Summary of INVESTORS REAL ESTATE TRUST

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 unaudited condensed consolidated financial statements included in this report, as well as the Company's audited financial statements for the fiscal year ended April 30, 2012, which are included in the Company's Form 10-K filed with the SEC on July 16, 2012, as amended by the Current Report on Form 8-K filed with the SEC on December 10, 2012.
Forward Looking Statements. Certain matters included in this discussion are forward looking statements within the meaning of the federal securities laws. Although we believe that the expectations reflected in the following statements are based on reasonable assumptions, we can give no assurance that the expectations expressed will actually be achieved. Many factors may cause actual results to differ materially from our current expectations, including general economic conditions, local real estate conditions, the general level of interest rates and the availability of financing and various other economic risks inherent in the business of owning and operating investment real estate. Overview
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying condensed consolidated financial statements and notes to assist readers in understanding our results of operations and financial condition. In addition to this overview, which provides a discussion of our business, an overview of our operating results in the three and six months ended October 31, 2012 compared to the three and six months ended October 31, 2011, and a summary of significant transactions in the second quarter of fiscal year 2013 compared to the second quarter of fiscal year 2012, the MD&A includes, in the Results of Operations subsection below, a discussion of our financial results comparing the three and six months ended October 31, 2012 and the three and six months ended October 31, 2011, and, in the Liquidity and Capital Resources subsection below, a discussion of our financial condition and an analysis of changes in our capital structure and cash flows.
Business. IRET is a self-advised equity REIT engaged in owning and operating income-producing real estate properties. Our investments include multi-family residential properties and commercial office, commercial medical, commercial industrial and commercial retail properties located primarily in the upper Midwest states of Minnesota and North Dakota. Our properties are diversified by type and location. As of October 31, 2012, our real estate portfolio consisted of 85 multi-family residential properties containing 9,934 apartment units and having a total real estate investment amount net of accumulated depreciation of $493.0 million, and 182 commercial properties containing approximately 12.3 million square feet of leasable space. 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 $478.6 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 $416.3 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 $97.4 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 $104.4 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. We intend to continue to achieve our business objective by investing in multi-family residential properties and in commercial office, commercial medical, commercial industrial, and commercial retail 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 Colorado, Idaho, Iowa, Kansas, Missouri, Montana, Nebraska, South Dakota, Wisconsin and Wyoming.

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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.
Operating Results. The Company's results of operations in the three and six months ended October 31, 2012 and 2011 were as follows:
(in thousands, except percentages)

                                                      Three Months Ended October 31
                                             2012          2011         $ Change        % Change
Real estate revenue                         $  64,943     $  60,200      $   4,743            7.9 %
NOI(1)                                         42,402        34,673          7,729           22.3 %
Net income attributable to Investors            8,512         1,285          7,227          562.4 %
Real Estate Trust
FFO(2)                                         20,691        15,187          5,504           36.2 %




                                                   (in thousands, except percentages)
                                                      Six Months Ended October 31
                                            2012          2011        $ Change        % Change
Real estate revenue                        $ 126,929     $ 119,364     $   7,565            6.3 %
NOI(1)                                        79,547        69,195        10,352           15.0 %
Net income attributable to Investors          10,191         2,706         7,485          276.6 %
Real Estate Trust
FFO(2)                                        38,288        31,016         7,272           23.4 %

(1) See Note 5 of the Notes to the Condensed Consolidated Financial Statements for reconciliations of NOI to net income.

(2) See pages 43-44 of the MD&A for the definition of FFO and reconciliations of FFO to net income.

Physical occupancy as of October 31, 2012 compared to October 31, 2011 increased in two of our five reportable segments, decreasing slightly in our multi-family residential, commercial medical and commercial industrial segments, on a stabilized basis and an all-property basis. Stabilized properties are properties owned and in operation for the entirety of the periods being compared (including properties that were redeveloped or expanded during the periods being compared, with properties purchased or sold during the periods being compared excluded from the stabilized property category), and, in the case of development or re-development properties, which have achieved a target level of occupancy. Physical Occupancy Levels on a Stabilized Property(1) and All Property Basis:

                          Stabilized Properties      All Properties
                            As of October 31,      As of  October 31,
Segments                        2012        2011        2012      2011
Multi-Family Residential       94.8%       95.2%       94.6%     94.7%
Commercial Office              78.4%       78.0%       78.4%     78.0%
Commercial Medical             94.9%       96.0%       95.2%     96.2%
Commercial Industrial          90.7%       92.3%       90.7%     92.3%
Commercial Retail              88.3%       87.0%       88.3%     87.0%

(1) See page 29 of the MD&A for the definition of Stabilized Property.

Significant Events and Transactions during the Three Months Ended October 31, 2012 and 2011. Summarized below are the Company's significant transactions and events during the second quarters of fiscal years 2013 and 2012:
Three Months Ended October 31, 2012
· the acquisition of a multi-family residential property in Sartell, Minnesota, for approximately $5.0 million, adding 58 units to the Company's multi-family residential portfolio.

· the acquisition of two parcels of vacant land for development, in Williston, North Dakota and St. Cloud, Minnesota, respectively.

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· the commencement of construction of the Company's 146-unit River Ridge Apartments project in Bismarck, North Dakota.

· the commencement of construction of the 132-unit Cypress Court Apartment Homes project in St. Cloud, Minnesota, of which the Company owns approximately 79%, with the remaining 21% owned by the Company's joint venture partner.

· the sale of two condominium units in Grand Chute, Wisconsin, and the sale of two multi-family residential properties in Fargo, North Dakota and Moorhead, Minnesota, respectively, for a total sales price of $7.3 million.

· the completion of a public offering of 4.6 million Series B preferred shares, for net proceeds of approximately $111.2 million, after underwriting discounts and estimated offering expenses.

Three Months Ended October 31, 2011
· the acquisition of two multi-family residential properties in Sioux Falls, South Dakota, for approximately $7.0 million, and a multi-family residential property in St. Cloud, Minnesota, for approximately $10.9 million, adding a total of 221 units to the Company's multi-family residential portfolio.

· the acquisition of a medical office property in Edina, Minnesota, for a purchase price of approximately $505,000.

· the acquisition of seven senior housing projects in Boise, Idaho and towns surrounding Boise, for a total purchase price of approximately $33.8 million.

· the completion of construction of an approximately 25,000 square foot, build-to-suit medical clinic in Minot, North Dakota.

· the acquisition of two parcels of vacant land in, respectively, Minot, North Dakota (approximately 9.6 acres) and Casper, Wyoming (approximately 0.39 acres, adjoining the Company's Meadow Wind senior housing facility).

· the sale of a small retail property in Livingston, Montana, for a sale price of approximately $2.2 million.

Critical Accounting Policies. In preparing the condensed consolidated financial statements management has made estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. A summary of the Company's critical accounting policies is included in the Company's Form 10-K for the fiscal year ended April 30, 2012, filed with the SEC on July 16, 2012, as amended by the Current Report on Form 8-K filed with the SEC on December 10, 2012, in Management's Discussion and Analysis of Financial Condition and Results of Operations. There have been no significant changes to those policies during the three months ended October 31, 2012.
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 condensed consolidated financial statements.

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