		40 years
Edgewood Vista - Bismarck, ND		0			511			9,193			177			511			9,370			9,881			(2,231		)	2005		40 years
Edgewood Vista - Brainerd, MN		0			587			8,999			134			587			9,133			9,720			(2,184		)	2005		40 years

F-46

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Healthcare - continued
Edgewood Vista - Columbus, NE		$	0		$	43		$	824		$	24		$	44		$	847		$	891		$	(148	)	2008		40 years
Edgewood Vista - East Grand Forks, MN		2,718			290			1,352			59			290			1,411			1,701			(251		)	2000		40 years
Edgewood Vista - Fargo, ND		11,846			775			20,870			199			775			21,069			21,844			(3,730		)	2008		40 years
Edgewood Vista - Fremont, NE		550			56			490			54			56			544			600			(179		)	2008		40 years
Edgewood Vista - Grand Island, NE		0			33			773			51			39			818			857			(142		)	2008		40 years
Edgewood Vista - Hastings, NE		567			49			517			63			50			579			629			(197		)	2008		40 years
Edgewood Vista - Hermantown I, MN		15,197			288			9,871			1,761			288			11,632			11,920			(3,888		)	2000		40 years
Edgewood Vista - Hermantown II, MN		0			719			10,517			121			719			10,638			11,357			(2,542		)	2005		40 years
Edgewood Vista - Kalispell, MT		568			70			502			633			70			1,135			1,205			(364		)	2001		40 years
Edgewood Vista - Minot, ND		9,017			1,045			11,590			210			1,047			11,798			12,845			(1,307		)	2010		40 years
Edgewood Vista - Missoula, MT		807			109			854			94			116			941			1,057			(412		)	1996		40 years
Edgewood Vista - Norfolk, NE		0			42			722			22			42			744			786			(131		)	2008		40 years
Edgewood Vista - Omaha, NE		359			89			547			53			89			600			689			(201		)	2001		40 years
Edgewood Vista - Sioux Falls, SD		1,022			314			974			58			314			1,032			1,346			(185		)	2008		40 years
Edgewood Vista - Spearfish, SD		0			315			8,584			124			330			8,693			9,023			(1,710		)	2005		40 years
Edgewood Vista - Virginia, MN		12,927			246			11,823			313			246			12,136			12,382			(3,669		)	2002		40 years
Edina 6363 France Medical - Edina, MN		9,567			0			12,675			2,906			0			15,581			15,581			(3,781		)	2008		40 years
Edina 6405 France Medical - Edina, MN		8,145			0			12,201			41			0			12,242			12,242			(2,969		)	2008		40 years
Edina 6517 Drew Avenue - Edina, MN		0			353			660			529			372			1,170			1,542			(579		)	2002		40 years
Edina 6525 Drew Avenue - Edina, MN		0			388			117			0			388			117			505			(10		)	2011		40 years
Edina 6525 France SMC II - Edina, MN		9,803			755			8,054			5,723			1,040			13,492			14,532			(5,874		)	2003		40 years
Edina 6545 France SMC I - Edina MN		29,622			3,480			30,192			14,423			3,480			44,615			48,095			(17,035		)	2001		40 years
Fresenius - Duluth, MN		576			50			1,520			2			50			1,522			1,572			(420		)	2004		40 years
Garden View - St. Paul, MN		0			0			7,408			898			26			8,280			8,306			(2,723		)	2002		40 years
Gateway Clinic - Sandstone, MN		828			66			1,699			0			66			1,699			1,765			(469		)	2004		40 years
Healtheast St John & Woodwinds - Maplewood & Woodbury, MN		7,366			3,239			18,362			0			3,239			18,362			21,601			(6,867		)	2000		40 years
High Pointe Health Campus - Lake Elmo, MN		7,500			1,305			10,528			2,091			1,329			12,595			13,924			(3,750		)	2004		40 years
Laramie 1072 N 22nd Street (Spring Wind) - Laramie, WY(2)		0			406			10,151			27			406			10,178			10,584			(1,251		)	2009		40 years
Legends at Heritage Place - Sartell, MN		0			970			9,920			0			970			9,920			10,890			(382		)	2013		40 years
Mariner Clinic - Superior, WI		1,811			0			3,781			90			20			3,851			3,871			(1,077		)	2004		40 years

F-47

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Healthcare - continued
Minneapolis 701 25th Avenue Medical - Minneapolis, MN		$	7,196		$	0		$	7,873		$	1,566		$	0		$	9,439		$	9,439		$	(1,837	)	2008		40 years
Missoula 3050 Great Northern - Missoula, MT		1,267			640			1,331			0			640			1,331			1,971			(159		)	2010		40 years
Park Dental - Brooklyn Center, MN		247			185			2,767			0			185			2,767			2,952			(873		)	2002		40 years
Pavilion I - Duluth, MN		4,773			1,245			8,898			31			1,245			8,929			10,174			(2,445		)	2004		40 years
Pavilion II - Duluth, MN		8,783			2,715			14,673			1,937			2,715			16,610			19,325			(5,788		)	2004		40 years
Ritchie Medical Plaza - St Paul, MN		5,980			1,615			7,851			3,611			1,647			11,430			13,077			(2,880		)	2005		40 years
Sartell 2000 23rd Street South - Sartell, MN		1,593			0			11,781			934			0			12,715			12,715			(4,101		)	2002		40 years
Spring Creek-American Falls - American Falls, ID		2,086			145			3,870			0			145			3,870			4,015			(404		)	2011		40 years
Spring Creek-Boise - Boise, ID		2,751			708			4,296			0			708			4,296			5,004			(482		)	2011		40 years
Spring Creek-Eagle - Eagle, ID		1,919			263			3,775			0			263			3,775			4,038			(396		)	2011		40 years
Spring Creek-Fruitland - Fruitland, ID		0			550			6,565			0			550			6,565			7,115			(260		)	2014		40 years
Spring Creek-Meridian - Meridian, ID		3,171			424			6,724			0			424			6,724			7,148			(698		)	2011		40 years
Spring Creek-Overland - Overland, ID		3,106			687			5,942			0			687			5,942			6,629			(644		)	2011		40 years
Spring Creek-Soda Springs - Soda Springs, ID		751			66			2,124			33			66			2,157			2,223			(228		)	2011		40 years
Spring Creek-Ustick - Meridian, ID		0			467			3,833			0			467			3,833			4,300			(370		)	2011		40 years
St Michael Clinic - St Michael, MN		1,795			328			2,259			264			328			2,523			2,851			(510		)	2007		40 years
Trinity at Plaza 16 - Minot, ND		4,718			568			9,009			125			674			9,028			9,702			(820		)	2011		40 years
Wells Clinic - Hibbing, MN		1,263			162			2,497			2			162			2,499			2,661			(690		)	2004		40 years
Total Healthcare		$	220,070		$	33,522		$	409,346		$	52,153		$	34,201		$	460,820		$	495,021		$	(112,515	)
Industrial
Bloomington 2000 W 94th Street - Bloomington, MN(2)		$	0		$	2,133		$	4,097		$	1,217		$	2,204		$	5,243		$	7,447		$	(1,423	)	2006		40 years
Lexington Commerce Center - Eagan, MN		1,604			453			4,352			1,977			480			6,302			6,782			(2,831		)	1999		40 years
Minot IPS - Minot, ND(2)		0			416			5,952			0			416			5,952			6,368			(374		)	2012		40 years
Stone Container - Fargo, ND		382			440			6,597			104			440			6,701			7,141			(2,943		)	2001		40 years
Roseville 3075 Long Lake Road - Roseville, MN		0			810			9,562			1,326			810			10,888			11,698			(145		)	2001		40 years
Urbandale 3900 106th Street - Urbandale, IA		10,418			3,680			9,893			1,982			3,863			11,692			15,555			(2,553		)	2007		40 years
Woodbury 1865 Woodlane - Woodbury, MN		0			1,108			2,628			1,884			1,123			4,497			5,620			(987		)	2007		40 years
Total Industrial		$	12,404		$	9,040		$	43,081		$	8,490		$	9,336		$	51,275		$	60,611		$	(11,256	)

F-48

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Other
1st Avenue Building - Minot, ND		$	0		$	30		$	337		$	0		$	30		$	337		$	367		$	(41	)	1981		33-40 years
17 South Main - Minot, ND		75			15			75			197			17			270			287			$	(202	)	2000		40 years
Arrowhead First International Bank - Minot, ND		0			75			1,211			20			95			1,211			1,306			(65		)	2013		40 years
Bismarck 715 East Broadway - Bismarck, ND		2,103			389			1,283			1,126			443			2,355			2,798			(458		)	2008		40 years
Dakota West Plaza - Minot , ND		347			92			493			30			106			509			615			(122		)	2006		40 years
Grand Forks Carmike - Grand Forks, ND		1,304			184			2,360			2			184			2,362			2,546			(1,211		)	1994		40 years
Minot 1400 31st Ave - Minot, ND(2)		0			1,026			6,143			4,404			1,038			10,535			11,573			(2,287		)	2010		40 years
Minot 2505 16th Street SW - Minot, ND(2)		0			298			1,724			296			298			2,020			2,318			(275		)	2009		40 years
Minot Arrowhead - Minot, ND(2)		0			100			3,216			5,553			176			8,693			8,869			(2,058		)	1973		40 years
Minot Plaza - Minot, ND		758			50			453			155			80			578			658			(339		)	1993		40 years
Minot Southgate Wells Fargo Bank - Minot, ND		0			992			2,194			0			992			2,194			3,186			(24		)	2014		40 years
Plaza 16 - Minot, ND		7,098			389			5,444			3,859			598			9,094			9,692			(2,041		)	2009		40 years
Total Other		$	11,685		$	3,640		$	24,933		$	15,642		$	4,057		$	40,158		$	44,215		$	(9,123	)
Subtotal		$	667,544		$	111,612		$	1,223,659		$	211,096		$	129,513		$	1,416,854		$	1,546,367		$	(313,308	)

F-49

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition
Unimproved Land
Badger Hills - Rochester, MN		$	0		$	1,050		$	0		$	0		$	1,050		$	0		$	1,050		$	0		2012
Bismarck 4916 - Bismarck, ND		0			3,250			0			0			3,250			0			3,250			0			2013
Bismarck 700 E Main - Bismarck, ND		0			314			0			565			879			0			879			0			2008
Creekside Crossing - Bismarck, ND		0			4,286			0			0			4,286			0			4,286			0			2014
Georgetown Square - Grand Chute, WI		0			1,860			0			0			1,860			0			1,860			0			2006
Grand Forks — Grand Forks, ND		0			4,278			0			0			4,278			0			4,278			0			2012
Isanti Unimproved - Isanti, MN		0			58			0			0			58			0			58			0			2014
Legends at Heritage Place - Sartell, MN		0			537			0			0			537			0			537			0			2013
Minot 1525 24th Ave SW - Minot, ND		0			1,262			0			0			1,262			0			1,262			0			2014
Monticello - Monticello, MN		0			115			0			3			118			0			118			0			2006
Monticello 7th Addition - Monticello, MN		0			1,734			0			0			1,734			0			1,734			0			2014
Rapid City Unimproved- Rapid City, SD		0			1,376			0			0			1,376			0			1,376			0			2014
Renaissance Heights - Williston, ND		0			2,229			0			1,581			3,810			0			3,810			0			2012
River Falls - River Falls, WI		0			176			0			5			181			0			181			0			2003
Spring Creek Fruitland - Fruitland, IA		0			339			0			0			339			0			339			0			2014
TCA - Eagan, MN		0			325			0			0			325			0			325			0			2006
Urbandale - Urbandale, IA		0			5			0			109			114			0			114			0			2009
Weston - Weston, WI		0			370			0			0			370			0			370			0			2006
Total Unimproved Land		$	0		$	23,564		$	0		$	2,263		$	25,827		$	0		$	25,827		$	0
Development in Progress
71 France - Edina, MN		$	0		$	4,721		$	27,655		$	2,761		$	4,721		$	30,416		$	35,137		$	0		2014
Cardinal Point - Grand Forks, ND		0			1,600			21,455			3,395			1,600			24,850			26,450			0			2013
Chateau II - Minot, ND		0			240			12,080			809			240			12,889			13,129			0			2013
Deer Ridge - Jamestown, ND		0			711			13,580			1,064			711			14,644			15,355			0			2013
Edina 6565 France SMC III - Edina, MN		0			0			20,799			1,750			0			22,549			22,549			0			2014
Minot Southgate Retail - Minot, ND		0			889			1,199			76			889			1,275			2,164			0			2014
PrairieCare Medical - Brooklyn Park, MN		0			2,610			14,715			2,132			2,610			16,847			19,457			0			2014
Renaissance Heights - Williston, ND		0			616			11,156			1,363			616			12,519			13,135			0			2013
Other		0			402			3,233			2,983			402			6,216			6,618			0			n/a
Total Development in Progress		$	0		$	11,789		$	125,872		$	16,333		$	11,789		$	142,205		$	153,994		$	0
Total		$	667,544		$	146,965		$	1,349,531		$	229,692		$	167,129		$	1,559,059		$	1,726,189		$	(313,308	)

F-50

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Discontinued Operations
610 Business Center IV - Brooklyn Park, MN		$	6,759		$	975		$	5,542		$	2,886		$	980		$	8,423		$	9,403		$	(2,408	)	2007		40 years
7800 West Brown Deer Road - Milwaukee, WI		10,320			1,455			8,756			2,431			1,475			11,167			12,642			(4,022		)	2003		40 years
American Corporate Center - Mendota Heights, MN		8,670			893			16,768			4,067			893			20,835			21,728			(8,926		)	2002		40 years
Ameritrade - Omaha, NE		2,020			327			7,957			65			327			8,022			8,349			(3,215		)	1999		40 years
Barry Pointe Office Park - Kansas City, MO		1,369			384			2,366			226			392			2,584			2,976			(547		)	2007		40 years
Benton Business Park - Sauk Rapids, MN		0			188			1,261			87			188			1,348			1,536			(429		)	2003		40 years
Brenwood - Minnetonka, MN		0			1,642			12,138			3,864			1,650			15,994			17,644			(5,810		)	2002		40 years
Brook Valley I - La Vista, NE		1,209			347			1,671			134			347			1,805			2,152			(458		)	2005		40 years
Burnsville 1 Strip Center - Burnsville, MN		0			208			773			200			208			973			1,181			(306		)	2003		40 years
Champlin South Pond - Champlin, MN		1,185			842			2,703			105			866			2,784			3,650			(797		)	2004		40 years
Chan West Village - Chanhassen, MN		12,307			5,035			14,665			2,079			5,679			16,100			21,779			(5,215		)	2003		40 years
Corporate Center West - Omaha, NE		17,315			3,880			5,253			21			3,880			5,274			9,154			(126		)	2006		40 years
Crosstown Centre - Eden Prairie, MN		9,000			2,884			14,569			3,183			2,980			17,656			20,636			(4,939		)	2004		40 years
Duluth 4615 Grand - Duluth, MN		544			130			1,800			156			131			1,955			2,086			(499		)	2004		40 years
Duluth Denfeld Retail - Duluth, MN		1,798			276			4,699			185			297			4,863			5,160			(1,380		)	2004		40 years
Eden Prairie 6101 Blue Circle Dr - Eden Prairie, MN		0			666			4,197			1			666			4,198			4,864			(1,701		)	1999		40 years
Farnam Executive Center - Omaha, NE		12,160			2,188			7,912			1			2,188			7,913			10,101			(190		)	2006		40 years
Flagship - Eden Prairie, MN		21,565			1,899			15,518			31			1,913			15,535			17,448			(373		)	2006		40 years
Forest Lake Auto - Forest Lake, MN		0			50			446			13			50			459			509			(143		)	2003		40 years
Forest Lake Westlake Center - Forest Lake, MN		0			2,446			5,304			1,747			2,480			7,017			9,497			(1,830		)	2003		40 years
Gateway Corporate Center - Woodbury, MN		8,700			1,637			6,663			0			1,637			6,663			8,300			(160		)	2006		40 years
Golden Hills Office Center - Golden Valley, MN		17,417			3,018			18,544			4,313			3,018			22,857			25,875			(8,851		)	2003		40 years
Grand Forks Medpark Mall - Grand Forks, ND		0			681			4,808			231			722			4,998			5,720			(1,924		)	2000		40 years
Granite Corporate Center - St. Cloud, MN		5,313			588			7,808			1,521			740			9,177			9,917			(3,524		)	2001		40 years
Great Plains - Fargo, ND(2)		0			126			15,240			721			126			15,961			16,087			(6,161		)	1997		40 years
Highlands Ranch I - Highlands Ranch, CO		0			2,268			8,362			1,117			2,268			9,479			11,747			(2,211		)	2006		40 years
Highlands Ranch II - Highlands Ranch, CO		0			1,437			9,549			1,901			1,437			11,450			12,887			(3,391		)	2004		40 years
Interlachen Corporate Center - Edina, MN		8,800			1,650			14,983			2,530			1,693			17,470			19,163			(6,389		)	2001		40 years
Intertech Building - Fenton, MO		4,177			2,130			3,968			1,721			2,191			5,628			7,819			(1,253		)	2007		40 years
Jamestown Buffalo Mall - Jamestown, ND		1,717			566			5,551			2,975			1,114			7,978			9,092			(1,996		)	2003		40 years
Jamestown Business Center - Jamestown, ND		327			297			1,023			1,312			333			2,299			2,632			(965		)	2003		40 years
Lakeville Strip Center - Lakeville, MN		0			46			1,142			955			94			2,049			2,143			(726		)	2003		40 years
Mendota Office Center I - Mendota Heights, MN		3,734			835			6,169			1,402			835			7,571			8,406			(2,683		)	2002		40 years
Mendota Office Center II - Mendota Heights, MN		5,516			1,121			10,085			2,097			1,121			12,182			13,303			(4,882		)	2002		40 years
Mendota Office Center III - Mendota Heights, MN		3,791			970			5,734			957			970			6,691			7,661			(2,419		)	2002		40 years
Mendota Office Center IV - Mendota Heights, MN		4,507			1,070			7,635			1,510			1,070			9,145			10,215			(3,235		)	2002		40 years

F-51

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

					Initial Cost to Company						Costs capitalized			Gross amount at which carried at close of period												Date of		Life on which depreciation in latest income
Description		Encumbrances(1)			Land			Buildings & Improvements			subsequent to acquisition			Land			Buildings & Improvements			Total			Accumulated Depreciation			Construction or Acquisition		statement is computed
Discontinued Operations - continued
Minnesota National Bank - Duluth, MN		628			287			1,454			224			288			1,677			1,965			(475		)	2004		40 years
Miracle Hills One - Omaha, NE		8,895			1,974			5,726			6			1,974			5,732			7,706			(139		)	2006		40 years
Monticello C Store - Monticello, MN		0			65			770			37			97			775			872			(247		)	2003		40 years
Northpark Corporate Center - Arden Hills, MN		11,519			2,034			14,584			2,497			2,037			17,078			19,115			(4,231		)	2006		40 years
Omaha 10802 Farnam Dr - Omaha, NE		5,061			2,462			4,374			392			2,818			4,410			7,228			(525		)	2010		40 years
Omaha Barnes & Noble - Omaha, NE		0			600			3,099			0			600			3,099			3,699			(1,511		)	1995		40 years
Pacific Hills - Omaha, NE		16,770			4,220			6,280			243			4,220			6,523			10,743			(180		)	2006		40 years
Pine City C-Store - Pine City, MN		0			83			357			12			83			369			452			(118		)	2003		40 years
Pine City Evergreen Square - Pine City, MN		0			154			2,646			1,334			385			3,749			4,134			(1,104		)	2003		40 years
Plaza VII - Boise, ID		0			300			913			4			300			917			1,217			(11		)	2003		40 years
Plymouth 5095 Nathan Lane - Plymouth, MN		1,147			604			1,253			87			636			1,308			1,944			(258		)	2007		40 years
Prairie Oak Business Center - Eden Prairie, MN		3,120			531			4,069			2,523			1,030			6,093			7,123			(2,365		)	2003		40 years
Rapid City 900 Concourse Drive - Rapid City, SD		181			285			6,600			1,151			514			7,522			8,036			(2,912		)	2000		40 years
Riverport - Maryland Heights, MO		19,690			1,891			6,109			0			1,891			6,109			8,000			(146		)	2006		40 years
Rochester Maplewood Square - Rochester, MN		6,325			3,275			8,610			2,155			3,652			10,388			14,040			(3,936		)	1999		40 years
Spring Valley IV - Omaha, NE		720			178			916			60			186			968			1,154			(259		)	2005		40 years
Spring Valley V - Omaha, NE		792			212			1,123			251			240			1,346			1,586			(388		)	2005		40 years
Spring Valley X - Omaha, NE		734			180			1,024			80			189			1,095			1,284			(282		)	2005		40 years
Spring Valley XI - Omaha, NE		720			143			1,094			36			151			1,122			1,273			(276		)	2005		40 years
St. Cloud Westgate - St. Cloud, MN		0			885			5,535			1,396			1,002			6,814			7,816			(1,827		)	2004		40 years
Superior Office Building - Duluth, MN		944			336			2,200			143			336			2,343			2,679			(688		)	2004		40 years
TCA Building - Eagan, MN		7,500			627			8,571			915			684			9,429			10,113			(2,767		)	2003		40 years
Three Paramount Plaza - Bloomington, MN		0			1,261			6,149			1,961			1,482			7,889			9,371			(3,085		)	2002		40 years
Timberlands - Leawood, KS		13,155			2,375			9,601			189			2,375			9,790			12,165			(242		)	2006		40 years
UHC Office - International Falls, MN		800			119			2,366			230			119			2,596			2,715			(734		)	2004		40 years
US Bank Financial Center - Bloomington, MN		12,766			3,117			13,350			2,023			3,195			15,295			18,490			(3,805		)	2005		40 years
Wells Fargo Center - St Cloud, MN		5,787			869			8,373			1,956			884			10,314			11,198			(2,641		)	2005		40 years
West River Business Park - Waite Park, MN		0			235			1,195			267			235			1,462			1,697			(430		)	2003		40 years
Westgate - Boise, ID		3,844			1,000			10,618			1,933			1,000			12,551			13,551			(4,512		)	2003		40 years
Woodlands Plaza IV - Maryland Heights, MO		4,360			771			4,609			1,461			862			5,979			6,841			(1,501		)	2006		40 years
Total Discontinued Operations		$	295,678		$	76,228		$	405,130		$	70,311		$	80,424		$	471,245		$	551,669		$	(135,679	)

(1) Amounts in this column are the mortgages payable balances as of April 30, 2015. These amounts do not include amounts owing under the Company’s multi-bank line of credit or under the Company’s construction loans.

(2) As of April 30, 2015, this property was included in the collateral pool securing the Company’s $90.0 million multi-bank line of credit. The Company may add and remove eligible properties from the collateral pool if certain minimum collateral requirements are satisfied. Advances under the facility may not exceed 60% of the value of properties provided as security.

F-52

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III

REAL ESTATE AND ACCUMULATED DEPRECIATION

Reconciliations of the carrying value of total property owned for the three years ended April 30, 2015, 2014, and 2013 are as follows:

		(in thousands)
		2015			2014			2013
Balance at beginning of year		$	1,450,216		$	1,435,574		$	1,303,393
Additions during year
Multifamily		183,114			84,117			113,859
Healthcare		0			18,005			11,122
Industrial		9,037			0			5,900
Other		3,186			0			1,240
Improvements and Other		22,665			24,619			27,037
		1,668,218			1,562,315			1,462,551
Deductions during year
Cost of real estate sold		(15,719		)	(85,030		)	(21,953		)
Impairment charge		(1,566		)	(8,322		)	(305		)
Write down of asset and accumulated depreciation on impaired assets		(881		)	(6,291		)	0
Properties classified as held for sale during the year		(97,824		)	(10,307		)	(1,893		)
Other(1)		(5,861		)	(2,149		)	(2,826		)
Balance at close of year		$	1,546,367		$	1,450,216		$	1,435,574

Reconciliations of accumulated depreciation/amortization for the three years ended April 30, 2015, 2014, and 2013, are as follows:

		(in thousands)
		2015			2014			2013
Balance at beginning of year		$	302,405		$	289,624		$	258,809
Additions during year
Provisions for depreciation		45,498			40,450			40,032
Deductions during year
Accumulated depreciation on real estate sold or classified as held for sale		(29,463		)	(19,413		)	(6,444		)
Write down of asset and accumulated depreciation on impaired assets		(881		)	(6,291		)	0
Other(1)		(4,251		)	(1,965		)	(2,773		)
Balance at close of year		$	313,308		$	302,405		$	289,624

F-53

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2015

Schedule III

REAL ESTATE AND ACCUMULATED DEPRECIATION - continued

Reconciliations of development in progress for the three years ended April 30, 2015, 2014, and 2013, are as follows:

		(in thousands)
		2015			2014			2013
Balance at beginning of year		$	104,609		$	46,782		$	27,599
Additions during year
Unimproved land acquisitions		12,647			2,079			9,177
Unimproved land moved to development in progress		7,015			2,870			0
Improvements and other		189,306			123,240			52,970
Deductions during year
Involuntary conversion		0			(7,052		)	0
Development placed in service(2)		(159,578		)	(63,210		)	(42,964		)
Other(3)		(5		)	(100		)	0
Balance at close of year		$	153,994		$	104,609		$	46,782

Reconciliations of unimproved land for the three years ended April 30, 2015, 2014, and 2013, are as follows:

		(in thousands)
		2015			2014			2013
Balance at beginning of year		$	22,864		$	21,503		$	10,990
Additions during year
Unimproved land acquisitions		10,487			3,022			13,329
Improvements and other		1,533			1,209			854
Deductions during year
Cost of real estate sold		(670		)	0			0
Impairment charge		(1,293		)	0			0
Properties classified as held for sale during the year		(79		)	0			0
Unimproved land moved to development in progress		(7,015		)	(2,870		)	(3,670		)
Balance at close of year		$	25,827		$	22,864		$	21,503
Total real estate investments(4)		$	1,412,880		$	1,275,284		$	1,214,235

(1) Consists of miscellaneous disposed assets.

(2) Includes development projects that are placed in service in phases.

(3) Consists of miscellaneous re-classed assets.

(4) The net basis of the Company’s real estate investments for Federal Income Tax purposes was $1.7 billion, $1.5 billion and $1.5 billion at April 30, 2015, 2014 and 2013, respectively.

F-54