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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Applicant is a North Dakota Real Estate Investment Trust. As of July 31, 2001, it had 24,321,325 shares of beneficial interest outstanding.
 

Item 1.Financial Statement - First Quarter Fiscal 2002 The accompanying condensed consolidated financial statements of Investors Real Estate Trust, and its subsidiaries (collectively, the "Company"), included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Annual Report on Form 10-K405 for the year ended April 30, 2001, of Investors Real Estate Trust, as filed with the SEC.The Condensed Consolidated Balance Sheet at April 30, 2001, contained herein, was derived from audited financial statements, but does not include all disclosures included in the Form 10-K405 and applicable under accounting principles generally accepted in the United States.Certain information and footnote disclosures normally included in interim financial statements prepared in accordance with accounting principals generally accepted in the United States have been omitted. In the opinion of the company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (of a normal recurring nature) necessary for a fair presentation of the financial statements.The results of operations for the three months ended July 31, 2001, are not necessarily indicative of operating results for the entire year.

OPERATING SEGMENTS

The following information summarizes the Trust's segment reporting for Residential and Commercial properties along with reconciliations to the consolidated financial statements: 

QUARTER ENDING July 31, 2001

QUARTER ENDING July 31, 2000

QUARTER ENDING July 31, 2001

YEAR ENDING APRIL 30, 2001

Proforma Condensed Financial Information (unaudited)

IRET acquired the following real estate investment during the three-month period ended July 31, 2001:

The following unaudited pro forma information was prepared as if the above transactions had occurred on May 1, 2001, the beginning of IRET’s current fiscal year.The proforma financial information is based upon the rent rolls and expected expenses for this property on the date of its actual acquisition.This proforma information is not necessarily indicative of the consolidated results which would have occurred if all of the transactions had been consummated on May 1, 2001, nor do they purport to represent the results of operations for future periods.

The pro forma consolidated statement of operations (unaudited) for the three-month period ended July 31, 2001, is presented as if the real estate acquisition had been completed at the beginning of the period May 1, 2001, rather than on the actual acquisition or closing date.

Pro Forma - continued

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.The following discussion and analysis should be read in conjunction with the consolidated financial statements included in this report as well as the audited financial statements prepared by Brady Martz & Associates, P.C. of Minot, North Dakota, certified public accountants for the period ending April 30, 2001, which financial statements were attached to the Form 10-K405 on file for the Company.

Certain matters included in this discussion are forward looking statements within the meaning of federal securities laws.Although the Company believes that the expectations reflected in such forward looking statements are based on reasonable assumptions, it can give no assurance that the expectations expressed will actually be achieved.Many factors may cause actual results to differ materially from the Company's current expectations, including general economic conditions, local real estate conditions, the general level of interest rates, and the availability of financing, timely completion and lease-up of properties under construction and various other economic risks inherent in the business of owning and operating investment real estate.

Results of Operations - Three-Month Periods Ended July 31, 2001 and July 31, 2000

Revenues. Total revenues of the Operating Partnership for the first quarter of Fiscal 2002 were $21,780,094, compared to $17,431,644 received in the first quarter of the prior fiscal year.This is an increase of $4,348,450 or 25%.This increase is attributable to the addition of new properties to IRET's investment portfolio.

Capital Gain Income. The Operating Partnership realized capital gain income of $307,934 during the first quarter of Fiscal 2002.This resulted from the sale of the 36-unit Sunchase Apartment property in Fargo, North Dakota and the sale of the GNMA investment portfolio, resulting in realized gains of $296,408 and $11,526 respectively.No capital gain income was realized in the first quarter of the prior fiscal year.

Expenses and Net Income. The following shows the changes in revenues, operating expenses, interest, and depreciation for the three-month period ending July 31, 2001 as compared to the three-month period ended July 31, 2000:

The above described changes result primarily from the addition of new real estate assets to IRET’s portfolio.The increase in insurance costs also resulted from an increase in the general level of premiums for property casualty insurance.The decline in administrative expenses also resulted from the acquisition of the advisory company by IRET on July 1, 2001, because the direct expenses for employee salaries and other operating costs proved to be less than the previous percentage fee payable under the advisory contract.

Comparison of Residential and Commercial Properties.The following is a comparison of the net operating income from the two types of real estate investments owned by IRET - residential and commercial - - for the three-month periods ending July 31, 2001 and 2000:

Net Real Estate Operating Income

The growth in the two operating segments resulted from the acquisition of properties during Fiscal 2002.The increase in net operating income for commercial properties resulted from the investment of $110,199,692 to acquire new commercial properties during the prior fiscal year.

Occupancy Rates.The following is a comparison of occupancy rates for stabilized properties (actual rent as a percentage of scheduled rent) for the three-month periods ended July 31, 2001 and 2000:

Property Acquisitions and Dispositions. During the three-month period ended July 31, 2001, the Operating Partnership acquired one commercial investment:

The 36-Unit Sunchase apartment complex in Fargo, North Dakota was sold during the first quarter of Fiscal 2001 at a gain of $296,409.

On July 31, 2001, the Operating Partnership owned 56 apartment communities with a total of 7,832 apartment units and 60 commercial properties totaling 2,729,052 square feet.

FUNDS FROM OPERATIONS

IRET considers Funds From Operations (“FFO”) a useful measure of performance for an equity REIT.FFO is defined as net income available to shareholders determined in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures.IRET uses the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO as amended by NAREIT to be effective January 1, 2000.FFO for any period means the net income of the company for such period, excluding gains or losses from debt restructuring and sales of property, and plus depreciation and amortization of real estate assets in IRET’s investment portfolio, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with GAAP.

FFO presented herein is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition.

FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as a measure of IRET’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of IRET’s needs or its ability to service indebtedness or make distributions.

Funds From Operations for the Operating Partnership for the three-month period ended 7/31/01 increased to $6,899,059, compared to $5,221,340 for the first quarter of Fiscal 2000, an increase of 32.1%.

Calculations of Funds From Operations for the Operating Partnership are as follows:

Dividends.The following dividends were paid during the first quarters of Fiscal Years 2001 and 2000:

The Board of Trustees of IRET have declared a dividend of $.1475 per share payable October 1, 2001 to shareholders of record at the close of business on September 14, 2001.

Liquidity and Capital Resources.The important changes in IRET’s balance sheet during the first quarter of Fiscal 2002 were:

As of the date of this report, IRET has entered into contracts to acquire the following real estate investments:

In addition to the above acquisitions, IRET is committed to provide construction financing for an assisted living and Alzheimer care facility in Virginia, MN for $7,000,000, which $301,960 was advanced as of July 31, 2001.

In addition to cash on hand of $13,309,576 on July 31, 2001, IRET has unsecured line of credit agreements with First International Bank & Trust, Bremer Bank, and First Western Bank & Trust, all of Minot, ND totaling $17,500,000, none of which were in use on July 31, 2001, nor on April 30, 2001.

IRET believes that its existing cash and borrowing capacities are adequate to fund all of its acquisition and development obligations and all of its other short and long-term liquidity requirements.IRET believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and the payment of dividends in accordance with Internal Revenue Code provisions pertaining to real estate investment trusts in both the short and long term. Budgeted expenditures for ongoing maintenance, capital improvements and renovations to its real estate portfolio are expected to be funded from the cash flow generated from the operation of these properties.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The market risks to which IRET is exposed are:

The balance of IRET’s indebtedness is individual mortgage loans secured by individual commercial and residential properties which totaled $372,402,308 as of July 31, 2001.Of this amount, $23,008,489 is subject to variable interest rate agreements and $11,630,265 will come due during Fiscal 2002, $4,925,762 during Fiscal 2003, $3,694,240 during Fiscal 2004 and the remaining balance in later years.

IRET has not entered into any interest rate hedge or other such agreements with respect to any of its indebtedness or business.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 2. Changes in Securities.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information - Sale of Shares of Beneficial Interest

IRET files this Report of Sales of Securities and Use of Proceeds therefrom in accordance with Rule 463 (17 CFR 230.463).

The use of proceeds shown above does not represent a material change in the use of proceeds described in the prospectus. 

Item 6. Exhibits and Reports on Form 8-K.

None

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)

By:  /S/ Thomas A. Wentz, Sr.
    Thomas A. Wentz, Sr.
    President

Date: September 14, 2001