UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q/A

Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter Ended July 31, 2004

Commission File Number 0-14851

INVESTORS REAL ESTATE TRUST

(701) 837-4738
(Registrant’s telephone number, including area code)

N/A
(Former name, former address, and former fiscal year, if changed since last report.)

     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.

     Yes  x     No  o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

     Yes  x     No  o

     Registrant is a North Dakota Real Estate Investment Trust. As of August 26, 2004, it had 42,357,297 common shares of beneficial interest outstanding.

Investors Real Estate Trust

Form 10-Q/A

Amendment No. 1

For the Quarterly Period Ended July 31, 2004

Explanatory Note:

     This Amendment No. 1 to the Quarterly Report on Form 10-Q of Investors Real Estate Trust for the quarterly period ended July 31, 2004 is being filed solely to amend and revise the subsection of our Quarterly Report entitled “Funds From Operations for the Three Months Ended July 31, 2004 and 2003” included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. This subsection is amended and revised to correct an error that resulted in incorrect numbers being reported for Funds From Operations (“FFO”) applicable to common shares and Units for the first quarter of fiscal year 2005, and also resulted in an incorrect number being reported for the increase in FFO applicable to common shares and Units in comparison to the first quarter of fiscal year 2004.

     No other items or disclosures in our original report are being amended, and accordingly this Amendment No. 1 does not otherwise change or update any information that was presented in the Company’s original Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2004, filed with the Securities and Exchange Commission on September 9, 2004. While not amended, the remaining items of the Form 10-Q are included with this Amendment No. 1 for convenience.

TABLE OF CONTENTS

PART I

ITEM 1. FINANCIAL STATEMENTS – FIRST QUARTER — FISCAL 2005

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

The accompanying notes are an integral part of these consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

The accompanying notes are an integral part of these consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

The accompanying notes are an integral part of these consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

continued

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited continued)
for the three months ended July 31, 2004 and 2003

The accompanying notes are an integral part of these consolidated financial statements.

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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

NOTE 1 • ORGANIZATION

     Investors Real Estate Trust (“IRET” or the “Company”) is a self-advised real estate investment trust engaged in acquiring, owning and leasing multi-family and commercial real estate. IRET has elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. REITs are subject to a number of organizational and operational requirements, including a requirement to distribute 90% of ordinary taxable income to shareholders, and, generally, are not subject to federal income tax on net income. IRET’s multi-family residential properties and commercial properties are located mainly in the states of North Dakota and Minnesota, but also in the states of Colorado, Idaho, Iowa, Georgia, Kansas, Montana, Nebraska, South Dakota, Texas, Michigan, Washington and Wisconsin. As of July 31, 2004, IRET owned 65 multi-family residential properties with 8,671 apartment units and 148 commercial properties totaling 7.7 million net rentable square feet. IRET conducts a majority of its business activities through its consolidated operating partnership, IRET Properties, a North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other subsidiary entities.

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

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

     The accompanying consolidated financial statements include the accounts of IRET and its general partnership interest in the Operating Partnership. The Company’s interest in the Operating Partnership was 77.3% and 78.0%, respectively, as of July 31, 2004, and April 30, 2004, which includes 100% of the general partnership interest. The limited partners have a redemption option that they may exercise. IRET has the option of redeeming the limited partners’ interests (“Units”) for IRET common shares of beneficial interest, on a one-for-one basis, or for cash payment to the unitholder. The redemption generally may be exercised by the limited partners at any time after the first anniversary of the date of the acquisition of the Units (provided, however, that in general not more than two redemptions by a limited partner may occur during each calendar year, and each limited partner may not exercise the redemption for less than 1,000 Units, or, if such limited partner holds less than 1,000 Units, for all of the Units held by such limited partner). The Operating Partnership and some limited partners have contractually agreed to a holding period of greater than one year and/or a greater number of redemptions during a calendar year.

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NOTE 2 • continued

     The 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 IRET’s other operations, with minority interests reflecting the minority partners’ share of ownership and income and expenses.

UNAUDITED INTERIM FINANCIAL STATEMENTS

     The interim consolidated financial statements of IRET have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America are omitted. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods have been included.

     The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2004, filed with the SEC.

RECLASSIFICATIONS

     Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.

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. The Company has no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings. While Units can be exchanged for common shares on a one-for-one basis after a minimum holding period of one year, the exchange of Units for common shares has no effect on net income per share, as Unitholders and common shareholders effectively share equally in the net income of the Operating Partnership. The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the consolidated financial statements for the three months ended July 31, 2004 and 2003:

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NOTE 3 • continued

NOTE 4 • SHAREHOLDERS’ EQUITY

     During the three months ended July 31, 2004, we issued 259,000 shares pursuant to our distribution reinvestment plan, for total proceeds of $2.5 million. In addition, as of July 31, 2004, 64,000 Units have been converted to shares during fiscal year 2005, with a total value of $424,000 included in shareholders’ equity.

NOTE 5 • SEGMENT REPORTING

     IRET is engaged in acquiring, owning and leasing multi-family residential and commercial real estate. Each property is considered a separate operating segment. Each segment on a stand-alone basis is less than 10% of the revenues, profit or loss, and assets of the combined reported operating segments, and meets the majority of the aggregation criteria under SFAS 131. Previously, IRET’s operating segments were aggregated and classified as multi-family residential and commercial properties, producing two reportable segments. Beginning with this first quarter of IRET’s current fiscal year, IRET is reporting its results in five segments: multi-family residential properties, office, industrial (including miscellaneous commercial properties), retail, and medical (including assisted living facilities) properties.

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NOTE 5 • continued

We have expanded our number of reportable segments in response to our growth and to the increased diversity of our properties, in particular the increase in the number of retail and medical properties we own. In April and May 2004 we acquired a significant number of medical properties located in the Duluth, Minnesota area. This growth and increased diversity of property type prompted us to reorganize our asset management group, effective July 2004, in order to permit greater management specialization by property type. It also provides a basis for aggregating properties with similar economic characteristics. While we will continue to separately evaluate the performance of each of our properties, our management will also assess our performance in each of our five segments.

     The revenues, profit (loss) and assets for these reportable segments are summarized as follows as of and for the three-month periods ended July 31, 2004 and 2003, along with reconciliations to the consolidated financial statements:

Three Months Ended July 31, 2004

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NOTE 5 • continued

Three Months Ended July 31, 2003

Segment Assets and Accumulated Depreciation

July 31, 2004

April 30, 2004

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NOTE 6 • COMMITMENTS AND CONTINGENCIES

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

     Insurance. IRET carries insurance coverage on its properties in amounts and types that the Company believes are customarily obtained by owners of similar properties.

     Purchase Options. The Company has granted options to purchase certain Company properties to various parties. In general, the options grant the parties the right to purchase these properties at the greater of their appraised value or an annual compounded increase of 2% to 2.5% of the initial cost of the property to the Company. The total property cost of the 18 properties subject to purchase options is approximately $82.3 million, and the gross rental revenue from these properties was approximately $2.0 million for the three months ended July 31, 2004.

     Real Estate Expansions and Development. The Company has certain funding commitments under contracts for property development and expansion projects. As of July 31, 2004, IRET’s funding commitments included the following:

     Grand Forks Apartment Construction. The Company is obligated under a construction contract and an excavating contract for the construction of a multi-family residential property in Grand Forks, ND. The Company is obligated to pay approximately $7.5 million under the construction contract, subject to additions and deductions as provided in the contract, and approximately $300,000 under the excavating contract, for this development project. As of July 31, 2004, approximately $2.1 million and $118,000 have been paid under the construction contract and the excavating contract, respectively.

     Lithia Springs, Georgia Expansion Project. The Company is obligated to pay up to $500,000 to construct expansion premises at its Lithia Springs, Georgia assisted living facility. As of July 31, 2004, the Company has not paid any amounts under this obligation.

     Kalispell Retail Center, Kalispell, MT. The Company has entered into a ten-year lease agreement with Conlin’s Furniture, Inc. The Company is obligated to pay approximately $620,000 for tenant improvements and leasing commissions under the lease agreement. As of July 31, 2004, the Company has not paid any amounts under this obligation.

     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 IRET currently has no knowledge of any violation of environmental laws, ordinances or regulations at any of its properties, there can be no assurance that areas of contamination will not be identified at any of the Company’s properties, or that changes in environmental laws, regulations or cleanup requirements would not result in significant costs to the Company.

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NOTE 6 • continued

     Pending Acquisitions and Dispositions. As of July 31, 2004, the Company had signed an agreement for the purchase of an approximately 185,000 sq. ft. office building in the Minneapolis, MN area, for a purchase price of approximately $22.0 million. In connection with this transaction, the seller of this office property would purchase from the Company an approximately 62,000 sq. ft. office building in Eden Prairie, MN, for a price of approximately $5.8 million. This pending acquisition and disposition is subject to customary closing conditions, and no assurance can be given that this pending transaction will be consummated.

NOTE 7 • DISCONTINUED OPERATIONS

     SFAS No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets,” requires the Company to report in discontinued operations the results of operations of a property that has either been disposed of or is classified as held for sale. It also requires that any gains or losses from the sale of a property be reported in discontinued operations. There were no properties held for sale as of July 31, 2004 or 2003. The following information shows the effect on net income, net of minority interest, and the gains or losses from the sale of properties classified as discontinued operations for the three months ended July 31, 2004 and 2003:

NOTE 8 • ACQUISITIONS AND DISPOSITIONS

     During the three months ended July 31, 2004, IRET acquired eight commercial properties, and sold three commercial properties and four apartment complexes.

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NOTE 8 • continued

ACQUISITIONS

     The eight commercial properties were acquired in exchange for the issuance of 3,301 shares of common stock with a value of $32,000 and for 681,189 Units with a value of $6.8 million, plus $54.5 million of cash and cash equivalents.

DISPOSITIONS

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NOTE 9 • SUBSEQUENT EVENTS

     Van Mall Woods, Vancouver, WA Disposition. On September 1, 2004, the Company closed on the disposition of the 100-unit apartment complex in Vancouver, Washington. The sales price was $6.9 million, which resulted in a gain of approximately $1.3 million.

COMMON AND PREFERRED SHARE DISTRIBUTIONS

     On August 18, 2004, the Company’s Board of Trustees declared a regular quarterly distribution of 16.10 cents per share on the Company’s common shares and Units, payable October 1, 2004, to common shareholders and Unitholders of record on September 17, 2004. The Company’s Board of Trustees also declared a distribution of 51.56 cents per share on the Company’s preferred shares of beneficial interest, payable September 30, 2004 to preferred shareholders of record on September 15, 2004.

ITEM 2. 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 Company’s audited financial statements for the fiscal year ended April 30, 2004, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

     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, 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.

     Overview. IRET is a self-advised equity real estate investment trust engaged in owning and operating income-producing real properties. Our investments include multi-family residential properties and office, industrial, medical and retail properties located primarily in the upper Midwest states of Minnesota and North Dakota. Our properties are diversified by type and location. As of July 31, 2004, our real estate portfolio consisted of 65 multi-family residential properties containing 8,671 apartment units and having a total carrying amount (net of accumulated depreciation) of $372 million, and 148 commercial properties containing approximately 7.7 million square feet of leasable space and having a total carrying amount (net of accumulated depreciation) of $669 million. Our commercial properties consist of:

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     Our primary source of income and cash is rents associated with multi-family residential and commercial leases. Our business objective is to increase shareholder value by employing a disciplined investment strategy. This strategy is focused on growing assets in desired geographical markets, achieving diversification by property type and location, and adhering to targeted returns in acquiring properties. We intend to continue to achieve our business objective by investing in multi-family residential properties and in office, industrial, retail and medical commercial properties that are leased to single or multiple tenants, usually for five years or longer, and are located throughout the upper Midwest. We operate mainly within the states of North Dakota and Minnesota, although we also have real estate investments in South Dakota, Montana, Nebraska, Colorado, Georgia, Idaho, Iowa, Kansas, Michigan, Washington, Texas and Wisconsin.

     We compete with other owners and developers of multi-family and commercial properties to attract tenants to our properties, and we compete with other real estate investors to acquire properties. Principal areas of competition for tenants are in respect of rents charged and the attractiveness of location and quality of our properties. Competition for investment properties affects our ability to acquire properties we want to add to our portfolio, and the price we pay for acquisitions.

     Critical Accounting Policies. In preparing the 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 the Company’s critical accounting policies is included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2004, in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the footnotes to the consolidated financial statements, Note 2 — Basis of Presentation and Significant Accounting Policies. There have been no significant changes to those policies during the first quarter of fiscal year 2005.

RECENT ACCOUNTING PRONOUNCEMENTS

     There are no accounting standards or interpretations that have been issued, but which have not yet been adopted, that we believe will have a material impact on our financial statements.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 31, 2004 AND 2003

     Throughout this section, we have provided certain information on a “stabilized property” basis. Information provided on a stabilized property basis is provided only for those properties owned for the entirety of both periods being compared, and includes properties which were redeveloped or expanded during the periods being compared. Properties purchased or sold, and properties under development during the periods being compared, are excluded from our stabilized property analysis.

REVENUES

     Total IRET revenues for the first quarter of fiscal year 2005, were $39.5 million, compared to $32.2 million received in the first quarter of the prior fiscal year. This is an increase of $7.2 million or 22.5%. This increase in revenue resulted primarily from the additional investments in real estate made by IRET during the first quarter of fiscal year 2005, as well as other factors shown by the following analysis:

SEGMENT EXPENSES AND OPERATING PROFIT

     The following table shows the changes in revenues, operating expenses, interest, and depreciation by reportable operating segment for the three months ended July 31, 2004, as compared to the three months ended July 31, 2003:

Three Months Ended July 31

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