Good morning and welcome to the Investors Real Estate Trust Second Quarter Fiscal 2013 Earnings conference call and webcast. All participants will be in listen-only mode. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Ms. Lindsey Anderson, Director of Investor Relations. Please go ahead.

Good morning and welcome to Investors Real Estate Trust Second quarter fiscal 2013 earnings conference call. IRET’s earnings release and supplemental disclosure package for the three months ended October 31, 2012 were posted to our website and also furnished on the Form 8-K on December 10. In the earnings release and supplemental disclosure package, Investors Real Estate Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with the regulations set forth in Regulation G. If you have not received a copy, these documents are available on IRET's website at iret.com in the 'Investor Section'. Additionally, a webcast and transcript of this call will be archived on the IRET website for one year. At this time, management would like to inform you that certain statements made during this call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Investors Real Estate Trust believes the expectations reflected in the forward-looking statements are based on reasonable assumptions. Investors Real Estate Trust can give no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in Monday's earnings release, and from time-to-time in Investors Real Estate Trust filings with the SEC. Investors Real Estate Trust does not undertake a duty to update any forward-looking statements. With me today from management are Tim Mihalick, President and Chief Executive Officer; Diane Bryantt, Executive Vice President and Chief Financial Officer and Thomas Jr., Executive Vice President and Chief Operating Officer. At this time, I would like to turn the call over to Tim Mihalick for its opening remarks.

Thank you Lindsey and good morning everyone. Over the last couple of earnings calls, I have talked about IRET’s appeal to investors as geographic peer play REIT investment. This morning, I intend to continue that thing. In doing so, I want to reference two recent articles. The first being in the USA today on November 27, 2012 and the second being numerous newspapers in the Midwest. But I will reference the article in the finance and commerce newspaper of Minneapolis, Minnesota, dated December 1, 2012. The first article in the USA today is titled “Wealth rises in the USA’s heartland.” If you have a chance, I encourage you to research the article and read it for yourself. But its point only reinforces what I have been relaying to in previous earnings calls. As this map indicates, IRET’s geographic footprint overlays the continued income growth in USA’s heartland. I believe that as we continue as a nation to search out a way to become energies self sufficient. IRET’s markets will continue to see the benefit of that growth. As we have said in the past and I will reiterate again today. The states that IRET operates in are net exporters of energy, including wind, oil, coal and natural gas, as well as commodities and water. We have the things that the rest of the country needs as well as the world. On a side note to the continued employee demand on the economy in western North Dakota, I wanted to bring your attention to an article titled Minard Inc. to fly Wisconsin workers to North Dakota store in the finance and commerce newspaper. The content of the article states the intention of the home improvement retailer to fly 50 workers from its home base in Wisconsin to its Minot location on…

Thanks Tim. Good morning everyone. This morning I will give a brief summary of highlights and results of operations in the second quarter of fiscal 2013, which ended on October 31. We were pleased with the results of the second quarter, even though we had positive financial impact due to gains from involuntary conversion and sale of properties. We also have seen positive results due to acquisitions development and performance of our stabilized properties. Overall, net operating income increased $7.7 million or 22.3% in the second quarter, as compared to the second quarter of last year. Year-to-date increase is $10.4 million or 15%. Acquisitions and development projects placed in service account for the majority of this increase. To summarize these non-stabilized properties accounted for $3.5 million for the quarter and $6.5 million year-to-date of increased NOI. All acquisitions and developments this fiscal year have been in the multi-family segment. These new properties are operating above 90% occupancy. Even on the development projects of Torrey Ridge in Rochester, Minnesota and Williston Gardens, Williston, North Dakota. Stabilized properties provided for a combined overall NOI increase of $1.9 million for the quarter, and $1.7 million year-to-date. Although, we have not seen significant changes in occupancy in the comparative periods, revenue has increased primarily in the multi-family segment as high occupancy allows us to increase rent. Also, we are seeing decreases in operating expenses as a percentage of revenue. For the quarter operating expenses as a percentage revenue was 38.2% versus 42.4% in the prior fiscal quarter. Raised rents, lower expenses has always been IRET’s model. And we have seen that results in our operations in fiscal 2013. Details can be found by segment on the stabilized properties that is provided in the 10-Q in the net operating income section. Also, over the past…

Thank you, Diane. Consistent with my past presentations, this morning, I will provide an overview of IRET’s fiscal 2013 second quarter that ended on October 31st, 2012. I will also provide a review of recent events and trends impacting IRET. Finally, I will cover the credit markets as they pertain to IRET and conclude with an overview of IRET’s segment operations as well as pending acquisitions, dispositions and development. Our second quarter results continued the trend of improving operations with almost all metrics compared to the same three and six-month period from last year. Compared to the same quarter last year, gross revenue was up, income was up, and more importantly our focus on expense control continues to improve cash flow and income. The year-to-date period reflecting our first six months has basically the same trend, with revenue up in all segments except medical and income up in all segments except office. And again, year-over-year expenses are down by approximately $520,000 through the first six months and gross revenue was up by almost $7.5 million, with income also up by the same amount primarily due to cost control and strong rental growth in our portfolio. Our revenue and profit are up both due to the growth in the size of our portfolio, but importantly to continued strength in our multi-family operations and some improvement in our other segments. While occupancy is down slightly overall, all segments except commercial office and commercial retail are operating above 90% occupancy. Commercial office continues to be a drag on overall operations. The slightest occupancy declines in our other segments have been offset by higher gross revenues and good expense control through our internal management platform. At the start of the last fiscal year, IRET outlined a number of areas of focus in an attempt…

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Good morning guys. First question, on your entire release that you talked about positively see momentum. I know that was absent this quarter. Can you kind of talk about what you are seeing on the commercial office side in terms of leasing success? And also, as you think about the back half of the year, I know you guys have been fairly active on leasing for the last couple of quarters, are there any leases that take effect that are not in the numbers at this point?

Mike, this is Tom. I guess again, given the size of our commercial portfolio, it’s difficult to see a trend in any particular quarter just because our commercial office portfolio, while large is not extremely large, and I guess to answer your question, I think this past quarter was actually pretty good. It may not show up in the numbers, but if you look at the trend over the last year or longer, we made some pretty good progress in the commercial space, industrial, retail and some incremental improvement in the office. And I guess in every period, yes, there always are leases that are signed or in progress that are not going to show up. I mean, obviously, this cut-off was October 31st, we are six weeks later than that. So, I guess the overall trend has been good, better in commercial office, but I wouldn’t say it’s been outstanding, I think consistent with our past presentations. There is still a lot of uncertainty out there in the commercial office user space, certainly not being helped by what’s going on in Washington right now.

Okay. That’s helpful. Second of all, can you give us an update on, in terms of sales, I mean, I think you talked about marketing in industrial portfolio there of properties. How much would you estimate the non-core pipeline to be currently in light of recent disposition activity? And just in terms of transaction activity, also the $38 million of projects you commenced during the quarter, what’s kind of the return expectations on those two multi-family developments?

The return expectations on the two multi-family developments, the Bismarck, North Dakota and the St. Cloud are projected at probably an eight, low eight cap on a pro forma basis. And I think that’s going to be consistent with what we are seeing on projects that were delivered in the market. We delivered some projects in North Dakota. So, we are expecting good strong returns in Bismarck, and then we delivered some projects in Minnesota. And so, that’s really what we are basing our return expectations on. And I guess at this point, both of those markets remain very strong on the multi-family side. So, our expectations, this will achieve both return targets, which approximately 200 basis points to 250 basis points above what we are seeing on acquisition cap rates. Development definitely appears to be a higher returning gain on the multi-family at this point.

And I will jump in. Mike, this is Tim. On dispositions, I think we have talked about in the past, anywhere from $100 million to $150 million of non-core assets, probably over the next 12 to 24 months as we look forward.

This (inaudible) on sale, is that dependent upon redeployment opportunities or is there an impetus to just advance those to clean up the portfolio a little bit faster?

I think probably more of an emphasis on that to philosophy of trim from the bottom and add quality to the top as we look to move forward, improve overall balance sheet.

Okay. And just final question. You guys benefited from a very mild winter in 2012. How can you – can you quantify how much benefit that was kind of versus the normalized run rate? And also, over the last couple of quarters, you guys have obviously benefited from lower expenses. How much of that is reoccurring related to the internalization of management and other changes versus kind of one-time in nature?

Well, this is Tom. I guess mild weather, that’s difficult to quantify. We have had some periods where we had very extreme weather, winters with a lot of snowfall, but really we don’t see that as material impact one way or the other, given the overall size of the operation, and really get expense, real estate taxes, labor costs, I mean, those are really our top line. Energy use, snow removal, those really are way down the list. And so, mild or extreme weather just really does not seem to have a huge impact one way or the other, favorable or unfavorable.

Okay. And then the cost reductions over the last couple of quarters, how much of that is recurring versus kind of one-time in nature related to prior restructuring and things of that nature?

Well, I think a lot of the cost savings, we have some issues associated with how we changed our operations on the senior housing. A lot of those expenses don’t come through anymore because we have gone to a net lease environment, but I think really our internal management platform is really driving a lot of the success we have had on cost control. And we really look at it as a percentage of gross revenue on the multi-family side, and one of the things by trying to add assets in our core markets, we can leverage off existing staffing, existing operations. So, we can add property without really adding a lot of top line expense in the form of management and labor. So, I think we are feeling pretty good, it’s going to fluctuate a little bit, but I think now that we are several years into the internal management platform, really all of the portfolio that’s going to be internally managed is in the house. I think we really seem where we are going to be from an expense standpoint. We don’t expect meaningful fluctuations one way or the other.

That’s helpful. Thanks guys.

Thanks Mike.

And the next question is from Richard Anderson of BMO Capital Markets.

Hi, good morning everybody.

Good morning, Rich.

So, in terms of the office side of the business, is there anything about the recent investments being made by Sam Zell in Minneapolis suburb and some of the activity by Target in downtown Minneapolis that have gotten you a little bit more optimistic about the office side or are those one-off type deal that don’t really move the needle in terms of your mindset about commercial office?

We have always been sort of optimistic about commercial office. Yes, I mean, there is definitely an increase in transaction activity, and I think we have reflected that in our calls. I mean, you go back several years, there really was no activity. There was just no demand and there were no users in the market. But I think now, if you look through our 8-Ks, we have had very good renewal success, and we are just not seeing the departure of commercial tenants and we are not seeing the consistent downsizing when leases come up. So, we are definitely holding our own on renewals and we are certainly seeing transaction activity as evidenced in our retail. That’s climbed up. Industrial, that’s climbed up. Now, those are two much smaller segments and I think commercial office is going to come because there certainly is activity in the market. What you are referring to is obviously investment activity and that’s always good to see that other people maybe are getting into a little bit more bullish on commercial office. There’s really been absolutely no development for the last five to six years. So, hopefully, that will translate into some pent-up demand when the economy gets back on track and we resolve some of these political uncertainties that are out there. And again, we have maintained our portfolio, it’s well positioned from a physical condition standpoint and location.

Okay. Did you say that the subsequent quarter and land purchase, where that was and what it was?

We have not and I guess at this point, those parcels are in due diligence. So, I don’t believe we disclosed locations. The one thing I would say is obviously it’s going to be consistent with our existing markets, but I don’t believe we disclosed locations and I don’t think we are in a position where we would want to do that at this point other than Williston, that land. Well, actually, I guess we did say Grand Forks and Rapid City, in the subsequent events. So, Grand Forks, North Dakota 10-acre parcel and then a 9-acre parcel in Rapid City.

And both multi-family?

Yes, those two were multi-family, and then we have a much larger parcel in Rochester, Minnesota.

Okay. Back to the disposition strategy, you mentioned, I think Tim, you said $100 million plus in non-core that could be executed over the next 12 to 24 months. That’s a substantially faster pace than what you guys have done in the past. To what extent do you think a bigger disposition program could slow the process of getting the dividend covered?

I think part of the thought process there, Rich, is to continue to recycle those proceeds towards new acquisitions that will cover the lost revenue from a sale. I think if you look out in the forward, we feel pretty comfortable that we can get to that full coverage on AFFO with that process.

Okay. So, it actually maybe would help the process as opposed to impede it?

Yes.

Okay. In terms of leverage, I think I asked on the last call where you think leverage could ultimately end up after it’s all said and done. I believe your answer had a five handle on it. Is it possible that with the greater emphasis on dispositions and other activity that you might even see leverage drop to something in the 40s on a gross asset basis or is that a little bit too much of a stretch at this point?

Yes, I think at this point in time, that’s a little bit of a stretch. I think w might be a right at that 5 number, but to get below that at this point in time is still little challenging.

And the time frame to get there?

I think we are still within the potentially fiscal year ’14.

Okay. And then, the last question is just generally about the Bakken influence and Williston, maybe in particular, is there a hesitation on your part to overemphasize that element of the story, even though you had this great success in the first development there? You kind of 16% return on the first multi-family development. Are you hesitant to overstate that opportunity because more than likely that number is not sustainable, and do you think that you are trying to tell the story, while the Bakken influence is important, it’s more of a – you are thinking more of a bigger sphere of influence and not to overemphasize that, because I assume the next deal in Williston would be something lower than 16. I just would like to get some color on what your thought process about the immediate area of the Bakken region?

I think as we have talked about, we don’t feel that is our only story, and I think as we step back and look that and evaluate the Bakken, the impact that it’s had from Williston all the way east to probably St. Cloud Minnesota and west over to (inaudible) down the Rapid City, we look at that as the whole, regional play for us. And again, those are our markets and we are on the ground and see the opportunity. I mean, as I mentioned in my opening remarks, they continue to bring employees from Wisconsin into these markets, and what you are seeing is opportunities and companies moving from that far away to take advantage of what’s here. And as we look at it, those are our region, that is our region and our opportunity so that the effect is not only on the Bakken, and certainly that’s the focus of ours, but our focus also sees opportunity, these other communities that have the things that we want to see the university, the large shopping and regional healthcare. And so, we see a continued growth demand in those markets and they also focus around the Bakken, and we see the opportunity take advantage of that.

Great. Is there anything about that 40-acre parcel that you have? Are you hesitating at all at any level or is it just a process of – you mentioned the infrastructure opportunity outlined by the governor, but are there other things that are stopping you from starting that development? What’s the timeline there would you say?

Well, this is Tom. I mean, it’s in progress. That land is entitled, obviously that parcel was raw land that needed all of the underlying infrastructure roads, water, sewer. That’s in progress. So, I guess there really hasn’t been any hesitation, we’re always evaluating projects and developments. Developments got a much longer time horizon to it and just given the heightened economic activity in this part of the country is not as easy to executive on from a timing standpoint is maybe, in some of other areas, where there is a lot more labor availability and contractor availability. But, we’ve certainly executed on development in North Dakota, the medical office building is near completion on target. The industrial building and that being slightly expanded and that delayed it slightly but, we’ve done some smaller projects multi-family in Minot. So I guess we’re not hesitating and I think we’ve always said that we’re not going to pivot the entire portfolio to over its oil. It’s a very nice growth story and it’s going to provide some development and acquisition opportunities that we might not otherwise have had, but for the energy development, but we’re continuing to focus on all aspects of our portfolio acquisitions in to peak up for example over the last year development Rochester, Minnesota, for example, Sioux Falls, South Dakota, senior housing portfolio in Sioux Falls, South Dakota. We continue to be active in all of our market, so we remain balanced.

And then just last quick one on that, back to that 40 acres and lows, would that more than likely be a joint venture relationship too, or could you put that all on your balance sheet.

Well we could do it all but it’s going to be a joint venture relationship with our same partner that we had in Williston Gardens. And when we joint venture, obviously capital is not an issue for us, its execution and so generally we have historically entered into joint ventures with partners that bring construction self performance expertise or some other specialty to the table. And that’s going to be the case in Williston. That’s anticipated to be a joint venture with the same that have had Williston Gardens.

Great, thanks for the color.

Thanks.

And our next question is from Carol Kemple of Hilliard Lyons.

Good morning. Earlier in the call, you all talked about a flood damage. I don’t know, how much are you expecting from that.

At this time, the flood portion is undetermined. We’re still in good communication with the carrier and again that should occur within the next third quarter or fourth quarter at the latest. But, what you did see in this quarter was the fire portion. It gets a little complicated once that fire came in with the flood claims, but again all going well is just a matter of timing for recording.

You think it would be a similar amount or lesser, or is too hard to determine at this point.

It’s too hard to determine. There are just so many variables and again, I can’t record anything until I actually get cash in bank, do the (inaudible) and things like that, so we will get a claim and we will get another gain, but at this time, I can’t estimate that.

And Carol, just to explain the complicated nature, this building was flooded, then was restored and cleaned up from the flood and then burned down. So that was part of the complicated aspect here, because obviously all the cost to restore it from the flood were spent and incurred, and those are part of the reimbursement claim and then of course, it burned down after the fact, which was separate claim. So that’s what is making it more complicated. But I guess, we don’t see it as being a material issue one, where the other there is no question about coverage, we’re going to get compensated for it. There is going to be a gain and we’re likely to rebuild in that location.

And do you have any of this decisions under contract at the current time?

No.

And then with the single tenant industrial asset. that you all want to sell. Have you talked to any of the users if there is an interest from them to buy the assets?

Of course, that’s obviously in the process. That’s the first place we start neighbors and users from that standpoint. And some of those building may end up being purchased by the user, but for the most part what we have in these buildings are businesses, companies that as a matter of course, choose to rent as oppose to own, just for their business model. So we’re anticipating that most of these will go out to the investor community.

Okay, thanks.

(Operator Instructions) And our next question is from Dave Rogers of Robert W. Baird.

Good morning. I have been following along the development question. As you look at your pipeline today and think about where that’s headed over the next year. What do you think your development pipeline, maybe the total budget looks like and where are you comfortable running that to, as a company. What do think, at what levels can you handle running development and construction out at this point?

Well I think we can handle quite a bit. I mean, historically we have developed in all the markets, we owned in all the markets that we’re looking at. We built Rochester before we build in two folds, done it in all these markets. So, I think we have the scale, I think conceptually our preferences to acquire, but obviously if you can’t acquire in those markets, a lot of these markets don’t have a lot of depth of investment of quarterly assets. So you’re going to be left with development. But I think at the peak, we were growing maybe, $200 to $250 million of acquisitions annually. I think if you look at our size, close to $2 billion, that’s a reasonable expectation if we want to grow in the depths what our target needs to be, now whether we can meet it or not, that’s going to be challenge. But that’s what I think we want a target.

And I think you said earlier, 200 bps spread in development versus acquisition yields. And I think Rich Anderson touched on that question a little bit, but where are disposition yields respect to what you want to sell in kind of that matrix?

You mean the cap rates on what we’re selling or the? What our expectations mean or?

Yeah that’s correct.

Well, I guess there is a difference right now between multi family. I mean the cap rates in multi-family acquisitions are definitely lower in our markets than the industrial cap rates for what we’re selling. So I mean there is going to be a difference if we take those proceeds out and reinvest, now the one primary difference is multi-family can be leveraged at a much more favorable level than commercial through the agencies. And so there is definitely a benefit there by redeploying that capital and leveraging it, as oppose to -- in industrial. But again, the assets were looking at really a not core, these aren’t the gems of the portfolio, these are assets that have been around their course could steady improve performers but all their smaller not strategically located and just a good time to exit out of those primarily just to get out of them, not because we need the capital or we’re going to rotate into some better sector.

Okay, and have you thought about what percentage of your capital spend or of acquisitions you’d like to fund through recycling annually? I’m guessing that sometime quickly you’d like to make that move?

Well, again as I said in my presentation, I don’t think we view selling as a growth strategy. That’s more expense control and a quality portfolio activity. I think in the past, we’ve always grown by additional capital. I don’t see that change, I mean of course we can reposition these sale proceeds into additional growth, but that isn’t really the primary focus. I mean, I think we’re just looking to move some of these assets that have run their course or a smaller non-core out of the portfolio.

Okay, last question. On the retail leasing in the quarter which appeared to be pretty healthy, was that seasonal or permanent or any thoughts about how much of that stays or goes, and maybe after the 1st of the year?

I don’t think there is a lot of seasonal in there. We did a couple of little seasonal deals, if I recall correctly, but I think for the most part those were permanent leases. That retail portfolio is pretty small, so it doesn’t take a lot of leases to move it one way or the other, but that was I think pretty routine basic leasing.

Okay, thank you.

And this concludes our question and answer session. I would not like to turn the conference back over to Tim Mihalick for any closing remarks.

Thank you. And again, I would just like to thank you for your continued interest in IRET in the recognition of the exciting times that we see in front of us and wish you all a Merry Christmas and A Happy New Year. Thank you.

And thank you. The conference is now concluded. We thank for attending today’s presentation. You may now disconnect.