CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


	(in thousands, except share data)
	July 31, 2016		April 30, 2016
ASSETS
Real estate investments
Property owned	$	1,667,442	$	1,681,471
Less accumulated depreciation		(319,087)		(312,889)
		1,348,355		1,368,582
Development in progress		27,454		51,681
Unimproved land		18,933		20,939
Total real estate investments		1,394,742		1,441,202
Assets held for sale and assets of discontinued operations		215,817		220,537
Cash and cash equivalents		54,438		66,698
Other investments		—		50
Receivable arising from straight-lining of rents, net of allowance of $285 and $333, respectively		7,683		7,179
Accounts receivable, net of allowance of $144 and $97, respectively		3,018		1,524
Prepaid and other assets		2,265		2,937
Intangible assets, net of accumulated amortization of $6,916 and $6,230, respectively		1,172		1,858
Tax, insurance, and other escrow		4,752		5,450
Property and equipment, net of accumulated depreciation of $1,129 and $1,058, respectively		977		1,011
Goodwill		1,680		1,680
Deferred charges and leasing costs, net of accumulated amortization of $3,919 and $3,719, respectively		4,999		4,896
TOTAL ASSETS	$	1,691,543	$	1,755,022
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
LIABILITIES
Liabilities held for sale and liabilities of discontinued operations	$	76,195	$	77,488
Accounts payable and accrued expenses		41,797		39,727
Revolving line of credit		17,500		17,500
Mortgages payable, net of unamortized loan costs of $4,544 and $4,930, respectively		812,082		812,393
Construction debt and other		78,481		82,130
TOTAL LIABILITIES		1,026,055		1,029,238
COMMITMENTS AND CONTINGENCIES (NOTE 6)
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES		7,468		7,522
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 July 31, 2016 and April 30, 2016, 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 July 31, 2016 and April 30, 2016, aggregate liquidation preference of $115,000,000)		111,357		111,357
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 121,527,837 shares issued and outstanding at July 31, 2016, and 121,091,249 shares issued and outstanding at April 30, 2016)		922,698		922,084
Accumulated distributions in excess of net income		(482,264)		(442,000)
Total Investors Real Estate Trust shareholders’ equity		579,108		618,758
Noncontrolling interests – Operating Partnership (16,285,239 units at July 31, 2016 and 16,285,239 units at April 30, 2016)		73,071		78,484
Noncontrolling interests – consolidated real estate entities		5,841		21,020
Total equity		658,020		718,262
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	1,691,543	$	1,755,022

(in thousands, except share data)
January 31, 2016 April 30, 2015
ASSETS
Real estate investments
Property owned $ 1,801,019 $ 1,546,367
Less accumulated depreciation (346,895 ) (313,308 )
1,454,124 1,233,059
Development in progress 78,341 153,994
Unimproved land 22,304 25,827
Total real estate investments 1,554,769 1,412,880
Assets held for sale 22,064 463,103
Cash and cash equivalents 47,117 48,970
Other investments 50 329
Receivable arising from straight-lining of rents, net of allowance of $766 and $718, respectively
16,778 15,617
Accounts receivable, net of allowance of $163 and $438, respectively
5,118 2,865
Real estate deposits 1,250 2,489
Prepaid and other assets 3,943 3,174
Intangible assets, net of accumulated amortization of $21,214 and $19,610, respectively
23,913 26,213
Tax, insurance, and other escrow 7,834 10,073
Property and equipment, net of accumulated depreciation of $1,116 and $1,464, respectively
1,442 1,542
Goodwill 1,715 1,718
Deferred charges and leasing costs, net of accumulated amortization of $9,078 and $8,077, respectively
9,816 8,864
TOTAL ASSETS $ 1,695,809 $ 1,997,837
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
LIABILITIES
Liabilities held for sale $ 11,449 $ 321,393
Accounts payable and accrued expenses 48,778 56,399
Revolving line of credit 17,500 60,500
Mortgages payable 761,645 668,112
Construction debt and other 140,264 144,111
TOTAL LIABILITIES 979,636 1,250,515
COMMITMENTS AND CONTINGENCIES (NOTE 6)
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES 7,244
6,368

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 January 31, 2016 and April 30, 2015, 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 January 31, 2016 and April 30, 2015, aggregate liquidation preference of $115,000,000)
111,357
111,357

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 121,033,647 shares issued and outstanding at January 31, 2016, and 124,455,624 shares issued and outstanding at April 30, 2015)
924,658
951,868

Accumulated distributions in excess of net income (434,388 ) (438,432 )
Total Investors Real Estate Trust shareholders’ equity 628,944 652,110
Noncontrolling interests – Operating Partnership (13,863,575 units at January 31, 2016 and 13,999,725 units at April 30, 2015)
58,254
58,325

Noncontrolling interests – consolidated real estate entities 21,731 30,519
Total equity 708,929 740,954
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY $ 1,695,809 $ 1,997,837

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

for the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015


	(in thousands, except per share data)
		Three Months Ended
		July 31,
		2016		2015
REVENUE
Real estate rentals		$	44,985	$	40,750
Tenant reimbursement			4,626		4,295
TOTAL REVENUE			49,611		45,045
EXPENSES
Property operating expenses, excluding real estate taxes			16,057		13,488
Real estate taxes			5,577		4,816
Depreciation and amortization			14,267		11,217
Impairment of real estate investments			54,153		1,285
General and administrative expenses			2,606		2,454
Acquisition and investment related costs			43		7
Other expenses			852		417
TOTAL EXPENSES			93,555		33,684
Operating (loss) income			(43,944)		11,361
Interest expense			(10,364)		(7,814)
Interest income			572		556
Other income			473		51
(Loss) income before gain (loss) on sale of real estate and other investments, and income from discontinued operations			(53,263)		4,154
Gain (loss) on sale of real estate and other investments			8,958		(175)
(Loss) income from continuing operations			(44,305)		3,979
Income from discontinued operations			3,711		748
NET (LOSS) INCOME			(40,594)		4,727
Net loss (income) attributable to noncontrolling interests – Operating Partnership			3,296		(186)
Net loss (income) attributable to noncontrolling interests – consolidated real estate entities			15,655		(1)
Net (loss) income attributable to Investors Real Estate Trust			(21,643)		4,540
Dividends to preferred shareholders			(2,879)		(2,879)
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	(24,522)	$	1,661
(Loss) earnings per common share from continuing operations – Investors Real Estate Trust – basic and diluted		$	(0.23)	$	0.01
Earnings (loss) per common share from discontinued operations – Investors Real Estate Trust – basic and diluted			0.03		—
NET (LOSS) INCOME PER COMMON SHARE – BASIC & DILUTED		$	(0.20)	$	0.01
DIVIDENDS PER COMMON SHARE		$	0.13	$	0.13

(in thousands, except per share data)

Three Months Ended
January 31

Nine Months Ended
January 31

2016 2015 2016 2015
REVENUE
Real estate rentals $ 50,277 $ 46,753 $ 142,526 $ 135,621
Tenant reimbursement 4,492 5,223 13,466 15,122
TRS senior housing revenue 1,003 963 3,006 2,599
TOTAL REVENUE 55,772 52,939 158,998 153,342
EXPENSES
Depreciation/amortization related to real estate investments 14,789 12,627 42,522 37,700
Utilities 3,427 3,564 9,757 9,533
Maintenance 5,821 5,033 16,979 15,081
Real estate taxes 5,029 5,284 14,948 15,052
Insurance 1,214 1,215 3,558 3,745
Property management expenses 4,676 3,825 13,182 10,970
Other property expenses 169 197 344 753
TRS senior housing expenses 912 825 2,493 2,243
Administrative expenses 2,929 2,754 8,316 9,308
Other expenses 86 488 1,714 1,678
Amortization related to non-real estate investments 130 210 470 647
Impairment of real estate investments 162 540 3,320 4,663
TOTAL EXPENSES 39,344 36,562 117,603 111,373
Operating income 16,428 16,377 41,395 41,969
Interest expense (10,540 ) (10,009 ) (29,867 ) (29,710 )
Loss on extinguishment of debt 0 0 (106 ) 0
Interest income 566 561 1,687 1,681
Other income 135 109 286 371
Income before gain (loss) on sale of real estate and other investments and income from discontinued operations 6,589 7,038 13,395 14,311
Gain (loss) on sale of real estate and other investments 1,446 951 1,271 (811 )
Income from continuing operations 8,035 7,989 14,666 13,500
Income from discontinued operations 35,408 1,162 50,181 1,322
NET INCOME 43,443 9,151 64,847 14,822
Net income attributable to noncontrolling interests – Operating Partnership (4,227 ) (657 ) (5,940 ) (618 )
Net loss (income) attributable to noncontrolling interests – consolidated real estate entities 581 (123 ) 2,096 (870 )
Net income attributable to Investors Real Estate Trust 39,797 8,371 61,003 13,334
Dividends to preferred shareholders (2,879 ) (2,879 ) (8,636 ) (8,636 )
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 36,918 $ 5,492 $ 52,367 $ 4,698
Earnings per common share from continuing operations – Investors Real Estate Trust – basic and diluted $ .04 $ .04 $ .06 $ .03
Earnings per common share from discontinued operations – Investors Real Estate Trust – basic and diluted .26 .01 .36 .01
NET INCOME PER COMMON SHARE – BASIC AND DILUTED $ .30 $ .05 $ .42 $ .04
DIVIDENDS PER COMMON SHARE $ .13 $ .13 $ .39 $ .39

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

for the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015


	(in thousands)
				NUMBER			ACCUMULATED
	NUMBER OF			OF			DISTRIBUTIONS		NONREDEEMABLE
	PREFERRED	PREFERRED		COMMON	COMMON		IN EXCESS OF		NONCONTROLLING		TOTAL
	SHARES	SHARES		SHARES	SHARES		NET INCOME		INTERESTS		EQUITY
Balance April 30, 2015	5,750	$	138,674	124,455	$	951,868	$	(438,432)	$	88,844	$	740,954
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests								4,540		194		4,734
Distributions – common shares and units								(16,200)		(1,815)		(18,015)
Distributions – Series A preferred shares								(593)				(593)
Distributions – Series B preferred shares								(2,286)				(2,286)
Distribution reinvestment and share purchase plan				766		5,241						5,241
Shares issued and share-based compensation				220		22						22
Redemption of units for common shares				79		576				(576)		—
Other										(170)		(170)
Balance July 31, 2015	5,750	$	138,674	125,520	$	957,707	$	(452,971)	$	86,477	$	729,887


Balance April 30, 2016	5,750	$	138,674	121,091	$	922,084	$	(442,000)	$	99,504	$	718,262
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests								(21,643)		(18,897)		(40,540)
Distributions – common shares and units								(15,742)		(2,117)		(17,859)
Distributions – Series A preferred shares								(593)				(593)
Distributions – Series B preferred shares								(2,286)				(2,286)
Shares issued and share-based compensation				437		614						614
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities										572		572
Distributions to nonredeemable noncontrolling interests – consolidated real estate entities										(126)		(126)
Other										(24)		(24)
Balance July 31, 2016	5,750	$	138,674	121,528	$	922,698	$	(482,264)	$	78,912	$	658,020

(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, 2014 5,750 $ 138,674 109,019 $ 843,268 $ (389,758 ) $ 128,362 $ 720,546
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests 13,334 1,351 14,685
Distributions – common shares and units (45,222 ) (6,753 ) (51,975 )
Distributions – Series A preferred shares (1,779 ) (1,779 )
Distributions – Series B preferred shares (6,857 ) (6,857 )
Distribution reinvestment and share purchase plan 6,205 50,875 50,875
Share-based compensation 204 2,632 2,632
Partnership units issued 100 100
Redemption of units for common shares 6,706 38,512 (38,512 ) 0
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities 8,540 8,540
Distributions paid to non-controlling interests (555 ) (555 )
Balance January 31, 2015 5,750 $ 138,674 122,134 $ 935,287 $ (430,282 ) $ 92,533 $ 736,212

Balance April 30, 2015 5,750 $ 138,674 124,455 $ 951,868 $ (438,432 ) $ 88,844 $ 740,954
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests 61,003 4,087 65,090
Distributions – common shares and units (48,323 ) (5,431 ) (53,754 )
Distributions – Series A preferred shares (1,779 ) (1,779 )
Distributions – Series B preferred shares (6,857 ) (6,857 )
Distribution reinvestment and share purchase plan 821 5,619 5,619
Share-based compensation 220 1,191 1,191
Partnership units issued 400 400
Redemption of units for common shares 181 980 (980 ) 0
Shares repurchased (4,643 ) (35,000 ) (35,000 )
Distributions paid to non-controlling interests (6,935 ) (6,935 )
Balance January 31, 2016 5,750 $ 138,674 121,034 $ 924,658 $ (434,388 ) $ 79,985 $ 708,929

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

for the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015


	(in thousands)
	Three Months Ended
	July 31,
	2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(40,594)	$	4,727
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		14,627		13,713
Depreciation and amortization from discontinued operations		40		4,996
(Gain) loss on sale of real estate, land, other investments and discontinued operations		(8,958)		175
Share-based compensation expense		262		66
Impairment of real estate investments		54,153		1,725
Bad debt expense		263		(97)
Changes in other assets and liabilities:
Receivable arising from straight-lining of rents		(736)		269
Accounts receivable		(1,503)		313
Prepaid and other assets		694		1,215
Tax, insurance and other escrow		256		41
Deferred charges and leasing costs		(303)		(1,436)
Accounts payable, accrued expenses and other liabilities		(2,446)		(925)
Net cash provided by operating activities		15,755		24,782
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from real estate deposits		—		5
Payments for real estate deposits		—		(4,131)
Decrease in other investments		50		—
Decrease in lender holdbacks for improvements		735		1,354
Increase in lender holdbacks for improvements		(346)		(292)
Proceeds from sale of real estate and other investments		13,874		6,783
Insurance proceeds received		30		20
Payments for development and re-development of real estate assets		(5,458)		(40,678)
Payments for improvements of real estate assets		(11,292)		(7,043)
Payments for improvements of real estate assets from discontinued operations		—		(1,470)
Net cash used by investing activities		(2,407)		(45,452)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages payable		905		23,123
Principal payments on mortgages payable		(13,127)		(35,594)
Proceeds from revolving lines of credit		—		23,000
Proceeds from construction debt		6,906		21,763
Proceeds from sale of common shares under distribution reinvestment and share purchase program		—		1,115
Proceeds from noncontrolling partner – consolidated real estate entities		572		—
Distributions paid to common shareholders		(15,742)		(12,203)
Distributions paid to preferred shareholders		(2,879)		(2,879)
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership		(2,117)		(1,685)
Distributions paid to noncontrolling interests – consolidated real estate entities		(126)		(170)
Net cash (used) provided by financing activities		(25,608)		16,470
NET DECREASE IN CASH AND CASH EQUIVALENTS		(12,260)		(4,200)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		66,698		48,970
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	54,438	$	44,770

(in thousands)

Nine Months Ended
January 31

2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 64,847 $ 14,822
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 43,811 39,198
Depreciation and amortization from discontinued operations 5,425 14,385
(Gain) loss on sale of real estate, land, other investments and discontinued operations (25,512 ) 811
Gain on extinguishment of debt (35,552 ) 0
Share-based compensation expense 1,391 1,935
Impairment of real estate investments 3,760 6,105
Bad debt expense 392 840
Changes in other assets and liabilities:
Receivable arising from straight-lining of rents (104 ) (244 )
Accounts receivable 301 2,217
Prepaid and other assets (265 ) (1,140 )
Tax, insurance and other escrow (193 ) (548 )
Deferred charges and leasing costs (999 ) (2,716 )
Accounts payable, accrued expenses, and other liabilities (10,363 ) 5,109
Net cash provided by operating activities 46,939 80,774
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from real estate deposits 3,725 575
Payments for real estate deposits (2,486 ) (7,924 )
Decrease in other investments 279 0
Decrease in lender holdbacks for improvements 3,906 11,063
Increase in lender holdbacks for improvements (862 ) (913 )
Proceeds from sale of discontinued operations 366,125 0
Proceeds from sale of real estate and other investments 8,580 26,758
Insurance proceeds received 1,035 2,537
Payments for acquisitions of real estate assets (71,381 ) (24,404 )
Payments for development and re-development of real estate assets (106,306 ) (143,256 )
Payments for improvements of real estate assets (20,692 ) (18,203 )
Payments for improvements of real estate assets from discontinued operations (5,182 ) (6,478 )
Net cash provided (used) by investing activities 176,741 (160,245 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages payable 95,602 78,875
Principal payments on mortgages payable (218,264 ) (83,198 )
Proceeds from revolving line of credit 43,000 45,000
Principal payments on revolving line of credit and other debt (110,554 ) (17,000 )
Proceeds from construction debt 62,268 69,051
Proceeds from sale of common shares under distribution reinvestment and share purchase program 1,493 38,819
Proceeds from noncontrolling partner – consolidated real estate entities 1,120 1,916
Repurchase of common shares (35,000 ) 0
Distributions paid to common shareholders (44,326 ) (33,672 )
Distributions paid to preferred shareholders (8,636 ) (8,636 )
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership (5,301 ) (6,247 )
Distributions paid to noncontrolling interests – consolidated real estate entities (6,935 ) (556 )
Net cash (used) provided by financing activities (225,533 ) 84,352
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,853 ) 4,881
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 48,970 47,267
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 47,117 $ 52,148

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, continued)

for the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015


	(in thousands)
	Three Months Ended
	July 31,
	2016		2015
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Distribution reinvestment plan – shares issued	$	—	$	3,997
Operating partnership distribution reinvestment plan – shares issued		—		130
Operating partnership units converted to shares		—		576
Increase to accounts payable included within real estate investments		3,768		6,880
Construction debt reclassified to mortgages payable		10,549		—

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized of $153 and $2,310, respectively	$	10,195	$	9,268

(in thousands)

Nine Months Ended
January 31

2016 2015
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES FOR THE PERIOD
Distribution reinvestment plan – shares issued $ 3,997 $ 11,550
Operating partnership distribution reinvestment plan – shares issued 130 506
Operating partnership units converted to shares 980 38,512
Real estate assets acquired through the issuance of operating partnership units 400 100
Real estate assets acquired through assumption of indebtedness and accrued costs 0 12,169
(Decrease) increase to accounts payable included within real estate investments (4,991 ) 6,384
Real estate assets contributed by noncontrolling interests – consolidated real estate entities 0 6,624
Construction debt reclassified to mortgages payable 41,649 0
Decrease in real estate assets in connection with transfer of real estate assets in settlement of debt 87,213 0
Decrease in debt in connection with transfer of real estate assets in settlement of debt 122,610 0

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized of $4,396 and $3,628, respectively
$ 28,990 $ 39,073

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

for the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015

NOTE 1 • ORGANIZATION

Investors Real Estate Trust (“IRET”, “we” or “us”) is a self-advised real estate investment trust engaged in acquiring, owning and leasing ~~multifamily residential and commercial~~ real estate. We have elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. As a REIT, we are subject to a number of organizational and operational requirements, including a requirement to distribute 90% of ordinary taxable income to shareholders, and, generally, are not subject to federal income tax on net income, except for taxes on undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiary (“TRS”). Our TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. We have considered estimated future taxable income and have determined that there were no material income tax provisions or material net deferred income tax items for our TRS for the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015. Our ~~multifamily properties and commercial~~ properties are located mainly in the states of North Dakota and Minnesota, but also in the states of Idaho, Iowa, Kansas, Montana, Nebraska, South Dakota, Wisconsin and Wyoming. As of ~~January~~July 31, 2016, we held for investment 94100 multifamily properties with ~~12,401~~13,012 apartment units and ~~83 commercial properties, consisting of healthcare, industrial and other, totaling 4.5~~2.8 million net rentable square ~~feet.~~feet in 31 healthcare and 16 other properties. We held for sale 81 multifamily property, 35 healthcare properties ~~1 commercial property~~ and ~~1 parcel~~2 parcels of land as of ~~January~~July 31, 2016. We conduct a majority of our business activities through our consolidated operating partnership, IRET Properties, a North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities.

All references to IRET, we or us refer to Investors Real Estate Trust and its consolidated subsidiaries.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation. Our fiscal year ends April 30th.

Our interest in the Operating Partnership was ~~89.7%~~88.2% of the limited partnership units of the Operating Partnership (“Units”) as of ~~January~~July 31, 2016 and ~~89.9%~~88.1% as of April 30, ~~2015.~~2016. Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their Units for cash any time following the first anniversary of the date they acquired such Units (“Exchange Right”). When a limited partner exercises the Exchange Right, we have the right, in our sole discretion, to acquire such Units by either making a cash payment or exchanging the Units for our common shares of beneficial interest (“Common Shares”), on a one-for-one basis. The Exchange Right is subject to certain conditions and limitations, including the limited partner may not exercise the Exchange Right more than two times during a calendar year and the limited partner may not exercise for less than 1,000 Units, or, if such limited partner holds less than 1,000 Units, for less than all of the Units held by such limited partner. The Operating Partnership and some limited partners have contractually agreed to a holding period of greater than one year, a greater number of redemptions during a calendar year or other limitations to their Exchange Right.

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

UNAUDITED INTERIM FINANCIAL STATEMENTS

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

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the opinion of management, all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods have been included.

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The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim condensed consolidated financial statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2015,~~2016, as filed with the SEC on June 29, ~~2015.~~

2016.

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 accounting principles generally accepted in the United States of America (“U.S. ~~GAAP~~GAAP”) and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 does not apply to lease contracts accounted for under ASC 840, Leases. The ASU is effective for fiscal years beginning after December 15, 2017. We do not expect adoption of this update to have a material impact on our 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 fiscal years beginning after December 15, 2015. We ~~do not expect adoption~~adopted the guidance in ASU 2015-02 as of ~~this update to have a material impact on our operating results or financial position.~~

May 1, 2016, as more fully described in the Variable Interest Entity section below.

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 fiscal years beginning after December 15, 2015. We ~~do not expect adoption~~adopted the guidance in ASU 2015-03 as of ~~this update~~May 1, 2016. We have retrospectively applied the guidance to ~~have a material impact~~debt issuance costs for all prior periods, which resulted in the reclassification of $4.5 million from deferred charges and leasing costs to mortgages payable on our ~~operating results or financial position.~~

Condensed Consolidated Balance Sheets at July 31, 2016.

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 fiscal years beginning after December 15, 2015. ~~We do not expect~~Our adoption of ~~this update to~~the guidance in ASU 2015-05 did not have a material impact on our operating results or financial position.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We do not expect adoption of this update to have a material impact on our operating results or financial position.

In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 amends existing accounting standards for lease accounting, including by requiring lessees to recognize most leases on the balance sheet and making certain changes to lessor accounting. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We are currently evaluating the impact the new standard may have on our consolidated financial statements.

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In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, accrual of compensation cost, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. We are currently evaluating the impact the new standard may have on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing diversity in practice. The cash flow issues include debt prepayment or debt extinguishment costs and proceeds from the settlement of insurance claims. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We are currently evaluating the impact the new standard may have on our consolidated financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS

We periodically evaluate our long-lived assets, including investments in real estate, for impairment indicators. The impairment evaluation is performed on assets by property such that assets for a property form an asset group. 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, we compare the expected future undiscounted cash flows for the long-lived asset group against the carrying amount of that asset group. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset group, 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 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.

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During the ~~nine~~three months ended ~~January~~July 31, 2016, we recognized impairments of $40.9 million, $5.8 million, $4.7 million, and $2.8 million, respectively, on three multifamily properties and one parcel of unimproved land in Williston, North Dakota, due to deterioration of this energy-impacted market, which resulted in poor leasing activity and declining rental rates during the three months ended July 31, 2016, which should generally be a strong leasing period. These properties were written-down to estimated fair value based on an independent appraisal in the case of one property and management cash flow estimates and market data in the case of the remaining assets. The properties impaired for $40.9 million, $4.7 million, and $2.8 million are owned by joint venture entities in which we have an approximately 70%, 60% and 70% interest, respectively, but which are consolidated in our financial statements. We expect to discuss rebalancing the mortgage loans with the lenders for two of these properties during the second quarter of fiscal year 2017.

During the three months ended July 31, 2015, we incurred a loss of approximately ~~$3.8~~$1.7 million due to impairment of one office property ~~two parcels~~and one parcel of ~~land and eight multifamily properties.~~land. We recognized ~~impairments~~impairment of approximately $440,000 on an office property in Eden Prairie, ~~Minnesota;~~Minnesota, which was written-down to estimated fair value during the first quarter of fiscal year 2016 based on receipt of a market offer to purchase and our intent to dispose of the property. We recognized impairment of $1.3 million on a parcel of land in Grand Chute, Wisconsin; $1.9 million on eight multifamily properties in St. Cloud, Minnesota; and $162,000 on a parcel of land in River Falls, Wisconsin. These properties were written-down to estimated fair value during the first, second and third quarters of fiscal year 2016Wisconsin based on ~~receipt of individual market offers to purchase and our intent to dispose of the properties or, in the case of the Grand Chute, Wisconsin, the~~its sale listing price and our intent to dispose of the property. The impairment loss of the Eden Prairie, Minnesota property for the first quarter of fiscal year 2016 is reported in discontinued operations. See Note 7 for additional information.

During the nine months ended January 31, 2015, we incurred a loss of $6.1 million due to impairment of four commercial properties and two parcels of unimproved land. We recognized impairments of approximately $2.1 million on a retail property in Kalispell, Montana; $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; $98,000 on unimproved land in Eagan, Minnesota; and $442,000 on unimproved land in Weston, Wisconsin. These properties were written-down to estimated fair value during the first, second and third quarters of fiscal year 2015 based on receipt of individual market offers to purchase and our intent to dispose of the properties or, in the case of the Boise, Idaho and Weston, Wisconsin properties, an independent appraisal. The Kalispell and Golden Valley properties were sold in the second quarter of fiscal year 2015, the Weston property was sold in the fourth quarter of fiscal year 2015, the Minneapolis property was sold in the first quarter of fiscal year 2016, and the Boise property was sold in the second quarter of fiscal year 2016.

HELD FOR SALE

We classify properties as held for sale when they meet the U.S. GAAP criteria, which include: (a) management commits to and initiates a plan to sell the asset (disposal group), (b) the sale is probable and expected to be completed within one year under terms that are usual and customary for sales of such assets (disposal groups), and (c) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Depreciation is not recorded on assets classified as held for sale. Liabilities classified as held for sale consist of

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liabilities to be included in the transaction and liabilities directly associated with assets that will be transferred in the transaction. ~~At January 31, 2016, we had 8 multifamily~~Thirty-five healthcare properties, one ~~healthcare~~multifamily property, and ~~one parcel~~two parcels of land were classified as held for sale ~~with assets~~at July 31, 2016. Thirty-five healthcare properties, one multifamily property, one industrial property and three parcels of ~~$22.1 million and liabilities of $11.4 million. At April 30, 2015, we had 49 office properties, 17 retail properties and two healthcare properties~~unimproved land were classified as held for sale ~~with assets of $463.1 million and liabilities of $321.4 million.~~

at April 30, 2016.

COMPENSATING BALANCES AND OTHER INVESTMENTS; HOLDBACKS

We maintain 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 ~~January~~July 31, 2016, our compensating balances totaled ~~$13.2~~$13.1 million and consisted of the following:


Financial Institution
First International Bank, Watford City, ND	$	6,000,000
Associated Bank, Green Bay, WI		3,000,000
The PrivateBank, Minneapolis, MN		2,000,000
Bremer Bank, Saint Paul, MN		1,285,000
Dacotah Bank, Minot, ND		250,000
Peoples State Bank, Velva, ND		225,000
American National Bank, Omaha, NE		200,000
Commerce Bank a Minnesota Banking Corporation		100,000
Total	$	13,060,000

Financial Institution
First International Bank, Watford City, ND $ 6,000,000
Associated Bank, Green Bay, WI 3,000,000
The PrivateBank, Minneapolis, MN 2,000,000
Bremer Bank, Saint Paul, MN 1,285,000
Dacotah Bank, Minot, ND 350,000
Peoples State Bank, Velva, ND 225,000
American National Bank, Omaha, NE 200,000
Commerce Bank a Minnesota Banking Corporation 100,000
Total $ 13,160,000

A portion of the deposit at Dacotah Bank is held as a certificate of deposit and comprises the approximately $50,000 in other investments on the Condensed Consolidated Balance Sheets. The certificate of deposit has a remaining term of less than six months and we intend to hold it to maturity.

We have a number of mortgage loans under which the lender retains a portion of the loan proceeds or requires a deposit for the payment of construction costs or tenant improvements. The decrease of ~~$3.9 million~~$735,000 in lender holdbacks for improvements reflected in the Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~January~~July 31, 2016 is due primarily to the release of loan proceeds to us upon completion of construction and tenant improvement projects, while the increase of approximately ~~$862,000~~$346,000 represents additional amounts retained by lenders for new projects.

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IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES AND GOODWILL

Upon acquisition of real estate, we record 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. We amortize identified intangible assets and liabilities that are determined to have finite lives based on the period over which the assets and liabilities are expected to affect, directly or indirectly, the future cash flows of the real estate property acquired (generally the life of the lease). In the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015, respectively, we added ~~approximately $1.3 million and $365,000 of~~no new intangible assets ~~and approximately $101,000 and $0 of new~~or intangible liabilities. ~~The weighted average lives of the intangible assets acquired in the nine months ended January 31, 2016 and 2015 are 0.8 years and 0.5 years, respectively.~~ Amortization of intangibles related to above or below-market leases is recorded in real estate rentals in the Condensed Consolidated Statements of Operations. Amortization of other intangibles is recorded in depreciation/amortization related to real estate investments in the Condensed 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.

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Our identified intangible assets and intangible liabilities at ~~January~~July 31, 2016 and April 30, ~~2015~~2016 were as follows:


	(in thousands)
	July 31, 2016		April 30, 2016
Identified intangible assets (included in intangible assets):
Gross carrying amount	$	8,088	$	8,088
Accumulated amortization		(6,916)		(6,230)
Net carrying amount	$	1,172	$	1,858

Identified intangible liabilities (included in other liabilities):
Gross carrying amount	$	159	$	159
Accumulated amortization		(61)		(55)
Net carrying amount	$	98	$	104

(in thousands)
January 31, 2016 April 30, 2015
Identified intangible assets (included in intangible assets):
Gross carrying amount $ 45,127 $ 45,823
Accumulated amortization (21,214 ) (19,610 )
Net carrying amount $ 23,913 $ 26,213

Identified intangible liabilities (included in other liabilities):
Gross carrying amount $ 159 $ 82
Accumulated amortization (49 ) (61 )
Net carrying amount $ 110 $ 21

The amortization of acquired below-market leases and acquired above-market leases reduced rental income by approximately ~~$3,000~~$5,000 and ~~$7,000~~$6,000 for the three months ended ~~January 31, 2016 and 2015, respectively, and approximately $14,000 and $18,000 for the nine months ended January~~July 31, 2016 and 2015, 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)
2018	$	5
2019		(11)
2020		(20)
2021		(16)
2022		(13)

Year Ended April 30, (in thousands)
2017 $ 3
2018 (11 )
2019 (20 )
2020 (16 )
2021 (13 )

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was ~~$1.4 million~~approximately $675,000 and ~~$1.1 million~~$192,000 for the three months ended ~~January 31, 2016 and 2015, respectively, and $3.6 million and $4.0 million for the nine months ended January~~July 31, 2016 and 2015, 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)
2018	$	1,171
2019		269
2020		170
2021		104
2022		78

Year Ended April 30, (in thousands)
2017 $ 3,835
2018 3,605
2019 3,507
2020 3,440
2021 3,312

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The excess of the cost of an acquired property over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Our 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. The book value of goodwill as of ~~January~~July 31, 2016 and April 30, ~~2015~~2016 was $1.7 million. The annual review at April 30, ~~2015~~2016 indicated no impairment to goodwill and there was no indication of impairment at ~~January~~July 31, 2016. During the ~~nine~~three months ended ~~January~~July 31, 2016, we disposed of ~~eight~~one commercial properties to which goodwill had been assigned, and as a result, approximately $196,000 of goodwill was derecognized. During the nine months ended January 31, 2015, we recognized approximately $852,000 of goodwill from the acquisition of the Homestead Garden multifamily property and disposed of one multifamily property to which goodwill had been assigned, and as a result, approximately ~~$11,000~~$17,000 of goodwill was derecognized.

The goodwill of the commercial property was included in assets held for sale at April 30, 2016. There were no changes to goodwill in the three months ended July 31, 2015.

USE OF ESTIMATES

The preparation of financial statements in conformity with 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~~

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RECLASSIFICATIONS

Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. On the Condensed Consolidated Statements of Operations, we ~~reclassified certain expenses from general and administrative expenses to administrative~~combined utilities, maintenance, insurance, property management expenses and other ~~expenses.~~property expenses onto a single line called property operating expenses, excluding real estate taxes. We also combined depreciation/amortization related to real estate investments and amortization related to non-real estate investments onto a single line called depreciation and amortization. Additionally on the Condensed Consolidated Statements of Operations, we reclassed acquisition and project costs from other expenses to acquisition and investment related costs. On the Condensed Consolidated Balance Sheets, we reclassified assets and liabilities related to properties classified as held for ~~sale.~~

sale and we reclassified debt issuance costs from deferred charges and leasing costs to mortgages payable, as part of our adoption of ASU 2015-03, as described above in the Recent Accounting Pronouncements section.

We report, in discontinued operations, the results of operations and the related gains or losses of properties that have either been disposed of or classified as held for sale and for which the disposition represents a strategic shift that has or will have a major effect on our operations and financial results. As the result of discontinued operations, retroactive reclassifications that change prior period numbers have been made. See Note 7 for additional information. During the ~~first~~fourth quarter of fiscal year 2016, we classified as discontinued operations ~~48 office~~34 senior housing properties, ~~17 retail properties and 1 healthcare property.~~

which remained in discontinued operations at July 31, 2016.

PROCEEDS FROM FINANCING LIABILITY

During ~~the first quarter of~~ fiscal year 2014, we sold a non-core assisted living property in exchange for $7.9 million in cash and a $29.0 million contract for deed. The buyer leased the property back to us, and also granted us an option to repurchase the property at a specified price at or prior to July 31, 2018. We accounted for the transaction as a financing liability due to our continuing involvement with the property and recorded the $7.9 million in sales proceeds within other liabilities on the Condensed Consolidated Balance Sheets. The balance of the liability as of ~~January~~July 31, 2016 was $7.9 million.

VARIABLE INTEREST ENTITY

~~On November 27, 2012,~~

As discussed in the Recent Accounting Pronouncements section, effective May 1, 2016, we ~~entered into~~adopted the guidance in ASU 2015-02. As a ~~joint venture operating agreement with a~~result, the Operating Partnership and each of our less than wholly-owned real estate ~~development company~~partnerships have been deemed to ~~construct an apartment project in Minot, North Dakota as IRET – Minot Apartments, LLC, with approximately 69%~~have the characteristics of the project financed with third-party debt and approximately 7% financed with debt from us to the joint venture entity. The two-phase project was substantially completed in the third quarter of fiscal year 2015. As of January 31, 2016, we are the approximately 51.0% owner of the joint venture and have management and leasing responsibilities and the real estate development company owns approximately 49.0% of the joint venture and was responsible for the development and construction of the property. We have determined that the joint venture is a variable interest entity (“VIE”)~~, primarily based on~~. However, we were not required to consolidate any previously unconsolidated entities or deconsolidate any previously consolidated entities as a result of the ~~fact~~change in classification. Accordingly, there has been no change to the recognized amounts in our condensed consolidated balance sheets and statements of operations or amounts reported in our condensed consolidated statements of cash flows. We determined that an additional six consolidated partnerships, including the ~~equity investment at risk is~~Operating Partnership, are VIEs under the new standard because the limited partners are not ~~sufficient~~able to ~~permit the entity to finance its activities without additional subordinated financial support.~~exercise substantive kick-out or participating rights. We have ~~also determined that we are~~a controlling financial interest in the ~~primary beneficiary of the VIE due to the fact that we are providing more than 50% of the equity contributions, the subordinated debt~~VIEs, and ~~a guarantee on the third party debt and have~~both the power to direct the activities of the VIEs that most ~~significant activities that~~significantly impact the ~~entity’s~~VIE’s economic ~~performance.~~performance as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. As a result, we are the VIEs primary beneficiary and the partnerships are required to be consolidated on our balance sheet. Because the Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE.

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On June 12, 2014 we entered into a joint venture operating agreement with a real estate development company and two other partners to construct a three-phase apartment project in Edina, Minnesota as IRET – 71 France, LLC. We estimate 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 us to the joint venture entity. The first phase of the project was substantially completed in the second quarter of fiscal year 2016, the second phase of the project was substantially completed in the third quarter of fiscal year 2016 and 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 6 for additional information. As of January 31, 2016, we are 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 and 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. We have determined that the joint venture is a 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. We have also determined that we are the primary beneficiary of the VIE due to the fact that we are providing more than 50% of the equity contributions, the subordinated debt and a guarantee on the third party debt and have the power to direct the most significant activities that impact the entity’s economic performance.

NOTE 3 • EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of Common Shares outstanding during the period. We have no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional shares that would result in dilution of earnings. ~~Units can be exchanged~~Upon the exercise of Exchange Rights, and in our sole discretion, we may issue shares in exchange for ~~shares~~Units 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 condensed consolidated financial statements for the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015:



	Three Months Ended
	July 31,
	2016		2015
NUMERATOR
(Loss) income from continuing operations – Investors Real Estate Trust	$	(24,914)	$	3,868
Income from discontinued operations – Investors Real Estate Trust		3,271		672
Net (loss) income attributable to Investors Real Estate Trust		(21,643)		4,540
Dividends to preferred shareholders		(2,879)		(2,879)
Numerator for basic earnings per share – net (loss) income available to common shareholders		(24,522)		1,661
Noncontrolling interests – Operating Partnership		(3,296)		186
Numerator for diluted (loss) earnings per share	$	(27,818)	$	1,847
DENOMINATOR
Denominator for basic earnings per share weighted average shares		121,117		124,855
Effect of convertible operating partnership units		16,285		13,951
Denominator for diluted earnings per share		137,402		138,806
(Loss) earnings per common share from continuing operations – Investors Real Estate Trust – basic and diluted	$	(0.23)	$	0.01
Earnings per common share from discontinued operations – Investors Real Estate Trust – basic and diluted		0.03		—
NET (LOSS) INCOME PER COMMON SHARE – BASIC & DILUTED	$	(0.20)	$	0.01

(in thousands, except per share data)

Three Months Ended
January 31

Nine Months Ended
January 31

2016 2015 2016 2015
NUMERATOR
Income from continuing operations – Investors Real Estate Trust $ 8,028 $ 7,334 $ 15,938 $ 12,195
Income from discontinued operations – Investors Real Estate Trust 31,769 1,037 45,065 1,139
Net income attributable to Investors Real Estate Trust 39,797 8,371 61,003 13,334
Dividends to preferred shareholders (2,879 ) (2,879 ) (8,636 ) (8,636 )
Numerator for basic earnings per share – net income available to common shareholders 36,918 5,492 52,367 4,698
Noncontrolling interests – Operating Partnership 4,227 657 5,940 618
Numerator for diluted earnings per share $ 41,145 $ 6,149 $ 58,307 $ 5,316
DENOMINATOR
Denominator for basic earnings per share weighted average shares 121,864 120,855 123,793 116,303
Effect of convertible operating partnership units 13,877 14,461 13,913 17,334
Denominator for diluted earnings per share 135,741 135,316 137,706 133,637
Earnings per common share from continuing operations – Investors Real Estate Trust – basic and diluted $ .04 $ .04 $ .06 $ .03
Earnings per common share from discontinued operations – Investors Real Estate Trust – basic and diluted .26 .01 .36 .01
NET INCOME PER COMMON SHARE – BASIC & DILUTED $ .30 $ .05 $ .42 $ .04

NOTE 4 • EQUITY

ATM. During the second quarter of fiscal year 2014, we and our Operating Partnership entered into an At the Market sales agreement (“ATM”) with Robert W. Baird & Co. Incorporated as sales agent, pursuant to which we may from time to time sell our Common Shares having an aggregate offering price of up to $75 million. The shares would be issued pursuant to our currently-effective shelf registration statement on Form S-3ASR. ~~To date,~~On June 1, 2016, we ~~have~~and our Operating Partnership terminated the ATM sales agreement with Baird according to its terms. We did not ~~issued~~issue any shares under the ATM.

Equity Awards. During the first quarter of fiscal year 2017, we issued approximately 378,000 Common Shares, with a total grant-date value of approximately $1.4 million, under our 2015 Incentive Award Plan, for executive officer and trustee share based compensation for future performance. We also issued approximately 59,000 Common Shares, with a total grant-date value of approximately $352,000, under our 2008 Incentive Award Plan, for trustee share based compensation for fiscal year 2016 performance. During the first quarter of fiscal year 2016, we issued approximately 220,000 Common Shares, net of withholding, with a total grant-date value of approximately $1.6 million, under our 2008 Incentive Award Plan, for executive officer and trustee ~~share-based~~share based compensation for fiscal year 2015 performance. Of these shares, approximately 108,000 are restricted, and will vest on the one-year anniversary of the grant date (i.e., on April 30, 2016), provided the recipient is still employed with us, and subject to the terms and conditions of our long-term incentive plan (“LTIP”). During the first quarter of fiscal year 2015, we issued approximately 204,000 Common Shares, with a total grant-date value of approximately $1.9 million, under the our 2008 Incentive Award Plan, for executive officer and trustee share-based compensation for fiscal year 2014 performance.

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~~Share Repurchase Program~~. In August 2015, we publicly announced the share repurchase program authorized by our Board of Trustees to repurchase up to $50 million of our Common Shares over a one year period. During the third quarter of fiscal year 2016, we repurchased and retired approximately 1.8 million Common Shares for an aggregate cost of approximately $13.1 million, including commissions, at an average price per share of $7.30. During the nine months ended January 31, 2016, we repurchased and retired approximately 4.6 million Common Shares for an aggregate cost of approximately $35.0 million, including commissions, at an average price per share of $7.54.

DRIP. We have implemented a Distribution Reinvestment and Share Purchase Plan (“DRIP”), which provides our common shareholders and the unitholders of the Operating Partnership an opportunity to invest their cash distributions in Common Shares and to purchase additional Common Shares through voluntary cash contributions. A DRIP participant cannot purchase additional Common Shares in excess of $10,000 per month, unless waived by us. We did not issue any waivers during the three months ended ~~January~~July 31, 2016 and 2015. We did not issue any waivers during the nine months ended January 31, 2016. During the nine months ended January 31, 2015, DRIP participants purchased approximately 926,000 additional Common Shares at an average price

Table of ~~$8.64 per share pursuant to waivers granted by us, for total net proceeds of $8.0 million.~~Contents

As permitted under the DRIP, starting on October 1, 2015, we changed the source from which Common Shares will be purchased under the DRIP to open market transactions, which are not eligible for purchase price discounts. During the three months ended ~~January~~July 31, 2016, no shares were issued under the DRIP. During the three months ended ~~January~~July 31, 2015, ~~2.0 million~~approximately 766,000 Common Shares with a total value included in equity of ~~$16.1~~$5.2 million, and an average price per share after applicable discounts of ~~$8.06,~~$6.84, were issued under the DRIP. During the nine months ended January 31, 2016 and 2015, approximately 821,000 and 6.2 million Common Shares with a total value included in equity of $5.6 million and $50.9 million, and an average price per share after applicable discounts of $6.85 and $8.20, respectively, were issued under the DRIP.

Exchange Rights. Pursuant to the exercise of Exchange Rights, there were no Common Shares issued in exchange for Units during the three months ended ~~January~~July 31, ~~2016 and~~2016. During the three months ended July 31, 2015, ~~respectively,~~ approximately ~~26,800 Units and 333,000 Units were exchanged for~~78,000 Common Shares were issued in exchange for Units, with a total value of approximately ~~$125,000 and $811,000~~$576,000 included in equity. During the nine months ended January 31, 2016 and 2015, respectively, approximately 180,600 Units and 6.7 million Units were exchanged for Common Shares, with a total value of approximately $981,000 and $38.5 million included in equity.

NOTE 5 • SEGMENT REPORTING

We report our results in ~~three~~two reportable segments, which are aggregations of similar properties: multifamily and healthcare, ~~(including~~excluding our senior ~~housing) and industrial properties. Prior to the first quarter of fiscal year 2016, we had reported our results in five reportable segments,~~housing properties, which ~~included the office and retail segments. However, during the first quarter of fiscal year 2016, we~~are classified ~~the majority of the properties in the office and retail segments~~ as held for sale and discontinued operations ~~and the remaining properties under these segments fell below the quantitative thresholds for reporting as separate reportable segments and are included in “all other.”~~

at July 31, 2016.

We measure the performance of our segments 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). During the three months ended July 31, 2016, we removed offsite costs associated with property management and casualty-related amounts from our assessment of segment performance as a result of our announced strategic shift to focus solely on our multifamily segment. These expenses were removed from the operating results reviewed by our chief operating decision maker to allow for the assessment of direct property costs in NOI, excluding allocated costs. 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 US GAAP and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance.

The revenues and NOI for these reportable segments are summarized as follows for the three ~~and nine~~ month periods ended ~~January~~July 31, 2016 and 2015, along with reconciliations to the condensed consolidated financial statements. Segment assets are also reconciled to total assets as reported in the condensed consolidated financial statements.


	(in thousands)
Three Months Ended July 31, 2016	Multifamily		Healthcare		All Other		Amounts Not Allocated To Segments(1)		Total
Real estate revenue	$	35,040	$	11,541	$	3,030	$	—	$	49,611
Real estate expenses		14,879		4,192		725		1,838		21,634
Net operating income (loss)	$	20,161	$	7,349	$	2,305	$	(1,838)	$	27,977
Depreciation and amortization										(14,267)
Impairment of real estate investments										(54,153)
General and administrative expenses										(2,606)
Acquisition and investment related costs										(43)
Other expenses										(852)
Interest expense										(10,364)
Interest and other income										1,045
Loss before gain on sale of real estate and other investments and income from discontinued operations										(53,263)
Gain on sale of real estate and other investments										8,958
Loss from continuing operations										(44,305)
Income from discontinued operations										3,711
Net loss									$	(40,594)

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(in thousands)
Three Months Ended January 31, 2016 Multifamily Healthcare Industrial All Other Total
Real estate revenue $ 33,296 $ 18,350 $ 1,650 $ 1,473 $ 54,769
Real estate expenses 15,460 4,208 453 215 20,336
Net operating income $ 17,836 $ 14,142 $ 1,197 $ 1,258 34,433
TRS senior housing revenue, net of expenses 91
Depreciation/amortization (14,919 )
Administrative expenses (2,929 )
Other expenses (86 )
Impairment of real estate investments �� (162 )
Interest expense (10,540 )
Interest and other income 701
Income before gain on sale of real estate and other investments and income from discontinued operations 6,589
Gain on sale of real estate and other investments 1,446
Income from continuing operations 8,035
Income from discontinued operations 35,408
Net income $ 43,443

(in thousands)
Three Months Ended January 31, 2015 Multifamily Healthcare Industrial All Other Total
Real estate revenue $ 30,256 $ 17,491 $ 1,741 $ 2,488 $ 51,976
Real estate expenses 13,318 4,260 501 1,039 19,118
Net operating income $ 16,938 $ 13,231 $ 1,240 $ 1,449 32,858
TRS senior housing revenue, net of expenses 138
Depreciation/amortization (12,837 )
Administrative expenses (2,754 )
Other expenses (488 )
Impairment of real estate investments (540 )
Interest expense (10,009 )
Interest and other income 670
Income before gain on sale of real estate and other investments and income from discontinued operations 7,038
Gain on sale of real estate and other investments 951
Income from continuing operations 7,989
Income from discontinued operations 1,162
Net income $ 9,151

(in thousands)
Nine Months Ended January 31, 2016 Multifamily Healthcare Industrial All Other Total
Real estate revenue $ 96,782 $ 50,435 $ 4,913 $ 3,862 $ 155,992
Real estate expenses 44,602 12,202 1,138 826 58,768
Net operating income $ 52,180 $ 38,233 $ 3,775 $ 3,036 97,224
TRS senior housing revenue, net of expenses 513
Depreciation/amortization (42,992 )
Administrative expenses (8,316 )
Other expenses (1,714 )
Impairment of real estate investments (3,320 )
Interest expense (29,867 )
Loss on extinguishment of debt (106 )
Interest and other income 1,973
Income before gain on sale of real estate and other investments and income from discontinued operations 13,395
Gain on sale of real estate and other investments 1,271
Income from continuing operations 14,666
Income from discontinued operations 50,181
Net income $ 64,847

(1)

Consists of offsite costs associated with property management and casualty-related amounts, which are excluded in our assessment of segment performance.


	(in thousands)
Three Months Ended July 31, 2015	Multifamily		Healthcare		All Other		Amounts Not Allocated To Segments(1)			Total
Real estate revenue	$	31,433	$	10,779	$	2,833	$	—	$	45,045
Real estate expenses		13,438		3,482		610		774		18,304
Net operating income (loss)	$	17,995	$	7,297	$	2,223	$	(774)		26,741
Depreciation and amortization										(11,217)
Impairment of real estate investments										(1,285)
General and administrative expenses										(2,454)
Acquisition and investment related costs										(7)
Other expenses										(417)
Interest expense										(7,814)
Interest and other income										607
Income before gain on sale of real estate and other investments										4,154
Loss on sale of real estate and other investments										(175)
Income from continuing operations										3,979
Income from discontinued operations										748
Net income									$	4,727

~~Table of Contents~~

(1)

Consists of offsite costs associated with property management and casualty-related amounts..

(in thousands)
Nine Months Ended January 31, 2015 Multifamily Healthcare Industrial All Other Total
Real estate revenue $ 87,576 $ 50,024 $ 4,904 $ 8,239 $ 150,743
Real estate expenses 37,700 12,726 1,223 3,485 55,134
Net operating income $ 49,876 $ 37,298 $ 3,681 $ 4,754 95,609
TRS senior housing revenue, net of expenses 356
Depreciation/amortization (38,347 )
Administrative expenses (9,308 )
Other expenses (1,678 )
Impairment of real estate investments (4,663 )
Interest expense (29,710 )
Interest and other income 2,052
Income before loss on sale of real estate and other investments and income from discontinued operations 14,311
Loss on sale of real estate and other investments (811 )
Income from continuing operations 13,500
Income from discontinued operations 1,322
Net income $ 14,822

Segment Assets and Accumulated Depreciation

Segment assets are summarized as follows as of ~~January~~July 31, 2016, and April 30, ~~2015,~~2016, along with reconciliations to the condensed consolidated financial statements:


	(in thousands)
As of July 31, 2016	Multifamily		Healthcare		All Other		Total
Segment assets
Property owned	$	1,226,490	$	340,806	$	100,146	$	1,667,442
Less accumulated depreciation		(211,953)		(86,120)		(21,014)		(319,087)
Total property owned	$	1,014,537	$	254,686	$	79,132	$	1,348,355
Assets held for sale and assets from discontinued operations								215,817
Cash and cash equivalents								54,438
Receivables and other assets								26,546
Development in progress								27,454
Unimproved land								18,933
Total Assets							$	1,691,543

(in thousands)
As of January 31, 2016 Multifamily Healthcare Industrial All Other Total

Segment Assets
Property owned $ 1,133,560 $ 559,997 $ 61,238 $ 46,224 $ 1,801,019
Less accumulated depreciation (200,363 ) (123,992 ) (12,494 ) (10,046 ) (346,895 )
Net property owned $ 933,197 $ 436,005 $ 48,744 $ 36,178 1,454,124
Assets held for sale 22,064
Cash and cash equivalents 47,117
Other investments 50
Receivables and other assets 71,809
Development in progress 78,341
Unimproved land 22,304
Total assets $ 1,695,809

(in thousands)
As of April 31, 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

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	(in thousands)
As of April 30, 2016	Multifamily		Healthcare		All Other		Total
Segment assets
Property owned	$	1,243,909	$	337,920	$	99,642	$	1,681,471
Less accumulated depreciation		(209,156)		(83,558)		(20,175)		(312,889)
Total property owned	$	1,034,753	$	254,362	$	79,467	$	1,368,582
Assets held for sale and assets from discontinued operations								220,537
Cash and cash equivalents								66,698
Other investments								50
Receivables and other assets								26,535
Development in progress								51,681
Unimproved land								20,939
Total Assets							$	1,755,022

NOTE 6 • COMMITMENTS AND CONTINGENCIES

Litigation. We are not a party to any legal proceedings which are expected to have a material effect on our liquidity, financial position, cash flows or results of operations. We are subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of our business, most of which are covered by liability insurance. Various claims of resident discrimination are also periodically brought, most of which also are covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material effect on our liquidity, financial position, cash flows or results of operations.

Insurance. We carry insurance coverage on our properties in amounts and types that we believe are customarily obtained by owners of similar properties and are sufficient to achieve our risk management objectives.

Purchase Options. We have granted options to purchase certain of our properties to tenants under lease agreements. In general, the options grant the tenant the right to purchase the property at the greater of such property’s appraised value or an annual compounded increase of a specified percentage of our initial cost for the property. As of ~~January~~July 31, 2016, ~~our~~the total ~~property~~investment cost, plus improvements, for the 1514 properties subject to purchase options was ~~$117.6~~$96.7 million, and the total gross rental revenue from these properties was ~~$6.8~~$2.2 million for the ~~nine~~three months ended ~~January~~July 31, 2016. The tenant in ~~the Nebraska Orthopaedic Hospital property~~our 8 Spring Creek senior housing properties has exercised its option to purchase the ~~property, which~~portfolio for a sale price of $43.5 million. The Spring Creek portfolio accounts for ~~$16.0~~$40.9 million of the total ~~property~~investment cost and ~~$1.3 million~~approximately $881,000 of the total gross rental revenue subject to purchase options. ~~However, we can give no assurance if or when such sale of the property will be completed.~~

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

Restrictions on Taxable Dispositions. Approximately 7851 of our properties, consisting of ~~2.7 million~~approximately 765,000 square feet of our combined commercial properties and ~~5,372~~4,603 apartment units, are subject to restrictions on our ability to resell in taxable transactions. These restrictions are contained in agreements we entered into with some of the sellers or contributors of the properties, and are effective for varying periods. The real estate investment amount of these properties (net of accumulated depreciation) was ~~$670.6~~$436.4 million at ~~January~~July 31, 2016. We do not believe that these restrictions materially affect the conduct of our business or decisions whether to dispose of these properties during the restriction periods because we generally hold properties for investment purposes, rather than for sale. Historically, ~~however,~~ where we have deemed it to be in the Company’s and the shareholders’ best interests to dispose of restricted properties, we have done so through tax-deferred transactions under Section 1031 of the Internal Revenue Code.

Exchange Value of Units. Whenever limited partners of the Operating Partnership exercise their Exchange Rights, we have the right, but not the obligation, to acquire such Units in exchange for either cash or our Common Shares on a ~~one-for-one~~one-

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for-one basis. If Units are exchanged for cash, the amount of cash per Unit is equal to the average of the daily market price of a Common Share for the ten consecutive trading days immediately preceding the date of valuation of the Unit. As of ~~January~~July 31, 2016 and 2015, the aggregate exchange value of the then-outstanding Units of the Operating Partnership owned by limited partners was approximately ~~$89.4~~$106.9 million and ~~$122.0~~$100.3 million, respectively. All Units receive the same cash distributions as those paid on our Common Shares.

Joint Venture Buy/Sell Options. Several of our 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 we buy our partners’ interests. However, from time to time, we have entered into joint venture agreements which contain options compelling us to acquire the interest of the other parties. We currently have one such joint venture, ~~our Southgate apartment project in Minot, North Dakota,~~IRET-Minot Apartments, in which our joint venture partner can, for the four-year period from February 6, 2016 through February 5, 2020, compel us 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 Condensed Consolidated Balance Sheets.

See Note 11 for additional information.

Tenant Improvements. In entering into leases with tenants, we may commit 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 we are accordingly exposed to some risk of loss if a tenant defaults prior to the expiration of the lease term and the rental income that was expected to cover the cost of the tenant improvements is not received. As of ~~January~~July 31, 2016, we are committed to fund ~~$4.5~~$5.3 million in tenant improvements within approximately the next 12 months.

~~Table of Contents~~

Development ~~Expansion and Renovation Projects.~~Project. As of ~~January~~July 31, 2016, we had ~~several~~ development ~~expansion and renovation~~ projects underway or placed in service during the quarter, the costs for which have been capitalized, as follows:

(in thousands)

(in fiscal years)

Rentable

Anticipated

(in thousands)

(in fiscal years)

Square Feet

Anticipated

Costs as of

Construction

Project Name and Location

Planned Segment

Rentable

Square Feet

or Number of Units

Anticipated

Total Cost⁽¹⁾

Costs as of

January 31,

2016⁽¹⁾

Anticipated

Construction

Completion

Planned Segment

or Number of Units

Total Cost

July 31, 2016

Completion

Deer Ridge - Jamestown, ND

Multifamily

163 units

24,874

4Q 2016

Cardinal Point - Grand Forks, ND⁽²⁾

Multifamily

251 units

48,242

4Q 2016

71 France - Edina, MN⁽³⁾

Multifamily

241 units

73,290

69,105

1Q 2017

71 France - Edina, MN(1)

Multifamily

241 units

73,290

72,230

In Service

Monticello Crossings - Monticello, MN

Multifamily

202 units

31,784

11,210

2Q 2017

Multifamily

202 units

31,784

24,248

3Q 2017

Other

n/a

3,524

n/a

3,155

n/a

178,190

156,955

105,074

99,633

~~(1)~~

~~Includes costs related to development projects that are placed in service in phases (Deer Ridge - $14.3 million, 71 France - $41.3 million, Cardinal Point - $23.0 million).~~

~~(2)~~

(1)

Anticipated total cost as of January 31, 2016 includes incremental cost increase due to the replacement of the project’s original general contractor. There may be additional costs for this project as it nears completion in the fourth quarter of fiscal year 2016.

~~(3)~~

The project is ~~being constructed in three phases~~owned by a joint venture entity in which we currently have 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.

Construction interest capitalized for the three month periods ended ~~January~~July 31, 2016 and 2015, respectively, was ~~$1.0 million~~approximately $153,000 and ~~$1.4~~$2.3 million for development projects completed and in progress. ~~Construction interest capitalized for the nine month periods ended~~ ~~January 31, 2016~~ ~~and 2015, respectively, was $4.4 million and $3.6 million for development projects completed and in progress.~~

Pending ~~Acquisitions.~~Disposition. We currently have a signed ~~purchase agreements~~sales agreement for the ~~acquisition~~disposition of the following properties. ~~These~~This pending ~~acquisitions are~~disposition is subject to various closing conditions and contingencies, and no assurances can be given that the ~~transactions~~transaction will be completed on the terms currently proposed, or at all:

●

~~four multifamily~~

eight senior housing properties ~~with 393 units~~and a parcel of unimproved land in Rochester, Minnesota, for a purchase price of $72.5 million, of which approximately $47.5 million is to be paid in cash with the remainder in Units of the Operating Partnership valued at approximately $25.0 million.

~~Pending Dispositions.~~ We currently have signed sales agreements for the disposition of the following properties. These pending dispositions are subject to various closing conditions and contingencies, and no assurances can be given that the transactions will be completed on the terms currently proposed, or at all:

●

~~a healthcare property in Omaha, Nebraska~~Idaho for a sales price of ~~$24.4~~$43.5 million, pursuant to the tenant exercising its purchase ~~option;~~option.

●

~~eight multifamily properties in St. Cloud, Minnesota for a sales price of $5.6 million; and~~

●

~~a parcel of unimproved land in River Falls, Wisconsin for a sales price of $20,000.~~

NOTE 7 • DISCONTINUED OPERATIONS

We report 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 our operations and financial results. During ~~the first quarter of~~ fiscal year 2016, we determined that our strategic plan to exit the office and retail segments met the criteria for discontinued operations. Accordingly, 48 office properties, 17 retail properties and 1 healthcare property were classified as held for sale

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subsequently sold during fiscal year 2016. Additionally, we determined that our strategic decision to exit senior housing, which was a subset of our healthcare segment, met the criteria for discontinued operations and we consequently classified 34 senior housing properties as held for sale and discontinued operations at April 30, 2016. These 34 properties continued to be classified as held for sale and discontinued operations at July 31, ~~2015. We sold these properties during the second and third quarters of fiscal year~~ 2016.

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The following information shows the effect on net income and the gains or losses from the sales of properties classified as discontinued operations for the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015:


													(in thousands)
	(in thousands)												Three Months Ended
	Three Months Ended January 31						Nine Months Ended January 31						July 31,
	2016			2015			2016			2015			2016		2015
REVENUE
Real estate rentals	$	3,576		$	13,687		$	21,966		$	40,780		$	5,010	$	18,440
Tenant reimbursement		718			6,290			8,268			18,309			114		6,265
TRS senior housing revenue														873		1,038
TOTAL REVENUE		4,294			19,977			30,234			59,089			5,997		25,743
EXPENSES
Depreciation/amortization related to real estate investments		0			4,207			4,239			12,146
Utilities		416			1,803			3,016			5,608
Maintenance		588			2,766			4,784			8,310
Property operating expenses, excluding real estate taxes														—		6,100
Real estate taxes		756			3,532			5,341			10,531			112		3,520
Insurance		58			264			462			815
Property management expenses		468			921			1,941			2,761
Other property expenses		0			30			0			30
Amortization related to non-real estate investments		105			706			1,002			1,981
Depreciation and amortization														16		7,089
Impairment of real estate investments		0			0			440			1,442			—		440
TRS senior housing expenses														784		769
Other expenses														—		—
TOTAL EXPENSES		2,391			14,229			21,225			43,624			912		17,918
Operating income		1,903			5,748			9,009			15,465			5,085		7,825
Interest expense⁽¹⁾		(3,436	)		(4,586	)		(12,832	)		(14,148	)		(1,374)		(7,147)
Gain on extinguishment of debt⁽¹⁾		36,456			0			29,336			0
Other income		154			0			427			5			—		70
Income from discontinued operations before gain on sale		35,077			1,162			25,940			1,322
Gain on sale of discontinued operations		331			0			24,241			0
INCOME FROM DISCONTINUED OPERATIONS⁽²⁾	$	35,408		$	1,162		$	50,181		$	1,322
INCOME FROM DISCONTINUED OPERATIONS													$	3,711	$	748

~~(1)~~

(1)

Interest expense ~~includes $1.6 million and $4.7 million~~ for the three ~~and nine~~ months ended ~~January~~July 31, ~~2016, respectively,~~2015 includes $1.5 million of default interest related to a $122.6 million non-recourse loan by one of our subsidiaries. ~~Gain on extinguishment~~In the third quarter of ~~debt in the three and nine months ended January 31,~~fiscal year 2016, ~~respectively, includes $36.5 million of gain on extinguishment of debt recognized in connection with our transfer of~~ ownership ~~to the mortgage lender~~ of the nine properties serving as collateral ~~for~~on the ~~$122.6 million non-recourse~~ loan ~~and~~was transferred to the ~~removal of~~mortgage lender and the debt obligation and accrued interest was removed from our balance sheet.

~~(2)~~

Discontinued operations for the nine months ended January 31, 2016 and 2015 includes a noncontrolling interest for our Mendota joint venture entity. Income from discontinued operations attributable to us was $51.4 million and $1.7 million for the nine months ended January 31, 2016 and 2015, respectively.

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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 Condensed Consolidated Balance Sheets:


	(in thousands)
	July 31, 2016		April 30, 2016
Carrying amounts of major classes of assets included as part of discontinued operations
Property owned and intangible assets, net of accumulated depreciation and amortization	$	193,169	$	189,900
Receivable arising from straight-lining of rents		10,000		9,805
Accounts receivable		1,628		1,707
Prepaid and other assets		33		43
Tax, insurance and other escrow		723		670
Property and equipment		464		479
Goodwill		18		18
Total major classes of assets of the discontinued operations		206,035		202,622
Other assets included in the disposal group classified as held for sale		9,782		17,915
Total assets of the disposal group classified as held for sale on the balance sheet	$	215,817	$	220,537

Carrying amounts of major classes of liabilities included as part of discontinued operations
Accounts payable and accrued expenses	$	612	$	810
Mortgages payable		67,179		67,940
Other		7,900		7,900
Total major classes of liabilities of the discontinued operations		75,691		76,650
Other liabilities included in the disposal group classified as held for sale		504		838
Total liabilities of the disposal group classified as held for sale on the balance sheet	$	76,195	$	77,488

(in thousands)

January 31, 2016
April 30, 2015
Carrying amounts of major classes of assets included as part of discontinued operations
Property owned and intangible assets, net of accumulated depreciation and amortization $ 0 $ 417,045
Receivable arising from straight-lining of rents 0 10,078
Accounts receivable 0 566
Prepaid and other assets 0 699
Tax, insurance and other escrow 0 1,176
Goodwill 0 193
Deferred charges and leasing costs 0 9,606
Total major classes of assets of the discontinued operations 0 439,363
Other assets included in the disposal group classified as held for sale 22,064 23,740
Total assets of the disposal group classified as held for sale on the balance sheet $ 22,064 $ 463,103

Carrying amounts of major classes of liabilities included as part of discontinued operations
Accounts payable and accrued expenses $ 0 $ 13,952
Mortgages payable 0 295,677
Other 0 4
Total major classes of liabilities of the discontinued operations 0 309,633
Other liabilities included in the disposal group classified as held for sale 11,449 11,760
Total liabilities of the disposal group classified as held for sale on the balance sheet $ 11,449 $ 321,393

NOTE 8 • ACQUISITIONS, DEVELOPMENTS PLACED IN SERVICE AND DISPOSITIONS

PROPERTY ACQUISITIONS

We added ~~$71.8 million of~~no new real estate properties to our portfolio through property acquisitions during the ~~nine~~three months ended ~~January~~July 31, 2016 ~~compared to $41.3~~and 2015.

DEVELOPMENT PROJECTS PLACED IN SERVICE

The Operating Partnership placed $72.2 million and $105.8 million of development projects in service during the ~~nine~~three months ended ~~January 31, 2015. We expensed approximately $162,000 and $104,000 of transaction costs related to the acquisitions in the nine months ended January~~July 31, 2016 and 2015, ~~respectively. Our acquisitions during the nine months ended January~~respectively, as detailed below.

Three Months Ended July 31, 2016 ~~and 2015 are detailed below.~~

~~Nine Months Ended January 31, 2016~~

(in thousands)

Total
Acquisition
Cost
Form of Consideration Investment Allocation
Acquisitions Date Acquired Cash
Units⁽¹⁾
Land Building
Intangible
Assets

Multifamily
74 unit - Gardens - Grand Forks, ND 2015-09-10 $ 9,250 $ 8,850 $ 400 $ 518 $ 8,672 $ 60
276 unit - GrandeVille at Cascade Lake - Rochester, MN 2015-10-29 56,000 56,000 0 5,003 50,363 634
65,250 64,850 400 5,521 59,035 694

Healthcare
27,819 sq ft Lakeside Medical Plaza - Omaha, NE 2015-08-20 6,500 6,500 0 903 5,109 488

Total Property Acquisitions $ 71,750 $ 71,350 $ 400 $ 6,424 $ 64,144 $ 1,182


		(in thousands)
	Date Placed					Development
Development Projects Placed in Service	in Service	Land		Building		Cost

Multifamily
241 unit - 71 France - Edina, MN(1)	2016-05-01	$	4,721	$	67,509	$	72,230

Total Development Projects Placed in Service		$	4,721	$	67,509	$	72,230

~~(1)~~

~~Value~~

(1)

Costs paid in prior fiscal years totaled $70.9 million. Additional costs incurred in fiscal year 2017 totaled $1.3 million, for a total project cost at July 31, 2016 of ~~Units of the Operating Partnership at the acquisition date.~~

~~Table of Contents~~

~~Nine Months Ended January 31, 2015~~

(in thousands)

Total
Acquisition
Cost
Form of Consideration Investment Allocation
Acquisitions Date Acquired Cash
Units⁽¹⁾

Other⁽²⁾
Land Building
Intangible
Assets

Multi-Family
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
26,780 14,511 100 12,169 1,754 24,661 365

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⁽⁴⁾
2014-06-12 1,413 0 0 1,413 1,413 0 0
Monticello 7^th Addition - Monticello, MN
2014-10-09 1,660 1,660 0 0 1,660 0 0
71 France Phase II & III - Edina, MN⁽⁴⁾
2014-11-04 3,309 0 0 3,309 3,309 0 0
Minot 1525 24^th 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 $ 41,297 $ 24,306 $ 100 $ 16,891 $ 16,271 $ 24,661 $ 365

~~(1)~~

~~Value of 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~~$72.2 million. The project is owned by ~~the~~a joint venture ~~partner (71 France: $4.7 million).~~

~~(3)~~

~~At acquisition, we adjusted the assumed debt to fair value and recognized approximately $852,000 of goodwill.~~

~~(4)~~

~~Land was contributed to a joint venture~~entity in which we currently have an approximately 52.6% interest. The joint venture is consolidated in our financial statements.

Acquisitions in the nine months ended January 31, 2016 and 2015 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 Condensed Consolidated Statements of Operations as of their acquisition date. The revenue and net income of our acquisitions in the nine months ended January 31, 2016 and 2015, respectively, are detailed below.

(in thousands)
Nine Months Ended January 31, 2016 2015
Total revenue $ 1,969 $ 1,756
Net income (loss) $ (62 ) $ (27 )

Table of Contents

~~DEVELOPMENT PROJECTS PLACED IN SERVICE~~

~~The Operating Partnership placed $136.8 million and $113.6 million of development projects in service during the nine months ended January 31, 2016 and 2015, respectively, as detailed below.~~

~~Nine~~

Three Months Ended ~~January~~July 31, ~~2016~~

2015

(in thousands)
Development Projects Placed in Service⁽¹⁾

Date Placed in
Service
Land Building
Development
Cost

Multifamily
72 unit – Chateau II - Minot, ND⁽²⁾
2015-06-01 $ 240 $ 14,401 $ 14,641
288 unit – Renaissance Heights - Williston, ND⁽³⁾
2015-07-27 3,080 59,371 62,451
3,320 73,772 77,092

Healthcare
57,624 sq ft Edina 6565 France SMC III - Edina, MN⁽⁴⁾
2015-06-01 0 32,725 32,725
70,756 sq ft PrairieCare Medical – Brooklyn Park, MN⁽⁵⁾
2015-09-08 2,610 21,748 24,358
2,610 54,473 57,083

Other
7,963 sq ft Minot Southgate Retail - Minot, ND⁽⁶⁾
2015-10-01 889 1,734 2,623

Total Development Projects Placed in Service $ 6,819 $ 129,979 $ 136,798


		(in thousands)
	Date Placed					Development
Development Projects Placed in Service	in Service	Land		Building		Cost

Multifamily
72 unit - Chateau II - Minot, ND (1)	2015-06-01	$	240	$	14,360	$	14,600
288 unit - Renaissance Heights - Williston, ND(2)	2015-07-27		3,080		59,259		62,339
			3,320		73,619		76,939

Healthcare
57,624 sq ft Edina 6565 France SMC III - Edina, MN(3)	2015-06-01		—		28,816		28,816

Total Development Projects Placed in Service		$	3,320	$	102,435	$	105,755

~~(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 Deer Ridge, 71 France, and Cardinal Point projects, which were partially placed in service during the nine months ended January 31, 2016.

~~(2)~~

(1)

Costs paid in prior fiscal years totaled $12.3 million. Additional costs ~~incurred~~paid in fiscal year 2016 totaled $2.3 million, for a total project cost at ~~January~~July 31, ~~2016~~2015 of $14.6 million.

~~(3)~~

(2)

Costs paid in prior fiscal years totaled $57.7 million. Additional costs ~~incurred~~paid in fiscal year ~~2016~~201 totaled ~~$4.8~~$4.6 million, for a total project cost at ~~January~~July 31, ~~2016~~2015 of ~~$62.5~~$62.3 million. The project is owned by a joint venture entity in which we currently have an approximately 70.0% interest. The joint venture is consolidated in our financial statements. An impairment charge of $36.7 million was recorded for this property in the three months ended July 31, 2016. See Note 2 for additional information.

~~(4)~~

(3)

Costs paid in prior fiscal years totaled $20.8 million. Additional costs ~~incurred~~paid in fiscal year 2016 totaled ~~$11.9~~$8.0 million, for a total project cost at ~~January 31, 2016 of $32.7 million.~~

~~(5)~~

~~Costs paid in prior fiscal years totaled $17.3 million. Additional costs incurred in fiscal year 2016 totaled $7.1 million, for a total project cost at January 31, 2016 of $24.4 million.~~

~~(6)~~

~~Costs paid in prior fiscal years totaled $2.1 million. Additional costs incurred in fiscal year 2016 totaled approximately $500,000, for a total project cost at January 31, 2016 of $2.6 million.~~

~~Table of Contents~~

~~Nine Months Ended January 31, 2015~~

(in thousands)
Development Projects Placed in Service
Date Placed in
Service
Land Building
Development
Cost

Multifamily
44 unit - Dakota Commons - Williston, ND⁽¹⁾
2014-07-15 $ 823 $ 9,596 $ 10,419
130 unit - Red 20 - Minneapolis, MN⁽²⁾
2014-11-21 1,900 26,430 28,330
233 unit - Commons at Southgate - Minot, ND⁽³⁾
2014-12-09 3,691 30,921 34,612
64 unit - Cypress Court II - St. Cloud, MN⁽⁴⁾
2015-01-01 447 6,191 6,638
165 unit - Arcata - Golden Valley, MN⁽⁵⁾
2015-01-01 2,088 28,296 30,384
8,949 101,434 110,383

Other
4,998 sq ft Minot Wells Fargo Bank - Minot, ND⁽⁶⁾
2014-11-10 992 2,193 3,185

Total Development Projects Placed in Service $ 9,941 $ 103,627 $ 113,568

~~(1)~~

~~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 January~~July 31, 2015 of ~~$10.4~~$28.8 million.

~~(2)~~

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 January 31, 2015 of $28.3 million. The project is owned by a joint venture entity in which we currently have an approximately 58.6% interest. The joint venture is consolidated in our financial statements.

~~(3)~~

Costs paid in prior fiscal years totaled $26.5 million. Additional costs paid in fiscal year 2015 totaled $8.1 million, for a total project cost at January 31, 2015 of $34.6 million. The project is owned by a joint venture entity in which we have an approximately 52.9% interest. The joint venture is consolidated in our financial statements.

~~(4)~~

Costs paid in prior fiscal years totaled $1.2 million. Additional costs paid in fiscal year 2015 totaled $5.5 million, for a total project cost at January 31, 2015 of $6.6 million. The project is owned by a joint venture entity in which we currently have an approximately 86.1% interest. The joint venture is consolidated in our financial statements.

~~(5)~~

~~Costs paid in prior fiscal years totaled $11.3 million. Additional costs paid in fiscal year 2015 totaled $19.1 million, for a total project cost at January 31, 2015 of $30.4 million.~~

~~(6)~~

~~Costs paid in prior fiscal years totaled $1.0 million. Additional costs paid in fiscal year 2015 totaled $2.2 million, for a total project cost at January 31, 2015 of $3.2 million.~~

~~Table of Contents~~

PROPERTY DISPOSITIONS

During the ~~third~~first quarter of fiscal year 2017, we sold one commercial property and one parcel of unimproved land for a total sales price of $13.7 million. During the first quarter of fiscal year 2016, we sold 3 retail properties for a total sales price of $3.5 million and transferred ownership of nine office properties pursuant to a deed in lieu transaction. During the third quarter of fiscal year 2015, we sold one ~~office property and one retail~~commercial property for a total sales price of ~~$10.0~~$7.0 million. The following table details our dispositions during the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015:

~~Nine~~

Three Months Ended ~~January~~July 31, 2016


		(in thousands)
	Date			Book Value
Dispositions	Disposed	Sales Price		and Sales Cost		Gain/(Loss)

Other
195,075 sq ft Stone Container - Fargo, ND	2016-07-25		13,400		4,418		8,982

Unimproved Land
Georgetown Square Unimproved Land - Grand Chute, WI	2016-05-06		250		274		(24)

Total Property Dispositions		$	13,650	$	4,692	$	8,958

Three Months Ended July 31, 2015


			(in thousands)
	Date			Book Value
Dispositions	Disposed	Sales Price		and Sales Cost		Gain/(Loss)

Other
117,144 sq ft Thresher Square – Minneapolis, MN	2015-05-18		7,000		7,175		(175)

Total Property Dispositions		$	7,000	$	7,175	$	(175)

(in thousands)
Dispositions Date Disposed Sales Price
Book Value
and Sales Cost
Gain/(Loss)

Other
117,144 sq ft Thresher Square – Minneapolis, MN 2015-05-18 $ 7,000 $ 7,175 $ (175 )
2,549,222 sq ft Office Sale Portfolio⁽¹⁾
2015-08-03 250,000 231,537 18,463
420,216 sq ft Mendota Office Center Portfolio – Mendota Heights, MN⁽²⁾
2015-08-12 40,000 41,574 (1,574 )
1,027,208 sq ft Retail Sale Portfolio⁽³⁾
2015-09-30 78,960 71,913 7,047
48,700 sq ft Eden Prairie 6101 Blue Circle Drive – Eden Prairie, MN 2015-10-19 2,900 2,928 (28 )
8,526 sq ft Burnsville I Strip Center – Burnsville, MN 2015-12-23 1,300 913 387
4,800 sq ft Pine City C-Store – Pine City, MN 2016-01-08 300 355 (55 )
11,003 sq ft Minot Plaza – Minot, ND 2016-01-19 1,854 393 1,461
937,518 sq ft 9-Building Office Portfolio⁽⁴⁾⁽⁵⁾
2016-01-29 122,600
⁽⁵⁾
86,144
⁽⁵⁾
36,456
⁽⁵⁾

Total Property Dispositions $ 504,914 $ 442,932 $ 61,982

~~(1)~~

The properties included in this portfolio disposition are: 610 Business Center, 7800 West Brown Deer Road, Ameritrade, Barry Pointe Office Park, Benton Business Park, Brenwood, Brook Valley I, Crosstown Centre, Golden Hills Office Center, Granite Corporate Center, Great Plains, Highlands Ranch I, Highlands Ranch II, Interlachen Corporate Center, Intertech Building, Minnesota National Bank, Northpark Corporate Center, Omaha 10802 Farnam Dr, Plaza VII, Plymouth 5095 Nathan Lane, Prairie Oak Business Center, Rapid City 900 Concourse Drive, Spring Valley IV, Spring Valley V, Spring Valley X, Spring Valley XI, Superior Office Building, TCA Building, Three Paramount Plaza, UHC Office, US Bank Financial Center, Wells Fargo Center, West River Business Park and Westgate.

~~(2)~~

~~The properties included in this portfolio disposition are: Mendota Office Center I, Mendota Office Center II, Mendota Office Center III, Mendota Office Center IV and American Corporate Center.~~

~~(3)~~

The properties included in this portfolio disposition are: Champlin South Pond, Chan West Village, Duluth 4615 Grand, Duluth Denfeld Retail, Forest Lake Auto, Forest Lake Westlake Center, Grand Forks Medpark Mall, Jamestown Buffalo Mall, Jamestown Business Center, Lakeville Strip Center, Monticello C Store & vacant land, Omaha Barnes & Noble, Pine City Evergreen Square, Rochester Maplewood Square and St. Cloud Westgate.

~~(4)~~

~~The properties included in this portfolio disposition are:~~ ~~Corporate Center West, Farnam Executive Center, Flagship Corporate Center, Gateway Corporate Center, Miracle Hills One, Pacific Hills, Riverport, Timberlands, and Woodlands Plaza IV.~~

~~(5)~~

On January 29, 2016, we transferred ownership of nine properties to the mortgage lender on a $122.6 million non-recourse loan and removed the debt obligation and accrued interest from our balance sheet. The properties had an estimated fair value of $89.3 million on the transfer date. Upon completion of this transfer, we recognized a gain on extinguishment of debt of $36.5 million, representing the difference between the loan and accrued interest payable extinguished over the carrying value of the properties, cash, accounts payable and accounts receivable transferred as of the transfer date and related closing costs.

Table of Contents

~~Nine Months Ended January 31, 2015~~

(in thousands)
Dispositions Date Disposed Sales Price
Book Value
and Sales Cost
Gain/(Loss)

Multi-Family
83 unit - Lancaster - St. Cloud, MN 2014-09-22 $ 4,451 $ 3,033 $ 1,418

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
18,898 19,316 (418 )

Unimproved Land
Kalispell Unimproved - Kalispell, MT 2014-10-15 670 670 0

Total Property Dispositions $ 27,619 $ 28,412 $ (793 )

NOTE 9 • MORTGAGES PAYABLE AND LINE OF CREDIT

Most of the properties we own serve as collateral for separate mortgage loans on single properties or groups of properties. The majority of these mortgages payable are non-recourse to us, 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 ~~2.73%~~2.47% to 7.94%, and the mortgages have varying maturity dates from the current fiscal year through July 1, 2036. As of ~~January~~July 31, 2016, our management believes there are no material defaults or material compliance issues in regard to any mortgages payable.

Of the mortgages payable, including mortgages on properties held for sale, the balances of fixed rate mortgages totalled ~~$671.6~~$635.1 million at ~~January~~July 31, 2016 and ~~$629.8~~$689.3 million at April 30, ~~2015.~~2016. The balances of variable rate mortgages totalled ~~$90.0~~$249.2 million and ~~$38.3~~$196.8 million as of ~~January~~July 31, 2016 and April 30, ~~2015,~~2016, respectively. We do not utilize derivative financial instruments to mitigate our exposure to changes in market interest rates. Most of the fixed rate mortgages have substantial pre-payment penalties. As of ~~January~~July 31, 2016, the weighted average rate of interest on our mortgage debt ~~excluding mortgages on properties held for sale,~~ was ~~4.80%~~4.54%, compared to ~~4.95%~~4.54% on April 30, ~~2015.~~2016. The aggregate amount of required future principal payments on mortgages payable as of ~~January~~July 31, 2016, ~~excluding $10.7 million in outstanding mortgage indebtedness related to assets held for sale,~~ is as follows:


		(in thousands)
		Mortgages		Mortgages
		on Properties		on Properties
		Held for		Held for
Year Ended April 30,		Investment		Sale
2017 (remainder)	$	79,673	$	47,017
2018		66,279		1,106
2019		145,153		6,921
2020		112,226		612
2021		154,461		4,901
Thereafter		258,834		7,237
Total payments	$	816,626	$	67,794

Fiscal year ended April 30, (in thousands)
2016 (remainder) $ 46,710
2017 43,543
2018 41,229
2019 116,598
2020 111,490
Thereafter 402,075
Total payments $ 761,645

~~Table of Contents~~

In addition to the individual ~~first~~ mortgage loans comprising our ~~$761.6~~$884.4 million of mortgage indebtedness, we also have a revolving, multi-bank line of credit with First International Bank and Trust, Watford City, North Dakota, as lead bank, which had, as of ~~January~~July 31, 2016, lending commitments of $100.0 million. This line of credit is not included in our mortgage indebtedness total. As of ~~January~~July 31, 2016, the line of credit was secured by mortgages on 17 properties. Under the terms of the line of credit, properties may be added and removed from the collateral pool with the agreement of the lenders. Participants in this credit facility as of ~~January~~July 31, 2016 included, in addition to First International Bank, the following financial institutions: The Bank of North Dakota, First Western Bank and Trust, Dacotah Bank, Highland Bank, American State Bank & Trust Company, Town & Country Credit Union, WoodTrust Bank, United Community Bank and United ~~Community~~Bankers’ Bank. As of ~~January~~July 31, 2016, the line of credit had an interest rate of 4.75% and a minimum outstanding principal balance requirement of $17.5 million. As of ~~January~~July 31, 2016 and April 30, ~~2015,~~2016, we had borrowed $17.5 ~~million and $60.5~~ million, respectively. The line of credit includes covenants and restrictions requiring us to achieve on a fiscal and 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. We are also required to maintain minimum depository account(s) totaling $6.0 million with First International Bank, of which $1.5 million is to be held in a non-interest bearing account. As of ~~January~~July 31, 2016, we believe we were in compliance with the line of credit’s covenants.

NOTE 10 • 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 1:~~

~~Quoted prices in active markets for identical assets~~

Table of Contents

~~Level 2:~~

~~Significant other observable inputs~~

~~Level 3:~~

~~Significant unobservable inputs~~

Level 2: Significant other observable inputs

Level 3: Significant unobservable inputs

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

We had no assets or liabilities recorded at fair value on a recurring basis at ~~January~~July 31, 2016 and April 30, ~~2015.~~

2016.

Fair Value Measurements on a Nonrecurring Basis

Non-financial assets and liabilities measured at fair value on a nonrecurring basis at ~~January~~July 31, 2016 consisted of real estate ~~held for sale~~investments that ~~was~~were written-down to estimated fair value during the ~~nine~~three months ended ~~January~~July 31, 2016. Non-financial assets measured at fair value on a nonrecurring basis at April 30, ~~2015~~2016 consisted of real estate held for sale that was written-down to estimated fair value during fiscal year ~~2015.~~2016. See Note 2 for additional information on impairment losses recognized during fiscal years ~~2016~~2017 and ~~2015.~~2016. The aggregate fair value of these assets by their levels in the fair value hierarchy is as follows:


	(in thousands)
	Total		Level 1		Level 2		Level 3
July 31, 2016
Real estate investments	$	35,281	$	—	$	—	$	35,281

April 30, 2016
Real estate held for sale	$	6,650	$	—	$	—	$	6,650

(in thousands)
Total Level 1 Level 2 Level 3
January 31, 2016
Real estate held for sale $ 20 $ 0 $ 0 $ 20

April 30, 2015
Real estate held for sale 7,100 0 0 7,100

We estimate the fair value of our real estate investments using an income or market approach, including appraisals, management estimates, and discounted cash flow calculations. As of July 31, 2016, we estimated fair value on one of our properties using an independent appraisal. Additionally, we used a discounted cash flow valuation technique to estimate fair value on three properties. The discounted cash flow valuation technique requires us to estimate cash flows for each investment over the anticipated holding period of 10 years. Cash flows are derived from property rental revenue less operating expenses, real estate taxes and capital and other costs, plus projected sales proceeds in the year of exit. Property rental revenue is based on leases currently in place and our estimates for future leasing activity, which are based on current market rents for similar space plus a projected growth factor. Similarly, estimated operating expenses and real estate taxes are based on amounts incurred or expected in the current fiscal year plus a projected growth factor for future periods. Anticipated sales proceeds at the end of an investment’s expected holding period are determined based on the net cash flow of the investment in the year of exit, divided by a terminal capitalization rate, less estimated selling costs.

The fair value of each property is calculated by discounting the future cash flows (including the projected sales proceeds), using an appropriate discount rate to determine the fair value of the equity in each investment. Significant unobservable quantitative inputs used in determining the fair value of each investment include capitalization rates and discount rates. These rates are based on the location, type and nature of each property, and current and anticipated market conditions. Significant unobservable quantitative inputs used in determining the fair value of these real estate investments at July 31, 2016, was a discount rate of 9.0% and a terminal capitalization rate of 9.0%.

As of April 30, 2016, we estimated fair value on two properties held for sale based upon receipt of individual market offers and our intent to dispose of the properties.

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 the consolidated financial statements except for debt.

Table of Contents

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).

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

~~Table of Contents~~

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 our financial instruments as of ~~January~~July 31, 2016 and April 30, ~~2015,~~2016, are as follows:


	(in thousands)
	July 31, 2016				April 30, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
FINANCIAL ASSETS
Cash and cash equivalents	$	54,438	$	54,438	$	66,698	$	66,698
FINANCIAL LIABILITIES
Other debt		78,383		78,383		82,026		82,026
Lines of credit		17,500		17,500		17,500		17,500
Mortgages payable		816,626		884,809		817,324		866,649
Mortgages payable related to assets held for sale		67,794		79,632		68,824		78,690

(in thousands)
January 31, 2016 April 30, 2015
Carrying Amount Fair Value Carrying Amount Fair Value
FINANCIAL ASSETS
Cash and cash equivalents $ 47,117 $ 47,117 $ 48,970 $ 48,970
Other investments 50 50 329 329
FINANCIAL LIABILITIES
Other debt 140,155 139,658 144,090 143,749
Line of credit 17,500 17,500 60,500 60,500
Mortgages payable 761,645 803,479 668,112 749,604
Mortgages payable related to assets held for sale 10,661 12,757 306,716 374,818

NOTE 11 • REDEEMABLE NONCONTROLLING INTERESTS

Redeemable noncontrolling interests on the Condensed Consolidated Balance Sheets represent the noncontrolling interest in joint ventures in which our unaffiliated partner, at its election, could require us 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 on the Condensed Consolidated Balance Sheets. We currently have one joint venture, ~~the Southgate apartment project in Minot, North Dakota,~~IRET-Minot Apartments, LLC, in which our joint venture partner can, for the four-year period from February 6, 2016 through February 5, 2020, compel us to acquire the partner’s interest for a price to be determined in accordance with the provisions of the joint venture agreement.

IRET-Minot Apartments, LLC owns the Commons and Landing at Southgate properties in Minot, ND.

As of ~~January~~July 31, 2016, the estimated redemption value of the redeemable noncontrolling interests was ~~$7.2~~$7.5 million. Below is a table reflecting the activity of the redeemable noncontrolling interests.


	(in thousands)
Balance at April 30, 2016	$	7,522
Net income		(54)
Balance at July 31, 2016	$	7,468

(in thousands)
Balance at April 30, 2015 $ 6,368
Contributions 1,120
Net loss (244 )
Balance at January 31, 2016 $ 7,244

NOTE 12 • SHARE BASED COMPENSATION

Share based awards are provided to officers, non-officer employees and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, which allows for awards in the form of cash and unrestricted and restricted Common Shares, up to an aggregate of 4,250,000 shares, over the ten year period in which the plan will be in effect. Through ~~January~~July 31, 2016, awards under the 2015 Incentive Plan consisted of restricted and unrestricted Common Shares.

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Prior to the approval of our 2015 Incentive Plan, share based awards were provided to officers, non-officer employees and trustees under the our 2008 Incentive Award Plan, which was approved by shareholders on September 16, 2008, which allowed for awards in the form of cash and unrestricted and restricted Common Shares, up to an aggregate of 2,000,000 shares, over the period in which the plan will be in effect. Through ~~January~~July 31, 2016, awards under the 2008 Incentive Award Plan consisted of cash and restricted and unrestricted Common Shares.

Long-Term Incentive Plan

Under the 2008 Incentive Award Plan, our officers and non-officer employees could earn share awards under the Long-Term Incentive ~~Plan~~Program (“LTIP”) adopted pursuant to the plan, which was a backward-looking program that measured performance over a one-year performance period beginning on the first day of each fiscal year. Such awards were payable to the extent deemed earned in shares, 50% of which vested on the last day of the performance period and 50% of which vested on the first anniversary of the end of the performance period. Such awards utilized the sole performance metric of the three-year average of the annual absolute total shareholder return (“TSR”).

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Under the 2015 Incentive Plan, our officers and non-officer employees may earn share awards under a revised long-term incentive ~~plan,~~program, a forward-looking program that measures long-term performance over the stated performance period. Such awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the revised program may vary from year to year.

2017 LTIP Awards

Awards granted on June 22, 2016 (“2017 LTIP Awards”) consist of time-based restricted share awards and performance restricted share awards for 45,651 and 273,901 shares, ~~50%~~respectively, that are classified as equity awards. The time-based restricted share awards vest as to one-third of ~~which~~the shares on each June 22, 2017, May 1, 2018 and May 1, 2019. We recognize compensation expense associated with the time-based restricted share awards ratably over the requisite service periods.

The performance restricted share awards are earned based on our TSR as compared to the MSCI US REIT Index over a forward looking three-year period. The maximum number of shares that are eligible to be earned are the shares that were granted. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the awards to vest. We recognize compensation expense ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, and regardless of whether the market conditions are achieved and the performance restricted share awards ultimately vest. Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved. The assumptions used to value the performance restricted share awards were an expected volatility of 23.8%, a risk-free interest rate of 0.86% and an expected life of 2.85 years. We based the expected volatility on the historical volatility of our daily closing share price. The share price at the ~~conclusion~~grant date, June 22, 2016, was $6.24. We based the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the award. We based the expected term on the performance period of the performance ~~period and 50% of which will vest on the first anniversary of the end of the performance period.~~ restricted share award.

2016 LTIP Awards

To accommodate the transition from the 2008 Incentive Award Plan to the 2015 Incentive Plan, performance periods for such awards granted on September 16, 2015 (“2016 LTIP Awards”) included one-year, two-year and three-year periods beginning on May 1, 2015. ~~Going forward, it is anticipated that LTIP awards will be issued with a three-year performance period.~~ The 2016 LTIP Awards utilize the performance metrics of relative TSR for 67% of the award and absolute TSR for 33% of the ~~award.~~award, and earned shares vest 50% at the conclusion of the performance period and 50% on the first anniversary of the end of the performance period. The 2016 LTIP Awards for performance periods of one, two and three years were ~~380,498;~~380,498 353,535 and 353,535 shares, respectively.

In connection with the 3-year 2016 LTIP ~~awards,~~Awards, we recognize compensation expense ratably (over 31.5 months for the 50% unrestricted shares and over 43.5 months for the 50% restricted shares) based on the grant date fair value, as determined using a binomial model employing the Monte Carlo simulation, and regardless of whether the market conditions are achieved and the 2016 LTIP ~~awards~~Awards ultimately vest. The market conditions utilized for the 2016 LTIP Awards are absolute TSR (1/3 weighting) and relative TSR measured against the MSCI US REIT Index (2/3 weighting). The model evaluates the LTIP awards for changing TSR over the vesting periods, and uses random simulations that are based on past share characteristics as well as distribution growth and other factors.

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The assumptions used to value the 2016 LTIP ~~awards~~Awards were an expected volatility of 16.6%, a risk-free interest rate of 1.13% and an expected life of 3 years. We based the expected volatility on the historical volatility of our daily closing share price. The share price at the grant date, September 16, 2015, was $7.13. We based the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the 2016 LTIP ~~award.~~Award. We based the expected term on the performance period of the ~~LTIP award.~~

~~The calculated grant date fair value as a percentage of the officers’ base salary for the~~ 2016 LTIP Award.

Trustee Awards

We award share-based compensation to our non-management trustees on an annual basis. Awards ~~with a three-year performance period beginning~~for 59,000 shares granted on June 22, 2016 consisted of time-based restricted share awards that vest on May 1, ~~2015 ranged from approximately 42% to 85% for~~2017. We recognize compensation expense associated with the ~~portion of~~time-based restricted share awards ratably over the awards based on relative TSR and from 5% to 10% for the portion of the awards based on absolute TSR. For the transition 2016 LTIP Awards with a one-year performance period beginning on May 1, 2015, the calculated grant date fair value as a percentage of the officers’ base salary ranged from approximately 46% to 96% for the portion of the awards based on relative TSR and from 5% to 10% for the portion of the awards based on absolute TSR. For the transition 2016 LTIP Awards with a two-year performance period beginning on May 1, 2015, the calculated grant date fair value as a percentage of the officers’ base salary ranged from approximately 43% to 86% for the portion of the awards based on relative TSR and from 5% to 10% for the portion of the awards based on absolute TSR.

requisite service periods.

Total Compensation Expense

Share-based compensation expense recognized in the consolidated financial statements for all outstanding share based awards was approximately ~~$787,000~~$262,000 and ~~$260,000~~$66,000 for the three months ended ~~January~~July 31, 2016 and 2015, ~~respectively, and $1.4 million and $1.9 million for the nine months ended January 31, 2016 and 2015,~~ respectively.

~~Restricted Share Awards~~

No share awards vested during the nine months ended January 31, 2016 and 2015. The total unvested restricted share awards at January 31, 2016 was 107,536 shares, which had a weighted average grant date fair value of $7.17 per share.

As of January 31, 2016, the total compensation cost related to non-vested share awards not yet recognized was approximately $96,000, which we expect to recognize during the remainder of fiscal year 2016.

NOTE 13 • SUBSEQUENT EVENTS

Common and Preferred Share Distributions. On ~~March 8,~~September1, 2016, our Board of Trustees declared the following distributions:


	Quarterly Amount
Class of shares/units	per Share or Unit		Record Date	Payment Date
Common shares and limited partnership units	$	0.1300	September 15, 2016	October 3, 2016
Preferred shares:
Series A	$	0.5156	September 15, 2016	September 30, 2016
Series B	$	0.4968	September 15, 2016	September 30, 2016

Acquisition of Joint Venture Minority Interest. On August 4, 2016, we purchased the remaining 41.41% minority interest in the Red 20 mixed-use, multifamily and retail property for a purchase price totaling $4.9 million.

Pending Acquisitions. On August 5, 2016 we signed an agreement to prepurchase a to-be-built multifamily property with 150 units and 23,600 square feet of retail space in Minneapolis, MN, for a purchase price of $47.6 million, to be paid in cash. This pending acquisition is subject to various closing conditions and contingencies, and no assurances can be given that the transaction will be completed on the terms currently proposed, or at all.

Pending Dispositions. On August 26, 2016 we signed six agreements to sell 26 senior housing properties for a total of approximately $236.0 million. These pending dispositions are subject to various closing conditions and contingencies, and no assurances can be given that the transactions will be completed on the terms currently proposed, or at all.

Class of shares/units
Quarterly Amount
per Share or Unit
Record Date Payment Date
Common shares and limited partnership units $ 0.1300 March 21, 2016 April 1, 2016
Preferred shares:
Series A $ 0.5156 March 21, 2016 March 31, 2016
Series B $ 0.4968 March 21, 2016 March 31, 2016

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ITEM 2. MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements included in this report, as well as our audited financial statements for the fiscal year ended April 30, ~~2015,~~2016, which are included in our Form 10-K filed with the SEC on June 29, ~~2015.~~

2016.

Forward Looking Statements. Certain matters included in this discussion are forward looking statements within the meaning of the federal securities laws. Although we believe that the expectations reflected in the following statements are based on reasonable assumptions, we can give no assurance that the expectations expressed will actually be achieved. Many factors may cause actual results to differ materially from our current expectations, including general economic conditions, local real estate conditions, the general level of interest rates and the availability of financing and various other economic risks inherent in the business of owning and operating investment real estate.

Overview

We are a self-advised equity REIT engaged in owning and operating income-producing real estate properties. Our investments include multifamily, ~~residential properties~~healthcare and ~~commercial~~other properties located primarily in the upper Midwest states of Minnesota and North Dakota. As of ~~January~~July 31, 2016, we held for investment 94100 multifamily properties containing ~~12,401~~13,012 apartment units and having a total real estate investment amount net of accumulated depreciation of ~~$933.2 million,~~$1.0 billion, 31 healthcare properties and ~~83 commercial~~16 other properties, containing approximately ~~4.5~~2.8 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of ~~$520.9~~$333.8 million.We held for sale 81 multifamily property, 35 healthcare properties ~~1 commercial property~~ and ~~1 parcel~~2 parcels of land as of ~~January~~July 31, 2016.

Our primary source of income and cash is rents associated with multifamily and commercial leases. Our business objective is to increase shareholder value by employing a disciplined investment strategy. This strategy is implemented by growing income-producing assets in desired geographical markets in real estate classes we believe will provide a consistent return on investment for our shareholders. We have paid quarterly distributions continuously since our first distribution in 1971.

Critical Accounting Policies

In preparing the condensed consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. A summary of our critical accounting policies is included in our Form 10-K for the fiscal year ended April 30, ~~2015,~~2016, filed with the SEC on June 29, ~~2015,~~2016, under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no significant changes to those policies during the three months ended ~~January~~July 31, 2016.

~~Third~~

First Quarter Activities

Summarized below are transactions that occurred during the ~~third~~first quarter of our fiscal year ~~2016:~~

2017:

As part of our strategic plan to sell our commercial office and retail portfolios, we disposed of ~~three retail properties~~one commercial property and one parcel of unimproved land for sales prices totaling ~~$3.5~~$13.7 million.

~~We disposed~~

The placement into service of ~~nine office properties that secured a $122.6 million non-recourse mortgage loan. Ownership~~the 241 unit 71 France multifamily property in ~~these properties was transferred to the mortgage lender, and~~Edina, MN, in which we ~~removed the debt obligation and accrued interest from our balance sheet.~~have an approximately 52.6% interest. This project also includes 20,956 square feet of retail space.

~~We repurchased 1.8 million Common Shares, at an average price of $7.30 per share, under our share repurchase program.~~

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~~Market Conditions and Outlook~~

The demand for investment and institutional quality real estate in our markets is strong. Investors have abundant equity and access to debt to facilitate acquisitions. Prices and sales volumes are up over last year. Fundamentals are also favorable with flat vacancies and rising rents in most of our markets. The exception for us is in the Bakken Oil impacted markets of Williston and Minot, North Dakota where we are experiencing rising apartment vacancies and concessions to attract residents.

We experienced generally stable trends across most of our apartment investments during the first three quarters of fiscal year 2016. Same-store net operating income decreased approximately $2.4 million for the nine months ended January 31, 2016 compared to the same period of the prior fiscal year and occupancy increased slightly from 94.5 to 94.9% from one year ago on same-store properties. According to AXIOMetrics Inc., the national apartment occupancy rate is just 2 basis points higher than one year ago, at 94.6%. Our ability to maintain occupancy levels and raise rents remains dependent on continued healthy employment and wage growth. We have continued to observe considerable multifamily development activity in our markets, and as this new construction is completed and leased, we will experience increased competition for residents. However, based on information available to us, apartment developers in our markets are currently seeing increases in construction costs for potential new apartment developments, which may slow new developments in our markets. The U.S. economic outlook through 2017 is forecasted to be good according to U.S. Bureau of Labor Statistics and Moody’s Analytics. Businesses are adding jobs and for the first time in this phase of the economic cycle we are seeing meaningful wage growth. There is an attitudinal shift also occurring toward renting by professional millennials and to lesser, although growing degree, by baby boomers. These trends are beneficial to apartment owners.

Our healthcare segment consists of medical office properties and senior housing facilities. The medical office component remains stable with high occupancy at 95.8% (same-store) and modest rent increases.

The industrial property market continues to improve as vacancies have come down across the country and in our principal market of Minneapolis. Our industrial properties are located primarily in the Minneapolis market, and same-store occupancy remained at 100%. We have placed into service one newly redeveloped industrial property of 220,557 square feet, located in Roseville, Minnesota, which is 83.6% leased. The demand for bulk warehouse and manufacturing space in our markets is healthy, with rents generally rising. The Minneapolis metro vacancy rate was 8.1% as of the fourth quarter calendar year 2015, according to Colliers International.

Same-store and Non-same-store Properties

Throughout this Quarterly Report on Form 10-Q, we have provided certain information on a same-store and non-same-store properties basis. Information provided on a same-store properties basis includes the results of properties that we have owned and operated for the entirety of both periods being compared (except for properties for which significant redevelopment or expansion occurred during either of the periods being compared, and properties sold or classified as

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held for sale), and which, in the case of development or re-development properties, have achieved a target level of occupancy of 90% for multifamily properties and 85% for healthcare ~~industrial~~ and other properties.

For the comparison of the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015, all or a portion of 5234 properties were non-same-store, of which 1611 were redevelopment or in-service development properties.

While there are judgments to be made regarding changes in designation, we typically remove properties from same-store to non-same-store when redevelopment has or is expected to have a significant impact on property net operating income within the fiscal year. Acquisitions are moved to same-store once we have owned the property for the entirety of comparable periods and the property is not under significant redevelopment or expansion. Our development projects in progress are not included in our non-same-store properties category until they are placed in-service, which occurs upon the substantial completion for a commercial development property and upon receipt of a certificate of occupancy for a multifamily development project. They are then subsequently moved from non-same-store to same-store when the property has been in-service for the entirety of both periods being compared and has reached the target level of occupancy specified above.

Market Conditions and Outlook

The demand for investment and institutional quality real estate in our markets is strong. Investors have abundant equity and access to debt to facilitate acquisitions and developments. Prices and sales volumes are strong. Fundamentals are favorable across property types. The exception for us is in Williston, ND, an energy-impacted market, where we are experiencing very high vacancies and offering rent concessions to attract residents. During the first quarter of fiscal year 2017 in Williston we saw a deterioration in the market, which resulted in poor leasing and declining rental rates during what should have been the best leasing season for multifamily properties. Consequently, we recorded impairments for our three multifamily properties and one parcel of unimproved land in Williston. See Note 2 of the Notes to the Condensed Consolidated Financial Statements in this report for additional information

We experienced generally stable trends across most of our apartment investments during the quarter ended July 31, 2016, except in energy impacted markets. Our ability to maintain occupancy levels and raise rents remains dependent on continued healthy employment and wage growth. We continue to observe considerable multifamily development activity in our markets, and as this new construction is completed, we will experience increased competition for residents. However, developers of new apartment projects are trying to push up market rents to support the increasing costs of new developments. Many existing apartment owners of modestly older properties are making significant upgrades to their units and raising rents. The calendar 2016 economic outlook of the Ninth Federal Reserve District, which overlays most of our geographic footprint, is positive according to the Federal Reserve Bank of Minneapolis. Increases in employment and personal income growth are projected. The biggest challenge facing employers is hiring qualified workers. The unemployment rate is generally below the national average in most of the district’s states.

Our healthcare segment consists of medical office properties. The same-store healthcare segment remains stable with occupancy at 95.6%. A significant portion of our medical office portfolio is on campus and located in the Minneapolis Metropolitan Statistical Area (“MSA”) which has an 11.4% on campus vacancy rate as of calendar year-end 2015 according to Colliers International. We developed one new medical office building on our Southdale campus in Edina, MN and the property is in lease-up.

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RESULTS OF OPERATIONS

Consolidated Results of Operations for the Three ~~and Nine~~ Months Ended ~~January~~July 31, 2016 and 2015

The discussion that follows is based on our consolidated results of operations for the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015.



	Three Months Ended
	July 31,				2016 vs. 2015
	2016		2015		$ Change		% Change
Real estate rentals	$	44,985	$	40,750	$	4,235	10.4	%
Tenant reimbursement		4,626		4,295		331	7.7	%
TOTAL REVENUE		49,611		45,045		4,566	10.1	%
Property operating expenses, excluding real estate taxes		16,057		13,488		2,569	19.0	%
Real estate taxes		5,577		4,816		761	15.8	%
Depreciation and amortization		14,267		11,217		3,050	27.2	%
Impairment of real estate investments		54,153		1,285		52,868	4,114.2	%
General and administrative expenses		2,606		2,454		152	6.2	%
Acquisition and investment related costs		43		7		36	514.3	%
Other expenses		852		417		435	104.3	%
TOTAL EXPENSES		93,555		33,684		59,871	177.7	%
Operating (loss) income		(43,944)		11,361		(55,305)	(486.8)	%
Interest expense		(10,364)		(7,814)		(2,550)	32.6	%
Interest income		572		556		16	2.9	%
Other income		473		51		422	827.5	%
(Loss) income before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations		(53,263)		4,154		(57,417)	(1,382.2)	%
Gain (loss) on sale of real estate and other investments		8,958		(175)		9,133	(5,218.9)	%
(Loss) income from continuing operations		(44,305)		3,979		(48,284)	(1,213.5)	%
Income from discontinued operations		3,711		748		2,963	396.1	%
NET (LOSS) INCOME		(40,594)		4,727		(45,321)	(958.8)	%
Net loss (income) attributable to noncontrolling interests – Operating Partnership		3,296		(186)		3,482	(1,872.0)	%
Net loss (income) attributable to noncontrolling interests – consolidated real estate entities		15,655		(1)		15,656	(1,565,600.0)	%
Net (loss) income attributable to Investors Real Estate Trust		(21,643)		4,540		(26,183)	(576.7)	%
Dividends to preferred shareholders		(2,879)		(2,879)		—	—	%
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(24,522)	$	1,661	$	(26,183)	(1,576.3)	%

(in thousands, except percentages)
Three Months Ended Nine Months Ended
January 31 2016 vs 2015 January 31 2016 vs 2015
2016 2015 $ Change % Change 2016 2015 $ Change % Change
Real estate rentals $ 50,277 $ 46,753 $ 3,524 7.5 % $ 142,526 $ 135,621 $ 6,905 5.1 %
Tenant reimbursement 4,492 5,223 (731 ) (14.0 )% 13,466 15,122 (1,656 ) (11.0 )%
TRS senior housing revenue 1,003 963 40 4.2 % 3,006 2,599 407 15.7 %
TOTAL REVENUE 55,772 52,939 2,833 5.4 % 158,998 153,342 5,656 3.7 %
Depreciation/amortization related to real estate investments 14,789 12,627 2,162 17.1 % 42,522 37,700 4,822 12.8 %
Utilities 3,427 3,564 (137 ) (3.8 )% 9,757 9,533 224 2.3 %
Maintenance 5,821 5,033 788 15.7 % 16,979 15,081 1,898 12.6 %
Real estate taxes 5,029 5,284 (255 ) (4.8 )% 14,948 15,052 (104 ) (0.7 )%
Insurance 1,214 1,215 (1 ) (0.1 )% 3,558 3,745 (187 ) (5.0 )%
Property management expenses 4,676 3,825 851 22.2 % 13,182 10,970 2,212 20.2 %
Other property expenses 169 197 (28 ) (14.2 )% 344 753 (409 ) (54.3 )%
TRS senior housing expenses 912 825 87 10.5 % 2,493 2,243 250 11.1 %
Administrative expenses 2,929 2,754 175 6.4 % 8,316 9,308 (992 ) (10.7 )%
Other expenses 86 488 (402 ) (82.4 )% 1,714 1,678 36 2.1 %
Amortization related to non-real estate investments 130 210 (80 ) (38.1 )% 470 647 (177 ) (27.4 )%
Impairment of real estate investments 162 540 (378 ) (70.0 )% 3,320 4,663 (1,343 ) (28.8 )%
TOTAL EXPENSES 39,344 36,562 2,782 7.6 % 117,603 111,373 6,230 5.6 %
Operating income 16,428 16,377 51 0.3 % 41,395 41,969 (574 ) (1.4 )%
Interest expense (10,540 ) (10,009 ) (531 ) 5.3 % (29,867 ) (29,710 ) (157 ) 0.5 %
Loss on extinguishment of debt 0 0 0 n/a (106 ) 0 (106 ) n/a
Interest income 566 561 5 0.9 % 1,687 1,681 6 0.4 %
Other income 135 109 26 23.9 % 286 371 (85 ) (22.9 )%
Income before gain (loss) on sale of real estate and other investments and income from discontinued operations 6,589 7,038 (449 ) (6.4 )% 13,395 14,311 (916 ) (6.4 )%
Gain (loss) on sale of real estate and other investments 1,446 951 495 52.1 % 1,271 (811 ) 2,082 (256.7 )%
Income from continuing operations 8,035 7,989 46 0.6 % 14,666 13,500 1,166 8.6 %
Income from discontinued operations 35,408 1,162 34,246 2,947.2 % 50,181 1,322 48,859 3,695.8 %
NET INCOME 43,443 9,151 34,292 374.7 % 64,847 14,822 50,025 337.5 %
Net income attributable to noncontrolling interests – Operating Partnership (4,227 ) (657 ) (3,570 ) 543.4 % (5,940 ) (618 ) (5,322 ) 861.2 %
Net loss (income) attributable to noncontrolling interests – consolidated real estate entities 581 (123 ) 704 (572.4 )% 2,096 (870 ) 2,966 (340.9 )%
Net income attributable to Investors Real Estate Trust 39,797 8,371 31,426 375.4 % 61,003 13,334 47,669 357.5 %
Dividends to preferred shareholders (2,879 ) (2,879 ) 0 0.0 % (8,636 ) (8,636 ) 0 0.0 %
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 36,918 $ 5,492 31,426 572.2 % $ 52,367 $ 4,698 47,669 1,014.7 %

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Revenues. Revenues for the three months ended ~~January~~July 31, 2016 were ~~$55.8~~$49.6 million compared to ~~$52.9~~$45.0 million in the three months ended ~~January~~July 31, 2015, an increase of ~~$2.8~~$4.6 million or ~~5.4%~~10.1%. The increase in revenue for the three months ended ~~January~~July 31, 2016 resulted primarily from properties acquired and development projects placed in service in fiscal ~~years~~year 2016, ~~and 2015,~~ as shown in the table below.

(in thousands)

Increase in Total
Revenue
Three Months
ended January 31, 2016

Revenue primarily from properties acquired and development projects placed in service in Fiscal 2016 $ 3,496
Increase in revenue primarily from properties acquired and development projects placed in service in Fiscal 2015 1,227
Decrease in revenue on same-store properties, excluding straight line rent⁽¹⁾
(188 )
Net change in straight line rent on same-store properties⁽¹⁾
(16 )
Decrease in revenue from properties sold or classified as held for sale in Fiscal 2016 and 2015 (1,726 )
Increase in TRS senior housing revenue⁽²⁾
40
Net increase in total revenue $ 2,833


	(in thousands)
	Increase in Total Revenue Three Months Ended July 31, 2016
Increase in revenue primarily from properties acquired and development projects placed in service in fiscal year 2016	$	6,418
Decrease in revenue from same-store properties(1)		(1,025)
Decrease in revenue from properties sold or classified as held for sale in fiscal years 2017 and 2016		(827)
Net increase in total revenue	$	4,566

~~(1)~~

(1)

See analysis of NOI by segment below for additional information.

~~(2)~~

~~See discussion in TRS Senior Housing Expenses paragraph below.~~

~~Revenues for the nine months ended January 31, 2016 were $159.0 million compared~~

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Property operating expenses, excluding real estate taxes. Property operating expenses, excluding real estate taxes, increased by 19.0% to ~~$153.3~~$16.1 million in the nine months ended January 31, 2015, an increase of $5.7 million or 3.7%. The increase in revenue for the nine months ended January 31, 2016 resulted primarily from properties acquired and development projects placed in service in fiscal years 2016 and 2015, as shown in the table below.

(in thousands)

Increase in Total
Revenue
Nine Months
ended January 31, 2016

Revenue primarily from properties acquired and development projects placed in service in Fiscal 2016 $ 4,575
Increase in revenue primarily from properties acquired and development projects placed in service in Fiscal 2015 7,196
Increase in revenue on same-store properties, excluding straight line rent⁽¹⁾
87
Net change in straight line rent on same-store properties⁽¹⁾
(553 )
Decrease in revenue from properties sold or classified as held for sale in Fiscal 2016 and 2015 (6,056 )
Increase in TRS senior housing revenue⁽²⁾
407
Net increase in total revenue $ 5,656

~~(1)~~

~~See analysis of NOI by segment below for additional information.~~

~~(2)~~

~~See discussion in TRS Senior Housing Expenses paragraph below.~~

~~Depreciation/Amortization Related to Real Estate Investments.~~ ~~Depreciation/amortization related to real estate investments increased by 17.1% to $14.8 million in the third~~first quarter of fiscal year ~~2016,~~2017 compared to ~~$12.6~~$13.5 million in the same period of the prior fiscal year. Of this $2.6 million increase, $1.1 million was attributable to non-same-store properties. Same-store properties accounted for $1.5 million of the increase, which was primarily attributable to increases in offsite property management costs, casualty related costs, and general maintenance expenses.

Real Estate Taxes. Real estate taxes increased by 15.8% to $5.6 million in the first quarter of fiscal year 2017, compared to $4.8 million in the same period of the prior fiscal year. An increase of $790,000 was attributable to non-same-store properties while same-store properties realized a decrease of $29,000.

Depreciation and Amortization. Depreciation and amortization increased by 27.2% to $14.3 million in the first quarter of fiscal year 2017, compared to $11.2 million in the same period of the prior fiscal year. This increase was primarily due to depreciation on new developments placed in service and acquisitions.

Depreciation/amortization related to real estate investments increased by 12.8% to $42.5 million in the nine months ended January 31, 2016, compared to $37.7 million in the same period of the prior fiscal year. This increase was primarily due to depreciation on new developments placed in service and acquisitions.

~~Utilities.~~ Utilities decreased by 3.8% to $3.4 million in the third quarter of fiscal year 2016, compared to $3.6 million in the same period of the prior fiscal year. Same-store properties realized a decrease of $276,000 due to decreased heating costs resulting from a milder winter. This decrease was offset by an increase of $139,000 attributable to non-same-store properties.

Utilities increased by 2.3% to $9.8 million in the nine months ended January 31, 2016 compared to $9.5 million in the same period of the prior fiscal year. Same-store properties realized a decrease of $65,000 while an increase of $289,000 was attributable to non-same-store properties.

~~Table of Contents~~

~~Maintenance.~~ Maintenance expenses increased by 15.7% to $5.8 million in the third quarter of fiscal year 2016, compared to $5.0 million in the same period of the prior fiscal year. An increase of $323,000 was attributable to same-store properties primarily due to an increase in labor and benefit costs as a result of tight labor markets. Non-same-store properties realized an increase of $465,000.

Maintenance expenses increased by 12.6% to $17.0 million in the nine months ended January 31, 2016 compared to $15.1 million in the same period of the prior fiscal year. An increase of $1.1 million was attributable to same-store properties primarily due to an increase in labor and benefit costs as a result of tight labor markets. Non-same-store properties realized an increase of $779,000.

~~Real Estate Taxes.~~ Real estate taxes decreased by 4.8% to $5.0 million in the third quarter of fiscal year 2016, compared to $5.3 million in the same period of the prior fiscal year. A decrease of $351,000 was attributable to same-store properties primarily due to decreased assessments in our North Dakota markets. An increase of $96,000 was attributable to non-same-store properties

Real estate taxes decreased by 0.7% to $14.9 million in the nine months ended January 31, 2016 compared to $15.1 million in the same period of the prior fiscal year. A decrease of $116,000 was attributable to same-store properties primarily due to decreased assessments in our North Dakota markets. An increase of $12,000 was attributable to non-same-store properties.

~~Insurance~~. Insurance expense decreased by 5.0% to $3.6 million in the nine months ended January 31, 2016 compared to $3.7 million in the same period of the prior fiscal year. Deductibles paid on insurance claims at same-store properties decreased by $308,000 when compared to the prior year while insurance premiums at same-store properties decreased by $74,000. These decreases were offset by an increase of $195,000 which was attributable to non-same-store properties. The change in insurance expense between the quarters ending January 31, 2016 and 2015 was immaterial.

~~Property Management Expenses.~~ Property management expenses increased by 22.2% to $4.7 million in the third quarter of fiscal year 2016, compared to $3.8 million in the same period of the prior fiscal year. An increase of $346,000 was attributable primarily to an increase in labor and benefit costs at same-store properties while an increase of $505,000 was realized at non-same-store properties.

Property management expenses increased by 20.2% to $13.2 million in the nine months ended January 31, 2016 compared to $11.0 million in the same period of the prior fiscal year. An increase of $851,000 was attributable primarily to increases in marketing costs, property management costs and labor and benefits costs at same-store properties while an increase of $1.4 million was realized at non-same-store properties.

~~Other Property Expenses.~~ Other property expense, consisting primarily of bad debt provision expense, decreased to approximately $344,000 in the nine months ended January 31, 2016, compared to approximately $753,000 in the same period of the prior fiscal year, primarily due to a decrease in the provision for bad debt. The change in other property expenses between the quarters ending January 31, 2016 and 2016 was immaterial.

~~TRS Senior Housing Expenses~~. We have one TRS which is the tenant in the Legends at Heritage Place senior housing facility. Property management expenses for the Heritage Place property are paid by the TRS, as the tenant in the property, and revenue from the Heritage Place facility is shown as TRS senior housing revenue on the Condensed Consolidated Statements of Operations. TRS senior housing expense for the nine months ended January 31, 2016 increased $250,000 compared to the same period of the prior year. The change in TRS senior housing expenses between the quarters ending January 31, 2016 and 2016 was immaterial.

~~Administrative Expenses.~~ Administrative expenses decreased by 10.7% to $8.3 million in the nine months ended January 31, 2016, compared to $9.3 million in the same period of the prior fiscal year. This change was primarily due to decreases of approximately $864,000 in short term incentive plan expense and $617,000 in share-based compensation expense, offset by increases in salary and bonus expenses. The change in other administrative expenses between the quarters ending January 31, 2016 and 2016 was immaterial.

~~Other Expenses.~~ Other expenses decreased 82.4% to approximately $86,000 in the third quarter of fiscal year 2016 compared to the same period of the prior fiscal year. The decrease for the quarter was primarily due to a post-sale reduction in property expenses. The change in other expenses between the nine months ending January 31, 2016 and 2016 was immaterial.

Impairment of Real Estate Investments. We recognized approximately ~~$162,000~~$54.2 million and ~~$540,000~~$1.3 million of impairment in continuing operations during the three months ended ~~January 31, 2016 and 2015, respectively and $3.3 million and $4.7 million during the nine months ended January~~July 31, 2016 and 2015, respectively. See Note 2 of the Notes to the Condensed Consolidated Financial Statements in this report for additional information.

33General and Administrative Expenses.

~~Table~~ General and administrative expenses increased by 6.2% to $2.6 million in the three months ended July 31, 2016, compared to $2.5 million in the same period of ~~Contents~~

the prior fiscal year. This change of approximately $152,000 was primarily due to increases in short term incentive plan expense and share-based compensation expense, offset by a decrease in salary expense.

Acquisition and Investment Related Costs. Acquisition and investment related costs increased to approximately $43,000 in the three months ended July 31, 2016, compared to approximately $7,000 in the same period of the prior fiscal year, primarily due to increased costs related to development projects we are no longer pursuing.

Other Expenses. Other expenses increased 104.3%, or approximately $435,000, to $852,000 in the first quarter of fiscal year 2017 compared to the same period of the prior fiscal year, primarily due to third-party consulting costs.

Interest Expense. Components of interest expense in the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015 were as follows.



	Three Months Ended
	July 31,				2016 vs. 2015
	2016		2015		$ Change		% Change
Mortgage debt	$	9,323	$	7,653	$	1,670	21.8	%
Line of credit		212		914		(702)	(76.8)	%
Other		829		(753)		1,582	(210.1)	%
Total interest expense	$	10,364	$	7,814	$	2,550	32.6	%

(in thousands, except percentages)
Three Months Ended Nine Months Ended
January 31 2016 vs 2015 January 31 2016 vs 2015
2016 2015 $ Change % Change 2016 2015 $ Change % Change
Mortgage debt $ 9,407 $ 8,902 $ 505 5.7 % $ 26,950 $ 26,811 $ 139 0.5 %
Line of credit 212 494 (282 ) (57.1 %) 1,367 1,363 4 0.3 %
Other 921 613 308 50.2 % 1,550 1,536 14 0.9 %
Total interest expense $ 10,540 $ 10,009 $ 531 5.3 % $ 29,867 $ 29,710 $ 157 0.5 %

Mortgage interest increased by ~~5.7%~~21.8% to ~~$9.4~~$9.3 million in the ~~third~~first quarter of fiscal year ~~2016,~~2017, compared to ~~$8.9~~$7.7 million in the same period of the prior fiscal year. Mortgages on non-same-store properties added approximately ~~$1.0 million and $2.0~~$1.7 million to our mortgage interest expense in the three months ~~and nine months~~ ended ~~January~~July 31, 2016, ~~respectively,~~ while mortgage interest on same-store properties decreased approximately ~~$301,000 and $913,000~~$84,000 compared to the three ~~and nine~~ months ended ~~January~~July 31, 2015, ~~respectively,~~ primarily due to loan payoffs and refinancings.

Interest expense on our line of credit decreased to approximately $212,000 in the three months ended ~~January~~July 31, 2016, compared to approximately ~~$494,000~~$914,000 in the same period of the prior fiscal year, primarily due to a lower average outstanding balance during the ~~third~~first quarter of fiscal year ~~2016. The change in interest expense on our line of credit between the nine months ending January 31, 2016 and 2016 was immaterial.~~

2017.

Other interest consists of interest on construction loans, ~~a financing liability,~~ security deposits and special assessments, as well as amortization of loan costs, offset by capitalized construction interest. Other interest increased by $1.6 million to approximately ~~$921,000~~$829,000 in the ~~third~~first quarter of fiscal year ~~2016,~~2017, compared to ~~approximately $613,000 in~~ the same period of the prior fiscal year, primarily due to a decrease in capitalized construction interest.

Table of Contents

Interest and Other Income. We recorded interest income in the first quarter of fiscal year 2017 and 2016 of approximately $572,000 and $556,000, respectively. The change ~~in other interest~~ between ~~the nine months ending January 31, 2016 and 2016~~periods was immaterial.

Other income increased 827.5% to approximately $473,000 in the first quarter of fiscal year 2017 compared to the same period of the prior fiscal year. The change was primarily due to an increase in real estate tax appeal refunds.

Gain (Loss) on Sale of Real Estate and Other Investments. We recorded in continuing operations a net gain of ~~$1.4~~$9.0 million and a net loss of approximately ~~$951,000~~$175,000 in the three months ended ~~January~~July 31, 2016 and 2015, respectively. ~~We recorded in continuing operations a net gain of $1.3 million in the nine months ended January 31, 2016, compared to a net loss of approximately $811,000 in the same period of the prior year.~~ Properties sold in the ~~nine~~three months ended ~~January~~July 31, 2016 and 2015 are detailed below in the section captioned “Property Acquisitions and Dispositions.”

Income from Discontinued Operations. During the first quarter of fiscal year 2016, we determined that our strategic plan to exit the office and retail segments met the criteria for discontinued operations. Accordingly, 48 office properties, 17 retail properties and 1 healthcare property were classified as held for sale and discontinued operations at July 31, 2015. We sold these properties during the second and third quarters of fiscal year 2016. We recorded income from discontinued operations of ~~$35.4~~$3.7 million and ~~$1.2 million~~approximately $748,000 in the three months ended ~~January~~July 31, 2016 and 2015, ~~respectively. During the nine months ended January 31, 2016 and 2015, we recorded income from discontinued operations of $50.2 million and $1.3 million,~~ respectively. See Note 7 of the Notes to the Condensed Consolidated Financial Statements in this report for further information on discontinued operations.

Occupancy

Occupancy as of ~~January~~July 31, 2016 compared to ~~January~~July 31, 2015 ~~increased~~decreased in our multifamily ~~segment~~ and ~~remained stable in our~~ healthcare ~~and industrial~~ segments on a same-store basis. In November 2015, a new 89-month lease was executed for 143,956 square feet at the Roseville 3075 Long Lake Road property, a newly redeveloped industrial property located in Roseville, Minnesota. The lease accounts for approximately 11.8% of the rentable square footage for our industrial segment and will commence upon completion of the leasehold improvements, currently estimated to be mid-April 2016. Occupancy represents the actual number of units or square footage leased divided by the total number of units or square footage at the end of the period.

Occupancy Levels on a Same-Store Property and All Property Basis:


	Same-Store Properties				All Properties
	As of July 31,				As of July 31,
Segments	2016		2015		2016		2015
Multifamily	93.0	%	95.1	%	90.4	%	91.2	%
Healthcare	92.7	%	95.8	%	88.7	%	89.3	%

Same-Store Properties All Properties
As of January 31, As of January 31,
Segments 2016 2015 2016 2015
Multifamily 94.9 % 94.5 % 91.1 % 91.3 %
Healthcare 95.8 % 95.8 % 94.7 % 95.9 %
Industrial 100.0 % 100.0 % 85.3 % 100.0 %

~~Table of Contents~~

Net Operating Income

Net Operating Income (“NOI”) is a non-US GAAP measure 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 US 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 show real estate revenues, real estate operating expenses ~~gain on involuntary conversion~~ and NOI by reportable operating segment for the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015. For a reconciliation of NOI of reportable segments to net income as reported, see Note 5 of the Notes to the Condensed Consolidated Financial Statements in this report.

The tables also show NOI by reportable operating segment on a same-store property and non-same-store property basis. This comparison allows us to evaluate the performance of existing properties and their contribution to net income. Management believes that measuring performance on a same-store property basis is useful to investors because it enables evaluation of how our properties are performing year over year. Management uses this measure to assess whether or not it has been successful in increasing NOI, renewing the leases of existing tenants, controlling operating costs and appropriately handling capital improvements. The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from same-store properties. Since changes from one fiscal year to another in real estate revenue and expenses from non-same-store properties are due to the addition of those properties to our real estate portfolio, such information is less useful for evaluating the ongoing operational performance of our real estate portfolio.

Table of Contents

All Segments

The following table of selected operating data reconciles NOI to net income and provides the basis for our discussion of NOI by segment in the three ~~and nine~~ months ended ~~January~~July 31, 2016 and 2015.



	Three Months Ended July 31,
	2016		2015		$ Change		% Change
All Segments

Real estate revenue
Same-store	$	40,548	$	41,573	$	(1,025)	(2.5)	%
Non-same-store(1)		9,063		3,472		5,591	161.0	%
Total	$	49,611	$	45,045	$	4,566	10.1	%

Real estate expenses
Same-store	$	18,092	$	16,661	$	1,431	8.6	%
Non-same-store(1)		3,542		1,643		1,899	115.6	%
Total	$	21,634	$	18,304	$	3,330	18.2	%

Net operating income
Same-store	$	22,456	$	24,912	$	(2,456)	(9.9)	%
Non-same-store(1)		5,521		1,829		3,692	201.9	%
Total	$	27,977	$	26,741	$	1,236	4.6	%
Depreciation/amortization		(14,267)		(11,217)
Impairment of real estate investments		(54,153)		(1,285)
General and administrative expenses		(2,606)		(2,454)
Acquisition and investment related costs		(43)		(7)
Other expenses		(852)		(417)
Interest expense		(10,364)		(7,814)
Interest and other income		1,045		607
Income (loss) before gain (loss) on sale of real estate and other investments and income from discontinued operations		(53,263)		4,154
Gain (loss) on sale of real estate and other investments		8,958		(175)
(Loss) income from continuing operations		(44,305)		3,979
Income from discontinued operations(2)		3,711		748
Net (loss) income	$	(40,594)	$	4,727

(in thousands, except percentages)
Three Months Ended January 31 Nine Months Ended January 31
2016 2015 $ Change % Change 2016 2015 $ Change % Change
All Segments

Real estate revenue
Same-store $ 44,928 $ 45,132 $ (204 ) (0.5 )% $ 132,534 $ 133,000 $ (466 ) (0.4 )%
Non-same-store⁽¹⁾
9,841 6,844 2,997 43.8 % 23,458 17,743 5,715 32.2 %
Total $ 54,769 $ 51,976 $ 2,793 5.4 % $ 155,992 $ 150,743 $ 5,249 3.5 %

Real estate expenses
Same-store $ 16,328 $ 16,447 $ (119 ) (0.7 )% $ 48,916 $ 48,109 $ 807 1.7 %
Non-same-store⁽¹⁾
4,008 2,671 1,337 50.1 % 9,852 7,025 2,827 40.2 %
Total $ 20,336 $ 19,118 $ 1,218 6.4 % $ 58,768 $ 55,134 $ 3,634 6.6 %

Net operating income
Same-store $ 28,600 $ 28,685 $ (85 ) (0.3 )% $ 83,618 $ 84,891 $ (1,273 ) (1.5 )%
Non-same-store⁽¹⁾
5,833 4,173 1,660 39.8 % 13,606 10,718 2,888 26.9 %
Total $ 34,433 $ 32,858 $ 1,575 4.8 % $ 97,224 $ 95,609 $ 1,615 1.7 %
TRS senior housing revenue, net of expenses 91 138 513 356
Depreciation/amortization (14,919 ) (12,837 ) (42,992 ) (38,347 )
Administrative expenses (2,929 ) (2,754 ) (8,316 ) (9,308 )
Other expenses (86 ) (488 ) (1,714 ) (1,678 )
Impairment of real estate investments (162 ) (540 ) (3,320 ) (4,663 )
Interest expense (10,540 ) (10,009 ) (29,867 ) (29,710 )
Loss on extinguishment of debt 0 0 (106 ) 0
Interest and other income 701 670 1,973 2,052
Income before gain (loss) on sale of real estate and other investments and income from discontinued operations 6,589 7,038 13,395 14,311
Gain (loss) on sale of real estate and other investments 1,446 951 1,271 (811 )
Income from continuing operations 8,035 7,989 14,666 13,500
Income from discontinued operations⁽²⁾
35,408 1,162 50,181 1,322
Net income $ 43,443 $ 9,151 $ 64,847 $ 14,822

~~(1)~~
(1)	Non-same-store properties consist of the following properties (re-development and in-service development properties are listed in bold type):

Held for Investment -	Multifamily -	71 France, Edina, MN; Arcata, Golden Valley, MN; Avalon Cove, Rochester, MN; Cardinal Point, Grand Forks, ND; Cascade Shores, Rochester, MN;Chateau II, Minot, ND; ~~Colonial Villa, Burnsville, MN~~;Crystal Bay, Rochester, MN; ~~Commons at Southgate, Minot, ND~~; ~~Cypress Court I and II, St. Cloud, MN~~; ~~Dakota Commons, Williston, ND~~; Deer Ridge, Jamestown, ND; French Creek, Rochester, MN; Gardens, Grand Forks, ND; GrandeVille at Cascade Lake, Rochester, MN; ~~Homestead Garden, Rapid City, SD;~~ Legacy Heights, Bismarck, ND; ~~Northridge, Bismarck, ND;~~ Red 20, Minneapolis, MN; and Renaissance Heights, Williston, ND~~and Silver Springs, Rapid City, SD.~~. Total number of units, ~~2,392.~~ 2,172.
	Healthcare -	Edina 6565 France SMC III, Edina, MN; Lakeside Medical Plaza, Omaha, NE and PrairieCare Medical, Brooklyn Park, MN. Total rentable square footage, 156,199.
	~~Industrial~~ Other -	Minot Southgate Retail, Minot, ND and Roseville 3075 Long Lake Road, Roseville, MN. Total rentable square footage, ~~220,557.~~228,406.

Held for Sale -

~~Other~~

Multifamily -

Pinecone Villas, Sartell, MN.

Total number of units, 24.

~~Minot Southgate Retail, Minot, ND~~ Healthcare~~and~~ - ~~Minot Southgate Wells Fargo Bank, Minot, ND~~

.Sartell 2000 23rd

St, Sartell, MN.

Total rentable square footage, ~~12,961.~~

59,760.

~~Held~~	Total NOI for ~~Sale~~held for sale properties for the three months ended July 31, 2016 and 2015, respectively, $(61) and $(86).

Sold -	Multifamily -	Campus Center, St. Cloud, MN; Campus Heights, St. Cloud, MN; Campus Knoll, St. Cloud, MN; Campus Plaza, St. Cloud, MN; Campus Side, St. Cloud, MN; Campus View, St. Cloud, MN; Cornerstone, St. Cloud, MNMN; and University Park Place, St. Cloud, MN. ~~Total number of units, 391~~.
	Healthcare -	Nebraska Orthopaedic Hospital, Omaha, ~~NE.~~ ~~Total rentable square footage, 61,758.~~ NE
	~~Total NOI for held for sale properties for the three months ended January 31, 2016 and 2015, respectively, $630 and $594.~~ ~~Total NOI for held for sale properties for the nine months ended January 31, 2016 and 2015, respectively, $1,735 and $1,642.~~

~~Table of Contents~~

~~Sold -~~	~~Multifamily -~~	~~Lancaster, St. Cloud, MN.~~
	~~Healthcare~~ -	~~Jamestown Medical Office Building, Jamestown, ND.~~
	~~Industrial -~~	~~Eagan 2785 & 2795 Hwy 55, Eagan, MN.~~
	Other -	~~2030 Cliff Road, Eagan, MN; Burnsville Bluffs II, Burnsville, MN; Dewey Hill Business Center, Edina, MN; Fargo Express Community, Fargo,~~ Minot Arrowhead First International, Minot, ND; ~~Kalispell Retail Center, Kalispell, MT;~~ Minot Plaza, Minot, ND; ~~Northgate I, Maple Grove, MN; Northgate II, Maple Grove, MN; Plymouth I, Plymouth, MN; Plymouth II, Plymouth, MN; Plymouth III, Plymouth, MN; Plymouth IV-V, Plymouth, MN; Southeast Tech, Eagan, MN;~~Stone Container, Fargo, ND and Thresher Square, Minneapolis, ~~MN; Weston Retail, Weston, WI; Whitewater Plaza, Minnetonka, MN and Wirth Corporate Center, Golden Valley,~~ MN.
	Total NOI for sold properties for the three months ended ~~January~~July 31, 2016 and 2015, respectively, ~~$53~~$278 and ~~$1,047.~~ ~~Total NOI for sold properties for the nine months ended January 31, 2016 and 2015, respectively, $149 and $3,454.~~ $800.

(2)

Discontinued operations include gain on disposals and income from operations for:

Held for Sale: Casper 1930 E 12th St, Casper 3955 E 12th St, Cheyenne 4010 N College Dr, Cheyenne 4606 N College Dr, Edgewood Vista (“EV”) Belgrade, EV Billings, EV Bismarck, EV Brainerd, EV Columbus, EV East Grand Forks, EV Fargo, EV Fremont, EV Grand Island, EV Hastings, EV Hermantown I and II, EV Kalispell, EV Minot, EV Missoula, EV Norfolk, EV Omaha, EV Sioux Falls, EV Spearfish, EV Virginia, Laramie 1072 N 22nd St, Legends at Heritage Place, Spring Creek (“SC”) American Falls, SC Boise, SC Eagle, SC Fruitland, SC Meridian, SC Overland, SC Soda Springs and SC Ustick.

Table of Contents

2016 Dispositions –: 610 Business Center, 7800 West Brown Deer Road, American Corporate Center, Ameritrade, Barry Pointe Office Park, Benton Business Park, Brenwood, Brook Valley I, Burnsville Strip Center, Champlin South Pond, Chan West Village, Corporate Center West, Crosstown Centre, Duluth 4615 Grand, Duluth Denfeld Retail, Eden Prairie 6101 Blue Circle Drive, Farnam Executive Center, Flagship Corporate Center, Forest Lake Auto, Forest Lake Westlake Center, Gateway Corporate Center, Golden Hills Office Center, Grand Forks Medpark Mall, Granite Corporate Center, Great Plains, Highlands Ranch I and II, Interlachen Corporate Center, Intertech Building, Jamestown Buffalo Mall, Jamestown Business Center, Lakeville Strip Center, Mendota Office Center I-IV, Minnesota National Bank, Miracle Hills One, Monticello C-Store, Northpark Corporate Center, Omaha 10802 Farnam Dr, Omaha Barnes & Noble, Pacific Hills, Pine City C-Store, Pine City Evergreen Square, Plaza VII, Plymouth 5095 Nathan Lane, Prairie Oak Business Center, Rapid City 900 Concourse Drive, Riverport, Rochester Maplewood Square, Spring Valley IV, V, X and XI, St. Cloud Westgate, Superior Office Building, TCA Building, Three Paramount Plaza, Timberlands, UHC Office, US Bank Financial Center, Wells Fargo Center, West River Business Park, Westgate and Woodlands Plaza IV.

An analysis of NOI by segment follows.

Multifamily

Real estate revenue from same-store properties in our multifamily segment decreased by ~~1.3%~~3.3% or ~~$336,000~~$958,000 in the three months ended ~~January~~July 31, 2016 compared to the same period in the prior fiscal year. AThe decrease was primarily attributable to a decrease in ~~revenue~~scheduled rent of ~~$364,000 was realized due to~~$657,000 and an increase in vacancy of ~~$241,000 and an increase in tenant concessions of $123,000.~~$299,000. Other real estate revenue combined ~~increased~~decreased by ~~$28,000.~~$2,000. The overall decrease of ~~1.3%~~3.3% in total revenue was primarily due to the operating results in our Minot and Williston, North Dakota markets. The balance of our portfolio in our ten other markets realized an increase in revenue of ~~$706,000~~$269,000 or ~~3.2%~~1.1%.

Real estate expenses at same-store properties increased by 3.4% or $389,000 in the three months ended January 31, 2016 compared to the same period in the prior fiscal year. The primary factors were increased property management expenses of $492,000 and increased maintenance expenses of $390,000. The increase in property management expenses was primarily attributable to increases in property management and labor and benefits costs while the increase in maintenance costs was primarily attributable to increases in labor, benefits and snow removal costs. These increases were offset by decreases in utilities of $287,000, real estate taxes of $172,000 and all other real estate expenses combined of $34,000.

~~Real estate revenue from same-store properties in our multifamily segment~~ decreased by 0.3% or $258,000 in the nine months ended January 31, 2016 compared to the same period in the prior fiscal year. A decrease in revenue of $1.2 million was realized due to an increase in vacancy of $898,000 and an increase in tenant concessions of $321,000. This decrease in revenue was offset by an increase in rental rates of $975,000 while all other real estate revenue combined decreased by $14,000. The overall decrease of 0.3% in total revenue was primarily due to the operating results in our Minot and Williston, North Dakota markets. The balance of our portfolio in our ten other markets realized an increase in revenue of $1.9 million or 2.8%.$105,000.



	Three Months Ended July 31,
	2016			2015			$ Change		% Change
Multifamily

Real estate revenue
Same-store	$	28,018		$	28,976		$	(958)	(3.3)	%
Non-same-store		7,022			2,457			4,565	185.8	%
Total	$	35,040		$	31,433		$	3,607	11.5	%

Real estate expenses(1)
Same-store	$	12,045		$	12,150		$	(105)	(0.9)	%
Non-same-store		2,834			1,288			1,546	120.0	%
Total	$	14,879		$	13,438		$	1,441	10.7	%

Net operating income
Same-store	$	15,973		$	16,826		$	(853)	(5.1)	%
Non-same-store		4,188			1,169			3,019	258.3	%
Total	$	20,161		$	17,995		$	2,166	12.0	%

Occupancy		2016			2015
Same-store		93.0	%		95.1	%
Non-same-store		77.5	%		55.3	%
Total		90.4	%		91.2	%

Number of Units		2016			2015
Same-store		10,840			10,838
Non-same-store		2,196			1,189
Total		13,036			12,027

(1)

Excludes offsite costs associated with property management and casualty-related amounts, which increased by approximately $476,000 and $505,000, respectively, for the three months ended July 31, 2016 as compared to the same period of the prior year.

Real estate expenses at same-store properties increased by 6.4% or $2.2 million in the nine months ended January 31, 2016 compared to the same period in the prior fiscal year. The primary factors were increased maintenance expenses of $1.1 million and increased property management expenses of $1.1 million. The increase in maintenance expenses was primarily attributable to increases in labor, benefits and snow removal costs. The increase in property management expenses was primarily due to increases in internal property management and marketing costs. All other real estate expenses combined decreased by $37,000.

~~Table of Contents~~

(in thousands, except percentages)
Three Months Ended January 31, Nine Months Ended January 31,
2016 2015 $ Change % Change 2016 2015 $ Change % Change
Multifamily

Real estate revenue
Same-store $ 25,513 $ 25,849
$
(336 ) (1.3 )% $ 77,402 $ 77,660 $ (258 ) (0.3 )%
Non-same-store 7,783 4,407 3,376 76.6 % 19,380 9,916 9,464 95.4 %
Total $ 33,296 $ 30,256 $ 3,040 10.0 % $ 96,782 $ 87,576 $ 9,206 10.5 %

Real estate expenses
Same-store $ 11,910 $ 11,521 $ 389 3.4 % $ 35,708 $ 33,557 $ 2,151 6.4 %
Non-same-store 3,550 1,797 1,753 97.6 % 8,894 4,143 4,751 114.7 %
Total $ 15,460 $ 13,318 $ 2,142 16.1 % $ 44,602 $ 37,700 $ 6,902 18.3 %

Net operating income
Same-store $ 13,603 $ 14,328 $ (725 ) (5.1 )% $ 41,694 $ 44,103 $ (2,409 ) (5.5 )%
Non-same-store 4,233 2,610 1,623 62.2 % 10,486 5,773 4,713 81.6 %
Total $ 17,836 $ 16,938 $ 898 5.3 % $ 52,180 $ 49,876 $ 2,304 4.6 %

Occupancy 2016 2015
Same-store 94.9 % 94.5 %
Non-same-store 78.1 % 74.5 %
Total 91.1 % 91.3 %

Number of Units 2016 2015
Same-store 9,877 9,878
Non-same-store 2,915 1,887
Total 12,792 11,765

~~Table of Contents~~

Healthcare

Real estate revenue from same-store properties in our healthcare segment decreased by ~~0.6%~~0.5% or ~~$103,000~~$49,000 in the three months ended ~~January~~July 31, 2016 compared to the same period in the prior fiscal year. The decrease in revenue was attributable to ~~a decrease~~an increase in ~~tenant reimbursements~~vacancy of ~~$134,000 resulting from decreased recoverable operating expenses.~~$182,000. All other real estate revenues combined increased by ~~$31,000.~~$133,000.

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Real estate expenses from same-store properties ~~decreased~~increased by ~~4.7%~~16.4% or ~~$192,000~~$535,000 in the three months ended January 31, 2016 compared to the same period in the prior fiscal year. The primary factor was decreased property management expenses due to a decrease in property management costs of $141,000. All other real estate expenses combined decreased by $51,000.

Real estate revenue from same-store properties in our healthcare segment decreased by 1.2% or $553,000 in the nine months ended January 31, 2016 compared to the same period in the prior fiscal year. The decrease in revenue was attributable to a decrease in the straight-line receivable of $698,000. This decrease was offset by an increase in rental rates of $130,000 and all other real estate revenues combined of $15,000.

~~Real estate expenses from same-store properties decreased by 6.1% or $745,000 in the nine months ended January~~July 31, 2016 compared to the same period in the prior fiscal year. The primary factors were ~~decreases~~increases in ~~real estate taxes of $372,000, other property expenses of $318,000 and property management expenses of $216,000. The decrease in other property expenses, consisting of~~the bad debt provision expense of $280,000 and the maintenance expenses of $107,000. The increase in bad debt provision expense was due to ~~a decrease in~~higher recoveries during the ~~estimated uncollectible accounts receivable while~~three months ended July 31, 2015. The increased maintenance expenses were the ~~decrease in property management expenses was due~~results of more general maintenance being completed compared to ~~a decrease in property management costs.~~the prior year. All other real estate expenses combined increased by ~~$161,000.~~$148,000.



	Three Months Ended July 31,
	2016			2015			$ Change		% Change
Healthcare

Real estate revenue
Same-store	$	10,131		$	10,180		$	(49)	(0.5)	%
Non-same-store		1,410			599			811	135.4	%
Total	$	11,541		$	10,779		$	762	7.1	%

Real estate expenses(1)
Same-store	$	3,788		$	3,253		$	535	16.4	%
Non-same-store		404			229			175	76.4	%
Total	$	4,192		$	3,482		$	710	20.4	%

Net operating income
Same-store	$	6,343		$	6,927		$	(584)	(8.4)	%
Non-same-store		1,006			370			636	171.9	%
Total	$	7,349		$	7,297		$	52	0.7	%

Occupancy		2016			2015
Same-store		92.7	%		95.8	%
Non-same-store		65.3	%		42.4	%
Total		88.7	%		89.3	%

Rentable Square Footage		2016			2015
Same-store		1,289,180			1,289,209
Non-same-store		215,959			179,142
Total		1,505,139			1,468,351

(1)

Excludes offsite costs associated with property management, which decreased by approximately $56,000 for the three months ended July 31, 2016 as compared to the same period of the prior year.

(in thousands, except percentages)
Three Months Ended January 31, Nine Months Ended January 31,
2016 2015 $ Change % Change 2016 2015 $ Change % Change
Healthcare

Real estate revenue
Same-store $ 16,490 $ 16,593 $ (103 ) (0.6 )% $ 46,920 $ 47,473 $ (553 ) (1.2 )%
Non-same-store 1,860 898 962 107.1 % 3,515 2,551 964 37.8 %
Total $ 18,350 $ 17,491 $ 859 4.9 % $ 50,435 $ 50,024 $ 411 0.8 %

Real estate expenses
Same-store $ 3,908 $ 4,100 $ (192 ) (4.7 )% $ 11,537 $ 12,282 $ (745 ) (6.1 )%
Non-same-store 300 160 140 87.5 % 665 444 221 49.8 %
Total $ 4,208 $ 4,260 $ (52 ) (1.2 )% $ 12,202 $ 12,726 $ (524 ) (4.1 )%

Net operating income
Same-store $ 12,582 $ 12,493 $ 89 0.7 % $ 35,383 $ 35,191 $ 192 0.5 %
Non-same-store 1,560 738 822 111.4 % 2,850 2,107 743 35.3 %
Total $ 14,142 $ 13,231 $ 911 6.9 % $ 38,233 $ 37,298 $ 935 2.5 %

Occupancy 2016 2015
Same-store 95.8 % 95.8 %
Non-same-store 80.0 % 96.5 %
Total 94.7 % 95.9 %

Rentable Square Footage 2016 2015
Same-store 2,870,087 2,870,116
Non-same-store 217,957 106,980
Total 3,088,044 2,977,096

~~Table of Contents~~

~~Industrial~~

Real estate revenue from same-store properties in our industrial segment decreased by 7.7% or $131,000 in the three months ended January 31, 2016 compared to the same period in the prior fiscal year. Tenant reimbursements decreased by $144,000 resulting from a decrease in recoverable operating expenses while all other revenue items combined increased by $13,000.

Real estate expenses from same-store properties decreased by 30.3% or $139,000 in the three months ended January 31, 2016 compared to the same period of the prior fiscal year. The primary factors were decreases in maintenance expenses of $100,000 and real estate taxes of $33,000. The decrease in maintenance expenses was due to fewer general maintenance items being completed during the quarter. All other real estate expenses combined decreased by $6,000.

Real estate revenue from same-store properties in our industrial segment decreased by 0.7% or $32,000 in the nine months ended January 31, 2016 compared to the same period in the prior fiscal year. Tenant reimbursements decreased by $43,000 resulting from a decrease in recoverable operating expenses while all other revenue items combined increased by $11,000.

Real estate expenses from same-store properties decreased by 16.8% or $186,000 in the nine months ended January 31, 2016 compared to the same period of the prior fiscal year. The primary factors were decreases in maintenance expenses of $125,000 and property management expenses of $23,000. The decrease in maintenance expenses was due to fewer general maintenance items being completed during the period while the decrease in property management expenses was due to decreased property management costs. All other real estate expenses items combined decreased by $38,000.

(in thousands, except percentages)
Three Months Ended January 31, Nine Months Ended January 31,
2016 2015 $ Change % Change 2016 2015 $ Change % Change
Industrial

Real estate revenue
Same-store $ 1,574 $ 1,705 $ (131 ) (7.7 )% $ 4,726 $ 4,758 $ (32 ) (0.7 )%
Non-same-store 76 36 40 111.1 % 187 146 41 28.1 %
Total $ 1,650 $ 1,741 $ (91 ) (5.2 )% $ 4,913 $ 4,904 $ 9 0.2 %

Real estate expenses
Same-store $ 319 $ 458 $ (139 ) (30.3 )% $ 919 $ 1,105 $ (186 ) (16.8 )%
Non-same-store 134 43 91 211.6 % 219 118 101 85.6 %
Total $ 453 $ 501 $ (48 ) (9.6 )% $ 1,138 $ 1,223 $ (85 ) (7.0 )%

Net operating income
Same-store $ 1,255 $ 1,247 $ 8 0.6 % $ 3,807 $ 3,653 $ 154 4.2 %
Non-same-store (58 ) (7 ) (51 ) (728.6 )% (32 ) 28 (60 ) (214.3 )%
Total $ 1,197 $ 1,240 $ (43 ) (3.5 )% $ 3,775 $ 3,681 $ 94 2.6 %

Occupancy 2016 2015
Same-store 100.0 % 100.0 %
Non-same-store 18.4 % 100.0 %
Total 85.3 % 100.0 %

Rentable Square Footage 2016 2015
Same-store 1,002,361 1,002,361
Non-same-store 220,557 17,750
Total 1,222,918 1,020,111

~~Table of Contents~~

Analysis of Commercial ~~Segments’~~ Credit Risk and Leases

Credit Risk

The following table lists our top ten commercial tenants on ~~January~~July 31, 2016, for all commercial properties owned by us, including healthcare, other commercial properties and those held for sale, measured by percentage of total commercial ~~segments’~~ minimum rents as of ~~January~~July 1, 2016. Our results of operations are dependent on, among other factors, the economic health of our tenants. We attempt to mitigate tenant credit risk by working to secure creditworthy tenants that meet our underwriting criteria and monitoring our portfolio to identify potential problem tenants. We believe that our credit risk is also mitigated by the fact that no individual tenant accounts for more than 10% of our total real estate rentals, although affiliated entities of Edgewood Vista together accounted for approximately ~~30.2%~~31.3% of our total commercial ~~segments’~~ minimum rents as of ~~January~~July 1, 2016.

As of July 31, 2016, ~~and they accounted for approximately 9.3%~~15 of our ~~total real estate rentals as of January 31, 2016.~~

~~As of January 31, 2016, 50 of our~~47 commercial properties held for investment, along with our held for sale properties including all 20 of our Edgewood Vista properties, all ~~eight~~7 of our Idaho Spring Creek senior housing properties, and all ~~five~~5 of our Wyoming senior housing properties, ~~and one of our properties held for sale~~ were leased under triple net leases under which the tenant pays a monthly lump sum base rent as well as all costs associated with the property, including property taxes, insurance, replacement, repair or restoration, in addition to maintenance. The failure by any of our triple net tenants to effectively conduct their operations or to maintain and improve our properties in accordance with the terms of their respective triple net leases could

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adversely affect their business reputations and ability to attract and retain residents and customers to our properties, which could have an indirect adverse effect on us.

We regularly monitor the relative credit risk of our significant tenants, including our triple net tenants. The metrics we use to evaluate a significant tenant’s liquidity and creditworthiness depend on facts and circumstances specific to that tenant and to the industry in which it operates, and include the tenant’s credit history and economic conditions related to the tenant, its operations and the markets in which it operates. These factors may change over time. Prior to signing a lease with a tenant, we generally assesses the prospective tenant’s credit quality through review of its financial statements and tax returns, and the result of that review is a factor in establishing the rent to be charged (e.g., higher risk tenants will be charged higher rent). Over the course of a lease, our property management and asset management personnel have regular contact with tenants and tenant employees, and, where the terms of the lease permit, receive tenant financial information for periodic review or review publicly-available financial statements in the case of public company tenants or non-profit entities, such as hospital systems, whose financial statements are required to be filed with state agencies. Through these means we monitor tenant credit quality.

~~Lessee~~
	% of Total Commercial ~~Segments’~~
	Minimum Rents
Lessee	as of ~~January~~July 1, 2016
Affiliates of Edgewood Vista(1)	31.3	~~30.2~~	%
Fairview Health Services	8.0	~~7.7~~	%
St. Luke’s Hospital of Duluth, Inc.	6.9	~~7.1~~	%
PrairieCare Medical LLC	4.8	~~4.6~~	%
HealthEast Care System	3.7	~~3.6~~	%
~~Nebraska Orthopaedic Hospital~~⁽¹⁾		~~2.8~~	%
Quality Manufacturing Corp	2.2	~~2.1~~	%
~~Westrock CP LLC~~ Allina Health	1.8	~~1.9~~	%
~~Allina Health~~		~~1.7~~	%
~~Children’s~~ Children's Hospitals & Clinics		1.7	%
~~All Others~~ Noran Neurological Clinic	1.6	~~36.6~~	%
Amerada Hess	1.5	%
All Others	36.5	%
Total Monthly Commercial Rent as of ~~January~~July 1, 2016		100.0	%

~~(1)~~

~~The tenant~~

(1)

Affiliates of Edgewood Vista are tenants in ~~the Nebraska Orthopaedic Hospital property has exercised its option to purchase the property. However, we can give no assurance if or when the~~our senior housing properties which are classified as held for sale ~~of the property will be completed.~~and discontinued operations at July 31, 2016.

~~Table of Contents~~

~~Commercial~~

Healthcare Leasing Activity

During fiscal year ~~2016,~~2017, we have executed new and renewal ~~commercial~~healthcare leases for our same-store ~~rental~~ properties on ~~57,206~~32,224 square feet for the three months ended ~~January 31, 2016 and 376,605 square feet for the nine months ended January~~July 31, 2016. Due to our leasing efforts, occupancy in our same-store healthcare ~~and industrial portfolios has~~portfolio remained strong at ~~96.9%~~92.7% as of ~~January~~July 31, ~~2016, compared to 97.0% as of January 31, 2015.~~

2016.

The total leasing activity for our same-store healthcare ~~and industrial~~ properties, expressed in square feet of leases signed during the period, and the resulting occupancy levels, are as follows:

Three Months Ended ~~January~~July 31, 2016 and 2015

Square Feet of
New Leases⁽¹⁾

Square Feet of
Leases Renewed⁽¹⁾

Total
Square Feet of
Leases Executed⁽¹⁾
Occupancy
Segments 2016 2015 2016 2015 2016 2015 2016 2015
Healthcare 40,630 6,400 16,576 7,703 57,206 14,103 95.8 % 95.8 %
Industrial 0 0 0 29,995 0 29,995 100.0 % 100.0 %
Total 40,630 6,400 16,576 37,698 57,206 44,098 96.9 % 97.0 %


					Total
	Square Feet of		Square Feet of		Square Feet of
	New Leases(1)		Leases Renewed(1)		Leases Executed(1)		Occupancy
Segment	2016	2015	2016	2015	2016	2015	2016		2015
Healthcare	12,140	1,624	20,084	46,422	32,224	48,046	92.7	%	95.8	%

~~(1)~~

(1)

The leasing activity presented is based on leases signed or executed for our same-store rental properties during the period and is not intended to coincide with the commencement of rental revenue in accordance with US GAAP. Prior periods reflect amounts previously reported and exclude retroactive adjustments for properties reclassified to discontinued operations or non-same-store in the current period.

~~Nine Months Ended January 31, 2016 and 2015~~

Square Feet of
New Leases⁽¹⁾

Square Feet of
Leases Renewed⁽¹⁾

Total
Square Feet of
Leases Executed⁽¹⁾
Occupancy
Segments 2016 2015 2016 2015 2016 2015 2016 2015
Healthcare 45,085 17,979 123,119 108,391 168,204 126,370 95.8 % 95.8 %
Industrial 0 0 208,401 29,995 208,401 29,995 100.0 % 100.0 %
Total 45,085 17,979 331,520 138,386 376,605 156,365 96.9 % 97.0 %

~~(1)~~

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Healthcare New Leases

The following table sets forth the average effective rents and the estimated costs of tenant improvements and leasing commissions, on a per square foot basis, that we are obligated to fulfill under the new leases signed for our same-store healthcare ~~and industrial~~ properties:

Three Months Ended ~~January~~July 31, 2016 and 2015

Square Feet of
New Leases⁽¹⁾

Average Term
in Years

Average
Effective Rent⁽²⁾

Estimated Tenant
Improvement Cost per
Square Foot⁽¹⁾
Leasing
Commissions per
Square Foot⁽¹⁾

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Healthcare 40,630 6,400 7.1 7.5 $ 19.86 $ 18.51 $ 11.45 $ 59.06 $ 3.09 $ 6.50
Industrial 0 0 0 0 0 0 0 0 0 0
Total 40,630 6,400 7.1 7.5 $ 19.86 $ 18.51 $ 11.45 $ 59.06 $ 3.09 $ 6.50


							Estimated Tenant		Leasing
	Square Feet of		Average Term		Average		Improvement Cost		Commissions per
	New Leases(1)		in Years		Effective Rent(2)		per Square Foot(1)		Square Foot(1)
Segment	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
Healthcare	12,140	1,624	15.0	16.5	20.30	23.64	55.15	35.00	8.75	10.00

~~(1)~~

(1)

~~(2)~~

(2)

Effective rents represent average annual base rental payments, on a straight-line basis for the term of each lease, excluding operating expense reimbursements. The underlying leases contain various expense structures including gross, modified gross, net and triple net.

~~Table of Contents~~

~~Nine Months Ended January 31, 2016 and 2015~~

Square Feet of
New Leases⁽¹⁾

Average Term
in Years

Average
Effective Rent⁽²⁾

Estimated Tenant
Improvement Cost per
Square Foot⁽¹⁾
Leasing
Commissions per
Square Foot⁽¹⁾
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Healthcare 45,085 17,979 7.1 6.1 $ 19.97 $ 20.00 $ 13.10 $ 37.16 $ 3.27 $ 6.84
Industrial 0 0 0 0 0 0 0 0 0 0
Total 45,085 17,979 7.1 6.1 $ 19.97 $ 20.00 $ 13.10 $ 37.16 $ 3.27 $ 6.84

~~(1)~~

~~(2)~~

Healthcare Lease Renewals

The following table summarizes our lease renewal activity within our same-store healthcare ~~and industrial segments~~segment (square feet data in thousands):

Three Months Ended ~~January~~July 31, 2016 and 2015

Square Feet of Leases
Renewed⁽¹⁾

Percent of Expiring
Leases Renewed⁽²⁾

Average Term
in Years

Weighted Average
Growth (Decline)
in Effective Rents⁽³⁾

Estimated
Tenant Improvement
Cost per Square
Foot⁽¹⁾

Leasing
Commissions per
Square Foot⁽¹⁾

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Healthcare 16,576 7,703 93.8 % 84.5 % 0.4 16.8 4.3 % 1.3 % $ 0 $ 35.00 $ 0 $ 7.80
Industrial 0 29,995 100.0 % 0 % 0 3.0 0 (4.5 %) 0 0 0 1.21
Total 16,576 37,698 98.2 % 84.5 % 0.4 9.9 4.3 % (2.3 %) $ 0 $ 7.15 $ 0 $ 2.56


													Estimated
									Weighted Average				Tenant Improvement		Leasing
	Square Feet of		Percent of Expiring				Average Term		Growth (Decline)				Cost per Square		Commissions per
	Leases Renewed(1)		Leases Renewed(2)				in Years(3)		in Effective Rents(4)				Foot(1)		Square Foot(1)
Segment	2016	2015	2016		2015		2016	2015	2016		2015		2016	2015	2016	2015
Healthcare	20,084	46,422	100.0	%	86.5	%	3.3	8.4	4.7	%	15.3	%	4.11	15.23	2.51	6.30

~~(1)~~

(1)

~~(2)~~

(2)

Renewal percentage of expiring leases is based on square footage of renewed leases and not the number of leases renewed. The category of renewed leases does not include leases that have become month-to-month leases, as the month-to-month leases are considered lease amendments.

~~(3)~~

(3)

Lease renewals during the three months ended July 31, 2016 ranged from six-month to ten-year terms, with a weighted average term of 3.3 years. The six-month renewal was for a 4,800 square foot lease that was designed to be co-terminus with another lease with the same tenant. Both leases are expected to renew for seven years at that time.

(4)

Represents the percentage change in effective rent between the original leases and the renewal leases. Effective rents represent average annual base rental payments, on a straight-line basis for the term of each lease, excluding operating expense reimbursements. The underlying leases contain various expense structures including gross, modified gross, net and triple net.

~~Nine Months Ended January 31, 2016 and 2015~~

Square Feet of Leases
Renewed⁽¹⁾

Percent of Expiring
Leases Renewed⁽²⁾

Average Term
in Years

Weighted Average
Growth (Decline)
in Effective Rents⁽³⁾

Estimated
Tenant Improvement
Cost per Square
Foot⁽¹⁾

Leasing
Commissions per
Square Foot⁽¹⁾

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Healthcare 123,119 108,391 91.5 % 73.2 % 4.9 6.3 5.8 % (3.5 %) $ 9.19 $ 10.99 $ 2.84 $ 1.54
Industrial 208,401 29,995 100.0 % 0 % 5.0 3.0 18.1 % (4.5 %) 0.59 0 0.07 1.21
Total 331,520 138,386 97.2 % 73.2 % 4.9 6.1 9.7 % (3.6 %) $ 3.78 $ 8.61 $ 1.10 $ 1.47

~~(1)~~

~~(2)~~

~~(3)~~

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~~Our ability to maintain or increase occupancy rates is a principal driver of maintaining and increasing the average effective rents in our commercial segments~~. The increase in the average growth in effective rents for the industrial segment for the nine months ended January 31, 2016 when compared to the same periods in the prior fiscal year is due to a 195,075 square foot lease renewal executed at our Stone Container property in Fargo, North Dakota. This lease was renewed at a 19.2% increase in effective rent primarily due to improved market conditions in the property location.

Healthcare Lease Expirations

Our ability to maintain and improve occupancy rates, and base rents, primarily depends upon our continuing ability to re-lease expiring space. The following table reflects the in-service portfolio lease expiration schedule of our consolidated healthcare ~~and industrial~~ properties, including square footage and annualized base rent for expiring leases, as of ~~January~~July 31, 2016.

Fiscal Year of Lease Expiration	# of Leases		Square Footage of Expiring Leases⁽²⁾		Percentage of Total Commercial Segments Leased Square Footage			Annualized Base Rent of Expiring Leases at Expiration⁽³⁾		Percentage of Total Commercial Segments Annualized Base Rent
2016 (remainder)⁽¹⁾		29		359,418		9.1	%	$	4,498,347		8.1	%
2017		28		195,819		4.9	%		2,975,306		5.4	%

																			Percentage of Total
															Percentage of Total		Annualized Base		Healthcare
Fiscal Year of Lease														Square Footage of	Healthcare Segment		Rent of Expiring		Segment
Expiration													# of Leases	Expiring Leases(3)	Leased Square Footage		Leases at Expiration(2)		Annualized Base Rent
2017⁽¹⁾													42	162,823	12.2	%	$	3,302,203	11.2	%
2018		21		190,145		4.8	%		4,432,353		8.0	%	18	172,258	12.9	%		4,275,288	14.5	%
2019		23		363,803		9.2	%		5,012,211		9.0	%	14	178,998	13.4	%		3,712,483	12.6	%
2020		14		170,080		4.3	%		2,024,020		3.6	%	13	75,006	5.6	%		1,555,258	5.3	%
2021		21		305,801		7.7	%		3,361,298		6.0	%	20	95,575	7.2	%		2,028,150	6.9	%
2022		39		1,296,621		32.7	%		17,019,770		30.6	%	11	62,328	4.7	%		1,152,353	3.9	%
2023		12		480,309		12.1	%		2,314,783		4.2	%	11	52,511	3.9	%		985,379	3.4	%
2024		26		206,209		5.2	%		4,053,182		7.3	%	25	154,575	11.6	%		3,572,636	12.1	%
2025		11		136,393		3.4	%		2,738,609		4.9	%	5	76,691	5.8	%		1,661,344	5.6	%
2026													9	103,178	7.7	%		1,777,081	6.0	%
Thereafter		13		260,954		6.6	%		7,160,363		12.9	%	15	200,308	15.0	%		5,451,265	18.5	%
Totals		237		3,965,552		100.0	%	$	55,590,242		100.0	%	183	1,334,251	100.0	%	$	29,473,440	100.0	%

~~(1)~~

(1)

Includes month-to-month leases. As of ~~January~~July 31, 2016, month-to-month leases accounted for ~~307,706~~24,014 square ~~feet of which 286,854 square feet were located in five senior housing facilities in Wyoming.~~feet.

~~(2)~~

(2)

Assuming that none of the tenants exercise renewal or termination options, and including leases renewed prior to expiration. Also excludes ~~99,535~~1,361 square feet of space occupied by us.

~~(3)~~

(3)

Annualized Base Rent is monthly scheduled rent as of ~~January~~July 1, 2016, multiplied by 12.

Because of ~~the different property types in our commercial portfolio and~~ the dispersed locations of a substantial portion of the portfolio’s properties in secondary and tertiary markets, information on current market rents is difficult to obtain, is highly subjective and is often not directly comparable between properties. As a result, we believe that the increase or decrease in effective rent on our recent leases is the most objective and meaningful information available regarding rent trends and the relationship between rents on leases expiring in the near term and current market rents across our markets. We believe that rents on our new and renewed leases generally approximate market rents.

PROPERTY ACQUISITIONS AND DISPOSITIONS

During the ~~third~~first quarter of fiscal year ~~2016,~~2017, we had no acquisitions.

During the ~~third~~first quarter of fiscal year ~~2016,~~2017, we sold ~~3 retail properties~~one commercial property and one parcel of unimproved land for a total sales price of ~~$3.5 million and transferred ownership of nine office properties pursuant to a deed in lieu transaction.~~ $13.7 million. See Note 8 of the Notes to Condensed Consolidated Financial Statements in this report for a table detailing our acquisitions and dispositions during the ~~nine~~three month periods ended ~~January~~July 31, 2016 and 2015.

Development ~~and Re-Development~~ Projects

The following tables provide additional detail, as of ~~January~~July 31, 2016, on our in-service (completed) development ~~and re-development projects~~project and development ~~and re-development projects~~project in progress. ~~All of these~~These projects are excluded from the same-store pool. We measure initial yield on our development projects upon completion and achievement of target lease-up levels by measuring net operating income from the development against the cost of the project. Estimated initial ~~yields~~yield on the ~~projects~~project in progress listed below ~~range from an estimated approximate 5.9% to an estimated approximate 6.3% initial yield.~~is approximately 6.0%.

44P

~~Table of Contents~~

~~Projects~~roject Placed in Service in the ~~Nine~~Three Months Ended ~~January~~July 31, 2016

(in thousands) (in fiscal years)
Project Name and Location Segment
Rentable
Square Feet
or Number of
Units

Percentage
Leased
or Committed

Anticipated
Total Cost⁽¹⁾

Costs as of
January 31, 2016⁽¹⁾

Cost per
Square Foot
or Unit⁽¹⁾

Date Placed
in Service
Anticipated
Same-Store
Date
Chateau II - Minot, ND Multifamily 72 units 79.2 % $ 14,711 $ 14,641 $ 204,319 1Q 2016 1Q 2019
Edina 6565 France SMC III - Edina, MN⁽²⁾
Healthcare 57,624 sq ft 24.5 % 37,763 32,725 655 1Q 2016 1Q 2019
Renaissance Heights - Williston, ND⁽³⁾
Multifamily 288 units 46.2 % 62,451 62,451 216,844 1Q 2016 1Q 2019
Minot Southgate Retail - Minot, ND Other 7,963 sq ft 0 % 2,923 2,623 367 2Q 2016 1Q 2019
PrairieCare Medical - Brooklyn Park, MN Healthcare 70,756 sq ft 100 % 24,435 24,358 345 2Q 2016 1Q 2018
$ 142,283 $ 136,798

(in thousands)

Percentage

Date

Anticipated

Number

Leased or

Anticipated

Costs as of

Cost per

Placed in

Same-Store

Project Name and Location

Segment

of Units

Committed

Total Cost

July 31, 2016

Unit

Service

Date

71 France I - Edina, MN (1)

Multifamily

241 units

72.8

73,290

72,230

304,108

Q1 2017

Q1 2019

~~(1)~~

~~Excludes tenant improvements and leasing commissions.~~

~~(2)~~

(1)

~~Anticipated total cost includes estimated tenant improvement costs that have not been incurred as of January 31, 2016.~~

~~(3)~~

We are currently ~~an approximately 70.0%~~a 52.6% partner in the joint venture entity constructing this project. ~~The anticipated~~Anticipated total cost ~~amount given~~ is the total cost to the joint venture entity.

~~Projects~~

Table of Contents

Project in Progress at ~~January~~July 31, 2016

(in thousands)

Project Name and Location

Planned Segment

Number of Units

Percentage Leased or Committed

Anticipated Total Cost

Costs as of July 31, 2016

Anticipated Construction Completion

Monticello Crossing - Monticello, MN

Multifamily

202 units

36.7

31,784

24,248

3Q 2017

Other

n/a

3,155

n/a

31,784

27,403

(in thousands) (in fiscal years)
Project Name and Location Planned Segment
Rentable
Square Feet
or Number of
Units

Percentage
Leased
or Committed

Anticipated
Total Cost⁽¹⁾

Costs as of
January 31, 2016⁽¹⁾

Anticipated
Construction
Completion

Deer Ridge - Jamestown, ND Multifamily 163 units 35.0 % $ 24,874 $ 24,874 4Q 2016
Cardinal Point - Grand Forks, ND⁽²⁾
Multifamily 251 units 35.5 % 48,242 48,242 4Q 2016
71 France - Edina, MN⁽³⁾
Multifamily 241 units 34.9 % 73,290 69,105 1Q 2017
Monticello Crossings - Monticello, MN Multifamily 202 units 0 % 31,784 11,210 2Q 2017
Other n/a n/a n/a n/a 3,524 n/a
$ 178,190 $ 156,955

~~(1)~~

~~Includes costs related to development projects that are placed in service in phases (Deer Ridge - $14.3 million, 71 France - $41.3 million, Cardinal Point - $23.0 million).~~

~~(2)~~

~~(3)~~

The project is being constructed in three phases by a joint venture entity in which we currently have an approximately 52.6% interest. The anticipated total cost amount given is the total cost to the joint venture entity. The anticipated total cost includes approximately 21,772 square feet of retail space.

FUNDS FROM OPERATIONS

We consider Funds from Operations (“FFO”) a useful measure of performance for an equity REIT. We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO to mean “net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.” In addition, in October 2011, NAREIT clarified its computation of FFO to exclude impairment charges for all periods presented. Because of limitations of the FFO definition adopted by NAREIT, we have made certain interpretations in applying the definition. We believe all such interpretations not specifically provided for in the NAREIT definition are consistent with the definition.

Management considers that FFO, by excluding depreciation costs, impairment write-downs, the gains or losses from the sale of operating real estate properties and extraordinary items as defined by US GAAP, is useful to investors in providing an additional perspective on our operating results. Historical cost accounting for real estate assets in accordance with US GAAP assumes, through depreciation, that the value of real estate assets decreases predictably over time. However, real estate asset values have historically risen or fallen with market conditions. NAREIT’s definition of FFO, by excluding depreciation costs, reflects the fact that real estate, as an asset class, generally appreciates over time and that depreciation charges required by US GAAP may not reflect underlying economic realities. Additionally, the exclusion in NAREIT’s definition of FFO of impairment write-downs and gains and losses from the sales of previously depreciated operating real estate assets, assists our management and investors in identifying the operating results of the long-term assets that form the core of our investments, and assists in comparing those operating results between periods. FFO is used by our management and investors to identify trends in occupancy rates, rental rates and operating costs.

~~Table of Contents~~

While FFO is widely used by us as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income as determined in accordance with US GAAP as a measure of our performance, but rather should be considered as an additional, supplemental measure, and should be viewed in conjunction with net income as presented in the consolidated financial statements included in this report. FFO does not represent cash generated from operating activities in accordance with US GAAP, and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions.

FFO applicable to Common Shares and Units for the three months ended ~~January~~July 31, 2016 ~~increased~~decreased to ~~$54.5~~$15.9 million compared to ~~$23.4~~$22.0 million for the comparable period ended ~~January~~July 31, 2015, an ~~increase~~decrease of ~~132.5%~~27.7%. ~~FFO applicable to Common Shares and Units for the nine months ended January 31, 2016 increased by 31.0% to $84.7 million, compared to $64.6 million for the nine months ended January 31, 2015.~~

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RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

INVESTORS REAL ESTATE TRUST TO FUNDS FROM OPERATIONS


	(in thousands, except per share and unit amounts)
Three Months Ended July 31,	2016					2015
				Per					Per
			Weighted Avg	Share				Weighted Avg	Share
			Shares and	and				Shares and	and
	Amount		Units(1)	Unit(2)		Amount		Units(1)	Unit(2)
Net income (loss) attributable to Investors Real Estate Trust	$	(21,643)		$		$	4,540		$
Less dividends to preferred shareholders		(2,879)					(2,879)
Net income (loss) available to common shareholders		(24,522)	121,117		(0.20)		1,661	124,855		0.01
Adjustments:
Noncontrolling interests – Operating Partnership		(3,296)	16,285				186	13,951
Depreciation and amortization		13,437					18,259
Impairment of real estate attributable to Investors Real Estate Trust		39,189					1,725
Gains on depreciable property sales attributable to Investors Real Estate Trust		(8,958)					175
Funds from operations applicable to common shares and Units	$	15,850	137,402	$	0.12	$	22,006	138,806	$	0.16

(in thousands, except per share amounts)
Three Months Ended January 31, 2016 2015
Amount
Weighted
Avg Shares
and Units⁽¹⁾

Per
Share
And
Unit⁽²⁾
Amount
Weighted
Avg Shares
and Units⁽¹⁾

Per
Share
And
Unit⁽²⁾

Net income attributable to Investors Real Estate Trust $ 39,797 $ 8,371
Less dividends to preferred shareholders (2,879 ) (2,879 )
Net income available to common shareholders 36,918 121,864 $ 0.30 5,492 120,855 $ 0.05
Adjustments:
Noncontrolling interest – Operating Partnership 4,227 13,877 657 14,461
Depreciation and amortization of real property 14,975 17,706
Impairment of real estate investments 162 540
Gain on depreciable property sales (1,777 ) (951 )
FFO applicable to Common Shares and Units⁽¹⁾⁽³⁾
$ 54,505 135,741 $ 0.40 $ 23,444 135,316 $ 0.17

(in thousands, except per share amounts)
Nine Months Ended January 31, 2016 2015
Amount
Weighted
Avg Shares
and Units⁽¹⁾

Per
Share
And
Unit⁽²⁾
Amount
Weighted
Avg Shares
and Units⁽¹⁾

Per
Share
And
Unit⁽²⁾

Net income attributable to Investors Real Estate Trust $ 61,003 $ 13,334
Less dividends to preferred shareholders (8,636 ) (8,636 )
Net income available to common shareholders 52,367 123,793 $ 0.42 4,698 116,303 $ 0.04
Adjustments:
Noncontrolling interest – Operating Partnership 5,940 13,913 618 17,334
Depreciation and amortization of real property 48,095 52,367
Impairment of real estate investments 3,760 6,105
(Gain) loss on depreciable property sales (25,512 ) 811
FFO applicable to Common Shares and Units⁽¹⁾⁽³⁾
$ 84,650 137,706 $ 0.61 $ 64,599 133,637 $ 0.48

~~(1)~~

~~Units of the Operating Partnership are exchangeable for cash, or, at our discretion, for Common Shares on a one-for-one basis.~~

~~(2)~~

~~Net income attributable to Investors Real Estate Trust is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.~~

~~(3)~~

Excluding gain or loss on extinguishment of debt and default interest, FFO would have been $19.6 million and $0.14 per Common Share and Unit for the three months ended January 31, 2016 and $60.1 million and $0.44 per Common Share and Unit for the nine months ended January 31, 2016.

46(1)

~~Table~~Upon the exercise of ~~Contents~~

Exchange Rights, Units of the Operating Partnership are exchangeable for cash or, at our discretion, for Common Shares on a one-for-one basis.

(2)Net income attributable to Investors Real Estate Trust is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.

DISTRIBUTIONS

The following distributions per Common Share and Unit were paid during the ~~nine~~three months ended ~~January~~July 31 of fiscal years ~~2016~~2017 and ~~2015:~~2016:


Month	Fiscal Year 2017		Fiscal Year 2016
July	$	0.13	$	0.13

Month Fiscal Year 2016 Fiscal Year 2015
July $ .1300 $ .1300
October .1300 .1300
January .1300 .1300

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

Our principal liquidity demands are maintaining distributions to the holders of Common Shares, preferred shares and Units; capital improvements and repairs and maintenance to properties; acquisition of additional properties; property development; tenant improvements; and debt service and repayments.

We have historically met our short-term liquidity requirements through net cash flows provided by our operating activities, and, from time to time, through draws on secured and unsecured lines of credit. As of ~~January~~July 31, 2016, we had one multi-bank line of credit with a total commitment capacity of $100.0 million, secured by mortgages on 17 properties. Management considers our ability to generate cash from property operating activities, cash-out refinancing of existing properties and, from time to time, draws on our line of credit to be adequate to meet all operating requirements and to make distributions to our shareholders in accordance with the REIT provisions of the Internal Revenue Code. Budgeted expenditures for ongoing maintenance and capital improvements and renovations to our real estate portfolio are also generally expected to be funded from existing cash on hand, cash flow generated from property operations, cash-out refinancing of existing properties, and/or new borrowings. However, the real estate market continues to be subject to various market factors that can result in reduced tenant demand, occupancies and rental rates. In the event of deterioration in property operating results, or absent our ability to successfully continue cash-out refinancing of existing properties and/or new borrowings, we may need to consider additional cash preservation alternatives, including scaling back development activities, capital improvements and renovations and reducing the level of distributions to shareholders.

To the extent we do not satisfy our long-term liquidity requirements, which consist primarily of maturities under long-term debt, construction and development activities and potential acquisition opportunities, through net cash flows provided by operating activities and our credit facilities, we intend to satisfy such requirements through a combination of funding sources which we believe will be available to us, including the issuance of Units, additional common or preferred equity, proceeds from the sale of properties, and additional long-term secured or short-term unsecured indebtedness.

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SOURCES AND USES OF CASH

Credit markets continue to be stable, with credit availability relatively unconstrained and benchmark interest rates remaining at or near historic lows. While to date there has been no material negative impact on our ability to borrow in our multifamily segment, we continue to monitor the roles of the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) in financing multifamily properties and their general capacity to lend given allocations set by the Federal Housing Finance Agency. We consider that one of the consequences of a modification in the agencies’ roles in recent years could potentially lead to a narrowing of their lending focus away from the smaller secondary or tertiary markets which we generally target, to multifamily properties in major metropolitan markets. We have historically obtained a significant portion of our multifamily debt from Freddie Mac, and we continue to plan to refinance portions of our maturing multifamily debt with these two entities, so any change in their ability or willingness to lend going forward could result in higher loan costs and/or more constricted availability of financing for us. Underwriting on commercial real estate continues to be more conservative compared to the underwriting standards employed prior to the recessionary period and we continue to find recourse security more frequently required, lower amounts of proceeds available and lenders limiting the amount of financing available in an effort to manage capital allocations and credit risk. While we continue to expect to be able to refinance our debt maturing in the next twelve months without significant issues, we also expect lenders to continue to employ conservative underwriting regarding asset quality, occupancy levels and tenant creditworthiness. Accordingly, we remain cautious regarding our ability to rely on cash-out refinancing at levels we had achieved in recent years to provide funds for investment opportunities and other corporate purposes.

~~Table of Contents~~

As of ~~January~~July 31, 2016, approximately ~~16.6%~~94.6%, or ~~$8.3~~$31.7 million, of our mortgage debt maturing in the ~~fourth quarter of fiscal year 2016~~second and ~~first quarter~~third quarters of fiscal year 2017 is debt placed on multifamily assets, and approximately ~~83.4%~~5.4%, or ~~approximately $41.7~~$1.8 million, is debt placed on ~~properties in our~~ commercial ~~segments.~~properties. Of this ~~$50.0~~$33.5 million, we expect to pay off ~~$8.5~~$1.8 million and ~~renew $41.4~~refinance $31.7 million in the ~~fourth quarter of fiscal year 2016~~second and ~~first~~third quarter of fiscal year 2017. As of ~~January~~July 31, 2016, approximately ~~15.7%~~85.5%, or ~~$8.3~~$54.9 million, of our mortgage debt maturing in the next twelve months is debt placed on multifamily assets, and approximately ~~84.3%~~14.5%, or ~~$44.7~~$9.3 million, is debt placed on ~~properties in our~~ commercial ~~segments.~~

properties.

Our revolving, multi-bank line of credit with First International Bank as lead bank had, as of ~~January~~July 31, 2016, lending commitments of $100.0 million at an interest rate of 4.75%. As of ~~January~~July 31, 2016, the line of credit was secured by mortgages on 17 properties and had a minimum outstanding principal balance requirement of $17.5 million. As of ~~January~~July 31, 2016 and April 30, 2015, we had borrowed $17.5 million, ~~and $60.5 million,~~ respectively.


Financial Institution
First International Bank, Watford City, ND	$	6,000,000
Associated Bank, Green Bay, WI		3,000,000
The Private Bank, Minneapolis, MN		2,000,000
Bremer Bank, Saint Paul, MN		1,285,000
Dacotah Bank, Minot, ND		250,000
Peoples State Bank, Velva, ND		225,000
American National Bank, Omaha, NE		200,000
Commerce Bank a Minnesota Banking Corporation		100,000
Total	$	13,060,000

Financial Institution
First International Bank, Watford City, ND $ 6,000,000
Associated Bank, Green Bay, WI 3,000,000
The Private Bank, Minneapolis, MN 2,000,000
Bremer Bank, Saint Paul, MN 1,285,000
Dacotah Bank, Minot, ND 350,000
Peoples State Bank, Velva, ND 225,000
American National Bank, Omaha, NE 200,000
Commerce Bank a Minnesota Banking Corporation 100,000
Total $ 13,160,000

Current anticipated total project costs for development projects in progress at ~~January~~July 31, 2016 and placed in service during the three months end July 31, 2016 total approximately ~~$178.2~~$105.1 million (including costs incurred by project joint venture entities), of which approximately ~~$157.0~~$99.6 million has been incurred as of ~~January~~July 31, 2016. As of ~~January~~July 31, 2016, the Operating Partnership (or the project joint venture entities) had entered into construction loans totaling approximately ~~$109.3~~$72.8 million for development projects in progress. In addition to current planned expenditures for development projects in progress, as of ~~January~~July 31, 2016, we are committed to fund ~~$4.5~~$5.3 million in tenant improvements within approximately the next 12 months.

Table of Contents

The issuance of Units for property acquisitions continues to be an expected source of capital for us. There were no Units issued in the three months ended ~~January 31, 2016. In the nine months ended January~~July 31, 2016 ~~approximately 44,000 Units, valued at issuance at $400,000 were issued in connection with our acquisition of property. There were no Units issued in the three months ended January 31,~~and 2015. ~~During the nine months ended January 31, 2015, approximately 11,000 Units, valued at issuance at $100,000 were issued in connection with our acquisition of property.~~

Under our DRIP, common shareholders and Unitholders have an opportunity to use their cash distributions to purchase additional Common Shares, and to purchase additional shares through voluntary cash contributions. As permitted under the DRIP, starting on October 1, 2015, we changed the source from which Common Shares will be purchased under the DRIP to open market transactions, which are not eligible for purchase price discounts. During the ~~nine~~three months ended ~~January~~July 31, 2016, ~~and~~no shares were issued under the DRIP. During the three months ended July 31, 2015, approximately ~~821,000 and 6.2 million~~766,000 Common Shares with a total value included in equity of ~~$5.6 million and $50.9~~$5.2 million, and an average price per share after applicable discounts of ~~$6.85 and $8.20, respectively,~~$6.84, were issued under the ~~DRIP plan.~~

DRIP.

Cash and cash equivalents at ~~January~~July 31, 2016 totaled ~~$47.1~~$54.4 million, compared to ~~$52.1~~$44.8 million at ~~January~~July 31, 2015, ~~a decrease~~an increase of ~~$5.0~~$9.6 million. Net cash provided by operating activities for the ~~nine~~three months ended ~~January~~July 31, 2016 decreased by ~~$33.8~~$9.0 million compared to the ~~nine~~three months ended ~~January~~July 31, 2015, primarily due to ~~a decrease~~an increase in accounts receivable and accounts payable and a decrease in net income adjusted for depreciation, loss on impairment, and gain on sale of ~~discontinued operations and gain on debt extinguishment.~~real estate investments. Net cash ~~provided~~used by investing activities was ~~$176.7~~$2.4 million for the ~~nine~~three months ended ~~January~~July 31, 2016, compared to net cash used of ~~$160.2~~$45.5 million for the ~~nine~~three months ended ~~January~~July 31, 2015. This change was primarily due to an increase in proceeds from sale of ~~discontinued operations~~real estate investments net of ~~an increase~~a decrease in payments for ~~acquisitions~~development of real estate. Net cash used by financing activities for the ~~nine~~three months ended ~~January~~July 31, 2016 was ~~$225.5~~$25.6 million, compared to net cash provided of ~~$84.4~~$16.5 million for the ~~nine~~three months ended ~~January~~July 31, 2015. This change was primarily due to ~~an increase~~a decrease in ~~payments on~~proceeds from mortgage debt, ~~and payments on~~ the revolving line of credit, and ~~other~~construction debt, ~~an increase in the repurchase~~net of ~~common shares and~~ a decrease in ~~proceeds from sale of common shares.~~

~~Table of Contents~~

payments on mortgage debt.

FINANCIAL CONDITION

Mortgage Loan Indebtedness. Mortgage loan indebtedness, ~~increased~~including mortgages on properties held for sale, decreased by approximately ~~$93.5~~$1.7 million as of ~~January~~July 31, 2016, compared to April 30, ~~2015,~~2016, due to ~~new loans.~~loan payoffs. As of ~~January~~July 31, 2016, approximately ~~88.2%~~76.4% of our ~~$761.6~~$884.4 million of mortgage debt is at fixed rates of interest, with staggered maturities. This limits our exposure to changes in interest rates, which minimizes the effect of interest rate fluctuations on our results of operations and cash flows. As of ~~January~~July 31, 2016, the weighted average rate of interest on our mortgage debt was ~~4.83%~~4.54%, compared to ~~4.95%~~4.54% on April 30, ~~2015.~~

2016.

Property Owned. Property owned was ~~$1.8~~$1.7 billion at ~~January~~July 31, 2016 ~~compared to $1.5 billion at~~and April 30, ~~2015.~~2016. During the ~~nine~~three months ended ~~January~~July 31, 2016, we had ~~three~~no new acquisitions and disposed of 67two properties, as described above in the “Property Acquisitions and Dispositions” subsection of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cash and Cash Equivalents. Cash and cash equivalents on hand on ~~January~~July 31, 2016 were ~~$47.1~~$54.4 million, compared to ~~$49.0~~$66.7 million on April 30, ~~2015.~~

~~Other Investments.~~ 2016.~~Other investments, consisting of certificates of deposit held primarily for compensating balances, totaled approximately $50,000 and $329,000 on January 31, 2016 and on April 30, 2015, respectively.~~

Operating Partnership Units. Outstanding Units in the Operating Partnership ~~decreased to 13.9~~were 16.3 million Units at ~~January~~July 31, 2016 ~~compared to 14.0 million Units outstanding at~~and April 30, ~~2015. The decrease resulted primarily from Unitholders exercising their Exchange Right, receiving in exchange an equal number of Common Shares.~~

2016.

Common and Preferred Shares of Beneficial Interest. Common Shares outstanding on ~~January~~July 31, 2016 ~~totaled 120.9 million, compared to 124.5 million outstanding on~~and April 30, ~~2015. We issued Common Shares pursuant to our DRIP, consisting of approximately 821,000 Common Shares issued during the nine months ended January 31,~~ 2016 for a total value of $5.6 million. Exchanges of approximately 181,000 Units for Common Shares, for a total of approximately $981,000 in shareholders’ equity, also increased the number of Common Shares outstanding during the nine months ended January 31, 2016.totaled 121.4 million and 121.1 million, respectively. We issued approximately ~~220,000~~378,000 Common Shares, ~~net of withholding,~~ with a total grant-date value of approximately ~~$1.6~~$1.4 million under our ~~2008~~2015 Incentive Award Plan, for executive officer and trustee ~~share-based~~share based compensation for future performance. We also issued approximately 59,000 Common Shares, with a total grant-date value of approximately $352,000, under our 2008 Incentive Award Plan for trustee share based compensation for fiscal year ~~2015~~2016 performance. During the nine months ended January 31, 2016 of fiscal year 2016, we repurchased and retired approximately 4.6 million Common Shares for an aggregate cost of approximately $35.0 million, including commissions.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is limited primarily to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations.

Approximately ~~88.2%~~76.4% and ~~92.8%~~77.8% of our mortgage debt, ~~excluding~~including mortgage debt related to properties held for sale, ~~assets,~~ as of ~~January~~July 31, 2016 and April 30, ~~2015,~~2016, respectively, is at fixed interest rates. Therefore, we have little exposure to interest rate fluctuation risk on our existing mortgage debt. Accordingly, interest rate fluctuations during the ~~third~~first quarter of fiscal year ~~2016~~2017 did not have a material effect on us. Even though our goal is to maintain a fairly low exposure to interest rate risk, we may become vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt and on future debt.

We primarily use long-term (more than nine years) and medium term (five to seven years) debt as a source of capital. We do not currently use derivative securities, interest rate swaps or any other type of hedging activity to manage our interest rate risk. As of ~~January~~July 31, 2016, we had the following amounts of future principal and interest payments due on mortgages, including mortgages held for sale, secured by our real estate:


	(In thousands)
	Future Principal Payments
	Remaining
Mortgages	Fiscal 2017			Fiscal 2018			Fiscal 2019			Fiscal 2020			Fiscal 2021			Thereafter		Total		Fair Value
Fixed Rate	$	14,583		$	38,303		$	79,534		$	63,780		$	154,394		$	257,395	$	607,989	$	676,172
Avg Fixed Interest Rate		3.69	%		4.80	%		4.64	%		4.44	%		3.79	%

Variable Rate	$	65,090		$	27,976		$	65,619		$	48,446		$	67		$	1,439	$	208,637	$	208,637
Avg Variable Interest Rate		2.41	%		3.57	%		3.65	%		5.07	%		3.92	%

Held for Sale	$	47,017		$	1,106		$	6,921		$	612		$	4,901		$	7,237	$	67,794	$	79,632
Avg Fixed Interest Rate		2.93	%		5.74	%		4.73	%		5.86	%		4.96	%
																		$	884,420	$	964,441

(in thousands)
Future Principal Payments
Mortgages
Remaining
Fiscal 2016
Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Thereafter Total Fair Value
Fixed Rate $ 46,209 $ 34,003 $ 39,110 $ 86,187 $ 64,067 $ 402,075 $ 671,651 $ 713,485
Avg Fixed Interest Rate⁽¹⁾
4.83 % 4.92 % 4.95 % 4.74 % 4.58 %

Variable Rate $ 501 $ 9,540 $ 2,119 $ 30,411 $ 47,423 $ 0 $ 89,994 $ 89,994
Avg Variable Interest Rate⁽¹⁾
4.08 % 4.04 % 4.17 % 4.69 % 4.82 %

Held for Sale $ 131 $ 541 $ 576 $ 9,413 $ 0 $ 0 10,661 12,757
Avg Fixed Interest Rate⁽¹⁾
6.26 % 6.14 %% 6.13 % 6.10 % 0 %
$ 772,306 $ 816,236

	(in thousands)
	Future Interest Payments																					(in thousands)
Mortgages	Remaining Fiscal 2016			Fiscal 2017			Fiscal 2018			Fiscal 2019			Fiscal 2020			Thereafter			Total
																						Future Interest Payments
Long Term Debt																						Remaining Fiscal 2016		Fiscal 2017		Fiscal 2018		Fiscal 2019		Fiscal 2020		Thereafter		Total
Fixed Rate		$	8,103		$	30,747		$	28,734		$	25,760		$	20,988		$	43,097		$	157,429	$	22,445	$	28,454	$	25,731	$	21,129	$	15,619	$	28,941	$	142,319
Variable Rate			917			3,622			3,331			2,581			1,472			0			11,923		4,636		4,844		3,574		1,412		59		14		14,539
Held for Sale			168			647			612			574			0			0			2,001		1,984		1,193		930		747		603		316		5,773
																				$	171,353													$	162,631

~~(1)~~

(1)

Interest rate given is for the entire year.

The weighted average interest rate on our fixed rate and variable rate debt, excluding mortgages related to assets held for sale, as of ~~January~~July 31, 2016, was ~~4.80%~~4.56%. Any fluctuations in variable interest rates could increase or decrease our interest expenses. For example, an increase of one percent per annum on our ~~$90.0~~$208.6 million of variable rate mortgage indebtedness would increase our annual interest expense by approximately ~~$900,000.~~

$2.1 million.

Exposure to interest rate fluctuation risk on our $100.0 million secured line of credit is limited by a cap on the interest rate of 8.65% with a floor of 4.75%. The line of credit has an interest rate equal to the Wall Street Journal Prime Rate plus 1.25%, matures in September 2017 and had an outstanding balance of $17.5 million at ~~January~~July 31, 2016.

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures:

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~January~~July 31, 2016, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting:

There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II — OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

None

~~Item 1A.~~

~~Risk Factors~~

The level of oil and gas drilling in the Bakken Shale Formation has declined substantially and has adversely impacted our apartments in western North Dakota. This condition could persist for an extended period of time. Item 1A. Risk FactorsWe have ownership interests in three apartment projects totaling 477 units in Williston, ND, the heart of the Bakken Shale Formation. The economy of Williston is significantly dependent on the oil and gas industry. To date we have experienced significant increased vacancy and a material decrease in our rents. We also have ownership interests in 1,039 units in Minot, ND that to a lesser extent ~~have experienced~~ declines in occupancy and rent rates. Oil drilling and production are impacted by factors beyond our control, including: the demand for and prices of crude oil and natural gas; environmental regulation and enforcement; producers’ finding and development costs of reserves; producers’ desire and ability to obtain necessary permits in a timely and economic manner; oil and natural gas field characteristics and production performance; and transportation and capacity constraints on natural gas, crude oil and natural gas liquids pipelines from the producing areas. Oil field activity could decline further in North Dakota as a result of any or all of these factors, which could have a material adverse effect on ~~our western North~~ ~~Dakota properties.~~

None

~~Item 2.~~

Item 2. Unregistered ~~Sales of Equity Securities and Use of Proceeds~~

Sales of Equity Securities

~~During the third quarter~~ and Use of fiscal year 2016, we issued an aggregate of 2,756 unregistered Common Shares to limited partners of the Operating Partnership, upon exercise of their Exchange Rights regarding an equal number of Units. All such issuances of Common Shares were exempt from registration as private placements under Section 4(2) of the Securities Act, including Regulation D promulgated thereunder. We have registered the re-sale of such Common Shares under the Securities Act.

~~Share Repurchase Program~~

Our Board of Trustees has authorized a share repurchase program of up to $50.0 million worth of our Common Shares over a one year period. Effective September 14, 2015 and December 15, 2015, as part of the implementation of the program, we established written trading plans (“Plans”) that provide for share repurchases in open market transactions that are intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The extent to which shares are repurchased and the timing of such repurchases will depend upon a variety of factors, including prevailing market conditions, regulatory requirements and other factors. The program does not obligate us to repurchase any specific number of shares and may be suspended at any time in our discretion. The following is a summary of the Common Shares repurchased under the Plans during the third quarter of fiscal year 2016:

~~The following is a summary of the Common Shares repurchased under the Plans during the third quarter of fiscal year 2016:~~

Period
Total Number of
Shares Purchased

Average Price
Paid per
Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs¹

Maximum Number (or
Approximate Dollar
Value) of Shares That May
Yet Be Purchased Under
the Plans or Programs

Beginning Balance $ 28,068,572
November 1 – 30, 2015 376,872 $ 8.14 376,872 25,000,302
December 1 – 31, 2015 759,011 7.15 759,011 19,574,309
January 1 – 31, 2016 654,742 6.99 654,742 15,000,334
Total 1,790,625 $ 7.30 1,790,625 $ 15,000,334

~~(1)~~

~~On August 8, 2015, we publicly announced the share repurchase program to repurchase up to $50.0 million worth of our Common Shares over a one year period.~~

Proceeds

None

~~Item 3.~~

~~Defaults Upon Senior Securities~~

Item 3. Defaults Upon Senior Securities

None

~~Table of Contents~~

~~Item 4.~~

~~Mine Safety Disclosures~~

Item 4. Mine Safety Disclosures

Not Applicable

~~Item 5.~~

~~Other Information~~

Item 5. Other Information

None

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits

Table of Contents

EXHIBIT INDEX

Exhibit No.	Description
10.1*	Separation Agreement and Release dated August 1, 2016 between the Company and Mark W. Reiling.
10.2* 31.1*	Stock Award Agreement under the 2015 Incentive Plan dated August 8, 2016 issued to Mark O. Decker, Jr. Section 302 Certification of ~~President and~~ Chief Executive Officer
31.2*
31.2*	Section 302 Certification of Executive Vice President and Chief Financial Officer
32.1*
32.1*	Section 906 Certifications of ~~President and~~ Chief Executive Officer
32.2*
32.2*	Section 906 Certifications of Executive Vice President and Chief Financial Officer
101*
101*	The following materials from our Quarterly Report on Form 10-Q for the quarter ended ~~January~~July 31, 2016 formatted in eXtensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) notes to these condensed consolidated financial statements.

* Filed herewith

Table of Contents

Signatures~~Signatures~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INVESTORS REAL ESTATE TRUST

(Registrant)

~~(Registrant)~~

/s/ Timothy P. Mihalick
Timothy P. Mihalick
~~President and~~ Chief Executive Officer

/s/ Ted E. Holmes
Ted E. Holmes
Executive Vice President and Chief Financial Officer

Date: ~~March 10,~~September 8, 2016

North Dakota		45-0311232
(State or other jurisdiction of ~~incorporation or organization)~~		(I.R.S. Employer Identification No.)
incorporation or organization)

1400 31st Avenue SW, Suite 60
Post Office Box 1988
Minot, ND 58702-1988
(Address of principal executive offices) (Zip code)


Large accelerated filer ☑	Accelerated filer ☐
	Non-accelerated filer ☐	Smaller Reporting Company ☐

	~~Page~~
	Page
Part I. Financial Information
~~Item 1. Financial Statements - Third Quarter - Fiscal 2016:~~	3
Condensed Consolidated Balance Sheets (unaudited) ~~January~~July 31, 2016 and April 30, 2015 6	3
Condensed Consolidated Statements of Operations (unaudited)For the Three ~~and Nine~~ Months ended ~~January~~July 31, 2016 and 2015	4
Condensed Consolidated Statements of Equity (unaudited)For the ~~Nine~~Three Months ended ~~January~~July 31, 2016 and 2015	5
Condensed Consolidated Statements of Cash Flows (unaudited)For the ~~Nine~~Three Months ended ~~January~~July 31, 2016 and 2015	6
Notes to Condensed Consolidated Financial Statements (unaudited~~(unaudited~~)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29 27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	50 42
Item 4. Controls and Procedures	51 43

Part II. Other Information
Item 1. Legal Proceedings	52 44
Item 1A. Risk Factors	52 44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	52 44
Item 3. Defaults Upon Senior Securities	52 44
Item 4. Mine Safety Disclosures	53 44
Item 5. Other Information	53 44
Item 6. Exhibits	53 44
Signatures	55 46

	(in thousands, except share data)
	January 31, 2016			April 30, 2015
ASSETS
Real estate investments
Property owned	$	1,801,019		$	1,546,367
Less accumulated depreciation		(346,895	)		(313,308	)
		1,454,124			1,233,059
Development in progress		78,341			153,994
Unimproved land		22,304			25,827
Total real estate investments		1,554,769			1,412,880
Assets held for sale		22,064			463,103
Cash and cash equivalents		47,117			48,970
Other investments		50			329
Receivable arising from straight-lining of rents, net of allowance of $766 and $718, respectively		16,778			15,617
Accounts receivable, net of allowance of $163 and $438, respectively		5,118			2,865
Real estate deposits		1,250			2,489
Prepaid and other assets		3,943			3,174
Intangible assets, net of accumulated amortization of $21,214 and $19,610, respectively		23,913			26,213
Tax, insurance, and other escrow		7,834			10,073
Property and equipment, net of accumulated depreciation of $1,116 and $1,464, respectively		1,442			1,542
Goodwill		1,715			1,718
Deferred charges and leasing costs, net of accumulated amortization of $9,078 and $8,077, respectively		9,816			8,864
TOTAL ASSETS	$	1,695,809		$	1,997,837
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
LIABILITIES
Liabilities held for sale	$	11,449		$	321,393
Accounts payable and accrued expenses		48,778			56,399
Revolving line of credit		17,500			60,500
Mortgages payable		761,645			668,112
Construction debt and other		140,264			144,111
TOTAL LIABILITIES		979,636			1,250,515
COMMITMENTS AND CONTINGENCIES (NOTE 6)
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES		7,244			6,368
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 January 31, 2016 and April 30, 2015, 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 January 31, 2016 and April 30, 2015, aggregate liquidation preference of $115,000,000)		111,357			111,357
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 121,033,647 shares issued and outstanding at January 31, 2016, and 124,455,624 shares issued and outstanding at April 30, 2015)		924,658			951,868
Accumulated distributions in excess of net income		(434,388	)		(438,432	)
Total Investors Real Estate Trust shareholders’ equity		628,944			652,110
Noncontrolling interests – Operating Partnership (13,863,575 units at January 31, 2016 and 13,999,725 units at April 30, 2015)		58,254			58,325
Noncontrolling interests – consolidated real estate entities		21,731			30,519
Total equity		708,929			740,954
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	1,695,809		$	1,997,837

	(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, 2014		5,750	$	138,674		109,019		$	843,268		$	(389,758	)	$	128,362		$	720,546
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests												13,334			1,351			14,685
Distributions – common shares and units												(45,222	)		(6,753	)		(51,975	)
Distributions – Series A preferred shares												(1,779	)					(1,779	)
Distributions – Series B preferred shares												(6,857	)					(6,857	)
Distribution reinvestment and share purchase plan						6,205			50,875									50,875
Share-based compensation						204			2,632									2,632
Partnership units issued															100			100
Redemption of units for common shares						6,706			38,512						(38,512	)		0
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities															8,540			8,540
Distributions paid to non-controlling interests															(555	)		(555	)
Balance January 31, 2015		5,750	$	138,674		122,134		$	935,287		$	(430,282	)	$	92,533		$	736,212


Balance April 30, 2015		5,750	$	138,674		124,455		$	951,868		$	(438,432	)	$	88,844		$	740,954
Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests												61,003			4,087			65,090
Distributions – common shares and units												(48,323	)		(5,431	)		(53,754	)
Distributions – Series A preferred shares												(1,779	)					(1,779	)
Distributions – Series B preferred shares												(6,857	)					(6,857	)
Distribution reinvestment and share purchase plan						821			5,619									5,619
Share-based compensation						220			1,191									1,191
Partnership units issued															400			400
Redemption of units for common shares						181			980						(980	)		0
Shares repurchased						(4,643	)		(35,000	)								(35,000	)
Distributions paid to non-controlling interests															(6,935	)		(6,935	)
Balance January 31, 2016		5,750	$	138,674		121,034		$	924,658		$	(434,388	)	$	79,985		$	708,929

	(in thousands)
Three Months Ended January 31, 2016	Multifamily		Healthcare			Industrial		All Other		Total
Real estate revenue	$	33,296	$	18,350		$	1,650	$	1,473	$	54,769
Real estate expenses		15,460		4,208			453		215		20,336
Net operating income	$	17,836	$	14,142		$	1,197	$	1,258		34,433
TRS senior housing revenue, net of expenses											91
Depreciation/amortization											(14,919	)
Administrative expenses											(2,929	)
Other expenses											(86	)
Impairment of real estate investments					��						(162	)
Interest expense											(10,540	)
Interest and other income											701
Income before gain on sale of real estate and other investments and income from discontinued operations											6,589
Gain on sale of real estate and other investments											1,446
Income from continuing operations											8,035
Income from discontinued operations											35,408
Net income										$	43,443

	(in thousands)
Three Months Ended January 31, 2015	Multifamily		Healthcare		Industrial		All Other		Total
Real estate revenue	$	30,256	$	17,491	$	1,741	$	2,488	$	51,976
Real estate expenses		13,318		4,260		501		1,039		19,118
Net operating income	$	16,938	$	13,231	$	1,240	$	1,449		32,858
TRS senior housing revenue, net of expenses										138
Depreciation/amortization										(12,837	)
Administrative expenses										(2,754	)
Other expenses										(488	)
Impairment of real estate investments										(540	)
Interest expense										(10,009	)
Interest and other income										670
Income before gain on sale of real estate and other investments and income from discontinued operations										7,038
Gain on sale of real estate and other investments										951
Income from continuing operations										7,989
Income from discontinued operations										1,162
Net income									$	9,151

	(in thousands)
Nine Months Ended January 31, 2016	Multifamily		Healthcare		Industrial		All Other		Total
Real estate revenue	$	96,782	$	50,435	$	4,913	$	3,862	$	155,992
Real estate expenses		44,602		12,202		1,138		826		58,768
Net operating income	$	52,180	$	38,233	$	3,775	$	3,036		97,224
TRS senior housing revenue, net of expenses										513
Depreciation/amortization										(42,992	)
Administrative expenses										(8,316	)
Other expenses										(1,714	)
Impairment of real estate investments										(3,320	)
Interest expense										(29,867	)
Loss on extinguishment of debt										(106	)
Interest and other income										1,973
Income before gain on sale of real estate and other investments and income from discontinued operations										13,395
Gain on sale of real estate and other investments										1,271
Income from continuing operations										14,666
Income from discontinued operations										50,181
Net income									$	64,847

	(in thousands)
Nine Months Ended January 31, 2015	Multifamily		Healthcare		Industrial		All Other		Total
Real estate revenue	$	87,576	$	50,024	$	4,904	$	8,239	$	150,743
Real estate expenses		37,700		12,726		1,223		3,485		55,134
Net operating income	$	49,876	$	37,298	$	3,681	$	4,754		95,609
TRS senior housing revenue, net of expenses										356
Depreciation/amortization										(38,347	)
Administrative expenses										(9,308	)
Other expenses										(1,678	)
Impairment of real estate investments										(4,663	)
Interest expense										(29,710	)
Interest and other income										2,052
Income before loss on sale of real estate and other investments and income from discontinued operations										14,311
Loss on sale of real estate and other investments										(811	)
Income from continuing operations										13,500
Income from discontinued operations										1,322
Net income									$	14,822

	(in thousands)
As of January 31, 2016	Multifamily			Healthcare			Industrial			All Other			Total

Segment Assets
Property owned	$	1,133,560		$	559,997		$	61,238		$	46,224		$	1,801,019
Less accumulated depreciation		(200,363	)		(123,992	)		(12,494	)		(10,046	)		(346,895	)
Net property owned	$	933,197		$	436,005		$	48,744		$	36,178			1,454,124
Assets held for sale														22,064
Cash and cash equivalents														47,117
Other investments														50
Receivables and other assets														71,809
Development in progress														78,341
Unimproved land														22,304
Total assets													$	1,695,809

	(in thousands)
As of April 31, 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)
			Total Acquisition Cost		Form of Consideration				Investment Allocation
Acquisitions	Date Acquired		Total Acquisition Cost		Cash		Units⁽¹⁾		Land		Building		Intangible Assets

Multifamily
74 unit - Gardens - Grand Forks, ND		2015-09-10	$	9,250	$	8,850	$	400	$	518	$	8,672	$	60
276 unit - GrandeVille at Cascade Lake - Rochester, MN		2015-10-29		56,000		56,000		0		5,003		50,363		634
				65,250		64,850		400		5,521		59,035		694

Healthcare
27,819 sq ft Lakeside Medical Plaza - Omaha, NE		2015-08-20		6,500		6,500		0		903		5,109		488

Total Property Acquisitions			$	71,750	$	71,350	$	400	$	6,424	$	64,144	$	1,182

	(in thousands)
Nine Months Ended January 31,	2016			2015
Total revenue	$	1,969		$	1,756
Net income (loss)	$	(62	)	$	(27	)

			(in thousands)
Development Projects Placed in Service⁽¹⁾	Date Placed in Service		Land		Building		Development Cost

Multifamily
72 unit – Chateau II - Minot, ND⁽²⁾		2015-06-01	$	240	$	14,401	$	14,641
288 unit – Renaissance Heights - Williston, ND⁽³⁾		2015-07-27		3,080		59,371		62,451
				3,320		73,772		77,092

Healthcare
57,624 sq ft Edina 6565 France SMC III - Edina, MN⁽⁴⁾		2015-06-01		0		32,725		32,725
70,756 sq ft PrairieCare Medical – Brooklyn Park, MN⁽⁵⁾		2015-09-08		2,610		21,748		24,358
				2,610		54,473		57,083

Other
7,963 sq ft Minot Southgate Retail - Minot, ND⁽⁶⁾		2015-10-01		889		1,734		2,623

Total Development Projects Placed in Service			$	6,819	$	129,979	$	136,798

			(in thousands)
Dispositions	Date Disposed		Sales Price			Book Value and Sales Cost			Gain/(Loss)

Other
117,144 sq ft Thresher Square – Minneapolis, MN		2015-05-18	$	7,000		$	7,175		$	(175	)
2,549,222 sq ft Office Sale Portfolio⁽¹⁾		2015-08-03		250,000			231,537			18,463
420,216 sq ft Mendota Office Center Portfolio – Mendota Heights, MN⁽²⁾		2015-08-12		40,000			41,574			(1,574	)
1,027,208 sq ft Retail Sale Portfolio⁽³⁾		2015-09-30		78,960			71,913			7,047
48,700 sq ft Eden Prairie 6101 Blue Circle Drive – Eden Prairie, MN		2015-10-19		2,900			2,928			(28	)
8,526 sq ft Burnsville I Strip Center – Burnsville, MN		2015-12-23		1,300			913			387
4,800 sq ft Pine City C-Store – Pine City, MN		2016-01-08		300			355			(55	)
11,003 sq ft Minot Plaza – Minot, ND		2016-01-19		1,854			393			1,461
937,518 sq ft 9-Building Office Portfolio⁽⁴⁾⁽⁵⁾		2016-01-29		122,600	⁽⁵⁾		86,144	⁽⁵⁾		36,456	⁽⁵⁾

Total Property Dispositions			$	504,914		$	442,932		$	61,982

Fiscal year ended April 30,	(in thousands)
2016 (remainder)	$	46,710
2017		43,543
2018		41,229
2019		116,598
2020		111,490
Thereafter		402,075
Total payments	$	761,645

	(in thousands)
Balance at April 30, 2015	$	6,368
Contributions		1,120
Net loss		(244	)
Balance at January 31, 2016	$	7,244

Class of shares/units	Quarterly Amount per Share or Unit		Record Date	Payment Date
Common shares and limited partnership units	$	0.1300	March 21, 2016	April 1, 2016
Preferred shares:
Series A	$	0.5156	March 21, 2016	March 31, 2016
Series B	$	0.4968	March 21, 2016	March 31, 2016

	(in thousands, except percentages)
	Three Months Ended												Nine Months Ended
	January 31						2016 vs 2015						January 31						2016 vs 2015
	2016			2015			$ Change			% Change			2016			2015			$ Change			% Change
Real estate rentals	$	50,277		$	46,753		$	3,524			7.5	%	$	142,526		$	135,621		$	6,905			5.1	%
Tenant reimbursement		4,492			5,223			(731	)		(14.0	)%		13,466			15,122			(1,656	)		(11.0	)%
TRS senior housing revenue		1,003			963			40			4.2	%		3,006			2,599			407			15.7	%
TOTAL REVENUE		55,772			52,939			2,833			5.4	%		158,998			153,342			5,656			3.7	%
Depreciation/amortization related to real estate investments		14,789			12,627			2,162			17.1	%		42,522			37,700			4,822			12.8	%
Utilities		3,427			3,564			(137	)		(3.8	)%		9,757			9,533			224			2.3	%
Maintenance		5,821			5,033			788			15.7	%		16,979			15,081			1,898			12.6	%
Real estate taxes		5,029			5,284			(255	)		(4.8	)%		14,948			15,052			(104	)		(0.7	)%
Insurance		1,214			1,215			(1	)		(0.1	)%		3,558			3,745			(187	)		(5.0	)%
Property management expenses		4,676			3,825			851			22.2	%		13,182			10,970			2,212			20.2	%
Other property expenses		169			197			(28	)		(14.2	)%		344			753			(409	)		(54.3	)%
TRS senior housing expenses		912			825			87			10.5	%		2,493			2,243			250			11.1	%
Administrative expenses		2,929			2,754			175			6.4	%		8,316			9,308			(992	)		(10.7	)%
Other expenses		86			488			(402	)		(82.4	)%		1,714			1,678			36			2.1	%
Amortization related to non-real estate investments		130			210			(80	)		(38.1	)%		470			647			(177	)		(27.4	)%
Impairment of real estate investments		162			540			(378	)		(70.0	)%		3,320			4,663			(1,343	)		(28.8	)%
TOTAL EXPENSES		39,344			36,562			2,782			7.6	%		117,603			111,373			6,230			5.6	%
Operating income		16,428			16,377			51			0.3	%		41,395			41,969			(574	)		(1.4	)%
Interest expense		(10,540	)		(10,009	)		(531	)		5.3	%		(29,867	)		(29,710	)		(157	)		0.5	%
Loss on extinguishment of debt		0			0			0			n/a			(106	)		0			(106	)		n/a
Interest income		566			561			5			0.9	%		1,687			1,681			6			0.4	%
Other income		135			109			26			23.9	%		286			371			(85	)		(22.9	)%
Income before gain (loss) on sale of real estate and other investments and income from discontinued operations		6,589			7,038			(449	)		(6.4	)%		13,395			14,311			(916	)		(6.4	)%
Gain (loss) on sale of real estate and other investments		1,446			951			495			52.1	%		1,271			(811	)		2,082			(256.7	)%
Income from continuing operations		8,035			7,989			46			0.6	%		14,666			13,500			1,166			8.6	%
Income from discontinued operations		35,408			1,162			34,246			2,947.2	%		50,181			1,322			48,859			3,695.8	%
NET INCOME		43,443			9,151			34,292			374.7	%		64,847			14,822			50,025			337.5	%
Net income attributable to noncontrolling interests – Operating Partnership		(4,227	)		(657	)		(3,570	)		543.4	%		(5,940	)		(618	)		(5,322	)		861.2	%
Net loss (income) attributable to noncontrolling interests – consolidated real estate entities		581			(123	)		704			(572.4	)%		2,096			(870	)		2,966			(340.9	)%
Net income attributable to Investors Real Estate Trust		39,797			8,371			31,426			375.4	%		61,003			13,334			47,669			357.5	%
Dividends to preferred shareholders		(2,879	)		(2,879	)		0			0.0	%		(8,636	)		(8,636	)		0			0.0	%
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	36,918		$	5,492			31,426			572.2	%	$	52,367		$	4,698			47,669			1,014.7	%

	(in thousands)
	Increase in Total Revenue Three Months ended January 31, 2016
Revenue primarily from properties acquired and development projects placed in service in Fiscal 2016	$	3,496
Increase in revenue primarily from properties acquired and development projects placed in service in Fiscal 2015		1,227
Decrease in revenue on same-store properties, excluding straight line rent⁽¹⁾		(188	)
Net change in straight line rent on same-store properties⁽¹⁾		(16	)
Decrease in revenue from properties sold or classified as held for sale in Fiscal 2016 and 2015		(1,726	)
Increase in TRS senior housing revenue⁽²⁾		40
Net increase in total revenue	$	2,833

	(in thousands)
	Increase in Total Revenue Nine Months ended January 31, 2016
Revenue primarily from properties acquired and development projects placed in service in Fiscal 2016	$	4,575
Increase in revenue primarily from properties acquired and development projects placed in service in Fiscal 2015		7,196
Increase in revenue on same-store properties, excluding straight line rent⁽¹⁾		87
Net change in straight line rent on same-store properties⁽¹⁾		(553	)
Decrease in revenue from properties sold or classified as held for sale in Fiscal 2016 and 2015		(6,056	)
Increase in TRS senior housing revenue⁽²⁾		407
Net increase in total revenue	$	5,656

	Same-Store Properties						All Properties
	As of January 31,						As of January 31,
Segments	2016			2015			2016			2015
Multifamily		94.9	%		94.5	%		91.1	%		91.3	%
Healthcare		95.8	%		95.8	%		94.7	%		95.9	%
Industrial		100.0	%		100.0	%		85.3	%		100.0	%

	(in thousands, except percentages)
	Three Months Ended January 31												Nine Months Ended January 31
	2016			2015			$ Change			% Change			2016			2015			$ Change			% Change
All Segments

Real estate revenue
Same-store	$	44,928		$	45,132		$	(204	)		(0.5	)%	$	132,534		$	133,000		$	(466	)		(0.4	)%
Non-same-store⁽¹⁾		9,841			6,844			2,997			43.8	%		23,458			17,743			5,715			32.2	%
Total	$	54,769		$	51,976		$	2,793			5.4	%	$	155,992		$	150,743		$	5,249			3.5	%

Real estate expenses
Same-store	$	16,328		$	16,447		$	(119	)		(0.7	)%	$	48,916		$	48,109		$	807			1.7	%
Non-same-store⁽¹⁾		4,008			2,671			1,337			50.1	%		9,852			7,025			2,827			40.2	%
Total	$	20,336		$	19,118		$	1,218			6.4	%	$	58,768		$	55,134		$	3,634			6.6	%

Net operating income
Same-store	$	28,600		$	28,685		$	(85	)		(0.3	)%	$	83,618		$	84,891		$	(1,273	)		(1.5	)%
Non-same-store⁽¹⁾		5,833			4,173			1,660			39.8	%		13,606			10,718			2,888			26.9	%
Total	$	34,433		$	32,858		$	1,575			4.8	%	$	97,224		$	95,609		$	1,615			1.7	%
TRS senior housing revenue, net of expenses		91			138									513			356
Depreciation/amortization		(14,919	)		(12,837	)								(42,992	)		(38,347	)
Administrative expenses		(2,929	)		(2,754	)								(8,316	)		(9,308	)
Other expenses		(86	)		(488	)								(1,714	)		(1,678	)
Impairment of real estate investments		(162	)		(540	)								(3,320	)		(4,663	)
Interest expense		(10,540	)		(10,009	)								(29,867	)		(29,710	)
Loss on extinguishment of debt		0			0									(106	)		0
Interest and other income		701			670									1,973			2,052
Income before gain (loss) on sale of real estate and other investments and income from discontinued operations		6,589			7,038									13,395			14,311
Gain (loss) on sale of real estate and other investments		1,446			951									1,271			(811	)
Income from continuing operations		8,035			7,989									14,666			13,500
Income from discontinued operations⁽²⁾		35,408			1,162									50,181			1,322
Net income	$	43,443		$	9,151								$	64,847		$	14,822

	(in thousands, except percentages)
	Three Months Ended January 31,										Nine Months Ended January 31,
	2016		2015		$ Change			% Change			2016		2015		$ Change			% Change
Multifamily

Real estate revenue
Same-store	$	25,513	$	25,849	$	(336	)		(1.3	)%	$	77,402	$	77,660	$	(258	)		(0.3	)%
Non-same-store		7,783		4,407		3,376			76.6	%		19,380		9,916		9,464			95.4	%
Total	$	33,296	$	30,256	$	3,040			10.0	%	$	96,782	$	87,576	$	9,206			10.5	%

Real estate expenses
Same-store	$	11,910	$	11,521	$	389			3.4	%	$	35,708	$	33,557	$	2,151			6.4	%
Non-same-store		3,550		1,797		1,753			97.6	%		8,894		4,143		4,751			114.7	%
Total	$	15,460	$	13,318	$	2,142			16.1	%	$	44,602	$	37,700	$	6,902			18.3	%

Net operating income
Same-store	$	13,603	$	14,328	$	(725	)		(5.1	)%	$	41,694	$	44,103	$	(2,409	)		(5.5	)%
Non-same-store		4,233		2,610		1,623			62.2	%		10,486		5,773		4,713			81.6	%
Total	$	17,836	$	16,938	$	898			5.3	%	$	52,180	$	49,876	$	2,304			4.6	%

	Square Feet of New Leases⁽¹⁾				Square Feet of Leases Renewed⁽¹⁾				Total Square Feet of Leases Executed⁽¹⁾				Occupancy
Segments	2016		2015		2016		2015		2016		2015		2016			2015
Healthcare		40,630		6,400		16,576		7,703		57,206		14,103		95.8	%		95.8	%
Industrial		0		0		0		29,995		0		29,995		100.0	%		100.0	%
Total		40,630		6,400		16,576		37,698		57,206		44,098		96.9	%		97.0	%

	Square Feet of New Leases⁽¹⁾				Average Term in Years				Average Effective Rent⁽²⁾							Estimated Tenant Improvement Cost per Square Foot⁽¹⁾					Leasing Commissions per Square Foot⁽¹⁾
	2016		2015		2016		2015		2016			2015			2016			2015			2016			2015
Healthcare		40,630		6,400		7.1		7.5		$	19.86		$	18.51		$	11.45		$	59.06		$	3.09		$	6.50
Industrial		0		0		0		0			0			0			0			0			0			0
Total		40,630		6,400		7.1		7.5		$	19.86		$	18.51		$	11.45		$	59.06		$	3.09		$	6.50

	Square Feet of Leases Renewed⁽¹⁾				Percent of Expiring Leases Renewed⁽²⁾						Average Term in Years				Weighted Average Growth (Decline) in Effective Rents⁽³⁾						Estimated Tenant Improvement Cost per Square Foot⁽¹⁾						Leasing Commissions per Square Foot⁽¹⁾
	2016		2015		2016			2015			2016		2015		2016			2015			2016			2015			2016			2015
Healthcare		16,576		7,703		93.8	%		84.5	%		0.4		16.8		4.3	%		1.3	%		$	0		$	35.00		$	0		$	7.80
Industrial		0		29,995		100.0	%		0	%		0		3.0		0			(4.5	%)			0			0			0			1.21
Total		16,576		37,698		98.2	%		84.5	%		0.4		9.9		4.3	%		(2.3	%)		$	0		$	7.15		$	0		$	2.56

Month	Fiscal Year 2016		Fiscal Year 2015
July	$	.1300	$	.1300
October		.1300		.1300
January		.1300		.1300

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs¹		Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
Beginning Balance							$	28,068,572
November 1 – 30, 2015		376,872	$	8.14		376,872		25,000,302
December 1 – 31, 2015		759,011		7.15		759,011		19,574,309
January 1 – 31, 2016		654,742		6.99		654,742		15,000,334
Total		1,790,625	$	7.30		1,790,625	$	15,000,334