The following information is provided in connection with, and should be read in conjunction with, the consolidated financial statements included in this Annual Report on Form 10-K. We operate on a fiscal year ending on April 30. The following discussion and analysis is for the fiscal year ended April 30, 2012.

Overview

We are 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 commercial properties located primarily in the upper Midwest states of Minnesota and North Dakota. Our properties are diversified in property type and location. As of April 30, 2012, our real estate portfolio consisted of 84 multi-family residential properties containing 9,161 apartment units and having a total real estate investment amount net of accumulated depreciation of $411.0

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million, and 182 commercial properties containing approximately 12.3 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $1.5 billion. Our commercial properties consist of:

• 68 commercial office properties containing approximately 5.1 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $483.9 million;

• 65 commercial medical properties (including senior housing) containing approximately 2.9 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $421.5 million;

• 19 commercial industrial properties containing approximately 2.9 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $98.3 million; and

• 30 commercial retail properties containing approximately 1.4 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $103.8 million.

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.

Total revenues of IRET Properties, our operating partnership, increased by $4.8 million to $241.8 million in fiscal year 2012, compared to $237.0 million in fiscal year 2011. This increase was primarily attributable to the addition of new real estate properties. We estimate that rent concessions offered to tenants during the twelve months ended April 30, 2012 lowered our operating revenues by approximately $5.7 million, compared to $4.5 million for fiscal year 2011.

On an all-property basis, physical occupancy levels in our total commercial property segments increased to 87.4% in fiscal year 2012 from 86.2% in fiscal year 2011. Physical occupancy rates in our commercial industrial and commercial retail segments increased; physical occupancy in our commercial office and commercial medical segments decreased. Physical occupancy in our multi-family residential segment increased to 93.7% in fiscal year 2012 on an all-property basis, from 92.8% in fiscal year 2011.

We continued to experience a challenging market environment in fiscal year 2012. Real estate operating fundamentals remained under pressure in our commercial office segment in particular, as the U.S. economy and local economies in many of our markets continued to be negatively affected by a number of adverse macro conditions. We expect that the ongoing recovery will remain slow and uneven, and that unemployment levels will remain elevated, with consequent challenges to the operating results in our commercial office segment in particular. Our multi-family residential properties continue to perform well, but while we expect to see continued favorable results in this segment in fiscal year 2013, our ability to maintain occupancy levels and selectively raise rents remains dependent on continued economic recovery and employment growth, and many economic forecasts, including those of the Federal Reserve, are predicting lingering high unemployment and slow growth through 2013. We plan during fiscal year 2013 to continue to pursue the selective disposition of assets in non-core markets, and to work to increase our multi-family residential properties in our identified core markets in the Midwest.

Additional information and more detailed discussions of our fiscal year 2012 operating results are found in the following sections of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Critical Accounting Policies

Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements included in this Annual Report on Form 10-K.

Real Estate. Real estate is carried at cost, net of accumulated depreciation, less an adjustment for impairment, if any. Depreciation requires an estimate by management of the useful life of each property as well as an allocation of the costs associated with a property to its various components. As described further below, the process of allocating property costs to its components involves a considerable amount of subjective judgments to be made by Company management. If the Company does not allocate these costs appropriately or incorrectly estimates the useful lives of

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its real estate, depreciation expense may be misstated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The Company uses a 20-40 year estimated life for buildings and improvements and a 5-12 year estimated life for furniture, fixtures and equipment. Maintenance and repairs are charged to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life, generally five to ten years.

Upon acquisitions of real estate, the Company assesses the fair value of acquired tangible assets (including land, buildings and personal property), which is determined by valuing the property as if it were vacant, and considers whether there were significant intangible assets acquired (for example, above-and below-market leases, the value of acquired in-place leases, and tenant relationships) and acquired liabilities, and allocates the purchase price based on these assessments. The as-if-vacant value is allocated to land, buildings, and personal property based on management's determination of the relative fair value of these assets. The estimated fair value of the property is the amount that would be recoverable upon the disposition of the property. Techniques used to estimate fair value include discounted cash flow analysis and reference to recent sales of comparable properties. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. Land value is assigned based on the purchase price if land is acquired separately, or based on estimated market value if acquired in a merger or in a portfolio acquisition.

Above-market and below-market in-place lease values for acquired properties are estimated based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company performs this analysis on a lease-by-lease basis. The capitalized above-market or below-market intangible is amortized to rental income over the remaining non-cancelable terms of the respective leases.

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

Property sales or dispositions are recorded when title transfers and sufficient consideration is received by the Company and the Company has no significant continuing involvement with the property sold.

Real Estate Held For Sale. Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Depreciation is not recorded on assets classified as held for sale.

The application of current accounting principles that govern the classification of any of our properties as held-for-sale on the balance sheet requires management to make certain significant judgments. The Company makes a determination as to the point in time that it is probable that a sale will be consummated. It is not unusual for real estate sales contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements, often remain pending even upon contract acceptance. As a result, properties under contract may not close within the expected time period, or may not close at all. Due to these uncertainties, it is not likely that the Company can meet the criteria of the current accounting principles governing the classification of properties as held-for-sale prior to a sale formally closing. Therefore, any properties categorized as held-for-sale represent only those properties that management has determined are probable to close within the requirements set forth in current accounting principles.

The Company reports, in discontinued operations, the results of operations and the related gains or losses of a property that has either been disposed of or is classified as held for sale and otherwise meets the classification of a discontinued operation.

Impairment. The Company's long-lived assets are reviewed for impairment quarterly if events or changes in circumstances (such as adverse market conditions, including conditions resulting from an ongoing economic recession) indicate that a long-lived asset might be impaired. Judgments regarding existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset and events that occur that affect the financial strength of significant tenants of the assets, including tenants who

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have filed for bankruptcy. For long-lived assets in which an impairment indicator is present, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of the asset, including any associated intangibles, subject to evaluation. The evaluation of undiscounted cash flows is subjective and reflects assumptions regarding current market conditions relative to the long-lived asset being evaluated, such as future occupancy, rental rates and capital requirements that could differ materially from actual results. A worsening real estate market may cause the Company to re-evaluate the assumptions used in our impairment analysis. If there is an indication of impairment based on this evaluation because the expected undiscounted cash flows plus reversion are less than the asset's carrying value, impairment is recorded based on the estimated fair value (typically based on a current independent appraisal) of the long-lived asset in comparison to its carrying value. The results of the Company's evaluation of impairment analysis could be material to the Company's financial statements.

Allowance for Doubtful Accounts. The Company periodically evaluates the collectibility of amounts due from tenants and maintains an allowance for doubtful accounts (approximately $154,000 as of April 30, 2012) for estimated losses resulting from the inability of tenants to make required payments under their respective lease agreements. The Company also maintains an allowance for deferred rents receivable arising from the straight-lining of rents (approximately $1.2 million as of April 30, 2012) and from mortgage loans ($0 as of April 30, 2012). The straight-lining of rents receivable arises from earnings recognized in excess of amounts currently due under lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. If estimates differ from actual results this would impact reported results.

Revenue Recognition - The Company has the following revenue sources and revenue recognition policies:

• Base Rents - income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis, which includes the effects of rent increases and abated rent under the leases. Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease. Rental revenue is recorded for the full term of each lease on a straight-line basis. Accordingly, the Company records a receivable from tenants for rents that it expects to collect over the remaining lease term as deferred rents receivable. When the Company acquires a property, the term of the existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Revenue recognition is considered to be critical because the evaluation of the reliability of such deferred rents receivable involves management's assumptions relating to such tenant's viability.

• Percentage Rents - income arising from retail tenant leases which are contingent upon the sales of the tenant exceeding a defined threshold. These rents are recognized only after the contingency has been removed (i.e., sales thresholds have been achieved).

• Expense Reimbursement Income - revenue arising from tenant leases, which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the expenses are incurred.

Income Taxes. The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a distribution to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. The Company intends to distribute to its shareholders 100% of its taxable income. Therefore, no provision for Federal income taxes is required. If the Company fails to distribute the required amount of income to its shareholders, it would fail to qualify as a REIT and substantial adverse tax consequences may result.

The Company's taxable income is affected by a number of factors, including, but not limited to, the following: that the Company's tenants perform their obligations under their leases with the Company and that the Company's tax and accounting positions do not change. These factors, which impact the Company's taxable income, are subject to change, and many are outside the control of the Company. If actual results vary, the Company's taxable income may change.

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Recent Accounting Pronouncements

For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 to our Consolidated Financial Statements.

RESULTS OF OPERATIONS

The discussion that follows is based on our consolidated results of operations for the fiscal years ended April 30, 2012, 2011 and 2010.

Revenues

Total revenues for fiscal year 2012 were $241.8 million, compared to $237.0
million in fiscal year 2011 and $230.9 million in fiscal year 2010. Revenues
during fiscal year 2012 were $4.8 million greater than revenues in fiscal year
2011 and revenues during fiscal year 2011 were $6.0 million greater than in
fiscal year 2010.

For fiscal 2012, the increase in revenue of $4.8 million resulted from:

                                                                         (in thousands)
Rent in Fiscal 2012 from 8 properties acquired in fiscal year 2011 in
excess of that received in 2011 from the same 8 properties               $         2,342
Rent from 16 properties acquired in fiscal year 2012                               4,707
Decrease in rental income on stabilized properties due primarily to a
decrease in occupancy                                                             (3,788 )
Increase in straight line rent                                                     2,723
Increase in tenant concessions                                                    (1,150 )
                                                                         $         4,834

For fiscal 2011, the increase in revenue of $6.0 million resulted from:

                                                                         (in thousands)
Rent in Fiscal 2011 from 10 properties acquired in fiscal year 2010 in
excess of that received in 2010 from the same 10 properties              $         7,799
Rent from 8 properties acquired in fiscal year 2011                                2,356
Decrease in rental income on stabilized properties due primarily to a
decrease in occupancy                                                             (4,144 )
                                                                         $         6,011

As illustrated above, the majority of the increase in our gross revenue for fiscal years 2012 and 2011 ($7.0 million and $10.2 million respectively) resulted from the addition of new real estate properties to the IRET Properties' portfolio. Rental revenue in fiscal years 2012 and 2011 from stabilized properties decreased $3.8 and $4.1 million, respectively. For the next 12 months, we continue to look to acquisitions and development of new properties and recovery in our stabilized portfolio to be the most significant factors in any increases in our revenues and ultimately our net income. However, identifying attractive acquisition possibilities remains a continuing challenge.

Gain on Sale of Real Estate

The Company realized a gain on sale of real estate, land and other investments for fiscal year 2012 of approximately $349,000. This compares to an approximately $19.4 million gain on sale of real estate recognized in fiscal year 2011 and approximately $68,000 recognized in fiscal year 2010. Properties sold in fiscal years 2012 and 2011 are detailed below in the section captioned "Property Dispositions."

Changes in Expenses and Net Income

Net income available to common shareholders for fiscal year 2012 was $5.8 million, compared to $17.7 million in fiscal year 2011 and $1.6 million in fiscal year 2010. On a per common share basis, net income was $.07 per common share in fiscal year 2012, compared to $.22 per common share in fiscal year 2011 and $.03 in fiscal year 2010.

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These changes in net income result from the changes in revenues and expenses detailed below:

Changes in net income available to common shareholders for fiscal year 2012 resulted from:

                                                                          (in thousands)
An increase in net operating income (defined below in the Net
Operating Income section) primarily due to acquisitions (not including
gain on involuntary conversion)                                          $          8,358
A decrease in net income attributable to noncontrolling interests -
Operating Partnership                                                               3,090
An increase in gain on involuntary conversion                                         274
An increase in other income                                                           356

These increases were offset by:

A decrease in income from discontinued operations                                 (20,040 )
An increase in depreciation/amortization expense related to real
estate investments                                                                 (1,342 )
An increase in interest expense primarily due to the revolving line of
credit                                                                             (1,293 )
An increase in amortization related to non-real estate investments                   (537 )
A decrease in net loss attributable to noncontrolling interests -
consolidated real estate entities                                                    (315 )
An increase in other expenses, administrative, advisory and trustee
services                                                                             (310 )
A decrease in interest income                                                        (111 )
Total decrease in fiscal 2012 net income available to common
shareholders                                                             $        (11,870 )

Changes in net income available to common shareholders for fiscal year 2011 resulted from:

                                                                         (in thousands)
An increase in income from discontinued operations                       $        21,341
A decrease in interest expense primarily due to debt refinancing                   1,622
An increase in net operating income (defined below in the Net
Operating Income section) (not including gain on involuntary
conversion)                                                                          351
An increase in net loss attributable to noncontrolling interests -
consolidated real estate entities                                                    202

These increases were offset by:
An increase in net income attributable to noncontrolling interests -
Operating Partnership                                                             (3,887 )
A decrease in gain on involuntary conversion                                      (1,660 )
An increase in depreciation/amortization expense related to real
estate investments                                                                  (980 )
An increase in amortization related to non-real estate investments                  (317 )
A decrease in interest income                                                       (280 )
An increase in other expenses, administrative, advisory and trustee
services                                                                            (238 )
A decrease in other income                                                           (73 )
Total increase in fiscal 2011 net income available to common
shareholders                                                             $        16,081

Net Operating Income

Net Operating Income ("NOI") is a non-GAAP measure which we define as total real estate revenues less real estate expenses and real estate taxes (excluding depreciation and amortization related to real estate investments and impairment of real estate investments). We believe that NOI is an important supplemental measure of operating performance for a REIT's operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing and general and administrative expense. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for commons shareholders or cash flow from operating activities as a measure of financial performance.

The following tables show real estate revenues, real estate operating expenses and NOI by reportable operating segment for fiscal years 2012, 2011 and 2010. For a reconciliation of net operating income of reportable segments to net income as reported, see Note 11 of the Notes to Consolidated Financial Statements in this report.

The tables also show net operating income by reportable operating segment on a stabilized property and non-stabilized property basis. Stabilized properties are properties owned for the entirety of the periods being compared, and, in the case of development or re-development properties, which have achieved a target level of occupancy. This comparison allows the Company to evaluate the performance of existing properties and their contribution to net

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income. Management believes that measuring performance on a stabilized property basis is useful to investors because it enables evaluation of how the Company's properties are performing year over year. Management uses this measure to assess whether or not it has been successful in increasing net operating income, 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 stabilized properties, since changes from one fiscal year to another in real estate revenue and expenses from non-stabilized properties are due to the addition of those properties to the Company's real estate portfolio, and accordingly provide less useful information for evaluating the ongoing operational performance of the Company's real estate portfolio.

Fiscal Year 2012 Compared to Fiscal Year 2011



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 fiscal year 2012
compared to fiscal year 2011.

                                                         (in thousands, except percentages)
                                                                Years Ended April 30
                                                     2012          2011       $ Change       % Change
All Segments

Real estate revenue
Stabilized                                      $ 231,735     $ 233,942     $   (2,207 )         (0.9 )%
Non-stabilized(1)                                  10,053         3,012          7,041          233.8 %
Total                                           $ 241,788     $ 236,954     $    4,834            2.0 %

Real estate expenses
Stabilized                                      $  95,832     $ 101,191     $   (5,359 )         (5.3 )%
Non-stabilized(1)                                   2,446           611          1,835          300.3 %
Total                                           $  98,278     $ 101,802     $   (3,524 )         (3.5 )%

Gain on involuntary conversion
Stabilized                                      $     274     $       0     $      274          100.0 %
Non-stabilized(1)                                       0             0              0            n/a
Total                                           $     274     $       0     $      274          100.0 %

Net operating income
. . .