Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE CO INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

MMISSION

COMMISSION

Washington, D.C. 20549


FORM 10-K


☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2016

December 31, 2021

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________ to ____________

______________

Commission File Number 001-35624

Investors Real Estate Trust

CENTERSPACE
(Exact name of Registrant as specified in its charter)

North Dakota

45-0311232

North Dakota

45-0311232
(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

1400 31st Avenue3100 10th Street SW Suite 60

Post Office Box 1988

0

Minot

ND58702-1988

(Address of principal executive offices)

 (Zip code)

701-837-4738

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common SharesSecurities Exchange Act of Beneficial Interest (no par value) - New York Stock Exchange

8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (no parvalue)-

New York Stock Exchange

7.95% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (no parvalue)-

New York Stock Exchange

1934:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares of Beneficial Interest, no par valueCSRNew York Stock Exchange
Series C Cumulative Redeemable Preferred SharesCSR-PRCNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☑   Yes    ☐     No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

☐   Yes ☑   No

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   ☐   No

Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

☑   Yes   ☐   No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

☑

Large accelerated filer

☑

☐ Accelerated filer

☐Emerging growth company☐

☐ Non-accelerated filer

☐

☐ Smaller reporting Company

company		☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report.      ☑
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐    Yes   ☑   No

The aggregate market value of the Registrant’s outstanding common shares of beneficial interest held by non-affiliates of the Registrant as of October 31, 2015June 30, 2021 was $985,547,1351,098,455,584 based on the last reported sale price on the New York Stock Exchange on October 31, 2015.June 30, 2021. For purposes of this calculation, the Registrant has assumed that its trustees and executive officers are affiliates.

The number of common shares of beneficial interest outstanding as of June 22, 2016,February 21, 2022, was 121,091,249.

15,041,487.

References in this Annual Report on Form 10-K to the “Company,” “IRET,“Centerspace,” “we,” “us,” or “our” include consolidated subsidiaries, unless the context indicates otherwise.

Documents Incorporated by Reference: Portions of IRET’sCenterspace's definitive Proxy Statement for its 20162021 Annual Meeting of Shareholders towill be held on September 20, 2016 are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) hereof.

2016 Annual Report


Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE

INDEX

PAGE

Item 1.

3
4 

Item 1A.

8
9 

Item 1B.

19
21 

Item 2.

20
21 

Item 3.

23
32 

Item 4.

23
32 

Item 5.

24
33 

Item 6.

Selected Financial Data

36 
25

Item 7.

26
37 

Item 7A.

38
69 

Item 8.

40
71 

Item 9.

39
71 

Item 9A.

40
71 

Item 9B.

40
73 

Item 10.

40
73 

Item 11.

40
73 

Item 12.

40
73 

Item 13.

40
73 

Item 14.

40
73 

Item 15.

41
73 

Exhibit Index

42
74 

Signatures

45
76 

Reports of Independent Registered Public Accounting Firm and Financial Statements

F-2

F-2

2016 Annual Report 2


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Special Note Regarding Forward-Looking Statements

Certain statements included in this Annual Report on Form 10-K and the documents incorporated into this document by reference are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include statements about our plans and objectives, including among other things, our future financial condition, anticipated capital expenditures, anticipated distributions, and our belief that we have the liquidity and capital resources necessary to meet our known obligations and to make additional real estate acquisitions and capital improvements when appropriate to enhance long termlong-term growth. Forward-looking statements are typically identified by the use of terms such as “believe,“expects,” “expect,“anticipates,” “intend,“intends,” “project,“plans,” “plan,“believes,” “anticipate,“seeks,” “potential,“estimates,” “will,” “assumes,” “may,” “will,“projects,” “designed,“outlook,” “estimate,“future,” “should,” “continue” and othervariations of those words and similar expressions. These forward-looking statements indicateinvolve known and unknown risks, uncertainties, and other factors, including risks associated with the ongoing COVID-19 pandemic, that we have used assumptions that are subject to a number of risks and uncertainties that couldmay cause ourthe actual results, performance, or performanceachievements to differbe materially different from those projected.

the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe that the expectations reflected in suchour forward-looking statements are based onupon reasonable assumptions, we can give no assurance that theseour expectations will provebe achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements, as these statements are subject to have been correct. Importantknown and unknown risks, uncertainties, and other factors thatbeyond our control and could differ materially from our actual results and performance.

The following factors, among others, could cause actualour future results to differ materially from the expectations reflectedthose expressed in the forward-looking statements include:

statements:

·

the economic health of the markets in which we own and operate multifamily and commercial properties, in particular the states of Minnesota and North Dakota, or other markets in which we may invest in the future;

•the COVID-19 pandemic and its ongoing effects on our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operations;

·

the economic health of our multifamily and commercial tenants;

•deteriorating economic conditions and rising unemployment rates in the markets where we own apartment communities or in which we may invest in the future;

·

market rental conditions, including occupancy levels and rental rates, for multifamily and commercial properties;

•rental conditions in our markets, including occupancy levels and rental rates, our potential inability to renew residents or obtain new residents upon expiration of existing leases, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions;

·

our ability to identify and secure additional properties that meet our criteria for investment;

•changes in operating costs, including real estate taxes, utilities, insurance costs, and expenses related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic;

·

our ability to complete construction and lease-up of our development projects on schedule and on budget;

•timely access to materials required to renovate apartment communities;

·

our ability to sell our non-core properties on terms and pricing that are acceptable;

•adverse changes in our markets, including future demand for apartment homes in our markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our ability to identify and consummate attractive acquisitions and dispositions on favorable terms, our ability to reinvest sales proceeds successfully, and our inability to accommodate any significant decline in market value of real estate serving as collateral for our mortgage obligations;

·

the level and volatility of prevailing market interest rates and the pricing of our common shares of beneficial interest;

•reliance on a single asset class (multifamily) and certain geographic areas (Midwest and Mountain West regions) of the U.S.;

·

changes in our operating expenses;

•inability to expand our operations into new or existing markets successfully;

·

financing risks, such as our inability to obtain debt or equity financing on favorable terms, or at all;

•failure of new acquisitions to achieve anticipated results or be efficiently integrated;

·

compliance with applicable laws, including those concerning the environment and access by persons with disabilities; and

•inability to complete lease-up of our projects on schedule and on budget;

·

the availability and cost of casualty insurance for losses.

•inability to sell our non-core properties on terms that are acceptable;

•failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and tax protection payments;
•inability to fund capital expenditures out of cash flow;
•inability to pay, or need to reduce, dividends on our common shares;
•inability to raise additional equity capital;
•financing risks, including our potential inability to meet existing covenants in our existing credit facilities or to obtain new debt or equity financing on favorable terms, or at all;
•level and volatility of interest or capitalization rates or capital market conditions;
•loss contingencies and the availability and cost of casualty insurance for losses;
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•inability to continue to satisfy complex tax rules in order to maintain our status as a REIT for federal income tax purposes, inability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for tax purposes, and the risk of changes in laws affecting REITs;
•inability to attract and retain qualified personnel;
•cyber liability or potential liability for breaches of our privacy or information security systems;
•inability to address catastrophic weather, natural events, and climate change;
•inability to comply with laws and regulations applicable to our business and any related investigations or litigation; and
•other risks identified in this Report, in our other SEC reports, or in other documents that we publicly disseminate.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of this Annual Report on Form 10-K and the other documents we file from time to time with the Securities and Exchange Commission (“SEC”).

In light of these uncertainties, the events anticipated by our forward-looking statements might not occur. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause our actual results to differ materially from those contemplated in any forward-looking statements included in this Annual Report on Form 10-K should not be construed as exhaustive.

2016 Annual Report 3

PART I

Table of Contents

PART I

Item 1. Business

Overview

Business

OVERVIEW
Centerspace (“we,” “us,” “our,” “Centerspace,” or the “Company”), formerly known as Investors Real Estate Trust, (“we,” “us,” “IRET” or the “Company”) is a self-advised equity Real Estate Investment Trust, or REIT,real estate investment trust (“REIT”) organized under the laws of North Dakota. SinceDakota, that is focused on the ownership, management, acquisition, development, and redevelopment of apartment communities. Our current emphasis is on making operational enhancements that will improve our formation in 1970, our business has consisted of owning and operating income-producing real estate properties. We are structured as an Umbrella Partnership Real Estate Investment Trust, or UPREIT, and we conduct our day-to-day business operations through our operating partnership, IRET Properties, a North Dakota Limited Partnership (“IRET Properties” or the “Operating Partnership”). Our investments mainly consist of multifamily and healthcare properties located primarily in the upper Midwest states of Minnesota and North Dakota. For the fiscal year ended April 30, 2016, our real estate investments in these two states accounted for 73.2%residents’ experience, redeveloping some of our total gross revenue. Our principal executive office is locatedexisting apartment communities to meet current market demands, and acquiring new apartment communities in Minot, North Dakota. target markets, including the Minneapolis/St. Paul and Denver metropolitan areas.
We also have corporate officesfocus on investing in Minneapolismarkets characterized by stable and St. Cloud, Minnesota,growing economic conditions, strong employment, and additional property management offices locatedan attractive quality of life that we believe, in the states where we own properties.

In January 2015, we announcedcombination, lead to higher demand for our intention to sell substantially allapartment homes and retention of our office and retail properties. During the first quarter of fiscal year 2016, we classified as held for sale and discontinued operations 48 office properties, 17 retail properties and 1 healthcare property and reduced our number of reportable segments from five to three when our office and retail segments fell below the quantitative thresholds for reporting as reportable segments due to dispositions. During the last quarter of fiscal year 2016, we further reduced our number of reportable segments from three to two due to our industrial segment not meeting the quantitative thresholds.

residents. As of April 30, 2016,December 31, 2021, we held for investment 99 multifamily propertiesowned interests in 79 apartment communities, containing 12,950 apartment units14,441 homes and having a total real estate investment amount, net of accumulated depreciation, of $1.0 billion,$1.8 billion. Our corporate headquarters is located in Minot, North Dakota. We also have a corporate office in Minneapolis, Minnesota.

Website and 47 commercial properties, consistingAvailable Information
Our internet address is www.centerspacehomes.com. We make available, free of healthcare, industrial, office and retail, containing approximately 2.9 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $333.8 million. As ofApril 30, 2016, we held for sale 1 multifamily property, 36 commercial properties and 3 parcels of land. On June 6, 2016, we announced our plan to move towards becoming a pure play multifamily REIT and our intention to sell our remaining commercial properties.

Our multifamily leases are generally for a one-year term. Our commercial properties are typically leased to tenantscharge, through the “SEC filings” tab under long-term lease arrangements. As of April 30, 2016, no individual tenant accounted for more than 10%the Investors section of our total real estate rentals, although affiliated entitieswebsite, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Transition Report on Form 10-KT, and amendments to such reports, and proxy statements for our Annual Meetings of Edgewood Vista together accounted for approximately 28.4%Shareholders, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports are filed with or furnished to the SEC. These reports are also available at www.sec.gov. We also make press releases, investor presentations, and certain supplemental information available on our website. Current copies of our total commercial minimum rentsCode of Conduct; Code of Ethics for properties heldSenior Financial Officers; and Charters for investmentthe Audit, Compensation, and for sale.

Structure

Nominating and Governance Committees of our Board of Trustees are also available on our website under the “Corporate Governance” tab under the Investors section of our website. Copies of these documents are also available free of charge to shareholders upon request addressed to the Secretary at Centerspace, P.O. Box 1988, Minot, North Dakota 58702-1988. Information on our website does not constitute part of this Report.

STRUCTURE
We were organized under the laws of North Dakota on July 31, 1970, and have operated as a REIT under Sections 856-858 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”“Code”), since our formation. On February 1, 1997, we were restructured as an UPREIT,Umbrella Partnership Real Estate Investment Trust (“UPREIT”), and have conductedwe conduct our daily business operations primarily through IRET Properties.

our operating partnership, Centerspace, LP, formerly known as IRET Properties was organized under the laws(the “Operating Partnership”). The

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Table of North Dakota pursuant to an Agreement of Limited Partnership dated January 31, 1997. IRET Properties is principally engaged in acquiring, owning, operating and leasing real estate. The Contents
sole general partner of IRET PropertiesCenterspace, LP is Centerspace, Inc., formerly known as IRET, Inc., a North Dakota corporation and our wholly-ownedwholly owned subsidiary. All of our assets (except for qualified REIT subsidiaries) and liabilities werehave been contributed to IRET Properties,Centerspace, LP, through IRET,Centerspace, Inc., in exchange for the sole general partnership interest in IRET Properties.Centerspace, LP. Centerspace, LP holds substantially all of the assets of the Company. Centerspace, LP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of limited partnership units (“Units”), which is one of the reasons the Company is structured in this manner. As of April 30, 2016, IRET,December 31, 2021, Centerspace, Inc. owned an 88.1%a 83.3% interest in IRET Properties.Centerspace, LP. The remaining ownership of IRET Propertiesinterest in Centerspace, LP is held by individual limited partners.

BUSINESS STRATEGIES
Our business is focused on our mission - to provide a great home - for our residents, our team members and our investors. We fulfill this mission by providing renters well-located options in various price ranges. While fulfilling our mission, we are seeking consistent earnings growth through exceptional operations, disciplined capital allocation, and market knowledge and efficiencies. Our operations and investment strategies are the foundation for fulfilling our mission and furthering our vision of being a premier provider of apartment homes in vibrant communities by focusing on integrity and serving others.
Operations Strategy
We manage our apartment communities with a focus on providing an exceptional resident experience and maximizing our property financial results. Our initiatives to optimize our operations include:
•Providing an exceptional customer experience to enhance resident satisfaction and retention;
•Attracting, developing, and retaining diverse talent to enable a culture of engagement;
•Scaling our business to enhance efficiencies;
•Leveraging technology and systems; and
•Demonstrating an organizational commitment to ESG.
Investment Strategy and Policies

Our business objective under our current strategic plan is to employ an investment strategy that encompasses:
•Seeking opportunities to increase shareholder value by employingdistributable cash flow;
•Managing our balance sheet to maintain flexibility and enhance growth opportunities; and
•Investing in high-quality and efficient rental communities.
FINANCING AND DISTRIBUTIONS
To fund our investment and capital activities, we rely on a disciplined investment strategy. This strategy is implemented by growing income-producing assets in desired geographical markets in real estate classes we believe will provide a consistent return on investment for our shareholders.

2016 Annual Report 4

Tablecombination of Contents

We generally use available cash or short-term floating rate debt to acquire real estate. We then replace such cash or short-term floating rate debt with fixed-rate secured debt. In appropriate circumstances, we also may acquire one or more propertiesissuance of common shares, preferred shares, Units in exchange for property, and borrowed funds. We regularly issue dividends to our shareholders. Each of these is described below.

At-the-Market Offering
In September 2021, we entered into an equity distribution agreement in connection with a new at-the-market offering program (the “2021 ATM Program”), replacing our prior at-the-market offering program (the “2019 ATM Program”). Under the 2021 ATM Program, we may offer and sell common shares having an aggregate sales price of beneficial interest (“common shares”) or for limited partnership unitsup to $250.0 million, in amounts and at times determined by management. Under the 2021 ATM Program, we may enter into separate forward sale agreements. The proceeds from the sale of IRET Properties (“limited partnership units” or “units”), which are convertible, after the expiration of a minimum holding period of one year, into cash or, at our sole discretion, into our common shares on a one-to-one basis.

Our investment strategy involves investing in multifamily propertiesunder the 2021 ATM Program are intended to be used for general corporate purposes, which may include the funding of future acquisitions, construction and commercial properties that are leased to single or multiple tenants, usually for five years or longer,mezzanine loans, community renovations, and are located throughout the upper Midwest. Our commercial properties consist primarilyrepayment of healthcare. Since January 2015, we have concentrated on multifamily and healthcare property acquisitions, and are now exploring the potential sale of our remaining commercial properties to eventually become a pure play multifamily REIT. We operate mainly within the states of North Dakota and Minnesota, although we also have real estate in Idaho, Iowa, Kansas, Montana, Nebraska, South Dakota, Wisconsin and Wyoming.

In order to implement our investment strategy we have certain investment policies. Our significant investment policies are as follows:

Investments in the securities of, or interests in, entities primarily engagedin real estate activities and other securities. While we are permitted to invest in the securities of other entities engaged in the ownership and operation of real estate, as well as other securities, we currently have no plans to make any investments in other securities.

Any policy, as it relates to investments in other securities, may be changed by a majority of the members of our Board of Trustees at any time without notice to or a vote of our shareholders.

Investments in real estate or interests in real estate. We currently own multifamily properties and/or commercial properties in ten states. We may invest in real estate, or interests in real estate, located anywhere in the United States. However, we currently plan to focus our investments in those states in which we already have property, with specific concentration in Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota and South Dakota. Similarly, we may invest in any type of real estate or interest in real estate, although we plan to focus new investments in multifamily properties.

It is not our policy to acquire assets primarily for capital gain through sale in the short term. Rather, it is our policy to acquire assets with an intention to hold such assets for at least a 10-year period.indebtedness. During the holding period, it is our policy to seek current incomeyear ended December 31, 2021, we issued 1.8 million common shares under both the 2019 ATM Program and capital appreciation through2021 ATM Program at an increase in valueaverage price of our real estate portfolio, as well as increased revenue as a result$86.13 per share, net of higher rents.

Any policy, as it relates to investments in real estate or interests in real estate may be changed by our Boardcommissions. Total consideration, net of Trustees at any time without notice to, or a vote of, our shareholders.

Investments in real estate mortgages. While not our primary business focus, from time to time we make loans to others that are secured by mortgages, liens or deeds of trust covering real estate. We have no restrictions on the type of property that may be used as collateral for a mortgage loan, except we may not invest in or make a mortgage loan without obtaining an appraisal concerning the value of the underlying property unless it is a loan insured or guaranteed by a government or a governmental agency. Unless otherwise approved by our Board of Trustees, it is our policy that we will not invest in mortgage loans on any one property if in the aggregate the total indebtedness on the property, including our mortgage, exceeds 85.0% of the property’s appraised value.  We can invest in junior mortgages without notice to, or the approval of, our shareholders.commissions and issuance costs, was approximately $156.4 million. As of April 30, 2016 and 2015,December 31, 2021, we had no junior mortgages outstanding. We had no investments in real estate mortgages at April 30, 2016 and 2015.

Our policies relatingcommon shares having an aggregate offering price of up to mortgage loans, including second mortgages, may be changed by our Board$158.7 million remaining available under the 2021 ATM Program.

Issuance of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders.

Senior Securities

2016 Annual Report 5

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Policies Regarding Other Activities

Our current policies as they pertain to other activities are described as follows:

Distributions to shareholders and holders of limited partnership units. One of the requirements of the Internal Revenue Code for a REIT is that it distribute 90% of its net taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our distributions meet these requirements. Our general policy has been to make cash distributions to our common shareholders and the holders of limited partnership units of approximately 65.0% to 90.0% of our funds from operations and to use the remaining funds for capital improvements or the purchase of additional properties. This policy may be changed at any time by our Board of Trustees without notice to, or approval of, our shareholders. Distributions to our common shareholders and unitholders in fiscal years 2016 and 2015 totaled approximately 68.4% and 81.3%, respectively, on a per share and unit basis of our funds from operations.

Issuing senior securities. On April 26, 2004,October 2, 2017, we issued 1,150,0004,118,460 shares of 8.25%6.625% Series AC Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series A preferred shares”), and on August 7, 2012, we issued 4,600,000 shares of 7.95% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series BC preferred shares”). As of December 31, 2021, 3,881,453 shares remained outstanding. Depending on

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future interest rates and market conditions, we may issue additional preferred shares or other senior securities which would have dividend and liquidation preference over our common shares.

Borrowing money. We rely The Series C preferred shares are redeemable, at our option, on borrowed funds in pursuingOctober 2, 2022.

Bank Financing and Other Debt
As of December 31, 2021, we owned 48 apartment communities that were not encumbered by mortgages and which were available to provide credit support for our investment objectivesunsecured borrowings. Our primary unsecured credit facility (“unsecured credit facility”) is a revolving, multi-bank line of credit, with the Bank of Montreal serving as administrative agent. Our line of credit has total commitments and goals. It has generally beenborrowing capacity of $250.0 million, based on the value of unencumbered properties. As of December 31, 2021, the additional borrowing availability was $173.5 million beyond the $76.0 million drawn, priced at an interest rate of 2.74%, including the impact of our policyinterest rate swap. This credit facility was amended on September 30, 2021 to borrowextend the maturity date to September 2025 and provide for an accordion option to increase borrowing capacity up to 65.0% to 75.0% of the appraised value of all new real estate acquired or developed. In the future, we expect this policy will reflect a more conservative approach of up to 50.0% to 65% of the appraised value of all new real estate acquired or developed. This policy concerning borrowed funds is vested solely with our Board of Trustees and can be changed by our Board of Trustees at any time, or from time to time, without notice to, or a vote of, our shareholders. Such policy is subject, however,$400.0 million.
Prior to the limitationamendment, the unsecured credit facility also had unsecured term loans of $70.0 million and $75.0 million. During the year ended December 31, 2021, these term loans were paid in full.
In January 2021, we amended and expanded our Fourth Restated Trustees’ Regulations (Bylaws)private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, PGIM) to increase the aggregate amount available for the issuance of unsecured senior promissory notes (“Bylaws”unsecured senior notes”), to $225.0 million. We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which provides that unless approved$25.0 million was under the private shelf agreement with PGIM. The following table shows the notes issued under both agreements.
(in thousands)
AmountMaturity DateInterest Rate
Series A$75,000 September 13, 20293.84 %
Series B$50,000 September 30, 20283.69 %
Series C$50,000 June 6, 20302.70 %
Series 2021-A$35,000 September 17, 20302.50 %
Series 2021-B$50,000 September 17, 20312.62 %
Series 2021-C$25,000 September 17, 20322.68 %
Series 2021-D$15,000 September 17, 20342.78 %
In September 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for financing the acquisition of 16 apartment communities. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, at a majorityblended weighted average interest rate of the independent members of our Board of Trustees and disclosed to our shareholders in our next quarterly report along with justification for such excess, we may not borrow in excess of 300.0% of our total Net Assets (as such term is used in our Bylaws, which usage is not in accordance with generally accepted accounting principles (“GAAP”)2.78%. “Net Assets” means our total assets at cost before deducting depreciation or other non-cash reserves, less total liabilities. Our Bylaws do not impose any limitation on the amount that we may borrow against any one particular property. As of April 30, 2016,December 31, 2021, the FMCF had a balance of $198.9 million.
As of December 31, 2021, we owned 15 apartment communities that served as collateral for mortgage loans, in addition to the apartment communities secured by the FMCF. All of these mortgages payable were non-recourse to us other than for standard carve-out obligations.
We also have a $6.0 million operating line of credit, which is designed to enhance treasury management activities and more effectively manage cash balances. As of December 31, 2021, our ratio of total indebtedness to total gross real estate investments was 63.6% while our ratio37.2%.
Issuance of total indebtedness as compared to our Net Assets (computedSecurities in accordance with our Bylaws) was 88.2%.

Offering securities in exchangeExchange for property. Property

Our organizational structure allows us to issue shares and to offer limited partnership unitsUnits of IRET PropertiesCenterspace, LP in exchange for real estate. The limited partnership unitsUnits generally are convertible into cash, or,redeemable, at our option for cash or common shares on a one-for-one basis after a minimum one-year holding period. All limited partnership unitsbasis. Generally, Units receive the same per unit cash distributions as thosethe per share dividends paid on common shares. Limited partners are not entitled to vote on any matters affecting us until their limited partnership units are converted into common shares.

Our Declaration of Trust, as amended (our “Declaration of Trust”), does not contain any restrictions on our ability to offer limited partnership units of IRET PropertiesCenterspace, LP in exchange for property. As a result, any decision to do so is vested solely in our Board of Trustees. This policy
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On September 1, 2021, we issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83 per unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may be changedelect to convert.
On February 26, 2019, we issued 165,600 Series D preferred units as partial consideration for the acquisition of SouthFork Townhomes. The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year. The Series D preferred units have a put option which allows the holder to redeem any time, or from timeall of the Series D preferred units for cash equal to time, without noticethe issue price. Each Series D preferred unit is convertible, at the holder’s option, into 1.37931 Units, representing a conversion exchange rate of $72.50 per unit. The holders of the Series D preferred units do not have any voting rights.

Distributions to Shareholders
The Code requires a REIT to distribute 90% of its net taxable income, excluding net capital gains, to its shareholders, and a separate requirement to distribute 100% net capital gains or pay a votecorporate level tax in lieu thereof. We have distributed, and intend to continue to distribute, enough of our shareholders. Fortaxable income to satisfy these requirements. Our general practice has been to target cash distributions to our common shareholders and the three most recent fiscal years ended April 30, we have issued the followingholders of limited partnership units of IRET Properties in exchange for properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

2014

 

Limited partnership units issued

 

 

2,559

 

 

89

 

 

361

 

Value at issuance, net of issue costs

 

$

18,226

 

$

800

 

$

3,480

 

Acquiring or repurchasing shares. As a REIT, it is our intentionapproximately 65% to invest only in real estate assets. Our Declaration of Trust does not prohibit the acquisition or repurchase90% of our funds from operations and to use the remaining funds for capital improvements or the reduction of debt. Distributions to our common or preferred shares or other securities so long as such activity does not prohibit us from operating asshareholders and unitholders in the years ended December 31, 2021 and 2020 totaled approximately 80% and 81%, respectively, on a REIT under the Internal Revenue Code. Any policy regarding the acquisition or repurchase of shares or other securities is vested solely in our Board of Trusteesper share and may be changed at any time, or from time to time, without notice to, or a voteunit basis of our shareholders.

funds from operations.

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During fiscal year 2016, our Board of Trustees authorized a share repurchase program of up to $50.0 million worth of our common shares, under which we repurchased 4.6 million of our outstanding common shares on the open market. We did not repurchase any of our preferred shares.

Making loans to other persons. Our organizational structure allows us to make loans to other persons, subject to certain conditions and subject to our election to be taxed as a REIT. All loans must be secured by real property or limited partnership units of IRET Properties. We had no investments in real estate mortgages at April 30, 2016 and 2015.

Investing in the securities of other issuers for the purpose of exercisingcontrol. We have not engaged in, and we are not currently engaging in, investment in the securities of other issuers for the purpose of exercising control. Our Declaration of Trust does not impose any limitationFor additional information on our ability to invest in the securitiessources of other issuers for the purpose of exercising control. Any decision to do so is vested solely in our Board of Trusteesliquidity and may be changed at any time, orfunds from time to time, without notice to, or a vote of, our shareholders.

Information about Segments

We currently operate in two reportable real estate segments: multifamily and healthcare. For further information on these segments and other related information,operations, see Note 11 of our consolidated financial statements as well as Item 2 Properties and Item 7, Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report-- Liquidity and Capital Resources.”

HUMAN CAPITAL
We strive to be a great place to work and offer competitive benefits and training programs to our team members. Our objective is to attract and reward individuals with the talent and skills to help support our business objectives and make our communities home for our residents. Our total rewards program includes competitive compensation, paid leave, paid holidays, volunteer time, health and dental benefits, discounted rental rates on Form 10-K.

Employees

our apartments, employee assistance program, life insurance, 401(k) plan, and more.

As of April 30, 2016,December 31, 2021, we had 483462 employees of whom 432 were(394 full-time and 54 were part-time. 5868 part-time) across multiple states. Training is important, and we facilitate that through a learning management system which allows us to provide custom training as well as utilize a library of multifamily focused courses specializing in customer service, sales, leadership, diversity, and fair housing.
We take great pride in our pay for performance strategy where team members are aligned with overall company performance as well as specific performance metrics based on roles. Our annual performance management process invites team members to complete a self-review along with their manager's assessment. The results of these employees were corporate staff located in our Minot, North Dakota and Minneapolis, Minnesota offices, and 428 were property management employees based either at our properties or in local property management offices.

Environmental Matters and Government Regulation

Under various federal, state and local laws, ordinances and regulations relating to the protectionassessments are a component of the environment,merit increase and pay for performance strategy.

We are committed to providing a currentworkplace that is safe and free from any form of discrimination or previous owner or operatorharassment and embraces inclusiveness. As part of real estate may be liableour Environmental, Social, and Governance (ESG) initiatives, we publish an annual ESG report detailing our efforts related to furthering our mission - through providing corporate sponsorship in the communities which we serve, offering paid time off for the coststeam members to volunteer, training and compensation programs, and our commitment to diversity, equity, and inclusion. As of removal or remediationDecember 31, 2021:
•The average tenure of certain hazardous or toxic substances released at aour team members is 4.3 years;
•52% of our total team members, 55% of our senior management, and 43% of our Board of Trustees are female;
•We have over 200 custom courses on our learning management system;
•Over 12,000 training courses were completed by team members;
•Our online reputation management scores increased from 3.46 out of 5 stars to 3.48 out of 5 stars; and
•479 volunteer hours were completed by team members.
INSURANCE
We purchase general liability and property insurance coverage for each of our properties. We also purchase limited terrorism, environmental, and may be held liableflood insurance as well as other types of insurance coverage related to a governmental entity or to third parties for property damage, personal injuriesvariety of risks and investigation and clean-up costs incurred in connection with any contamination. In addition, some environmental laws create a lien on a contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. These laws often impose liability without regard to whether the current owner was responsible for, or even knew of, the presence of such substances. It is generally our policy to obtain from independent environmental consultants a “Phase I” environmental audit (which involves visual inspection but not soil or groundwater analysis) on all properties that we seek to acquire. We do not believe that any of our properties are subject to any material environmental contamination. However, no assurances can be given that:

·

a prior owner, operator or occupant of the properties we own or the properties we intend to acquire did not create a material environmental condition not known to us, which might have been revealed by more in-depth study of the properties; and

·

future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations) will not result in the imposition of environmental liability upon us.

In addition to laws and regulations relating to the protection of the environment, many other laws and governmental regulations are applicable to our properties, and changes in the laws and regulations, or in their interpretation by agencies and the courts, occur frequently. Under the Americans with Disabilities Act of 1990 (the “ADA”), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. In addition, the Fair Housing Amendments Act of 1988 (the “FHAA”) requires apartment communities first occupied after March 13, 1990, to be accessible to the handicapped. Non-compliance with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants. We believe that those of our properties to which the ADA and/or FHAA apply are substantially in compliance with present ADA and FHAA requirements.

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exposures.

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Competition

InvestingThere are certain types of losses that may not be covered or could exceed coverage limits. Due to changing market conditions, our insurance policies are also subject to increasing deductibles and coverage limits. Based on market conditions, we may change or potentially eliminate insurance coverages or face higher deductibles or other costs. Although we believe that we have adequate insurance coverage on our properties, we may incur losses, which could be material, due to uninsured risks, deductibles and/or losses in and operating real estate isexcess of coverage limits, any of which could have a very competitivematerial adverse effect on our business. We

COMPETITION
There are numerous housing alternatives that compete with other owners and developers of multifamily and commercial properties to attract tenants to our properties. Ownership of competing properties is diversified among other REITs, financial institutions, individuals and public and private companies who are actively engagedapartment communities in this business.attracting residents. Our multifamily propertiesapartment communities compete directly with other rental apartments, as well as withapartment communities, condominiums, and single-family homes that are available for rent or purchase in the areas in which our properties are located. Our commercial properties compete with other commercial propertiesIf the demand for tenants.our apartment communities is reduced or competitors develop or acquire competing housing, rental and occupancy rates may decrease, which could have a material adverse effect on our business. Additionally, we compete with other real estate investors, including other REITs, pension and investment funds, partnerships and investment companies, to acquire properties. This competition affects our ability to acquire properties we want to add to our portfolio and the price we pay forcost of those acquisitions.  We do not believe we have a dominant position in any of
GOVERNMENT REGULATION
See the geographic markets in which we operate, but some of our competitors may be dominant in selected markets. Many of our competitors have greater financial and management resources than we have. We believe, however, that the geographic diversity of our investments, the experience and abilities of our management, the quality of our assets and the financial strength of many of our commercial tenants affords us some competitive advantages that have in the past and will in the future allow us to operate our business successfully despite the competitive nature of our business.

Corporate Governance

Our Board of Trustees has adopted various policies and initiatives to strengthen our corporate governance and increase the transparency of financial reporting. Each of the committees of the Board of Trustees operates under written charters, and our independent trustees meet regularly in executive sessions at which only the independent trustees are present.  The Board of Trustees has adopted a Code of Conduct applicable to trustees, officers and employees; adopted a Code of Ethics for Senior Financial Officers; and has established processes for shareholders and all interested parties for communication with the Board of Trustees.

Additionally, our Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by our employees of concerns regarding accounting or auditing matters. The Audit Committee also maintains a policy requiring Audit Committee approval of all audit and non-audit services provided to us by our independent registered public accounting firm.

We will disclose any amendment to our Code of Ethics for Senior Financial officers on our website. In the event we waive compliance with the Code of Ethics or Code of Conduct by any of our trustees or officers, we will disclose such waiver in a Form 8-K filed within four business days.

Website and Available Information

Our internet address is www.iret.com. We make available, free of charge, through the “SEC filings” tabdiscussion under the Investor Relations/Financial Reporting section of our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits and amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports are filed with or furnished to the SEC. Current copies of our Code of Conduct; Code of Ethics for Senior Financial Officers; and Charters for the Audit, Compensation, Executive and Nominating and Governance Committees of our Board of Trustees are also available on our website under the “Corporate Governance” tab under the Investor Relations/Corporate Overview section of our website. Copies of these documents are also available to shareholders upon request addressed to the Secretary at Investors Real Estate Trust, P.O. Box 1988, Minot, North Dakota 58702-1988. Information on our website does not constitute part of this Annual Report on Form 10-K.

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Item 1A.  Risk Factors

caption “Risks Related to Our Properties and Business

Operations -- We may be responsible for potential liabilities under environmental laws” in Item 1A, Risk Factors, for information concerning the potential effects of environmental matters on our business, “Complying with laws benefiting disabled persons or other safety regulations and requirements may affect our costs and investment strategies” in Item 1A, Risk Factors, for information concerning the potential effects of compliance with disabled persons and other safety regulations on our business, “Changes in federal or state laws and regulations relating to climate change could result in increased costs to our business, including capital expenditures to improve the energy efficiency of our existing communities or new development communities without a corresponding increase in revenue” in Item 1A, Risk Factors, for information concerning the potential effects of climate change regulation on our business, “Complying with zoning and permitting law may affect our acquisition, redevelopment, and development costs” in Item 1A. Risk Factors, for information concerning the potential costs associated with zoning and permitting regulations, and “The current pandemic of COVID-19 and the potential future outbreak of other highly infectious or contagious diseases may materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our equityholders” in Item 1A Risk Factors, for information concerning the potential effects of regulations related to the COVID-19 pandemic, which discussions thereunder are incorporated by reference into this Item 1.


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Item 1A.  Risk Factors
We face certain risks related to our ownership of apartment communities and operation of our business. Set forth below are the risks that we believe are material to our shareholders and unitholders. You should carefully consider the following risks in evaluating our properties, business, and operations. Our business, financial condition, cash flows, results of operations, value of our real estate assets and/or the value of an investment in our stock or units are subject to various risks and uncertainties, including those set forth below, any of which could cause our actual operating results to vary materially from our recent results or from our anticipated future results.
Risks Related to Our Properties and Operations
The current pandemic of COVID-19 and the potential future outbreak of other highly infectious or contagious diseases may materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our equityholders. The COVID-19 pandemic has and may continue to impact our financial condition, results of operations, and cash flows as well as adversely affect our residents and commercial tenants, the real estate market, and the global economy and financial markets generally. The continued effects of COVID-19 will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. Moreover, many of the other risks identified in this Report may be heightened because of the adverse impacts of COVID-19.

The ongoing COVID-19 pandemic and continuing restrictions intended to prevent and mitigate its spread could have
additional adverse effects on our business, including with regards to:

•our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operations;
•deteriorating economic conditions and rising unemployment rates in the markets where we own apartment communities or in which we may invest in the future;
•government actions or regulations arising out of the COVID-19 pandemic that limit economic and consumer activity or affect the operation of our properties;
•rental conditions in our markets, including occupancy levels and rental rates, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions; and
•changes in operating costs related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic.
Our financial performance and share value areis subject to risks associated with the real estate industry.industry and ownership of apartment communities.Our results of operations and financial condition, the value of our real estate assets, and the value of an investment in us are subject to the risks normally associated with the ownership and operation of real estate properties. Theseperformance risks include, but are not limited to, the following factorsfollowing:
•downturns in national, regional, and local economic conditions (particularly increases in unemployment); 
•competition from other apartment communities; 
•local real estate market conditions, including an oversupply of apartments or other housing, or a reduction in demand for apartment communities; 
•the attractiveness of our apartment communities to residents as well as residents’ perceptions of the safety, convenience, and attractiveness of our apartment communities and the areas in which among others, may adversely affect the income generated by our properties:

they are located;

·

downturns in national, regional and local economic conditions (particularly increases in unemployment);

·

competition from other multifamily and commercial properties;

·

local real estate market conditions, such as oversupply or reduction in demand for multifamily and commercial space;

·

changes in interest rates and availability of attractive financing;

·

declines in the economic health and financial condition of our tenants and our ability to collect rents from our tenants;

·

vacancies, changes in market rental rates and the need periodically to repair, renovate and re-lease space;

·

increased operating costs, including real estate taxes, state and local taxes, insurance expense, utilities, and security costs;

·

significant expenditures associated with each investment, such as debt service payments, real estate taxes and insurance and maintenance costs, which are generally not reduced when circumstances cause a reduction in revenues from a property;

·

weather conditions, civil disturbances, natural disasters, terrorist acts or acts of war which may result in uninsured or underinsured losses; and

·

decreases in the underlying value of our real estate.

The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any •changes in lawsinterest rates and regulations affecting the relationship between Fannie Mae and Freddie Macavailability of attractive financing that might make other housing options, like home ownership, more attractive; 

•our ability to collect rents from our residents;
•vacancies, changes in rental rates, and the U.S. Government, may adversely affectperiodic need to repair, renovate, and redevelop our business. We depend on the Federal National Mortgage Association (Fannie Mae)apartment communities; 
•increases in operating costs, including real estate taxes, state and the Federal Home Loan Mortgage Corporation (Freddie Mac) for financing forlocal taxes, insurance expenses, utilities, and security costs, many of our multifamily properties. Fannie Mae and Freddie Mac are U.S. Government-sponsored entities, or GSEs, but their guaranteeswhich are not backed byreduced significantly when circumstances cause a reduction in revenues from a property;
•increases in compensation costs due to the full faith and credittight labor market in many of the United States. In September 2008, Fannie Mae and Freddie Mac were placedmarkets in federal conservatorship. The problems faced by Fannie Mae and Freddie Mac resulting in their being placed into federal conservatorship stirred debate among some federal policy makers regarding the continued role of the U.S. Government in providing liquidity for the residential mortgage market. It is unclear how future legislation may impact Fannie Mae and Freddie Mac’s involvement in multifamily financing. The scope and nature of the actions that the U.S. Government may undertake with respect to the future of Fannie Mae and Freddie Mac are unknown and will continue to evolve. It is possible that each of Fannie Mae and Freddie Mac could be dissolved and the U.S. Government could decide to stop providing liquidity support of any kind to the multifamily mortgage market. Future legislation could further change the relationship between Fannie Mae and Freddie Mac and the U.S. Government, and could also nationalize or eliminate such GSEs entirely. Any law affecting these GSEs may create market uncertainty and have the effect of reducing the credit available for financing multifamily properties. The loss or reduction of this important source of credit would be likely to result in higher loan costs for us, and could result in inability to borrow or refinance maturing debt, all of which could materially adversely affect our business, operations and financial condition.

2016 Annual Report 9

we operate; 

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•our ability to provide adequate maintenance for our apartment communities;

•our ability to provide adequate insurance on our apartment communities; and
•changes in tax laws and other government regulations that could affect the value of REITs generally or our business in particular.
Our property acquisition activities may not produce the cash flows expected and could subject us to various risks whichthat could adversely affect our operating results.We have acquired in the past and intend to continue to pursue the acquisition of properties and portfoliosapartment communities, but the success of properties, including large portfolios that could increase our size and result in alterations to our capital structure. Our acquisition activities and their success areis subject to numerous risks, including but not limited to: 

the following:

·

even if we enter into an acquisition agreement for a property, it is subject to customary closing conditions, including completion of due diligence investigations, and we may be unable to complete that acquisition after making a non-refundable deposit and incurring other acquisition-related costs;

•acquisition agreements are subject to customary closing conditions, including completion of due diligence investigations, and we may be unable to complete an acquisition after making a non-refundable deposit and incurring other acquisition-related costs; 

·

we may be unable to obtain financing for acquisitions on favorable terms or at all;

•actual results may differ from expected occupancy, rental rates, and operating expenses of acquired apartment communities, or from those of our existing apartment communities;

·

acquired•we may be unable to obtain financing for acquisitions on favorable terms, or at all; 

•competition for these properties may fail to perform as expected;

·

the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates; and

·

we may be unable to quickly and efficiently integrate new acquisitions into our existing operations.

These risks could have an adverse effect on our results of operations and financial condition and the amount of cash available for payment of distributions. 

Acquired propertiescause us to pay higher prices or prevent us from purchasing a desired property at all;

•we may be subject us to unknown liabilities which could adversely affect our operating results.We may acquirefrom acquired properties, subject to liabilities without any recourse,with either no or with only limited recourse against prior owners or other third parties with respectparties; and 
•we may be unable to unknown liabilities. As a result, if liability were asserted against us based upon ownership of these properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operationsquickly and cash flows. Unknown liabilities with respect to acquired properties might include liabilities for clean-up of undisclosed environmental contamination; claims by tenants, vendors or other persons against the former owners of the properties; liabilities incurred in the ordinary course of business; and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. 

Our geographic concentration in Minnesota and North Dakota may result inlosses due to our significant exposure to the effects of economic and real estate conditions in those markets.For the fiscal year ended April 30, 2016, we received approximately 73.2% of our gross revenue from properties in Minnesota and North Dakota. As a result of this concentration, we are subject to substantially greater risk than if our investments were more geographically dispersed. Specifically, we are more significantly exposed to the effects of economic and real estate conditions in those particular markets, such as building by competitors, local vacancy and rental rates and general levels of employment and economic activity. To the extent that weak economic or real estate conditions affect Minnesota and/or North Dakota more severely than other areas of the country, our financial performance could be negatively impacted.

If we are not able to renew leases or enterefficiently integrate new acquisitions into new leases on favorable terms or at all as our existing leases expire, our revenue, operating results and cash flows will be reduced.operations.

We may be unable to renew leases withacquire or develop properties and expand our existing tenants or enteroperations into new leases withor existing markets successfully. We intend to explore acquisitions or developments of properties in new tenants due to economic and other factors as our existing leases expiregeographic markets. Acquiring or are terminated priordeveloping new properties and expanding into new markets introduces several risks, including but not limited to the expiration of their current terms. As a result, following:
•we could lose a significant source of revenue while remaining responsible for the payment ofmay not be successful in identifying suitable properties or other assets that meet our obligations. In addition, even if we were able to renew existing leasesacquisition or enter into new leasesdevelopment criteria or in a timely manner, the terms of those leases may be less favorable to us than the terms of expiring leases, because the rental rates of the renewalconsummating acquisitions or new leases may be significantly lower than those of the expiring leases, or tenant installation costs, including the cost of required renovations or concessions to tenants, may be significant.  If we are unable to enter into lease renewals or new leasesdevelopments on favorablesatisfactory terms, or in a timely manner for all or a substantial portion of space that is subject to expiring leases, our revenue, operating results and cash flows will be adversely affected. As a result, our ability to make distributions to the holders of our shares of beneficial interest may be adversely affected. As of April 30, 2016, approximately 1,189 of our 12,974 apartment units, or 9.2%, were vacant. Approximately 159,000 square feet, or 10.6% of our healthcare property square footage, was vacant. As of April 30, 2016, leases covering approximately 8.4% of our healthcare properties net rentable square footage will expire in fiscal year 2017, 15.0% in fiscal year 2018, 14.2% in fiscal year 2019, 4.9% in fiscal year 2020 and 7.9% in fiscal year 2021, assuming that none of the tenants exercise future renewal options and excluding the effect of early renewals completed on existing leases.

at all;

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We face potential adverse effects from commercial tenant bankruptcies or insolvencies.The bankruptcy or insolvency of our commercial tenants may adversely affect the income produced by our properties. If a tenant defaults, •we may experience delays and incur substantial costs in enforcing our rights as landlord. If a tenant files for bankruptcy, we cannot evict the tenant solely because of such bankruptcy. A court, however, may authorize the tenant to reject and terminate its lease with us. In such a case, our claim against the tenant for unpaid future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and it is unlikely that a bankrupt tenant would pay in full amounts it owes us under a lease. This shortfall could adversely affect our cash flow and results of operations. If a tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely rental payments. Under some circumstances, we may agree to partiallymaintain consistent standards, controls, policies, and procedures, or wholly terminaterealize the lease in advanceanticipated benefits of the termination date in consideration for a lease termination fee that is less thanacquisitions within the agreed rental amount. Additionally, without regard to the manner in which a lease termination occurs, we are likely to incur additional costs in the form of tenant improvementsanticipated time frame, or at all;

•acquisitions and leasing commissions indivestitures could divert our efforts to lease the space to a new tenant, as well as possibly lower rental rates reflective of declines in market rents.

Because real estate investments are generally illiquid, and various factors limit our ability to dispose of assets, we may not be able to sell properties when appropriate.Real estate investments are relatively illiquid and, therefore, we have limited ability to change our portfolio of properties quickly in response to our strategic plan and changes in economic or other conditions. In addition, the prohibitions under the federal income tax laws on REITs holding property for sale and related regulations may affect our ability to sell properties. Under certain circumstances, the Internal Revenue Code imposes certain penalties on a REIT that sells property held for less than two years and limits the number of properties it can sell in a given year. Our ability to dispose of assets may also be limited by constraints on our ability to utilize disposition proceeds to make acquisitions on financially attractive terms, and the requirement that we take additional impairment charges on certain assets. More specifically, we are required to distribute or pay tax on all capital gains generated from the sale of assets, and, in addition, a significant number of our properties were acquired using limited partnership units of IRET Properties, our operating partnership, and are subject to certain agreements which restrict our ability to sell such properties in transactions that would create current taxable income to the former owners. As a result, we are motivated to structure the sale of these assets as tax-free exchanges. To accomplish this, we must identify attractive re-investment opportunities. These considerations impact our decisions on whether or not to dispose of certain of our assets.

Capital markets and economic conditions can materially affect our financial condition and results of operations, the value of our equity securities, and our ability to sustain payment of our distribution at current levels.Many factors affect the value of our equity securities and our ability to make or maintain at current levels distributions to the holders of our shares of beneficial interest, including the state of the capital markets and the economy, which in recent years have negatively affected substantially all businesses, including ours. Demand for office, industrial, and retail space has declined nationwide due to bankruptcies, downsizing, layoffs and cost cutting. The availability of credit has been and may in the future again be adversely affected by illiquid credit markets. Regulatory pressures and the burden of troubled and uncollectible loans led some lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers. If these market conditions recur, they may limit our ability and the ability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs, which may materially affect our financial condition and results of operations and the value of our equity securities. Declining rental revenuesattention from our properties due to persistent negative economic conditions may have a material adverse effect on our ability to make distributions to the holders of our shares of beneficial interest. In fiscal years 2016 and 2015, distributions to our common shareholders and unitholders of IRET Properties in cash and common shares pursuant to our Distribution Reinvestment and Share Purchase Plan (DRIP) totaled approximately 107.2% and 61.9%, respectively, of our net cash provided by operating activities. 

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Inability to manage rapid growth effectively may adversely affect ouroperating results.We have experienced significant growth at various times in the past, principally through the acquisition of additional real estate properties. Subject to our ability to raise equity capital and issue limited partnership units of IRET Properties and identify suitable investment properties, we intend to continue our acquisition of real estate properties. Effective management of rapid growth presents challenges, including:

·

the need to expand our management team and staff;

·

the need to enhance internal operating systems and controls; and

·

the ability to consistently achieve targeted returns on individual properties.

We may not be able to maintain similar rates of growth in the future or manage our growth effectively. Additionally, an inability to make accretive property acquisitions may adversely affect our ability to increase our net income. The acquisition of additional real estate properties is critical to our ability to increase our net income. If we are unable to make real estate acquisitions on terms that meet our financial and strategic objectives, whether due to market conditions, a changed competitive environment or unavailability of capital, our ability to increase our net income may be materially and adversely affected. Our failure to do so may have a material adverse effect on our financial condition and results of operations and ability to make distributions to the holders of our shares of beneficial interest.

Competition may negatively impact our earnings.We compete with many kinds of institutions, including other REITs, private partnerships, individuals, pension funds and banks, for tenants and investment opportunities. Many of these institutions are active in the markets in which we invest and have greater financial and other resources that may be used to compete against us. With respect to tenants, this competition may affect our ability to lease our properties, the price at which we are able to lease ourexisting properties and the cost of required renovations or tenant improvements. With respect to acquisition and development investment opportunities, this competition maycould cause us to pay higher prices for new properties than we otherwise would have paid, or may prevent us from purchasing a desired property at all.

High leverage on our overall portfolio may result in losses.As of April 30, 2016, our ratio of total indebtedness to total Net Assets (as defined in our Bylaws, which usage is not in accordance with GAAP) was approximately 88.2%. “Net Assets” under our Bylaws mean our total assets at cost before deducting depreciation or other non-cash reserves, less total liabilities. As of April 30, 2015 and 2014, our percentage of total indebtedness to total Net Assets was approximately 97.8% and 93.3%, respectively. Under our Bylaws, we may increase our total indebtedness up to 300.0% of our Net Assets, or by an additional approximately $3.1 billion. There is no limitation on the increase that may be permitted if approved by a majority of the independent members of our Board of Trustees and disclosed to the holders of our securities in the next quarterly report, along with justification for any excess.

This amount of leverage may expose us to cash flow problems if rental income decreases. Under those circumstances, in order to pay our debt obligations we might be required to sell properties at a losslose key employees or be unable to make distributionsattract highly qualified new employees;

•unfamiliarity with the dynamics and prevailing market conditions or decrease distributions to holderslocal government or permitting procedures of our shares of beneficial interest. A failure to pay amounts due may result in a default on our obligations and the loss of the property through foreclosure. Additionally, our degree of leverageany new geographic markets could adversely affect our ability to obtain additional financing and may have an adverse effectsuccessfully expand into or operate within those markets or cause us to become more dependent on the market price ofthird parties in new markets due to our common shares.

Our inability to renew, repaydirectly and efficiently manage and otherwise monitor new properties in new markets;

•we may make assumptions regarding the expected future performance of acquired properties, including expected occupancy, rental rates, and cash flows, that prove to be inaccurate; and
•we may improperly estimate the costs of repositioning or refinance our debtredeveloping an acquired property.
We also may result in losses.We incur a significant amount of debt in the ordinary course of our business and in connection with acquisitions of real properties. In addition, becauseabandon opportunities to enter new markets that we have a limited abilitybegun to retain earningsexplore for any reason and may, as a result, of the REIT distribution requirements, we will generally be requiredfail to refinance debt that matures with additional debt or equity. We are subject to the normal risks associated with debt financing, including the risks that:

·

our cash flow will be insufficient to meet required payments of principal and interest;

·

we will not be able to renew, refinance or repay our indebtedness when due; and

·

the terms of any renewal or refinancing will be less favorable than the terms of our current indebtedness.

recover expenses already incurred.

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These risks increase when credit markets are tight. In general, when the credit markets are constrained, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to be less favorable to us than the terms of our current indebtedness.

We anticipate that only a small portion of the principal of our debt will be repaid prior to maturity, and we will need to refinance a significant portion of our outstanding debt as it matures. We cannot guarantee that any refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us. If we cannot refinance, extend or pay principal payments due at maturity with the proceeds of other capital transactions, such as new equity capital, our cash flows may not be sufficient in all years to repay debt as it matures. Additionally, if we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more of our properties on disadvantageous terms, which may result in losses to us. These losses could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments or refinance the debt at maturity, the mortgagee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, including taking ownership of the property, all with a consequent loss of revenues and asset value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Internal Revenue Code.

As of April 30, 2016, approximately 17.0% of our mortgage debt, including mortgage debt on properties held for sale, is due for repayment in fiscal year 2017. As of April 30, 2016, we had approximately $150.7 million of principal payments and approximately $38.8 million of interest payments due in fiscal year 2017 on fixed and v1ariable-rate mortgages secured by our real estate. Additionally, as of April 30, 2016, we had $17.5 million outstanding under our $100.0 million multi-bank line of credit, which has a maturity date of September 1, 2017.

The cost of our indebtedness may increase.Portions of our fixed-rate indebtedness incurred for past property acquisitions come due on a periodic basis. Rising interest rates could limit our ability to refinance this existing debt when it matures, and would increase our interest costs, which could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In addition, we have incurred, and we expect to continue to incur, indebtedness that bears interest at a variable rate. As of April 30, 2016, $196.8 million, or approximately 22.2%, of the principal amount of our total mortgage indebtedness was subject to variable interest rates agreements, and approximately 91.2% of the principal amount of our total construction loan indebtedness was subject to variable interest rates. Additionally, our $100.0 million multi-bank line of credit bears interest at a rate of 1.25% over the Wall Street Journal Prime Rate, with a floor of 4.75% and a cap of 8.65%. If short-term interest rates rise, our debt service payments on adjustable rate debt would increase, which would lower our net income and could decrease our distributions to the holders of our shares of beneficial interest. 

Our current or future insurance may not protect us against possible losses.We carry comprehensive liability, fire, cyber, extended coverage, and rental lossother insurance with respect to our properties at levels that we believe to be adequate and comparable to coverage customarily obtained by owners of similar properties. However, the coverage limits of our current or future policies may be insufficient to cover the full cost of repair or replacement of all potential losses. Moreover, thislosses, or our level of coverage may not continue to be available in the future or, if available, may be available only at unacceptable cost or with unacceptable terms.

Additionally, there may be certain extraordinary losses, such as those resulting from civil unrest, terrorism or environmental contamination, that are not generally, or fully, insured against because they are either uninsurable or not economically insurable. For example, we We also do not currently carrymaintain coverage for certain catastrophic events like hurricanes and earthquakes because the cost of such insurance against losses as a resultis deemed by management to be higher than the risk of environmental contamination. Should an uninsured or underinsured loss occurdue to a property, we could be required to use our own funds for restoration or lose all or partthe location of our investment in, and anticipated revenues from, the property.properties. In any event, we would continue to be obligated on any mortgage indebtedness on the property. Any loss could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt.

In addition, in most cases, we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases. In addition, a reduction of the number of insurance providers or the unwillingness of existing insurance providers to write insurance for multifamily properties may reduce the potential availability and/or cost for obtaining insurance on our properties. Any material increaseincreases in insurance rates or decrease in available coverage in the future could adversely affect our results of operations.

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Catastrophic weather, natural events, and climate change could adversely affect our business. Some of our apartment communities are located in areas that may experience catastrophic weather and other natural events from time to time, including snow or ice storms, flooding, tornadoes, or other severe or inclement weather. These adverse and natural events could cause damage or losses that may be greater than insured levels. In the event of a loss in excess of insured limits, we could lose all or a portion of our investment in an affected property as well as additional revenue from that apartment community. We may continue to be obligated to repay mortgage indebtedness or other obligations related to an affected apartment community.
To the extent that we experience any significant changes in the climate in areas where our apartment communities are located, we may experience extreme weather conditions and prolonged changes in precipitation and temperature, all of which could result in physical damage to, and/or a decrease in demand for, our apartment communities located in these areas. If the impact of any such climate change were to be material, or occur for a lengthy period of time, our business may be adversely affected.
Changes in federal or state laws and regulations relating to climate change could result in increased costs to our business, including capital expenditures to improve the energy efficiency of our existing communities or new development communities without a corresponding increase in revenue. Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency and waste management. The imposition of such requirements in the future, including the imposition of new energy efficiency standards or requirements relating to resistance to inclement weather, could increase the costs of maintaining or improving our properties without a corresponding increase in revenue, thereby having an adverse effect on our financial condition or results of operation. The impact of climate change also may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.
We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn or slowdown in the sector or other economic factors. Since April 30, 2018, substantially all of our investments have been concentrated in the multifamily sector. As a result, we will be subject to risks inherent in investments in a single type of property. A downturn or slowdown in the demand for multifamily housing may have more pronounced effects on our business and results of operations which could cause a decline inor on the market value of our securities.

assets than if we had continued to be more diversified in our investments into more than one asset class.

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Our operations are concentrated in certain regions of the United States, and we are subject to general economic conditions in the regions in which we operate. Our overall operations are concentrated in the Midwest and Mountain West regions of the United States. Our performance could be adversely affected by economic conditions in, and other factors relating to, these geographic areas, including supply and demand for apartments in these areas, zoning and other regulatory conditions, and competition from other communities and alternative forms of housing. In particular, our performance is influenced by job growth and unemployment rates in the areas in which we operate. To the extent the economic conditions, job growth and unemployment in any of these markets deteriorate or any of these areas experience natural disasters or more pronounced effects of climate change, the value of our portfolio, our results of operations, and our ability to make payments on our debt and to make distributions could be adversely affected.

Our business depends on our ability to continue to provide high quality housing and consistent operation of our apartment communities, the failure of which could adversely affect our business and results of operations. Our business depends on providing our residents with quality housing and reliable services (including utilities), along with the consistent operation of our communities and their associated amenities, including covered parking, swimming pools, clubhouses with fitness facilities, playground areas, and other similar features. We may be required to undertake significant capital expenditures to renovate or reconfigure our communities in order to attract new residents and retain existing residents. The delayed delivery, material reduction, or prolonged interruption in any of these services may cause our residents to terminate their leases, may result in the reduction of rents and/or may result in an increase in our costs. In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including mechanical failure, power failure, inclement weather, physical or electronic security breaches, vandalism or acts of terrorism, or other similar events. Any of these issues could cause our residents to terminate or fail to renew their leases, could expose us to additional costs or liability claims, and could damage our reputation, any of which could impact our ability to provide quality housing and consistent operation of our apartment communities, which in turn could materially affect our business and results of operations.
Competition may negatively impact our earnings.We compete with many kinds of institutions, including other REITs, private partnerships, individuals, pension funds, and banks in attracting residents and finding investment opportunities. Many of these institutions are active in the markets in which we invest and have greater financial and other resources than we do, including access to capital on more favorable terms. Our apartment communities compete directly with other multifamily apartment communities, single-family homes, condominiums, and other short-term rentals.

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We have significant investmentsShort-term leases could expose us to the effects of declining market rents. Our apartment leases are generally for a term of 12 months or less. Because these leases generally allow residents to leave at the expiration of the lease term without penalty, our rental revenues are impacted by declines in healthcare properties and adverse trends inhealthcare provider operations may negatively affectmarket rents more quickly than if our lease revenues fromthese properties.We have acquired a significant number of specialty healthcare properties (including senior housing). As of April 30, 2016, ourleases were for longer terms.

Because real estate portfolio held for investment included 31 healthcare properties, with a total real estate investment amount, netinvestments are relatively illiquid and various other factors limit our ability to dispose of accumulated depreciation, of $254.4 million, or approximately 18.6% of the total real estate investment amount, net of accumulated depreciation, of our entire real estate portfolio held for investment. Additionally, as of April 30, 2016, we held for sale 34 senior housing properties. The healthcare industry continues to experience changes in the demand for, and methods of delivery of, healthcare services; changes in third-party reimbursement policies; significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas; continuing pressure by private and governmental payors to reduce payments to providers of services; and increased scrutiny of billing, referral and other practices by federal and state authorities. Sources of revenue for our healthcare property tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. These factors may adversely affect the economic performance of some or all of our healthcare services tenants and, in turn, our lease revenues. In addition, if we or our tenants terminate the leases for these properties, or our tenants lose their regulatory authority to operate such properties,assets, we may not be able to locate suitable replacement tenantssell properties when appropriate.We may have limited ability to leasechange our portfolio of properties quickly in response to our strategic plan and changes in economic or other conditions, and the propertiesprohibitions under the federal income tax laws on REITs holding property for their specialized uses. Alternatively, wesale and related regulations may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues and/or additional capital expenditures occurring as a result could hinderaffect our ability to make distributionssell properties. Under certain circumstances, the Code imposes penalties on a REIT that sells property held for less than two years and limits the number of properties it can sell in a given year. Our ability to the holdersdispose of our shares of beneficial interest.

New federal healthcare reform lawsassets also may adversely affect the operators and tenants of our healthcare (including senior housing) properties.In March 2010, the President signed into law The Patient Protection and Affordable Care Act (“PPACA”) and The Health Care and Education and Reconciliation Act of 2010 (the “Reconciliation Act”), which amends the PPACA (collectively, the “Health Care Reform Acts”).  The Health Care Reform Acts contain various provisions that may affect us directly as an employer, and that may affect the operators and tenants of healthcare (including senior housing) properties. While some of the provisions of these laws may have a positive impact on operators’ or tenants’ revenues,be limited by increasing coverage of uninsured individuals, other provisions may have a negative effect on operator or tenant reimbursements, for example by changing the “market basket” adjustments for certain types of healthcare facilities. The Health Care Reform Acts also enhance certain fraud and abuse penalty provisions that could apply to our operators and tenants in the event of one or more violations of complex federal healthcare laws.  Additionally, provisions in the Health Care Reform Acts may affect the health coverage that we and our operators and tenants provide to our respective employees. We currently cannot predict the impact that this far-reaching, landmark legislation will have on our business and the businesses and operations of our tenants. Any loss of revenues and/or additional expenditures incurred by us or by operators and tenants of our properties as a result of the Health Care Reform Acts could adversely affect our cash flow and results of operations and have a material adverse effectconstraints on our ability to use disposition proceeds to make distributionsacquisitions on financially attractive terms. Some of our properties were acquired using limited partnership units of Centerspace, LP, our operating partnership, and are subject to certain tax-protection agreements that restrict our ability to sell these properties in transactions that would create current taxable income to the holdersformer owners. As a result, we are motivated to structure the sale of these assets as tax-free exchanges, the requirements of which are technical and may be difficult to achieve.

Inability to manage growth effectively may adversely affect ouroperating results.We have experienced significant growth at various times in the past and may do so in the future, principally through the acquisition of additional real estate properties. Effective management of rapid growth presents challenges, including:
•the need to expand our sharesmanagement team and staff;
•the need to enhance internal operating systems and controls; and
•the ability to consistently achieve targeted returns on individual properties.
We may not be able to maintain similar rates of beneficial interest.

growth in the future or manage our growth effectively.

Adverse changes in applicabletaxes and other laws may affect our potential liabilitiesrelating to our properties and operations.Increases in real estate taxes, including recent property tax increases in several of the markets in which we operate, and income, service and transfer taxes cannot always be passed through to all tenants in the form of higher rents. As a result, any increase may adversely affect our cash available for distribution, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. Similarly, changes in laws that increase the potential liability for environmental conditions existing on properties, that increase the restrictions on discharges or other conditions or that affect development, construction, and safety requirements may result in significant unanticipated expenditures that could have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In addition, futurecosts. Future enactment of rent control or rent stabilization laws or other laws regulating multifamily propertiesapartment communities may reduce rental revenues or increase operating costs.

Complying

We may be unable to retain or attract qualified management.We are dependent upon our senior officers for essentially all aspects of our business operations. Our senior officers have experience in the real estate industry, and the loss of them would likely have a material adverse effect on our operations and could adversely impact our relationships with laws benefiting disabled personslenders and industry personnel. We do not have employment contracts with any of our senior officers. As a result, any senior officer may terminate his or other safety regulationsher relationship with us at any time, without providing advance notice. If we fail to effectively manage a transition to new personnel, or if we fail to attract and requirements mayretain qualified and experienced personnel on acceptable terms, it could adversely affect our costsbusiness.
We may not be able to attract andinvestment strategies.Federal, state retain qualified employees. Strong economic growth in recent years has created a tight labor market in many of the markets in which we operate, and local laws and regulations designedwe are dependent on employees at our apartment communities to improve disabled persons’ access to and useprovide attractive homes for our residents. The loss of buildings, including the Americans with Disabilities Act of 1990, may require modifications to, or restrict renovations of, existing buildings. Additionally,key personnel at these laws and regulations may require that structural features be added to buildings under construction. Legislation or regulations that may be adopted in the future may impose further burdens or restrictions on us with respect to improved access to, and use of these buildings by, disabled persons. Noncompliance could result in the imposition of fines by government authoritiesapartment communities, or the awardinability or cost of damages to private litigants. The costs

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of complying with these laws and regulations may be substantial, and limits or restrictions on construction, or the completion of required renovations, may limit the implementation of our investment strategy or reduce overall returns on our investments. Thisreplacing such personnel at such communities, could have an adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts dueimpact on our debt. Our properties are also subject to various other federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. Additionally, in the event that existing requirements change, compliance with future requirements may require significant unanticipated expenditures that may adversely affect our cash flowbusiness and results of operations.

We face risks associated with security breaches through cyber-attacks, cyber intrusions, or otherwise, which could pose a risk to our systems, networks, and services. We face risks associated with security breaches or disruptions, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, or persons inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions around the world have increased. In the normal course of business, we and our service providers (including service providers engaged in providing web hosting, property management, leasing, accounting and/or payroll software/services) collect and retain certain personal information provided by our residents, employees, and vendors. We also rely extensively on computer systems to process transactions and manage our business. While we and our service providers employ a variety of data security measures to protect confidential information on our systems and periodically review and improve our data security measures, we cannot provide assurance that we or our service providers will be able to prevent unauthorized access to this personal information, that our efforts to maintain the security and integrity of the information that we and our service providers collect will be effective, or that attempted security breaches or disruptions would not be successful
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or damaging. Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target. In some cases, these breaches are designed not to be detected and, in fact, may not be detected. Accordingly, we and our service providers may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, thereby making it impossible to entirely mitigate this risk. The risk of a breach or security failure, particularly through cyber-attacks or cyber-intrusion, has generally increased due to the rise in new technologies and the increased sophistication and activities of the perpetrators of attempted attacks and intrusions. A security breach or other significant disruption involving computer networks and related systems could cause substantial costs and other negative effects, including litigation, remediation costs, costs to deploy additional protection strategies, compromising of confidential information, and reputational damage adversely affecting investor confidence.
In November 2021, we suffered a ransomware attack on our information technology systems. Promptly upon detection of the attack, we launched an investigation and notified law enforcement, legal counsel and engaged other incident response experts. We recovered all of our critical operational data, and the incident did not have a material impact on our business, operations or financial results. We implemented additional and enhanced measures to reinforce the security of our information technology systems for any cyber-attack we may face in the future. However, notwithstanding every measure taken to address cybersecurity matters, and although we have not experienced any material losses relating to this incident, we cannot assure you that we will not suffer additional losses related to similar cyber-attacks in the future.
We may be responsible for potential liabilities under environmental laws.Under various federal, state, and local laws, ordinances and regulations, we, as a current or previous owner or operator of real estate, may be liable for the costs of removal of, or remediation of hazardous or toxic substances in, on, around, or under that property. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. The presence of these substances, or the failure to properly remediate any property containing these substances, may adversely affect our ability to sell or rent the affected property or to borrow funds using the property as collateral. In arranging for the disposal or treatment of hazardous or toxic substances, we also may also be liable for the costs of removal of, or remediation of, these substances at that disposal or treatment facility, whether or not we own or operate the facility. In connection with our current or former ownership (direct or indirect), operation, management, development, and/or control of real properties, we may be potentially liable for removal or remediation costs with respect to hazardous or toxic substances at those properties, as well as certain other costs, including governmental fines and claims for injuries to persons and property. A findingAlthough we are not aware of liability for an environmental condition as to any one or moresuch claims associated with our existing properties couldthat would have a material adverse effect on us,our business, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may have for such events or such coverage may not exist. The presence of such substances, or the failure to properly remediate any such impacts, may adversely affect our ability to make distributionsborrow against, develop, sell, or rent the affected property. Some environmental laws create or allow a government agency to impose a lien on the holdersimpacted property in favor of our sharesthe government for damages and costs it incurs as a result of beneficial interest and our abilityresponding to pay amounts due on our debt.

hazardous or toxic substances.

Environmental laws also govern the presence, maintenance, and removal of asbestos, and require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos; notify and train those who may come into contact with asbestos; and undertake special precautions if asbestos would be disturbed during renovation or demolition of a building. Indoor air quality issues may also necessitate special investigation and remediation. These air quality issues can result from inadequate ventilation, chemical contaminants from indoor or outdoor sources, or biological contaminants such as molds, pollen, viruses and bacteria. Such asbestosAsbestos or air quality remediation programs could be costly, necessitate the temporary relocation of some or all of the property’s tenantsresidents, or require rehabilitation of an affected property.

It is generally our policy to obtain a Phase I environmental study on each property that we seek to acquire. A Phase I environmental study generally includes a visual inspection of the property and the surrounding areas, an examination of current and historical uses of the property and the surrounding areas, and a review of relevant state and federal documents but does not involve invasive techniques such as soil and ground water sampling. If the Phase I indicates any possible environmental problems, our policy is to order a Phase II study, which involves testing the soil and ground water for actual hazardous substances. However, Phase I and Phase II environmental studies, or any other environmental studies undertaken with respect to any of our current or future properties, may not reveal the full extent of potential environmental liabilities. We currently do not carry insurance for environmental liabilities.

We may be unable

Expanding social media usage could present new risks. The use of social media could cause us to retainsuffer broad reputational damage. Negative posts or attract qualified management.We are dependent uponcomments about us through social media, whether by residents or prospective residents, could damage our senior officers for essentially all aspectsreputation or that of our business operations. Our senior officers have experienceapartment communities, whether or not such claims or posts are valid, which in the specialized business segments in which we operate, and the loss of them would likely have a material adverse effect on our operations, andturn could adversely impact our relationships with lenders, industry personnel and potential tenants. We do not have employment contracts with any of our senior officers. As a result, any senior officer may terminate his or her relationship with us at any time, without providing advance notice. If we fail to manage effectively a transition to new personnel, or if we fail to attract and retain qualified and experienced personnel on acceptable terms,affect our business and prospects could be harmed. The locationresults of our company headquarters in Minot, North Dakota, may make it more difficult and expensiveoperations. Similarly, disclosure of any non-public sensitive information relating to attract, relocate and retain current and future officers and employees.

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our business or our residents or prospective residents could damage our reputation, our business, or our results of operations. The levelcontinuing evolution of oilsocial media will present us with new and gas drillingongoing challenges and risks.

Litigation risks could affect our business. As a publicly traded owner, manager, and developer of apartment communities, we may incur liability based on various conditions at our properties and the buildings thereon. In the past, we have been, and in the Bakken Shale Formation has declined substantiallyfuture may become, involved in legal proceedings, including consumer, employment, tort, or commercial litigation, any of which if decided adversely to us or settled by us and has adversely impacted our apartmentsnot adequately covered by insurance, could result in western North Dakota. This conditionliability that could persist for an extended period of time.We have ownership interests in three apartment projects totaling 477 units in Williston, ND, the heart of the Bakken Shale Formation. The economy of Williston is significantly dependent on the oil and gas industry. To date we have experienced significant increased vacancy and a material decrease in our rents. We also have ownership interests in 1,039 units in Minot, ND that to a lesser extent have experienced declines in occupancy and rent rates. Oil drilling and production are impacted by factors beyond our control, including: the demand for and prices of crude oil and natural gas; environmental regulation and enforcement; producers’ finding and development costs of reserves; producers’ desire and ability to obtain necessary permits in a timely and economic manner; oil and natural gas field characteristics and production performance; and transportation and capacity constraints on natural gas, crude oil and natural gas liquids pipelines from the producing areas. Oil field activity could decline further in North Dakota as a result of any or all of these factors, which could have a material adverse effect on our western North Dakota properties. In addition, we have various mortgage loans on assets in western North Dakota with various operating income covenant requirements. Compliance with such covenants may be at risk if the material reductions in rents and vacancies continue. We do not believe these mortgage loans to be material to our operations, but if we are unable to comply with such covenants, we could be required to pay down such loans or seek a remedy with an escrow to relieve debt service payments. 

results of operations.

Risks related to properties under constructiondevelopment, redevelopment, or developmentnewly developed properties may adversely affect our financial performance.Our development and construction activities involve significant risks that may adversely affect our cash flow and results of operations, and consequently our ability to make distributions to the holders of our shares of beneficial interest and our ability to pay amounts due on our debt. In connection with our renovation, redevelopment, development and related construction activities, weWe may be unable to obtain, or may suffer delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations. These denials or delaysauthorizations, which could result inlead to increased costs or our abandonment of projects. In addition, weWe may not be able to obtain financing on favorable terms, which may prevent us from proceeding with our development activities,or at all, and we may not be able to complete construction and lease-up of a property on schedule, which could result in increased debt service expense or construction costs. Additionally, theschedule. The resulting time required for development, constructionredevelopment, and lease-up means that we may have to wait years for significant cash returns. Because we
Complying with zoning and permitting law may affect our acquisition, redevelopment, and development costs. We face risks associated with zoning and permitting of our communities, the majority of which are requiredgoverned by municipal, county, and state regulations. We may be liable for costs associated with bringing communities into compliance and additionally may face costs or delays when seeking approvals for redevelopment or development projects within our portfolio.Some regulations related to makezoning or permitting allow governmental entities to discontinue operations if violations are left uncured, which would significantly impact our business. We are not aware of any non-compliance at our communities that would have a material adverse effect on our business.
Future cash distributionsflows may not be sufficient to ensure recoverability of the carrying value of our shareholders,real estate assets. We periodically evaluate the recoverability of the carrying value of our real estate assets under United States generally accepted accounting principles (“GAAP”). Factors considered in evaluating impairment of our real estate assets held for investment include recurring net operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Generally, a real estate asset held for investment is not considered impaired if ourthe estimated undiscounted future cash flows of the asset over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. Assumptions used to estimate annual and residual cash flow from operationsand the estimated holding period of these assets require the judgment of management.
Complying with laws benefiting disabled persons or refinancings is not sufficient, weother safety regulations and requirements may affect our costs andinvestment strategies.Federal, state, and local laws and regulations designed to improve disabled persons’ access to and use of buildings, including the Americans with Disabilities Act of 1990, may require modifications to, or restrict renovations of, existing buildings that may require unexpected expenditures. These laws and regulations may require that structural features be added to buildings under construction. Legislation or regulations that may be forced to borrow additional money to fund such distributions.

Newly developed propertiesadopted in the future may not produce the cash flow that we expect, which could adversely affect our overall financial performance. In deciding whether to develop a particular property, we make assumptions regarding the expected future performance of that property. In particular, we estimate the returnimpose further burdens or restrictions on our investment based on expected occupancy and rental rates. If our financial projectionsus with respect to a new property are inaccurate,improved access to, and use of these buildings by, disabled persons. Noncompliance could result in the property is unableimposition of fines by government authorities or the award of damages to achieve the expected occupancy and rental rates, it may fail to perform as we had expected. Our estimate of theprivate litigants. The costs of repositioningcomplying with these laws and regulations may be substantial, and limits or redeveloping an acquired propertyrestrictions on construction, or the completion of required renovations, may also prove to be inaccurate, which may result inlimit the implementation of our failure to meetinvestment strategy or reduce overall returns on our profitability goals.

investments.

Risks related to joint ventures may adversely affect our financial performance and results of operations.We have entered into, and may continue in the future to enter into, partnerships or joint ventures with other persons or entities. Joint venture investments involve risks that may not be present with other methods of ownership, includingbased on the possibility:  thatfinancial condition and business interests of our partner might become insolvent, refuse to make capital contributions when due or otherwise fail to meet its obligations,partners, which are beyond our control and which may result in certain liabilities to us for guarantees and other commitments; that our partner might at any time have economic or other business interests or goals that are or become inconsistentconflict with our interests or goals; that we could become engaged in a dispute with our partner, which could require us to expend additional resources to resolve such disputes and could have an adverse impact on the operations and profitability of the joint venture; and that our partner may be in a position to take action or withhold consent contrary to our instructions or requests. In addition, our ability to transfer our interest in a joint venture to a third party may be restricted. interests.
In some instances, we and/or our partner may have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partner’s interest may be limited if we do not have sufficient cash, available borrowing capacity, or other capital resources. In such event, we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it. Joint ventures may require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition, or financing of a property.

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A war, terrorism attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively affect various aspects of our business, including our workforce and supply chains, and could make it more difficult and expensive to meet our obligations to our residents. Our operations are susceptible to national or international events, including acts or threats of war or terrorism, political instability, natural disasters, and health

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epidemics or pandemics. In late February 2022, Russian-led military forces illegally invaded Ukraine, and prolonged conflict and disruption in the region is likely. In response to this invasion, the United States, the United Kingdom, the European Union and other countries and organizations initiated a range of formal and informal sanctions against Russia, Belarus and certain Russian and Belarussian officials, individuals, industries and businesses. The war in Ukraine, the sanctions and any future expansion of or reaction to either of them are likely to have wide-ranging and unpredictable effects on the world economy and financial markets, which could materially and adversely affect our business and results of operations.


We facecould also be adversely affected by a widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic. The COVID-19 pandemic has resulted in travel bans, quarantines, and work restrictions that prohibit many employees from going to work. As a result of pandemics, including COVID-19, businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Governmental mandates may require dramatic changes at our apartment communities or could impact the availability of goods or services from many of our suppliers for extended or indefinite periods of time.

Potential changes to the financial condition of Fannie Mae and Freddie Mac and in government support for apartment communities may adversely affect our business. Historically, we have depended on the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to provide financing for certain apartment communities. Although Fannie Mae and Freddie Mac have a mandate to support multifamily housing through their financing activities, government proposals relating to the future of agency mortgage finance in the U.S. could involve the phase-out of Fannie Mae and Freddie Mac. Although we believe that Fannie Mae and Freddie Mac will continue to provide liquidity to the multifamily sector, any phase-out of Fannie Mae and Freddie Mac, change in their mandate, or reduction in government support for apartment communities generally could result in adverse changes to interest rates, capital availability, development of additional apartment communities, and the value of these communities.
Employee theft or fraud could result in loss. Certain employees have access to, or signature authority with respect to, our bank accounts or assets, which exposes us to the risk of fraud or theft. Certain employees also have access to key information technology (“IT”) infrastructure and to resident and other information that may be commercially valuable. If any employee were to compromise our IT systems, or misappropriate resident or other information, we could incur losses, including potentially significant financial or reputational harm. We may not have insurance that covers any losses in full or covers losses from particular criminal acts.
Risks Related to Our Indebtedness and Financings
Our inability to renew, repay, or refinance our debt may result in losses.We incur a significant amount of debt in the ordinary course of our business and in connection with acquisitions of real properties. Because we have a limited ability to retain earnings as a result of the REIT distribution requirements, we will generally be required to refinance debt that matures with additional debt or equity. We are subject to the normal risks associated with security breaches through cyber-attacks, cyber intrusions, or otherwise, which could pose a riskdebt financing, including the risks that:
•our cash flow will be insufficient to our systems, networksmeet required payments of principal and services. We face risks associated with security breaches or disruptions, whether through cyber-attacks or cyber intrusions overinterest, particularly if net operating income is reduced significantly due to the Internet, malware, computer viruses, attachments to emails, or persons inside our organization. The riskeffects of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. In the normal course of business, COVID-19 pandemic;
•we and our service providers (including service providers engaged in providing web hosting, property management, leasing, accounting and/or payroll software/services) collect and retain certain personal information provided by our tenants, employees and vendors. We also rely extensively on computer systems to process transactions and manage our business. While we and our service providers employ a variety of data security measures to protect confidential information on our systems and periodically review and improve our data security measures, we cannot assure that we or our service providers will not be able to prevent unauthorized accessrenew, refinance, or repay our indebtedness when due; and
•the terms of any renewal or refinancing are at terms less favorable than the terms of our current indebtedness.
These risks increase when credit markets are tight, as they may be during the COVID-19 pandemic. In general, when the credit markets are tight, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to this personal information.be less favorable to us than the terms of our current indebtedness.
We anticipate that we will need to refinance a significant portion of our outstanding debt as it matures. We cannot guarantee that any refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us. If we cannot refinance, extend, or pay principal payments due at maturity with the proceeds of other capital transactions, our cash flows may not be sufficient in all years to repay debt as it matures. If we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more properties on disadvantageous terms, which may result in losses. These losses could have a material adverse effect on our business, our ability to make distributions to our shareholders, and our ability to pay amounts due on our debt. If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments or refinance the debt at maturity, the mortgagor could foreclose upon the property, appoint a receiver, and receive an assignment of rents and leases or pursue other remedies, including taking ownership of the property, all with a consequent loss of revenues and asset value. Foreclosures also could affect our ability to obtain new debt and could create
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taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code and impeding our ability to obtain financing for our other properties.
Restrictive covenants in our debt agreements may limit our operating and financial flexibility, and our inability to comply with these covenants could have significant implications. Our indebtedness, which at December 31, 2021 totaled outstanding borrowings of approximately $859.8 million, contains a number of significant restrictions and covenants. These restrictions and covenants include financial covenants relating to fixed charge coverage ratios, maximum secured debt, maintenance of unencumbered asset value, and total debt to total asset value, among others and certain non-financial covenants. These may limit our ability to make future investments and dispositions, add incremental secured and recourse debt, and add overall leverage. Our ability to comply with these covenants will depend on our future performance, which may be affected by events beyond our control. Our failure to comply with these covenants would be an event of default. An event of default under the terms of our indebtedness would permit the lenders to accelerate indebtedness under effected agreements, which would include agreements that contain cross-acceleration provisions with respect to other indebtedness.
Rising interest rates may affect our cost of capital and financing activities. The potential for rising interest rates could limit our ability to refinance portions of our fixed-rate indebtedness when it matures and would increase our interest costs. We also have an unsecured credit facility that bears interest at variable rates based on amounts drawn. As a result, any increase in interest rates could increase our interest expense on our variable rate debt, increase our interest rates when refinancing fixed-rate debt, increase the cost of issuing new debt, and reduce the cash available for distribution to shareholders.
Interest rate hedging arrangements may result in losses. From time to time, we use interest rate swaps and other hedging instruments to manage our interest rate risks. Although these arrangements may partially protect us against rising interest rates, they also may reduce the benefits to us if interest rates decline. If a hedging arrangement is not indexed to the same rate as the indebtedness that is hedged, we may be exposed to losses to the extent that the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other, and nonperformance by the other party to the hedging arrangement also may subject us to increased credit risks. In order to minimize any counterparty credit risk, we enter into hedging arrangements only with investment grade financial institutions.
Changes to LIBOR could affect our financing covenants. LIBOR has been used as a primary benchmark for short-term interest rates, including under our credit facility. The U.K. Financial Conduct Authority (FCA), which regulates LIBOR, ceased providing the one-week and two-month U.S. dollar LIBOR settings and all non-U.S. dollar LIBOR settings as of January 1, 2022. The ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced it plans to cease providing the remaining U.S. dollar LIBOR settings immediately after June 30, 2023. Although the FCA does not expect these remaining LIBOR settings to become unrepresentative before the cessation date, it is unknown whether any banks will continue to voluntarily submit rates for the calculation of LIBOR, or whether LIBOR will continue to be published by its administrator based on these submissions, or on any other basis, after such dates. A joint statement by key regulatory authorities called on banks to cease entering into new contracts that use USD LIBOR as a reference rate by no later than December 31, 2021.

The Alternative References Rates Committee, a steering committee comprised of large U.S. financial institutions, has proposed replacing USD LIBOR with a new index calculated by short-term repurchase agreements - Secured Overnight Financing Rate (SOFR). The market transition away from LIBOR and toward SOFR or another alternate reference rate has been and is expected to continue to be complicated and to include the development of term and credit adjustments to accommodate differences between LIBOR and SOFR or any other alternate reference rate as well as adjustments to other market conventions. During the market transition away from the remaining LIBOR settings, LIBOR may experience increased volatility, and the overnight Treasury repurchase market underlying SOFR may also experience disruptions from time to time, which may result in unexpected fluctuations in SOFR. While market activity in SOFR-linked financial instruments has continued to develop, the progress has been uneven and there can be no guarantee that SOFR will become widely accepted and used across market segments and financial products in a timely manner or that any other alternative reference rate will be developed. Although the full impact of such reforms and actions, together with any transition away from LIBOR and toward , including the potential or actual discontinuance of LIBOR publication, remains unclear, these changes may have a material adverse impact on the availability of financing. In addition, as it relates to future and derivatives contracts, ISDA master agreements between counterparties may need to be amended or replaced, including derivative contracts in which we are invested. There can be no assurance that our efforts to maintain the security and integritySOFR or another new global standard will be agreed upon or that any new rate will be reflective of the information weoriginal interest rate and our service providers collect and our and their computer systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not be detected and, in fact, may not be detected. Accordingly, we and our service providers may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us and our service providers to entirely mitigate this risk. A security breach or other significant disruption involving computer networks and related systems could cause substantial costs and other negative measures including litigation, remediation costs, costs to deploy additional protection strategies, compromisingcredit risk included within LIBOR, any of confidential information, and reputational damage adversely affecting investor confidence, which could adversely impacthave a material adverse effect on our financial condition.

financing costs as well as our business and results of operations.

Risks Related to Our StructureShares
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Our stock price may fluctuate significantly. The market price and Organization

trading volume of our common shares are subject to fluctuation due to general market conditions, the risks discussed in this report, and several other factors, including the following:

•regional, national, and global economic and business conditions;
•actual or anticipated changes in our quarterly operating results or dividends;
•changes in our estimates of funds from operations or earnings;
•investor interest in our property portfolio;
•the market perception and performance of REITs in general and apartment REITs in particular;
•the market perception or trading volume of REITs relative to other investment opportunities;
•the market perception of our financial condition, performance, distributions, and growth potential;
•general stock and bond market conditions, including potential increases in interest rates that could lead investors to seek higher annual yields from dividends;
•shifts in our investor base to a higher concentration of passive investors, including exchange-traded funds and index funds, that could have an adverse effect on our ability to communicate with our shareholders;
•our ability to access capital markets, which could impact our cost of capital;
•a change in our credit rating or analyst ratings;
•changes in minimum dividend requirements;
•terrorism or other factors that adversely impact the markets in which our stock trades; and
•changes in tax laws or government regulations that could affect the attractiveness of our stock.
Rising interest rates could have an adverse effect on our share price. If interest rates increase, this could cause holders of our common shares and other investors to seek higher dividends on our shares or higher yields through other investments, which could adversely affect the market price of our shares.
Low trading volume on the NYSE may prevent the timely sale or resale of our shares. Although our common shares are listed on the NYSE, the daily trading volume of our shares may be lower than the trading volume for other companies. As a result of lower trading volume, an owner of our common shares may encounter difficulty in selling our shares in a timely manner and may incur a substantial loss.
Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to our shareholders. A decrease in rental revenue, an increase in funding to support our acquisition and development needs, or other unmet liquidity needs could have an adverse effect on our ability to pay distributions to our shareholders or the Operating Partnership’s unitholders.
Payment of distributions on our common shares is notguaranteed.Our Board of Trustees must approve any stock distributions and may elect at any time, or from time to time, and for an indefinite duration, to reduce or not pay the distributions payable on our common shares. Our Board may reduce distributions for a variety of reasons, including but not limited to the following:
•operating and financial results cannot support the current distribution payment;
•unanticipated costs, capital requirements, or cash requirements;
•annual distribution requirements under the REIT provisions of the Code;
•a conclusion that the payment of distributions would cause us to breach the terms of certain agreements or contracts, such as financial ratio covenants in our debt financing documents; or
•other factors the Board of Trustees may consider relevant.
Our future growth depends, in part, on our ability to raise additionalequity capital, which will have the effect of diluting the interests of our common shareholders.Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of Centerspace, LP. Sales of substantial amounts of our common or preferred shares in the public market, or the perception that such sales or issuances might occur, may dilute the interests of the current common shareholders and could adversely affect the market price of our common shares. In addition, as a REIT, we are required to make distributions to holders of our equity securities of at least 90% of our REIT taxable income, determined before a deduction for
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dividends paid and excluding any net capital gain. This limits our ability to retain cash or earnings to fund future growth and makes us more dependent on raising funds through other means, which may include raising additional equity capital.
We may issue additional classes or series of our shares of beneficialinterest with rights and preferences that are superior to the rights andpreferences of our common shares.Our Declaration of Trust provides for an unlimited number of shares of beneficial interest. Without the approval of our common shareholders, our Board of Trustees may establish additional classes or series of our shares of beneficial interest, and such classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, or other rights and preferences that are superior to the rights of the holders of our common shares. In that regard, in September 2020, we filed a shelf registration statement with the SEC that enables us to sell an undetermined number of equity and debt securities as defined in the prospectus, including under the 2021 ATM Program. Future sales of common shares, preferred shares, or convertible debt securities may dilute current shareholders and could have an adverse impact on the market price of our common shares.
Any material weaknesses identified in our internal control over financial reporting could adversely affect our stock price. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we were to identify one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in our financial reporting and results of operations, which in turn could have an adverse effect on our stock price.
Certain provisions of our Declaration of Trust may limit a change in control and deter a takeover. In order to maintain our qualification as a REIT, among other things, our Declaration of Trust provides that any transaction that would result in our disqualification as a REIT under Section 856 of the Code will be void, including any transaction that would result in the following:
•less than 100 Persons owning our shares;
•our being “closely held” within the meaning of Section 856(h) of the Code; or
•50% or more of the fair market value of our shares being held by Persons other than “United States persons,” for federal income tax purposes.
If the transaction is not void, then the shares in violation of the foregoing conditions will automatically be exchanged for an equal number of excess shares, and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable beneficiaries named by our Board of Trustees. The Trust’s Declaration of Trust also provides a limit on a Person owning in excess of the ownership limit of 9.8%, in number or value, of the Trust’s outstanding shares, although the Board of Trustees retains the ability to make exceptions to this ownership threshold. These limitations may have the effect of preventing a change in control or takeover of us by a third party, even if the change in control or takeover would be in the best interests of our shareholders.
Risks Related to Tax Matters
We may incur tax liabilities as a consequence of failingif we were to fail to qualify as a REIT. Although our management believes that we are organized andREIT, which could force us to borrow funds during unfavorable market conditions. We have operated and are operating in such a mannerelected to qualifybe taxed as a “real estate investment trust,” as that term is definedREIT under the Internal Revenue Code, we may not in fact have operated, or may not be able to continue to operate, in a manner to qualify or remain so qualified.Code. Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions, including income, asset, and distribution tests, for which there are only limited judicial or administrative interpretations. Even a technical or inadvertent mistake could endanger our REIT status. The determination that we qualify as a REIT requires an ongoing analysis of various factual matters and circumstances, some of which may not be within our control. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must come from certain passive sources that are itemized in the REIT tax laws, and we are prohibited from owning specified amounts of debt or equity securities of some issuers. Thus, to the extent revenues from non-qualifying sources, such as income from third-party management services, represent more than five percent5% of our gross income in any taxable year, we will not satisfy the 95% income test and may fail to qualify as a REIT, unless certain relief provisions contained in the Internal Revenue Code apply. Even if relief provisions apply, however, a tax would be imposed with respect to excess net income. We are also required to make distributions to the holders of our securities of at least 90% of our REIT taxable income, determined before a deduction for dividends paid and excluding any net capital gains.gain. To the extent that we satisfy the 90% test but distribute less than 100% of our REIT taxable income, we will be subject to corporate income tax on such undistributed income and could be subject to an additional 4% excise tax. Because we need to meet these tests to maintain our qualification as a REIT, it could cause us to have to forgo certain business opportunities and potentially require us to liquidate otherwise attractive investments. The fact that we hold substantially all of our assets (except for qualified REIT subsidiaries) through IRET Properties,Centerspace, LP, our operating partnership, and its subsidiaries, and our ongoing reliance on factual determinations, such as determinations related to the valuation of our assets, further complicates the application of the REIT requirements for us. Additionally, if IRET PropertiesIf Centerspace, LP or one or more of our
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subsidiaries is determined to be taxable as a corporation, we may fail to qualify as a REIT. Either our failure to qualify as a REIT, for any reason, or the imposition of taxes on excess net income from non-qualifying sources, could have a material adverse effect on us,adversely affect our business and our ability to make distributions to the holders of our shares of beneficial interestshareholders and our ability to pay amounts due on our debt. Furthermore, newNew legislation, regulations, administrative interpretations or court decisions could change the tax laws with respect to our qualification as a REIT or the federal income tax consequences of our qualification.

If we failedwere to fail to qualify as a REIT, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates, could be subject to increased state and local taxes and, unless entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification, which would likely have a material adverse effect on us, our ability to make distributions to the holders of our shares of beneficial interestshareholders, and our ability to pay amounts due on our debt. This treatment would reduce funds available for investment or distributions to the holders of

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our securities because ofdue to the additional tax liability to us for the year or years involved. In addition,involved, and we would no longer be able to deduct, and would not be required to make, distributions to holders of our securities.shareholders. To the extent that distributions to the holders of our securities had been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain investments to pay the applicable tax.

Failure of our operating partnership to qualify as a partnership would have a material adverse effect on us.We believe that IRET Properties, our operating partnership, qualifies as a partnership for federal income tax purposes. No assurance can be given, however, that the Internal Revenue Service will not challenge its status as a partnership for federal income tax purposes or that a court would not sustain such a challenge. If the Internal Revenue Service were to be successful in treating IRET Properties as an entity that is taxable as a corporation (such as a publicly-traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in IRET Properties would exceed 5% of our assets and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation. Also, the imposition of a corporate tax on IRET Properties would reduce significantly the amount of cash available for distribution by it.

Certain provisions of our Declaration of Trust may limit achange in control and deter a takeover.In order to maintain our qualification as a REIT, our Declaration of Trust provides that any transaction, other than a transaction entered into through the NASDAQ National Market or other similar exchange, that would result in our disqualification as a REIT under Section 856 of the Internal Revenue Code, including any transaction that would result in (i) a person owning in excess of the ownership limit of 9.8%, in number or value, of our outstanding securities, (ii) less than 100 people owning our securities, (iii) our being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code, or (iv) 50% or more of the fair market value of our securities being held by persons other than “United States persons,” as defined in Section 7701(a)(30) of the Internal Revenue Code, will be void ab initio. If the transaction is not void ab initio, then the securities in excess of the ownership limit, that would cause us to be closely held, that would result in 50% or more of the fair market value of our securities to be held by persons other than United States persons or that otherwise would result in our disqualification as a REIT, will automatically be exchanged for an equal number of excess shares, and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable beneficiaries named by our Board of Trustees. These limitations may have the effect of preventing a change in control or takeover of us by a third party, even if the change in control or takeover would be in the best interests of the holders of our securities.

In order to maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions.In order to maintain our REIT status, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even if the then-prevailing market conditions are not favorable for these borrowings. To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our net taxable income each year, excluding net capital gains. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions made by us with respect to the calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income for that year, and any undistributed taxable income from prior periods. We intend to make distributions to our shareholders to comply with the 90% distribution requirement and to avoid the nondeductible excise tax and will rely for this purpose on distributions from our operating partnership. However, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.

Failure of our operating partnership to qualify as a partnership would result in corporate taxation and significantly reduce the amount of cash available for distribution.We believe that Centerspace, LP, our operating partnership, qualifies as a partnership for federal income tax purposes. However, we can provide no assurance that the IRS will not challenge its status as a partnership for federal income tax purposes or that a court would not sustain such a challenge. If the IRS were to be successful in treating Centerspace, LP as an entity taxable as a corporation (such as a publicly traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in Centerspace, LP would exceed 5% of our assets and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation. The imposition of a corporate tax on Centerspace, LP would significantly reduce the amount of cash available for distribution.
Legislative or regulatory actions affecting REITs could have an adverse effect on us or our shareholders. Changes to tax laws or regulations may adversely impact our shareholders and our business and financial results. The REIT rules are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department, which may result in revisions to regulations and interpretations as well as statutory changes. 
At any time, the U.S. federal income tax laws governing REITs or the administrative and judicial interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative and judicial interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative or judicial interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. Several recent proposals have been made that would make substantial changes to the U.S. federal income tax laws generally. We cannot predict whether any of these proposed changes will become law, or the long-term effect of any future law changes on REITs and their shareholders generally. We and our shareholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative and judicial interpretation.
Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations, which could reduce the net cash received by our shareholders and may be detrimental to our ability to raise additional funds through any future sale of our stock. Dividends paid by REITs to U.S. shareholders that are individuals, trusts, or estates are generally not eligible for the reduced tax rate applicable to qualified dividends received from non-REIT corporations. For taxable year beginning before January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate is still higher than the tax rate applicable to regular corporate qualified dividends. This may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of stock in REITs, including our stock. Investors should consult with their tax advisers regarding the U.S. tax consequences of an investment in our stock or Units.
We may face risks in connection with Section 1031 exchanges. From time to time, we dispose of properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code. If a transaction intended to qualify as a Section 1031 exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such
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transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis. If we are unable to meet the technical requirements of a desired Section 1031 exchange, we may be required to make a special dividend payment to our shareholders if we are unable to mitigate the taxable gains realized. The failure to reinvest proceeds from sales of properties into tax-deferred exchanges could necessitate payments to unitholders with tax protection agreements.
We have tax protection agreements in place on thirty-four properties. If these properties are sold in a taxable transaction, we must make the unitholders associated with these particular properties whole through the payment of their related tax. We dispose of properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code whenever possible. If we are not able to satisfy all of the technical requirements of Section 1031, or if Section 1031 is repealed, selling a property with a tax protection agreement could trigger a material obligation to make the associated unitholders whole.

Complying with REIT requirements may force us to foregoforgo otherwise attractive opportunities or liquidate otherwise attractive investments.To qualify and maintain our status as a REIT, we must satisfy certain requirements with respect to the character of our assets. If we fail to comply with these requirements at the end of any quarter, we must correct such failure within 30 days after the end of the quarter (by, possibly, selling assets notwithstanding their prospects as an investment) to avoid losing our REIT status. If we fail to comply with these requirements at the end of any quarter, and the failure exceeds a minimum threshold, we nonetheless may be able to preserve our REIT status if (a) the failure was due to reasonable cause and not to willful neglect, (b) we dispose of theThis could include potentially selling otherwise attractive assets causing the failure within six months after the last day of the quarter in which we identified the failure, (c) we file a schedule with the Internal Revenue Service describing each asset that caused the failure, and (d) we pay an additional tax of the greater of $50,000 or the product of

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the highest applicable tax rate multiplied by the net income generated on those assets. As a result, compliance with the REIT requirements may require us to liquidateliquidating or foregoforegoing otherwise attractive investments. These actions could have the effect of reducingreduce our income and amounts available for distribution to our shareholders.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.flows.Even if we qualify for taxation as a REIT under the U.S. tax code, we may be subject to certain federal, state, and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property, and transfer taxes, such as mortgage recording taxes. Any of these taxes would decrease cash available for distribution to our shareholders.

The tax imposed on REITs engaging in prohibited transactions and our agreements entered into with certain contributors of our properties may limit our ability to engage in transactions that would be treated as sales for federal income tax purposes.The federal income tax provisions applicable to REITs provide that any gain realized by a REIT on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of business is treated as income from a “prohibited transaction” that is subject to a 100% penalty tax. Under current law, unless a sale of real property qualifies for a safe harbor, the question of whether the sale of a property constitutes the sale of property held primarily for sale to customers is generally a question of the facts and circumstances regarding a particular transaction. We may make sales that do not satisfy the requirements of the safe harbors, or the IRS may successfully assert that one or more of our sales are prohibited transactions and, thereforeas a result, we may be required to pay a penalty tax. To avert this penalty tax, we may hold some of our assets through a taxable REIT subsidiary (“TRS”). While the TRS structure would allow the economic benefits of ownership to flow to us, a TRS is subject to tax on its income from the operations of an assisted living facility at the federal and state level. In addition,We have entered into agreements with certain contributors of our properties that contain limitations on our ability to dispose of certain properties in taxable transactions. The restrictions on taxable dispositions are effective for varying periods. Such agreements may require that we make a payment to the contributor in the event that we dispose of a covered property in a taxable sale during the restriction period.
Our ownership of TRSs is limited, and our transactions with TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms. A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Our TRS is subject to detailed tax regulations that affect how it may be capitalizedapplicable federal, state, and operated. We currently have one TRS, to which we lease our Legends at Heritage Place assisted living facility, located in Sartell, Minnesota.

Because of the ownership structure of our Sartell, Minnesota assisted living facility, we face potential adverse effects from changes to the applicable tax laws. Under the Internal Revenue Code, REITs are not allowed to operate assisted living facilities directly or indirectly. Accordingly, we lease our Sartell, Minnesota assisted living facility to our TRS. While the TRS structure allows the economic benefits of ownership to flow to us, the TRS is subject tolocal income tax on its income from the operations of the assisted living facilities at the federal and state level. In addition, theany taxable income. TRS is subject to detailedrules also impose a 100% excise tax regulations that affect how it may be capitalized and operated. If the tax laws applicable to a TRS are modified, we may be forced to modify the structure for owning these assisted living facilities, and such changes may adversely affect the cash flows from the facilities. In addition, the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, and we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such actions may prospectively or retroactively modify the tax treatment of the TRS and, therefore, may adversely affect our after-tax returns from our Sartell, Minnesota assisted living facility.

The lease of qualified health care properties to a taxable REIT subsidiary is subject to special requirements. We currently lease our Sartell, Minnesota assisted living facility toon certain transactions between a TRS and we may in the future lease other qualified health care properties we acquire from operators to a TRS (or a limited liability company of which the TRS is a member), which lessee will contract with such operators (or a related party) to operate the health care operations at these properties. The rents from this TRS lessee structure will be treated as qualifying rents from real property if (1) they are paid pursuant to an arms-length lease of a qualified health care property with a TRS and (2) the operator qualifies as an eligible independent contractor. If any of these conditionsits parent REIT that are not satisfied, then the rents will not be qualifying rents, which could have a material adverse effectconducted on us and our qualification as a REIT.

Recent tax legislation impacts certain federal income tax rules applicable to REITs and could adversely affect our current tax positions.The recently enacted Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”) contains changes to certain aspects of the federal income tax rules applicable to us. The PATH Act is a recent example of changes to the REIT rules, and additional legislative changes may occur that could adversely affect our current tax positions. The PATH Act modifies various rules that apply to our ownership of, and business relationshipan arm’s-length basis. We scrutinize transactions with our TRS and reduces the maximum allowable value of our assets attributable to TRSs from 25% to 20% which could impact our ability to enterensure that they are entered into future investments. It expands prohibited transaction safe harbors and qualifying hedges and repeals the preferential dividend rule for public REITs. The PATH Act also adjusts the way we may calculate certain earnings and profit calculationson arm's-length terms to avoid double taxation atincurring the shareholder level, and expands the types of qualifying assets and income for purposes of the REIT requirements. The provisions enacted by the PATH Act could result in changes in our

100% excise tax described above.

2016 Annual Report 19

Table of Contents

tax positions or investments, and future legislative changes related to those rules described above could have a materially adverse impact on our results of operations and financial condition.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares.At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or the market price of our common shares of beneficial interest.

The U.S. federal income tax laws governing REITs are complex.We intend to operate in a manner that will qualify us as a REIT under the U.S. federal income tax laws. The REIT qualification requirements are extremely complex, however, and interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that we will continue to qualify as a REIT. At any time, new laws, interpretations or court decisions may change the federal tax laws or the U.S. federal income tax consequences of our qualification as a REIT.

Our Board of Trustees may make changes to our major policies without approval of the holders of our shares of beneficial interest. Our operating and financial policies, including policies relating to development and acquisition of real estate, financing, growth, operations, indebtedness, capitalization and distributions, are exclusively determined by our Board of Trustees. Our Board of Trustees may amend or revoke those policies, and other policies, without advance notice to, or the approval of, the holders of our shares of beneficial interest. Accordingly, our shareholders do not control these policies, and policy changes could adversely affect our financial condition and results of operations.

Risks Related to the Purchase of our Shares of Beneficial Interest

Our future growth depends, in part, on our ability to raise additionalequity capital, which will have the effect of diluting the interests of theholders of our common shares.Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of IRET Properties. The issuance of additional common shares, including the issuance of common shares in connection with redemption requests for limited partnership units, will dilute the interests of the current holders of our common shares. Additionally, sales of substantial amounts of our common or preferred shares in the public market, or substantial issuances of our common shares in connection with redemption requests for limited partnership units, or the perception that such sales or issuances might occur, could adversely affect the market price of our common shares.

We may issue additional classes or series of our shares of beneficialinterest with rights and preferences that are superior to the rights andpreferences of our common shares.Without the approval of the holders of our common shares, our Board of Trustees may establish additional classes or series of our shares of beneficial interest, and such classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights and preferences that are superior to the rights of the holders of our common shares.

Payment of distributions on our shares of beneficial interest is notguaranteed.Our Board of Trustees must approve our payment of distributions and may elect at any time, or from time to time, and for an indefinite duration, to reduce the distributions payable on our shares of beneficial interest or to not pay distributions on our shares of beneficial interest. Our Board of Trustees may reduce distributions for a variety of reasons, including, but not limited to, the following:

·

operating and financial results below expectations that cannot support the current distribution payment;

·

unanticipated costs or cash requirements; or

·

a conclusion that the payment of distributions would cause us to breach the terms of certain agreements or contracts, such as financial ratio covenants in our debt financing documents.

2016 Annual Report 20

Table of Contents

Our distributions are not eligible for the lower tax rate on dividends except in limited situations.The tax rate applicable to qualifying corporate dividends received by shareholders taxed at individual rates is a maximum rate of 20%. This special tax rate is generally not applicable to distributions paid by a REIT, unless such distributions represent earnings on which the REIT itself had been taxed. As a result, distributions (other than capital gain distributions) paid by us to shareholders taxed at individual rates will generally be subject to the tax rates that are otherwise applicable to ordinary income. Although the earnings of a REIT that are distributed to its shareholders are still generally subject to less federal income taxation than earnings of a non-REIT C corporation that are distributed to its shareholders net of corporate-level income tax, this law change may make an investment in our securities comparatively less attractive relative to an investment in the shares of other entities which pay dividends but are not formed as REITs.

Changes in market conditions could adversely affect the price of oursecurities. As is the case with any publicly-traded securities, certain factors outside of our control could influence the value of our common shares, Series A preferred shares, Series B preferred shares and any other securities to be issued in the future. These conditions include, but are not limited to:

·

market perception of REITs in general;

·

market perception of REITs relative to other investment opportunities;

·

market perception of our financial condition, performance, distributions and growth potential;

·

prevailing interest rates;

·

general economic and business conditions;

·

government action or regulation, including changes in the tax laws; and

·

relatively low trading volumes in securities of REITS.

Higher market interest rates may adversely affect the market price of our securities, and low trading volume on the New York Stock Exchange may prevent the timelyresale of our securities. One of the factors that investors may consider important in deciding whether to buy or sell shares of a REIT is the distribution with respect to such REIT’s shares as a percentage of the price of those shares, relative to market interest rates. If market interest rates rise, prospective purchasers of REIT shares may expect a higher distribution rate in order to maintain their investment. Higher market interest rates would likely increase our borrowing costs and might decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our common shares to decline. In addition, although our common shares of beneficial interest are listed on the New York Stock Exchange, the daily trading volume of our shares may be lower than the trading volume for other companies. The average daily trading volume for the period of May 1, 2015 through April 30, 2016 was 558,328 shares and the average monthly trading volume for the period of May 1, 2015 through April 30, 2016 was 11,724,894 shares. As a result of this trading volume, an owner of our common shares may encounter difficulty in selling our shares in a timely manner and may incur a substantial loss.

Item 1B.  Unresolved Staff CommentComments 

None.
19
Table of Contentss

None.

Item 2. Properties

Properties

Communities
We are organized as a REIT under SectionSections 856-858 of the Internal Revenue Code and are structured as an UPREIT, throughwhich allows us to accept the contribution of real estate to our Operating Partnership in exchange for Units. Our business is focused on the ownership, management, acquisition, redevelopment, and development of apartment communities, which we conduct the businessown and operate through our Operating Partnership. We are a fully integrated owner-operator of owning, leasing, developing and acquiring real estate properties. These real estate investments are managed by our own employees and by third-party professional real estate management companies on our behalf.

apartment communities.

2016 Annual Report 21


Table of Contents

Total Real Estate Rental Revenue

As of April 30, 2016, our real estate portfolio held for investment consisted of 99 multifamily, 31 healthcare and 16 other properties, comprising 74.0%, 20.1% and 5.9%, respectively, of our total real estate portfolio, based on the dollar amount of our original investment plus capital improvements, net of accumulated depreciation, through April 30, 2016. Gross annual rental revenue and percentages of total annual real estate rental revenue by property type for each of the three most recent fiscal years ended April 30, are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Revenue

 

 

 

(in thousands)

 

Fiscal Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended April 30,

    

Multifamily

    

%

    

Healthcare

    

%

    

All Other

    

%

    

Total

 

2016

 

$

131,149

 

69.7

%  

$

45,621

 

24.2

%  

$

11,550

 

6.1

%  

$

188,320

 

2015

 

$

118,526

 

66.1

%  

$

44,153

 

24.6

%  

$

16,642

 

9.3

%  

$

179,321

 

2014

 

$

102,059

 

62.0

%  

$

44,098

 

26.8

%  

$

18,433

 

11.2

%

$

164,590

 

Average Effective Annual Rent

The table below sets out the average effective annual rent per unit or square foot at same-store properties for each of the last five fiscal years in each of our two segments. Same-store properties are properties owned or in service 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 of 90% for multifamily properties and 85% for healthcare properties.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Effective Annual Rent per unit or square foot(1)

 

As of April 30, 

    

2016

    

2015

    

2014

    

2013

    

2012

 

Multifamily(2)

 

$

844

 

$

829

 

$

783

 

$

744

 

$

719

 

Healthcare(3)

 

$

20

 

$

16

 

$

17

 

$

16

 

$

16

 

(1)

Previously reported amounts are not revised for discontinued operations or changes in the composition of the same-store properties pool.

(2)

Monthly rent per unit, calculated as annualized rental revenue, net of free rent, including rent abatements and rent credits, divided by the occupied units as of April 30.

(3)

Monthly rental rate per square foot calculated as annualized contractual base rental income, net of free rent and excluding operating expense reimbursements, divided by the leased square feet as of April 30.

Occupancy Rates

Occupancy represents the actual number of units or square footage leased divided by the total number of units or square footage at the end of the period. Occupancy levels on a same-store property and all-property basis are shown below for each property type in each of the three most recent fiscal years ended April 30. In the case of multifamily properties, lease arrangements with individual tenants vary from month-to-month to one-year leases. Leases on healthcare properties generally vary from month-to-month to 20 years.

Occupancy Levels on a Same-Store Property and All Property Basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segments

 

Same-Store Properties

 

All Properties

 

 

 

Fiscal Year Ended April 30, 

 

Fiscal Year Ended April 30, 

 

 

 

2016

    

2015

    

2014

    

2016

    

2015

    

2014

 

Multifamily

    

94.8

%  

95.1

%  

93.4

%  

90.8

%  

92.0

%  

93.0

%

Healthcare

 

95.6

%  

95.3

%  

92.2

%  

89.4

%  

91.5

%  

92.5

%

Certain Lending Requirements

In certain instances, in connection with the acquisitionfinancing of investment properties, the lender financing such properties may require, as a condition of the loan, that the properties be owned by a “single asset entity.” Accordingly, we have organized a number of wholly-ownedwholly owned subsidiary corporations, and IRET Properties has organized several limited liability companies,entities for the purpose of holding title in an entity that complies with such lending conditions. All financial statements of these subsidiaries are consolidated into our financial statements.

2016 Annual Report 22

Table of Contents

Management and Leasing of Our Real Estate Assets

We conduct our corporate operations from offices in Minot, North Dakota and Minneapolis, and St. Cloud, Minnesota. We also have property management offices located in the states where we own properties. The day-to-day management of our properties is generally carried out by our own employees and in certain cases by third-party property management companies. In markets where the amount of rentable square footage we own does not justify self-management, whenemployees. When properties acquired have effective pre-existing property management in place or when for other reasons particular properties are, in our judgment, not attractive candidates for self-management, we may utilize third-party professional management companies for day-to-day management. For example, during the fourth quarter of fiscal year 2015, we had transferred the property management of the majority of our office and retail properties to a third-party company as part of our plan to sell those assets. However, all decisions relating to purchase, sale, insurance coverage, major capital improvements, approval of commercial leases, annual operating budgets, and major renovations are made exclusively by our employees and implemented by the third-party management companies. Generally, our third-party management contracts are for terms of one year or less and provide for compensation ranging from 2.5% to 5.0% of gross rent collections and, typically, we may terminate these contracts inupon 60 days or less notice for cause or upon the property manager’s failure to meet certain specified financial performance goals. With respect to multi-tenant commercial properties, we rely almost exclusively on third-party brokers to locate potential tenants. As compensation, brokers may receive a commission that is generally calculated as a percentage of the net rent to be paid over the term of the lease. We believe that the broker commissions paid by us conform to market and industry standards, and accordingly are commercially reasonable.

Summary of Real Estate Investment Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

 

As of April 30,

    

2016

    

%

    

2015

    

%

    

2014

    

%

 

Real estate investments

 

 

    

 

 

    

 

    

    

 

    

 

    

    

 

 

Property owned

 

$

1,681,471

 

 

 

$

1,335,687

 

 

 

$

1,241,195

 

 

 

Less accumulated depreciation

 

 

(312,889)

 

 

 

 

(279,417)

 

 

 

 

(273,935)

 

 

 

 

 

$

1,368,582

 

95.0

%  

$

1,056,270

 

85.5

%  

$

967,260

 

88.4

%

Development in progress

 

 

51,681

 

3.6

%  

 

153,994

 

12.4

%  

 

104,609

 

9.6

%

Unimproved land

 

 

20,939

 

1.4

%  

 

25,827

 

2.1

%  

 

22,864

 

2.0

%

Total real estate investments

 

$

1,441,202

 

100.0

%  

$

1,236,091

 

100.0

%  

$

1,094,733

 

100.0

%

2016 Annual Report 23

Table of Contents

Summary of Individual PropertiesCommunities Owned as of April 30, 2016

December 31, 2021

The following table presents information regarding our 146 multifamily, healthcare and other properties79 apartment communities held for investment, as of December 31, 2021. We provide certain information on a same-store and non-same-store basis. Same-store communities are owned or in service for substantially all of the periods being compared, and, in the case of development properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, we determine the composition of our same-store pool for that year as well as unimproved land, developmentadjust the previous year, which allows us to evaluate the performance of existing apartment communities. “Other” includes non-multifamily properties and properties held for sale asnon-multifamily components of April 30, 2016.mixed use properties. We own the following interests in real estate either through our wholly-owned subsidiaries or by ownership of a controlling interest in an entity owning the real estate. We account for these interests on a consolidated basis. Additional information is included in Schedule III to our financial statements included in this Annual Report on Form 10-K.

Report.

 

 

 

 

 

 

 

 

 

    

 

    

(in thousands)

    

 

 

 

 

 

Investment

 

 

 

 

 

 

(initial cost plus

 

Occupancy 

 

 

 

 

improvements less

 

as of 

Property Name and Location

 

Units

 

impairment)

 

April 30, 2016

 

 

 

 

 

 

 

 

MULTIFAMILY

 

 

 

 

 

 

 

71 France - Edina, MN

 

181

 

$

41,339

 

53.0%

11th Street 3 Plex - Minot, ND

 

3

 

 

84

 

66.7%

4th Street 4 Plex - Minot, ND

 

4

 

 

126

 

100.0%

Alps Park - Rapid City, SD

 

71

 

 

6,081

 

100.0%

Apartments on Main - Minot, ND

 

10

 

 

1,340

 

100.0%

Arbors - S Sioux City, NE

 

192

 

 

9,094

 

100.0%

Arcata - Golden Valley, MN

 

165

 

 

32,759

 

86.7%

Ashland - Grand Forks, ND

 

84

 

 

8,512

 

92.9%

Avalon Cove - Rochester, MN

 

187

 

 

35,699

 

95.7%

Boulder Court - Eagan, MN

 

115

 

 

9,573

 

100.0%

Brookfield Village - Topeka, KS

 

160

 

 

8,825

 

99.4%

Brooklyn Heights - Minot, ND

 

72

 

 

2,574

 

95.8%

Canyon Lake - Rapid City, SD

 

109

 

 

6,011

 

96.3%

Cardinal Point - Grand Forks, ND

 

251

 

 

49,772

 

44.2%

Cascade Shores - Rochester, MN

 

90

 

 

18,295

 

93.3%

Castlerock - Billings, MT

 

166

 

 

7,881

 

90.4%

Chateau I & II - Minot, ND

 

104

 

 

21,126

 

84.6%

Cimarron Hills - Omaha, NE

 

234

 

 

14,760

 

95.3%

Colonial Villa - Burnsville, MN

 

240

 

 

22,107

 

91.7%

Colony - Lincoln, NE

 

232

 

 

18,186

 

98.7%

Colton Heights - Minot, ND

 

18

 

 

1,193

 

83.3%

Commons at Southgate - Minot, ND

 

233

 

 

36,623

 

95.3%

Cottage West Twin Homes - Sioux Falls, SD

 

50

 

 

5,225

 

100.0%

Cottonwood - Bismarck, ND

 

268

 

 

22,279

 

84.3%

Country Meadows - Billings, MT

 

133

 

 

9,953

 

92.5%

Crestview - Bismarck, ND

 

152

 

 

6,378

 

98.7%

Crown - Rochester, MN

 

48

 

 

3,825

 

97.9%

Crown Colony - Topeka, KS

 

220

 

 

13,206

 

94.5%

Crystal Bay - Rochester, MN

 

76

 

 

11,858

 

94.7%

Cypress Court - St. Cloud, MN

 

196

 

 

20,624

 

96.4%

2016 Annual Report 24

(in thousands)
InvestmentPhysical
Number of(initial cost plusOccupancy 
Apartmentimprovements lessas of 
Community Name and LocationHomesimpairment)December 31, 2021
SAME-STORE
71 France - Edina, MN (1)
241 $67,108 92.1 %
Alps Park - Rapid City, SD71 6,529 100.0 %
Arcata - Golden Valley, MN
165 33,537 95.2 %
Ashland - Grand Forks, ND83 8,674 92.8 %
Avalon Cove - Rochester, MN187 36,515 96.8 %
Boulder Court - Eagan, MN115 9,689 92.2 %
Canyon Lake - Rapid City, SD109 6,548 96.3 %
Cardinal Point - Grand Forks, ND251 35,400 95.6 %
Castlerock - Billings, MT165 7,857 90.3 %
Chateau - Minot, ND104 21,544 91.3 %
Cimarron Hills - Omaha, NE (1)
234 14,978 93.2 %
Commons and Landing at Southgate - Minot, ND341 55,905 94.4 %
Connelly on Eleven - Burnsville, MN240 29,926 93.3 %
Cottonwood - Bismarck, ND268 24,227 94.4 %

20
Table of Contents

 

 

 

 

 

 

 

 

 

    

 

    

(in thousands)

    

 

 

 

 

 

Investment

 

 

 

 

 

 

(initial cost plus

 

Occupancy 

 

 

 

 

improvements less

 

as of 

Property Name and Location

 

Units

 

impairment)

 

April 30, 2016

Dakota Commons - Williston, ND

 

44

 

 

10,517

 

86.4%

Deer Ridge - Jamestown, ND

 

163

 

 

24,897

 

50.9%

Evergreen - Isanti, MN

 

36

 

 

3,262

 

100.0%

Evergreen II - Isanti, MN

 

36

 

 

3,567

 

100.0%

Fairmont - Minot, ND

 

12

 

 

481

 

100.0%

First Avenue - Minot, ND

 

20

 

 

3,067

 

90.0%

Forest Park - Grand Forks, ND

 

269

 

 

14,135

 

93.7%

French Creek - Rochester, MN

 

40

 

 

4,936

 

100.0%

Gables Townhomes - Sioux Falls, SD

 

24

 

 

2,463

 

100.0%

Gardens - Grand Forks, ND

 

74

 

 

9,291

 

100.0%

Grand Gateway - St. Cloud, MN

 

116

 

 

9,019

 

95.7%

GrandeVille at Cascade Lake - Rochester, MN

 

276

 

 

55,586

 

74.6%

Greenfield - Omaha, NE

 

96

 

 

5,635

 

97.9%

Heritage Manor - Rochester, MN

 

182

 

 

10,286

 

98.4%

Homestead Garden - Rapid City, SD

 

152

 

 

15,076

 

99.3%

Indian Hills - Sioux City, IA

 

120

 

 

7,148

 

99.2%

Kirkwood Manor - Bismarck, ND

 

108

 

 

4,941

 

88.0%

Lakeside Village - Lincoln, NE

 

208

 

 

17,672

 

93.3%

Landing at Southgate - Minot, ND

 

108

 

 

17,399

 

89.8%

Landmark - Grand Forks, ND

 

90

 

 

2,852

 

97.8%

Legacy - Grand Forks, ND

 

360

 

 

30,594

 

92.2%

Legacy Heights - Bismarck, ND

 

119

 

 

15,174

 

74.8%

Mariposa - Topeka, KS

 

54

 

 

6,074

 

98.1%

Meadows - Jamestown, ND

 

81

 

 

6,629

 

87.7%

Monticello Village - Monticello, MN

 

60

 

 

4,849

 

95.0%

Northern Valley - Rochester, MN

 

16

 

 

860

 

100.0%

North Pointe - Bismarck, ND

 

73

 

 

5,068

 

86.3%

Northridge - Bismarck, ND

 

68

 

 

8,496

 

94.1%

Oakmont Estates - Sioux Falls, SD

 

79

 

 

5,981

 

98.7%

Oakwood Estates - Sioux Falls, SD

 

160

 

 

7,797

 

96.9%

Olympic Village - Billings, MT

 

274

 

 

14,917

 

86.5%

Olympik Village - Rochester, MN

 

140

 

 

9,458

 

94.3%

Oxbow Park - Sioux Falls, SD

 

120

 

 

6,734

 

96.7%

Park Meadows - Waite Park, MN

 

360

 

 

17,836

 

95.0%

Pebble Springs - Bismarck, ND

 

16

 

 

937

 

93.8%

Pinehurst - Billings, MT

 

21

 

 

1,119

 

85.7%

Pines - Minot, ND

 

16

 

 

437

 

100.0%

Plaza - Minot, ND

 

71

 

 

16,268

 

98.6%

Pointe West - Rapid City, SD

 

90

 

 

5,452

 

94.4%

Ponds at Heritage Place - Sartell, MN

 

58

 

 

5,359

 

100.0%

Prairie Winds - Sioux Falls, SD

 

48

 

 

2,535

 

91.7%

Quarry Ridge - Rochester, MN

 

313

 

 

33,968

 

99.0%

2016 Annual Report 25

(in thousands)
InvestmentPhysical
Number of(initial cost plusOccupancy 
Apartmentimprovements lessas of 
Community Name and LocationHomesimpairment)December 31, 2021
Country Meadows - Billings, MT133 9,923 97.0 %
Cypress Court - St. Cloud, MN (1) (3)
196 21,007 96.4 %
Deer Ridge - Jamestown, ND163 25,188 92.6 %
Donovan - Lincoln, NE (1)
232 22,197 96.6 %
Dylan - Denver, CO274 90,508 96.0 %
Evergreen - Isanti, MN72 7,281 93.1 %
FreightYard Townhomes & Flats - Minneapolis, MN96 26,801 90.6 %
Gardens - Grand Forks, ND74 9,361 91.9 %
Grand Gateway - St. Cloud, MN116 10,052 92.2 %
GrandeVille Shores - Rochester, MN (1)
365 79,401 93.4 %
Greenfield - Omaha, NE96 7,707 96.9 %
Homestead Garden - Rapid City, SD152 16,013 94.7 %
Lakeside Village - Lincoln, NE (1)
208 20,421 96.6 %
Legacy - Grand Forks, ND360 34,047 95.3 %
Legacy Heights - Bismarck, ND
119 15,239 98.3 %
Lugano at Cherry Creek - Denver, CO328 96,762 95.4 %
Meadows - Jamestown, ND81 7,184 87.7 %
Monticello Crossings - Monticello, MN
202 32,519 96.5 %
Monticello Village - Monticello, MN60 5,457 98.3 %
Northridge - Bismarck, ND68 8,695 97.1 %
Olympic Village - Billings, MT274 15,652 90.9 %
Oxbo - St Paul, MN191 57,658 92.7 %
Park Meadows - Waite Park, MN360 20,218 96.1 %
Park Place - Plymouth, MN499 104,977 92.6 %
Plaza - Minot, ND71 16,769 94.4 %
Pointe West - Rapid City, SD90 5,987 95.6 %
Ponds at Heritage Place - Sartell, MN58 5,499 100.0 %
Quarry Ridge - Rochester, MN (1)
313 37,501 92.3 %
Red 20 - Minneapolis, MN (1)
130 26,537 94.6 %
Regency Park Estates - St. Cloud, MN (1)
149 17,055 87.9 %
Rimrock West - Billings, MT78 5,863 92.3 %
River Ridge - Bismarck, ND146 26,400 97.3 %
Rocky Meadows - Billings, MT97 8,014 97.9 %
Rum River - Isanti, MN
72 6,181 93.1 %
Silver Springs - Rapid City, SD
52 4,299 98.1 %
South Pointe - Minot, ND196 15,912 90.8 %
SouthFork Townhomes - Lakeville, MN (1)
272 52,281 90.4 %
Southpoint - Grand Forks, ND96 10,753 89.6 %
Sunset Trail - Rochester, MN146 16,579 96.6 %
Thomasbrook - Lincoln, NE (1)
264 16,380 95.8 %
West Stonehill - Waite Park, MN (1)
313 22,039 92.3 %
Westend - Denver, CO390 128,640 93.6 %
Whispering Ridge - Omaha, NE (1)
336 31,278 94.0 %
Woodridge - Rochester, MN110 11,778 90.9 %
TOTAL SAME-STORE10,672 $1,568,450 94.0 %
NON-SAME-STORE
Bayberry Place - Minneapolis, MN (2)
120 $16,458 93.3 %
Burgandy & Hillsboro Court - Minneapolis, MN (2)
250 35,160 96.8 %
Civic Lofts - Denver, CO176 61,399 93.2 %
Gatewood - St. Cloud, MN (2)
120 7,533 93.3 %
Grove Ridge - Minneapolis, MN (2)
84 11,926 95.2 %
Ironwood - Minneapolis, MN182 39,277 94.5 %
New Hope Garden & Village - Minneapolis, MN (2)
150 14,661 99.3 %

21
Table of Contents

 

 

 

 

 

 

 

 

 

    

 

    

(in thousands)

    

 

 

 

 

 

Investment

 

 

 

 

 

 

(initial cost plus

 

Occupancy 

 

 

 

 

improvements less

 

as of 

Property Name and Location

 

Units

 

impairment)

 

April 30, 2016

Red 20 - Minneapolis, MN

 

130

 

 

28,606

 

94.6%

Regency Park Estates - St. Cloud, MN

 

145

 

 

12,660

 

96.6%

Renaissance Heights - Williston, ND

 

288

 

 

62,800

 

43.8%

Ridge Oaks - Sioux City, IA

 

132

 

 

6,783

 

97.7%

Rimrock West - Billings, MT

 

78

 

 

5,525

 

96.2%

River Ridge - Bismarck, ND

 

146

 

 

25,706

 

95.2%

Rocky Meadows - Billings, MT

 

98

 

 

7,819

 

98.0%

Rum River - Isanti, MN

 

72

 

 

5,935

 

100.0%

Sherwood - Topeka, KS

 

300

 

 

19,231

 

96.7%

Sierra Vista - Sioux Falls, SD

 

44

 

 

2,815

 

95.5%

Silver Springs - Rapid City, SD

 

52

 

 

3,572

 

98.1%

South Pointe - Minot, ND

 

196

 

 

13,934

 

87.8%

Southpoint - Grand Forks, ND

 

96

 

 

10,564

 

96.9%

Southview - Minot, ND

 

24

 

 

1,089

 

87.5%

Southwind - Grand Forks, ND

 

164

 

 

8,724

 

98.8%

Summit Park - Minot, ND

 

95

 

 

3,906

 

89.5%

Sunset Trail - Rochester, MN

 

146

 

 

16,076

 

91.8%

Temple - Minot, ND

 

4

 

 

234

 

100.0%

Terrace Heights - Minot, ND

 

16

 

 

489

 

93.8%

Thomasbrook - Lincoln, NE

 

264

 

 

14,484

 

97.0%

Valley Park - Grand Forks, ND

 

167

 

 

8,098

 

97.0%

Villa West - Topeka, KS

 

308

 

 

18,502

 

97.7%

Village Green - Rochester, MN

 

36

 

 

3,539

 

100.0%

West Stonehill - Waite Park, MN

 

312

 

 

17,542

 

96.2%

Westridge - Minot, ND

 

33

 

 

2,264

 

97.0%

Westwood Park - Bismarck, ND

 

65

 

 

4,000

 

96.9%

Whispering Ridge - Omaha, NE

 

336

 

 

28,588

 

98.5%

Williston Garden - Williston, ND

 

145

 

 

19,311

 

66.2%

Winchester - Rochester, MN

 

115

 

 

8,247

 

95.7%

Woodridge - Rochester, MN

 

108

 

 

8,786

 

99.1%

TOTAL MULTIFAMILY

 

12,950

 

$

1,243,909

 

90.8%

(in thousands)
InvestmentPhysical
Number of(initial cost plusOccupancy 
Apartmentimprovements lessas of 
Community Name and LocationHomesimpairment)December 31, 2021
Palisades - Minneapolis, MN (1)
330 53,882 93.0 %
Parkhouse - Thornton, CO465 143,566 94.1 %
Plymouth Pointe - Minneapolis, MN (2)
96 14,378 96.9 %
Pointe West - St. Cloud, MN (2)
93 7,533 98.9 %
Portage - Minneapolis, MN (2)
62 9,233 93.5 %
River Pointe - Minneapolis, MN (2)
300 37,415 96.3 %
Southdale Parc - Minneapolis, MN (2)
69 9,611 97.1 %
The Legacy - St. Cloud, MN (2)
119 10,396 97.5 %
Union Pointe - Longmont, CO256 76,029 92.6 %
Venue on Knox - Minneapolis, MN (2)
97 18,729 91.8 %
Windsor Gates - Minneapolis, MN (2)
200 21,821 94.5 %
Wingate - Minneapolis, MN (2)
136 15,513 94.9 %
Woodhaven - Minneapolis, MN (2)
176 24,647 93.2 %
Woodland Pointe - Minneapolis, MN (2)
288 46,632 90.3 %
TOTAL NON-SAME-STORE3,769 $675,799 95.1 %
TOTAL MULTIFAMILY14,441 $2,244,249 

2016 Annual Report 26

  (in thousands) 
 InvestmentPhysical
 Net Rentable(initial cost plusOccupancy 
 Squareimprovements lessas of 
Property Name and LocationFootageimpairment)December 31, 2021
OTHER - MIXED USE COMMERCIAL   
71 France - Edina, MN (1)
20,955 $6,746 82.0 %
Civic Lofts - Denver, CO1,600 — 100.0 %
Lugano at Cherry Creek - Denver, CO13,295 2,257 47.8 %
Oxbo - St Paul, MN11,477 3,526 100.0 %
Plaza - Minot, ND50,610 9,280 100.0 %
Red 20 - Minneapolis, MN (1)
9,155 3,000 81.4 %
TOTAL OTHER - MIXED USE COMMERCIAL107,092 $24,809 
OTHER - COMMERCIAL
3100 10th St SW - Minot, ND(4)
9,690 $2,112 — 
TOTAL OTHER - COMMERCIAL9,690 $2,112 
TOTAL SQUARE FOOTAGE - OTHER116,782   
TOTAL GROSS REAL ESTATE INVESTMENTS, EXCLUDING MORTGAGE NOTES RECEIVABLE $2,271,170  

(1)Encumbered by mortgage debt.
(2)Encumbered by mortgage in our Fannie Mae Credit Facility.
(3)Owned by a joint venture entity and consolidated in our financial statements. We have an approximately 86.1% ownership in Cypress Court.
(4)This is our Minot corporate office building.

22
Table of Contents

 

 

 

 

 

 

 

 

 

    

 

    

(in thousands)

    

 

 

 

Approximate

 

Investment

 

 

 

 

Net Rentable

 

(initial cost plus

 

Occupancy 

 

 

Square

 

improvements less

 

as of 

Property Name and Location

 

Footage

 

impairment)

 

April 30, 2016

 

 

 

 

 

 

 

 

HEALTHCARE

 

 

 

 

 

 

 

2800 Medical Building - Minneapolis, MN

 

53,603

 

$

9,886

 

85.6%

2828 Chicago Avenue - Minneapolis, MN

 

56,239

 

 

17,325

 

100.0%

Airport Medical - Bloomington, MN*

 

24,218

 

 

4,729

 

100.0%

Billings 2300 Grant Road - Billings, MT

 

14,705

 

 

1,865

 

100.0%

Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN

 

53,896

 

 

10,050

 

100.0%

Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN

 

36,199

 

 

6,537

 

92.9%

Denfeld Clinic - Duluth, MN

 

20,512

 

 

3,099

 

100.0%

Eagan 1440 Duckwood Medical - Eagan, MN

 

17,640

 

 

2,624

 

100.0%

Edina 6363 France Medical - Edina, MN*

 

70,934

 

 

15,994

 

100.0%

Edina 6405 France Medical  - Edina, MN*

 

55,478

 

 

12,458

 

100.0%

Edina 6517 Drew Avenue - Edina, MN

 

12,140

 

 

1,040

 

100.0%

Edina 6525 Drew Avenue - Edina, MN

 

3,431

 

 

505

 

100.0%

Edina 6525 France SMC II - Edina, MN

 

67,409

 

 

14,965

 

95.1%

Edina 6545 France SMC I - Edina MN*

 

227,626

 

 

48,055

 

91.5%

Edina 6565 France SMC III - Edina, MN

 

57,624

 

 

34,233

 

24.5%

Fresenius - Duluth, MN

 

9,052

 

 

1,572

 

100.0%

Garden View - St. Paul, MN*

 

43,404

 

 

8,480

 

100.0%

Gateway Clinic - Sandstone, MN*

 

12,444

 

 

1,776

 

100.0%

Healtheast St John & Woodwinds - Maplewood & Woodbury, MN

 

114,316

 

 

21,601

 

100.0%

High Pointe Health Campus - Lake Elmo, MN

 

60,558

 

 

14,007

 

75.5%

Lakeside Medical Plaza - Omaha, NE

 

27,819

 

 

6,113

 

100.0%

Mariner Clinic - Superior, WI*

 

28,928

 

 

4,056

 

100.0%

Minneapolis 701 25th Avenue Medical - Minneapolis, MN*

 

57,212

 

 

9,439

 

92.0%

Missoula 3050 Great Northern - Missoula, MT

 

14,640

 

 

1,971

 

100.0%

Park Dental - Brooklyn Center, MN

 

9,998

 

 

2,967

 

100.0%

Pavilion I - Duluth, MN*

 

45,081

 

 

10,174

 

100.0%

Pavilion II - Duluth, MN

 

73,000

 

 

19,325

 

100.0%

PrairieCare Medical - Brooklyn Park, MN

 

70,756

 

 

24,440

 

100.0%

Ritchie Medical Plaza - St Paul, MN

 

52,116

 

 

13,529

 

92.9%

St Michael Clinic - St Michael, MN

 

10,796

 

 

2,851

 

100.0%

Trinity at Plaza 16 - Minot, ND

 

24,795

 

 

9,593

 

100.0%

Wells Clinic - Hibbing, MN

 

18,810

 

 

2,661

 

100.0%

TOTAL HEALTHCARE

 

1,445,379

 

$

337,920

 

94.9%

 

 

 

 

 

 

 

 

2016 Annual Report 27

Table of Contents

 

 

 

 

 

 

 

 

 

    

 

    

(in thousands)

    

 

 

 

Approximate

 

Investment

 

 

 

 

Net Rentable

 

(initial cost plus

 

Occupancy 

 

 

Square

 

improvements less

 

as of 

Property Name and Location

 

Footage

 

impairment)

 

April 30, 2016

OTHER

 

 

 

 

 

 

 

1st Avenue Building - Minot, ND

 

4,427

 

$

367

 

100.0%

17 South Main - Minot, ND

 

2,454

 

 

287

 

100.0%

Bismarck 715 East Broadway - Bismarck, ND

 

22,187

 

 

2,798

 

100.0%

Bloomington 2000 W 94th Street - Bloomington, MN

 

101,567

 

 

7,473

 

100.0%

Dakota West Plaza - Minot , ND

 

16,921

 

 

615

 

78.0%

Grand Forks Carmike - Grand Forks, ND

 

28,528

 

 

2,546

 

100.0%

Lexington Commerce Center - Eagan, MN

 

90,260

 

 

6,882

 

100.0%

Minot 1400 31st Ave - Minot, ND

 

48,960

 

 

11,573

 

76.3%

Minot 2505 16th Street SW - Minot, ND

 

15,000

 

 

2,318

 

100.0%

Minot Arrowhead - Minot, ND

 

81,594

 

 

8,870

 

96.0%

Minot IPS - Minot, ND

 

27,698

 

 

6,368

 

100.0%

Minot Southgate Wells Fargo Bank - Minot, ND

 

4,998

 

 

3,229

 

100.0%

Minot Southgate Retail - Minot, ND

 

7,963

 

 

2,623

 

- %

Plaza 16 - Minot, ND

 

50,610

 

 

9,693

 

100.0%

Roseville 3075 Long Lake Road - Roseville, MN

 

220,557

 

 

12,825

 

83.6%

Urbandale 3900 106th Street - Urbandale, IA

 

518,161

 

 

15,555

 

100.0%

Woodbury 1865 Woodlane - Woodbury, MN

 

69,600

 

 

5,620

 

100.0%

TOTAL OTHER

 

1,311,485

 

$

99,642

 

95.8%

SUBTOTAL

 

2,769,814

 

$

1,681,471

 

 

(in thousands)

Investment

(initial cost plus

improvements less

Property Name and Location

impairment)

UNIMPROVED LAND

Badger Hills - Rochester, MN

$

1,050

Bismarck 4916 - Bismarck, ND

3,267

Bismarck 700 E Main - Bismarck, ND

882

Creekside Crossing - Bismarck, ND

4,352

Grand Forks - Grand Forks, ND

4,278

Isanti Unimproved - Isanti, MN

58

Minot 1525 24th Ave SW - Minot, ND

1,262

Rapid City Unimproved- Rapid City, SD

1,376

Renaissance Heights - Williston, ND

3,930

Urbandale - Urbandale, IA

114

Weston - Weston, WI

370

TOTAL UNIMPROVED LAND

$

20,939

DEVELOPMENT IN PROGRESS

71-France - Edina, MN

30,415

Monticello 7th Addition - Monticello, MN

17,507

Other

3,759

TOTAL DEVELOPMENT IN PROGRESS

$

51,681

TOTAL UNITS - MULTIFAMILY

12,950

TOTAL SQUARE FOOTAGE - COMMERCIAL

2,769,814

TOTAL REAL ESTATE

$

1,754,091

2016 Annual Report 28

Table of Contents

 

    

 

    

(in thousands)

 

    

 

 

Approximate

 

Investment

 

 

 

 

Net Rentable

 

(initial cost plus

 

Occupancy 

 

 

Square

 

improvements less

 

as of 

Property Name and Location

 

Footage or Units

 

impairment)

 

April 30, 2016

HELD FOR SALE

 

 

 

 

 

 

 

Casper 1930 E 12th Street (Park Place) - Casper, WY(2)

 

65,160

 

 

7,515

 

100.0%

Casper 3955 E 12th Street (Meadow Wind) - Casper, WY(2)

 

57,822

 

 

12,582

 

100.0%

Cheyenne 4010 N College Drive (Aspen Wind) - Cheyenne, WY(2)

 

47,509

 

 

13,143

 

100.0%

Cheyenne 4606 N College Drive (Sierra Hills) - Cheyenne, WY(2)

 

54,072

 

 

9,618

 

100.0%

Edgewood Vista - Belgrade, MT(2)

 

5,192

 

 

1,943

 

100.0%

Edgewood Vista - Billings, MT(2)

 

11,800

 

 

3,915

 

100.0%

Edgewood Vista - Bismarck, ND(2)

 

74,112

 

 

10,722

 

100.0%

Edgewood Vista - Brainerd, MN(2)

 

82,535

 

 

10,502

 

100.0%

Edgewood Vista - Columbus, NE(2)

 

5,194

 

 

1,398

 

100.0%

Edgewood Vista - East Grand Forks, MN(2)

 

18,488

 

 

4,506

 

100.0%

Edgewood Vista - Fargo, ND(2)

 

167,391

 

 

25,677

 

100.0%

Edgewood Vista - Fremont, NE(2)

 

6,042

 

 

605

 

100.0%

Edgewood Vista - Grand Island, NE(2)

 

5,185

 

 

1,346

 

100.0%

Edgewood Vista - Hastings, NE(2)

 

6,042

 

 

628

 

100.0%

Edgewood Vista - Hermantown I, MN(2)

 

119,349

 

 

20,253

 

100.0%

Edgewood Vista - Hermantown II, MN(2)

 

160,485

 

 

12,178

 

100.0%

Edgewood Vista - Kalispell, MT(2)

 

10,295

 

 

1,197

 

100.0%

Edgewood Vista - Minot, ND(2)

 

108,503

 

 

15,440

 

100.0%

Edgewood Vista - Missoula, MT(2)

 

10,150

 

 

1,035

 

100.0%

Edgewood Vista - Norfolk, NE(2)

 

5,135

 

 

1,258

 

100.0%

Edgewood Vista - Omaha, NE(2)

 

6,042

 

 

691

 

100.0%

Edgewood Vista - Sioux Falls, SD(2)

 

11,800

 

 

3,042

 

100.0%

Edgewood Vista - Spearfish, SD(2)

 

84,126

 

 

9,563

 

100.0%

Edgewood Vista - Virginia, MN(2)

 

147,183

 

 

16,650

 

100.0%

Georgetown Square - Grand Chute, WI

 

n/a

 

 

250

 

n/a

Laramie 1072 N 22nd Street (Spring Wind) - Laramie, WY(2)

 

62,291

 

 

11,853

 

100.0%

Legends at Heritage Place - Sartell, MN(2)

 

98,174

 

 

10,890

 

100.0%

Legends at Heritage Place - Sartell, MN

 

n/a

 

 

537

 

n/a

Pinecone Villas - Sartell, MN

 

24

 

 

2,822

 

100.0%

Sartell 2000 23rd Street South - Sartell, MN(2)

 

59,760

 

 

6,400

 

- %

Spring Creek-American Falls - American Falls, ID(2)

 

17,273

 

 

4,070

 

100.0%

Spring Creek-Boise - Boise, ID(2)

 

16,311

 

 

5,075

 

100.0%

Spring Creek-Eagle - Eagle, ID(2)

 

15,559

 

 

4,100

 

100.0%

Spring Creek-Fruitland - Fruitland, ID(2)

 

39,500

 

 

7,115

 

100.0%

Spring Creek Fruitland - Fruitland, ID

 

n/a

 

 

339

 

n/a

Spring Creek-Meridian - Meridian, ID(2)

 

31,820

 

 

7,250

 

100.0%

Spring Creek-Overland - Overland, ID(2)

 

26,605

 

 

6,725

 

100.0%

Spring Creek-Soda Springs - Soda Springs, ID(2)

 

15,571

 

 

2,253

 

100.0%

Spring Creek-Ustick - Meridian, ID(2)

 

26,605

 

 

4,300

 

100.0%

Stone Container - Fargo, ND

 

195,075

 

 

7,141

 

100.0%

TOTAL HELD FOR SALE

 

 

 

 

266,527

 

 

TOTAL UNITS

 

24

 

 

 

 

 

TOTAL SQUARE FOOTAGE

 

1,874,156

 

 

 

 

 

(1)

Real estate not owned in fee; all or a portion is leased under a ground or air rights lease.

(2)

Properties classified as discontinued operations.

2016 Annual Report 29

Table of Contents

Mortgages Payable and Line of Credit

As of April 30, 2016, mortgage loans on the above properties, including properties held for sale, totaled $886.1 million. Of this amount, on April 30, 2016, $196.8 million, or 22.2%, is represented by variable rate mortgages on which the future interest rate will vary based on changes in the interest rate index for each respective loan. As of April 30, 2016, our management believes there are no material defaults or material compliance issues in regards to any of these mortgages payable. Principal payments due on our mortgage indebtedness are as follows:

 

 

 

 

 

 

 

(in thousands)

 

 

Mortgages

 

Mortgages

 

 

on Properties

 

on Properties

 

 

Held for

 

Held for

Fiscal Year Ended April 30, 

 

Investment

 

Sale

2017

$

102,636

$

48,046

2018

 

54,931

 

1,106

2019

 

144,436

 

6,921

2020

 

103,537

 

612

2021

 

154,389

 

4,901

Thereafter

 

257,395

 

7,237

Total

$

817,324

$

68,823

We also have a revolving, multi-bank line of credit with First International Bank and Trust, Watford City, North Dakota (“First International Bank”), as lead bank. The line of credit has lending commitments of $100.0 million, a current interest rate of 4.75%, a maturity date of September 1, 2017 and a minimum outstanding principal balance requirement of $17.5 million, and is secured by mortgages on 17 properties. Under the terms of the line of credit, properties may be added and removed from the collateral pool with the agreement of the lenders. As of April 30, 2016, participants included, in addition to First International Bank, the following financial institutions: The Bank of North Dakota, First Western Bank and Trust, Dacotah Bank, United Community Bank, American State Bank & Trust Company, Town & Country Credit Union, Highland Bank and United Bankers’ Bank. As of April 30, 2016, our outstanding principal balance under the line of credit was $17.5 million.

The line of credit includes covenants and restrictions requiring us to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and we are also required to maintain minimum depository account(s) totaling $6.0 million with First International Bank, of which $1.5 million is to be held in a non-interest bearing account. As of April 30, 2016, we believe we are in compliance with the covenants under the line of credit.

Future Minimum Lease Receipts

The future minimum lease receipts to be received under leases in place as of April 30, 2016 at healthcare properties held for investment, assuming that no options to renew or buy out the leases are exercised, are as follows:

 

 

 

 

 

 

    

(in thousands)

 

Fiscal Year Ended April 30, 

 

Lease Payments

 

2017

 

 

28,558

 

2018

 

 

26,235

 

2019

 

 

22,289

 

2020

 

 

18,423

 

2021

 

 

17,216

 

Thereafter

 

 

112,551

 

Total

 

$

225,272

 

2016 Annual Report 30

Table of Contents

Capital Expenditures

Each year we review the physical condition of each property we own. In order for our properties to remain competitive, attract new tenants and retain existing tenants, we plan for a reasonable amount of capital improvements. In addition, we have launched a value add program whereby we will commit an estimated $3.5 million per quarter to rehab 4,000 units. Under this program, apartments will be remodeled as the leases expire and upgrades will include a variety of new appliances, flooring, lighting, kitchen cabinets, and bathroom upgrades. For the year ended April 30, 2016, excluding discontinued operations, we spent approximately $34.6 million on capital improvements, tenant improvements and other capital expenditures.

We define recurring capital expenditures as those made on a regular or recurring basis to maintain a property’s competitive position within its market, generally with a depreciable life of 5 to 12 years, but excluding (a) capital expenditures made in the year of acquisition and in subsequent periods until the property is classified as same-store (i.e., excluding capital expenditures on non-same-store properties), (b) improvements associated with the expansion or re-development of a building, (c) renovations to a building which change the underlying classification of the building or (d) capital improvements that represent the addition of something new to a property, rather than the replacement of an existing item. We believe that recurring capital expenditures is a useful measure of performance because it provides an indication of the expenses that we can expect to incur on an on-going basis. Non-recurring capital expenditures correspond to major capital expenditures for items such as roof replacements or items that result in something new being added to the property (for example, the addition of a new heating and air conditioning unit that is not replacing one previously there), generally with a depreciable life of 20 to 40 years, and include expenditures completed in the year of acquisition and in subsequent periods until the property is classified as same-store (i.e., including capital expenditures on non-same-store properties). The following table shows total and weighted average per square foot/unit recurring and non-recurring capital expenditures (excluding capital expenditures recoverable from tenants and capital expenditures at properties sold or classified as held for sale during the period), and, for our same-store healthcare segment, tenant improvements (excluding tenant-funded tenant improvements) and leasing costs, for the three years ended April 30, 2016, 2015 and 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands except per SF or Unit data)

 

 

 

Years Ended April 30, 

 

 

 

2016

 

2015

 

2014

 

 

 

 

 

 

Cost/SF

 

 

 

 

Cost/SF

 

 

 

 

Cost/SF

 

 

 

Amount

 

or Unit

 

Amount

 

or Unit

 

Amount

 

or Unit

 

Multifamily Properties:

    

 

    

    

    

    

 

    

    

    

    

 

    

    

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring capital expenditures

 

$

5,553

$

564

 

$

5,444

$

550

 

$

4,956

$

589

 

Non-recurring capital expenditures, excluding value add expenditures

 

 

9,083

 

701

 

 

9,663

 

815

 

 

11,355

 

1,053

 

Value add expenditures(1)

 

 

4,463

 

7,553

 

 

 —

 

 —

 

 —

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare Properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Recoverable Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring capital expenditures

 

$

 —

$

 —

 

$

691

$

0.24

 

$

 —

$

 —

 

Non-recurring capital expenditures

 

 

77

 

0.05

 

 

821

 

0.28

 

 

612

 

0.20

 

Tenant improvements at same-store properties

 

 

1,073

 

0.83

 

 

1,427

 

0.50

 

 

3,235

 

1.11

 

Leasing costs at same-store properties

 

 

554

 

0.43

 

 

353

 

0.12

 

 

518

 

0.18

 

(1)

Amount represents total spent on completed and in-progress units during the period. Cost per unit represents the average amount spent on completed units during the period.

2016 Annual Report 31

Table of Contents

Contracts or Options to Purchase

We have granted options to purchase certain of our properties to tenants under their lease agreements. In general, these options grant the tenant the right to purchase the property at the greater of such property’s appraised value or an annual compounded increase of a specified percentage of the initial cost to us. As of April 30, 2016, our properties subject to purchase options are as follows:

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

Gross Rental Revenue

Property

Investment Cost

2016 
2015 
2014 

Billings 2300 Grant Road - Billings, MT

$

2,522 

$

327 

$

318 

$

308 

Missoula 3050 Great Northern - Missoula, MT

 

2,723 

 

352 

 

343 

 

332 

Sartell 2000 23rd Street South - Sartell, MN

 

8,298 

 

0 

 

141 

 

357 

Spring Creek American Falls- American Falls, ID(1)

 

4,070 

 

352 

 

352 

 

352 

Spring Creek Boise - Boise, ID(1)

 

5,075 

 

440 

 

440 

 

440 

Spring Creek Eagle - Eagle, ID(1)

 

4,100 

 

356 

 

356 

 

356 

Spring Creek Fruitland - Fruitland, ID(1)

 

7,115 

 

608 

 

606 

 

141 

Spring Creek Meridian - Meridian, ID(1)

 

7,250 

 

624 

 

624 

 

624 

Spring Creek Overland - Overland, ID(1)

 

6,725 

 

580 

 

580 

 

580 

Spring Creek Soda Springs - Soda Springs, ID(1)

 

2,253 

 

196 

 

196 

 

196 

Spring Creek Ustick - Meridian, ID(1)

 

4,300 

 

368 

 

368 

 

368 

St. Michael Clinic - St. Michael, MN

 

2,851 

 

256 

 

253 

 

252 

Urbandale - Urbandale, IA

 

15,555 

 

1,594 

 

1,573 

 

1,541 

PrairieCare – Brooklyn Park, MN

 

24,408 

 

1,564 

 

0 

 

0 

Total

$

97,245 

$

7,617 

$

6,150 

$

5,847 

(1)

Subsequent to fiscal year end, the tenant in our Spring Creek senior housing portfolio exercised its option to purchase the properties for a sale price of $43.5 million. These are our only senior housing properties that have purchase options and they were classified as held for sale at April 30, 2016.

Properties by State

The following table presents, as of April 30, 2016,December 31, 2021, the total amount of property held for investment,owned, net of accumulated depreciation, by state:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

(in thousands)

    

    

 

(in thousands)

State

 

Multifamily

    

Healthcare

    

Other

    

Total

 

% of Total

 

StateTotal% of Total

Minnesota

 

$

396,035

 

$

233,456

 

$

26,492

 

$

655,983

 

47.9

%

Minnesota$941,366 51.5 %
ColoradoColorado557,133 30.5 %

North Dakota

 

 

409,495

 

 

8,544

 

 

40,374

 

 

458,413

 

33.5

%

North Dakota212,518 11.6 %

Nebraska

 

 

88,830

 

 

6,021

 

 

 —

 

 

94,851

 

6.9

%

Nebraska71,323 3.9 %

South Dakota

 

 

53,207

 

 

 —

 

 

 —

 

 

53,207

 

3.9

%

South Dakota25,142 1.4 %

Kansas

 

 

47,874

 

 

 —

 

 

 —

 

 

47,874

 

3.5

%

Montana

 

 

29,349

 

 

3,467

 

 

 —

 

 

32,816

 

2.4

%

Montana20,096 1.1 %

Iowa

 

 

9,963

 

 

 —

 

 

12,601

 

 

22,564

 

1.7

%

Wisconsin

 

 

 —

 

 

2,874

 

 

 —

 

 

2,874

 

0.2

%

Total

 

$

1,034,753

 

$

254,362

 

$

79,467

 

$

1,368,582

 

100.0

%

Total$1,827,578 100.0 %


Item 3. Legal Proceedings

Proceedings

In the ordinary course of our operations, we become involved in litigation. At this time, we know of no material pending or threatened legal proceedings, or other proceedings contemplated by governmental authorities, that would have a material impact upon us.

Item 4. Mine Safety Disclosures

Disclosures

Not Applicable

Applicable.

2016 Annual Report 32

23

Table of Contents

PART II

II


Item 5. Market for Registrant’s Common Equity,Equity, Related StockholderMatters, and Issuer Purchases of Equity Securities

Quarterly Share and Distribution Data

Market Information
Our common sharesCommon Shares of beneficial interest tradeBeneficial Interest, no par value, are traded on the New York Stock Exchange (“NYSE”) under the symbol “IRET.” The following table shows the high and low sales prices for our common shares for the periods indicated, as reported by the NYSE, and the distributions per common share and limited partnership unit declared with respect to each period.

“CSR”.

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Distributions Declared

 

Quarter Ended

 

High

 

Low

 

(per share and unit)

 

Fiscal Year 2016

 

 

 

 

 

 

 

 

 

 

April 30, 2016

 

$

7.48

 

$

5.97

 

$

0.1300

 

January 31, 2016

 

 

8.39

 

 

6.24

 

 

0.1300

 

October 31, 2015

 

 

8.16

 

 

6.51

 

 

0.1300

 

July 31, 2015

 

 

7.44

 

 

6.93

 

 

0.1300

 

Shareholders 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Distributions Declared

 

Quarter Ended

 

High

 

Low

 

(per share and unit)

 

Fiscal Year 2015

 

 

 

 

 

 

 

 

 

 

April 30, 2015

 

$

8.31

 

$

7.09

 

$

0.1300

 

January 31, 2015

 

 

8.60

 

 

8.05

 

 

0.1300

 

October 31, 2014

 

 

8.59

 

 

7.49

 

 

0.1300

 

July 31, 2014

 

 

9.21

 

 

8.52

 

 

0.1300

 

It is our policy to pay quarterly distributions to our common shareholders and unitholders, at the discretion of our Board of Trustees, based on our funds from operations, financial condition and capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board of Trustees deems relevant. Since July 1, 1971, we have paid quarterly cash distributions in the months of January, April, July and October.

Shareholders

As of June 22, 2016,February 21, 2022, there were approximately 3,6442,567 common shareholders of record.

Unregistered Sales of Shares

Under the terms of IRET Properties’Centerspace, LP’s Agreement of Limited Partnership, limited partners have the right to require the IRET PropertiesCenterspace, LP to redeem their limited partnership units for cash any time following the first anniversary of the date they acquired such unitsUnits (“Exchange Right”). When a limited partner exercises the Exchange Right, we have the right, in our sole discretion, to acquireredeem such unitsUnits by either making a cash payment or exchanging the unitsUnits for our common shares, on a one-for-one basis. The Exchange Right is subject to certain conditions and limitations, including that the limited partner may not exercise the Exchange Right more than two times during a calendar year and the limited partner may not exercise for less than 1,000 units,100 Units, or, if such limited partner holds less than 1,000 units,100 Units, for less than all of the unitsUnits held by such limited partner. IRET PropertiesCenterspace, LP and some limited partners have contractually agreed to a holding period of greater than one year, a greater number of redemptions during a calendar year, or other limitationsmodifications to their Exchange Right.

During the fiscal yearsthree months ended April 30, 2016, 2015 and 2014, respectively,December 31, 2021, we issued an aggregate of 36,156, 471,800 and 254,9484,533 unregistered common shares to limited partners of IRET PropertiesCenterspace, LP upon exercise of their Exchange Rights regardingfor an equal number of units.Units. All such issuances of our common shares were exempt from registration as private placements under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder. We have registered the resale of such common shares under the Securities Act.

2016 Annual Report 33

Table of Contents

Issuer Purchases of Shares

Our BoardEquity Securities

Maximum Dollar
Total Number of SharesAmount of Shares That
Total Number ofAverage PricePurchased as Part ofMay Yet Be Purchased 
Shares and UnitsPaid perPublicly AnnouncedUnder the Plans or
Period
Purchased(1)
Share and Unit(2)
Plans or Programs
Programs(3)
October 1 - 31, 2021— $— — $— 
November 1 - 30, 2021— — — — 
December 1 - 31, 2021— — — — 
Total— $— — 
(1)Includes Units redeemed for cash pursuant to the exercise of Trustees has authorized a share repurchase program of up to $50.0 million worth of our common shares over a one year period. Effective September 14, 2015 and December 15, 2015, as part of the implementation of the program, we established written trading plans (“Plans”) that provide for share repurchases in open market transactions for $25.0 million and $10.0 million, respectively, which are intended to comply with Rule 10b5-1 under the Securities Exchange Act. The extent to which common shares are repurchased and the timing of such repurchases will depend upon a variety of factors, including prevailing market conditions, regulatory requirements and other factors. The program does not obligate us to repurchase any specific number of shares and may be suspended at any time in our discretion. We did not repurchase any of our common shares during the fourth quarter of fiscal year 2016.

exchange rights.

(2)Amount includes commissions paid.
Comparative Stock Performance

The information contained in this Comparative Stock Performance section shall not be deemed to be “soliciting material” or “filed” or incorporated“incorporated by referencereference” into our future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.

Set forth below is a graph that compares, for the five fiscal years commencing May 1, 2011December 31, 2016 and ending April 30, 2016,December 31, 2021, the cumulative total returns for our common shares with the comparable cumulative total return of two indexes,three indices, the Standard & Poor’s 500 Index (“S&P 500”), the FTSE Nareit Equity REITs Index, and the FTSE NAREITNareit Equity REITsApartments Index, the latter of which is an index prepared by the FTSE Group for the National Association of Real Estate Investment Trusts, which includes all tax-qualified equity REITs listed on the NYSE the American Stock Exchange and the NASDAQ Market. 

The performance graph assumes that, at the close of trading on April 30, 2011, the last trading day of fiscal year 2011,December 31, 2016, $100 was invested in our common shares and in each of the indexes.indices. The comparison assumes the reinvestment of all distributions. Cumulative total shareholder returns for our common shares, the S&P 500 and the FTSE NAREIT Equity REITs Index are based on our fiscal year ending April 30.

2016 Annual Report 34

24
Table of Contents

iret-20211231_g1.jpg

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

FY11

    

FY12

    

FY13

    

FY14

    

FY15

    

FY16

 

Investors Real Estate Trust

 

100.00

 

82.26

 

117.93

 

112.39

 

98.48

 

89.02

 

S&P 500

 

100.00

 

104.76

 

122.45

 

147.48

 

166.62

 

168.63

 

FTSE NAREIT Equity REITs

 

100.00

 

109.81

 

131.28

 

132.42

 

150.15

 

161.96

 

Period Ending
Index12/31/201612/31/201712/31/201812/31/201912/31/202012/31/2021
Centerspace100.00 83.52 76.11 117.40 119.46 193.85 
S&P 500 Index100.00 121.83 116.49 153.17 181.35 233.41 
FTSE Nareit Equity REITs100.00 105.23 100.36 126.45 116.34 166.64 
FTSE Nareit Equity Apartments Index100.00 103.72 107.56 135.87 115.02 188.19 

Source: SNL Financial LC

S&P Global Market Intelligence

2016 Annual Report 35

Item 6.    Reserved
25

Table of Contents

Item 6. Selected7. Management’s Discussion and Analysis of Financial Data

Set forth below is selected financial data on a historical basis for the five most recent fiscal years ended April 30. This informationCondition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations.
We are presenting our results of operations for the years ended December 31, 2021 and 2020. For additional comparison of results of operations for the years ended December 31, 2020 and December 31, 2019, please refer to our Annual Report on Form 10-K.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

2016

 

2015

 

2014

 

2013

 

2012

 

Consolidated Income Statement Data

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Revenue

 

$

188,320

 

$

179,321

 

$

164,590

 

$

149,572

 

$

130,110

 

Impairment of real estate investments in continuing and discontinued operations

 

$

5,983

 

$

6,105

 

$

44,426

 

$

 —

 

$

 —

 

Gain on debt extinguishment

 

$

29,230

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

Gain (loss) on sale of discontinued operations and real estate and other investments

 

$

9,640

 

$

6,093

 

$

(51)

 

$

 —

 

$

 —

 

Income from continuing operations

 

$

19,280

 

$

19,506

 

$

5,898

 

$

12,275

 

$

2,890

 

Income (loss) from discontinued operations

 

$

57,322

 

$

9,178

 

$

(22,838)

 

$

17,697

 

$

6,816

 

Net income (loss)

 

$

76,602

 

$

28,684

 

$

(16,940)

 

$

29,972

 

$

9,706

 

Net (income) loss attributable to noncontrolling interests – Operating Partnership

 

$

(7,032)

 

$

(1,526)

 

$

4,676

 

$

(3,633)

 

$

(1,359)

 

Net income (loss) attributable to Investors Real Estate Trust

 

$

72,006

 

$

24,087

 

$

(13,174)

 

$

25,530

 

$

8,212

 

Consolidated Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate investments

 

$

1,441,202

 

$

1,236,091

 

$

1,094,733

 

$

1,046,933

 

$

916,200

 

Total assets

 

$

1,760,177

 

$

1,997,837

 

$

1,869,221

 

$

1,889,554

 

$

1,714,367

 

Mortgages payable

 

$

817,324

 

$

596,965

 

$

604,844

 

$

638,439

 

$

596,106

 

Revolving lines of credit

 

$

17,500

 

$

60,500

 

$

22,500

 

$

10,000

 

$

39,000

 

Total Investors Real Estate Trust shareholders’ equity

 

$

618,758

 

$

652,110

 

$

592,184

 

$

612,787

 

$

432,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Per Common Share Data (basic and diluted)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations - Investors Real Estate Trust

 

$

0.08

 

$

0.04

 

$

(0.05)

 

$

0.02

 

$

0.00

 

Income (loss) from discontinued operations - Investors Real Estate Trust

 

$

0.41

 

$

0.07

 

$

(0.18)

 

$

0.15

 

$

0.07

 

Net income (loss)

 

$

0.49

 

$

0.11

 

$

(0.23)

 

$

0.17

 

$

0.07

 

Distributions

 

$

0.52

 

$

0.52

 

$

0.52

 

$

0.52

 

$

0.56

 

 

 

 

 

 

 

 

 

 

 

 

 

CALENDAR YEAR 

    

2015

    

2014

    

2013

    

2012

    

2011

 

Tax status of distributions

 

 

 

 

 

 

 

 

 

 

 

Capital gain

 

11.99

%  

23.09

%  

3.09

%  

2.41

%  

37.48

%

Ordinary income

 

36.28

%  

25.74

%  

28.41

%  

23.17

%  

18.04

%

Return of capital

 

51.73

%  

51.17

%  

68.50

%  

74.42

%  

44.48

%

For the fiscal year ended April 30, 2016, we recognized approximately $55.2 million of net capital gain for federal income tax purposes. We designate the entire $55.2 million of net capital gain as capital gain dividends.

2016 Annual Report 36

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations

The following discussion and analysis should be read in conjunction10-K filed with the consolidated financial statements included in this Annual ReportSEC 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, 2016.

Overview

We are a self-advised equity REIT engaged in owning and operating income-producing real properties. Our investments include multifamily, healthcareFebruary 22, 2021.

This and other properties locatedsections of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future.
Executive Summary
We own, manage, acquire, redevelop, and develop apartment communities. We primarily focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for our apartment homes and retention of our residents. As of December 31, 2021, we owned interests in 79 apartment communities consisting of 14,441 homes as detailed in Item 2 - Properties. Property owned, as presented in the upper Midwest states of Minnesota and North Dakota.

In January 2015, we announcedconsolidated balance sheets, was $2.3 billion at December 31, 2021, compared to $1.8 billion at December 31, 2020.

Renting apartment homes is our intention to sell substantially all of our office and retail properties. During the first quarter of fiscal year 2016, we classified as held for sale and discontinued operations 48 office properties, 17 retail properties and 1 healthcare property and reduced our number of reportable segments from five to three when our office and retail segments fell below the quantitative thresholds for reporting as reportable segments due to dispositions. During the last quarter of fiscal year 2016, we further reduced our number of reportable segments from three to two due to our industrial segment not meeting the quantitative thresholds.

As of April 30, 2016, we held for investment 99 multifamily properties containing 12,950 apartment units and having a total real estate investment amount net of accumulated depreciation of $1.0 billion, and 47 commercial properties, consisting of healthcare, industrial, office and retail, containing approximately 2.9 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $333.8 million.As of April 30, 2016, we held for sale 1 multifamily property, 36 commercial properties and 3 parcels of land.

Our primary source of incomerevenue, and cash is rents associated with multifamily and commercial leases. Ourour business objective is to increase shareholder valueprovide great homes. We strive to maximize resident satisfaction and retention by employing a disciplined investment strategy. This strategy is implemented by growing income-producinginvesting in high-quality assets in desired geographical markets in real estate classes wedesirable locations and developing and training team members to create vibrant apartment communities through resident-centered operations. We believe that delivering superior resident experiences will provide adrive consistent return on investmentprofitability for our shareholders. We have paid quarterly distributions continuouslyevery quarter since our first distribution in 1971.

COVID-19 Developments
The COVID-19 pandemic has had an impact on our business since March 2020, when it spread to many of the markets in which we own properties. Our first priority continues to be the health and well-being of our residents, team members, and the communities we serve. We enhanced cleaning protocols at our communities and offices, implemented physical distancing in community common spaces, and instituted remote work guidelines for our team members, all in accordance with state and local guidelines. We provided rent deferrals to residents and rent abatement to commercial tenants who were financially impacted by the COVID-19 pandemic.
Certain states and cities, including some of those in which our apartment communities are located, have reacted to the COVID-19 pandemic by instituting quarantines, restrictions on travel, shelter-in-place or stay-at-home directives, restrictions on types of businesses that may continue to operate, and restrictions on the types of construction projects that may continue. The availability of vaccines has led many states and cities to lift restrictions; however, due to new variants of the virus, we cannot predict whether restrictions will be reinstated or if additional restrictions will be imposed in the future. We implemented a plan to safely re-open common spaces in our communities while adhering to state and local guidelines, but we recognize that an increase in COVID-19 cases in these markets could cause us to close common spaces or take other preventive measures.
We cannot predict the continued impact of the pandemic, including the impact of the proposed U.S. vaccinemandate, and the degree to which our business and results of operations may be affected, particularly given the extended duration of the pandemic.
Financial Impact of the COVID-19 Pandemic
Many companies, especially in urban areas, have extended directives for employees to work from home during the COVID-19 pandemic. These extended directives have resulted in decreased traffic to businesses and, in some cases, closures of businesses in urban areas, which has resulted in lower demand and lower rent increases for our urban based apartment communities. The COVID-19 pandemic and these directives have affected our operations but did not have a material impact on our financial condition, operating results, or cash flows for the twelve months ended December 31, 2021.
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The ongoing COVID-19 pandemic may have adverse financial and economic impacts that include, but are not limited to, the following:
•cause our residents or commercial tenants to defer or stop rental payments, and abandon or fail to renew leases, which would reduce our primary source of net operating income and cash flows;
•cause the capital markets generally to become restricted or unavailable, thereby limiting our access to any needed debt or equity capital financing;
•impact the business of, or cause the loss of, certain critical third-party suppliers or other service providers;
•restrict our ability to continue to pay dividends on a quarterly basis at the current rate;
•impair the value of our tangible or intangible assets;
•require us to record loss contingencies and incur additional expenses related to our COVID-19 response; or
•cause the U.S. economy to suffer an extended economic slowdown, which could lead to a prolonged recession or even economic depression, which in turn would affect the demand for our apartment communities and could have an adverse impact on our business and operating results.
Despite our response to the COVID-19 pandemic, the ultimate impact of the COVID-19 pandemic on our rental revenue in future years cannot be determined at present. The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response in collaboration with residents, commercial tenants, government officials, and business partners and assessing potential impacts to our financial position and operating results, as well as potential adverse impacts on our business. Our management remains committed to ensuring the safety of our team members, residents, and communities, and to maintaining the financial stability of our business enterprise for the duration of the COVID-19 pandemic.

Significant Transactions and Events for the Year Ended December 31, 2021
Highlights. For the year ended December 31, 2021, our highlights included the following:
•Net Loss was $0.47 per diluted share for the year ended December 31, 2021, compared to Net Loss of $0.15 per diluted share for the year ended December 31, 2020;
•Same-store year-over-year revenue growth of 4.8%, driven by 5.1% growth in rental revenue, offset by a decrease of 0.3% in occupancy; and
•Same-store net operating income growth of 4.8%.
Acquisitions and Dispositions. During the year ended December 31, 2021, we completed the following transactions in furtherance of our strategic plan:
•Closed on a strategic portfolio acquisition in Minneapolis and St. Cloud, Minnesota for an aggregate acquisition cost of $359.9 million. The portfolio is comprised of 14 apartment communities in Minneapolis and three apartment communities in St. Cloud with a total of 2,696 apartment homes. In connection with this transaction, we issued 1.8 million Series E preferred units with a par value of $100 per unit. The Series E preferred units pay a 3.875% dividend rate and are convertible, at the holder’s option, into Units at an exchange rate of 1.2048 Units per Series E preferred unit, representing a conversion price of $83.00 per Unit. The acquired assets were subject to $126.5 million in mortgage liabilities, of which $20.0 million was assumed at a rate of 4.31% with the remaining amount financed through a $198.9 million Fannie Mae credit facility agreement. The FMCF includes tranches in 7, 10, and 12-year increments with a weighted average interest rate of 2.78%;
•Acquired Civic Lofts, a 176-home apartment community located in Denver, Colorado for $63.0 million;
•Acquired Union Pointe, a 256-home apartment community located in Longmont, Colorado for $76.9 million; and
•Disposed of five apartment communities in Rochester, Minnesota and a commercial property for an aggregate sale price of $62.3 million.
Financing Transactions. During the year ended December 31, 2021, we completed the following financing transactions:
•Issued 1.8 million common shares at an average price of $86.13 per share for total consideration, net of commissions and issuance costs, of approximately $156.4 million;
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•Amended and expanded our Note Purchase Private Shelf Agreement to increase the aggregate amount under the agreement from $150.0 million to $225.0 million and issued $50.0 million of 2.7% unsecured Series C Notes due June 6, 2030;
•Issued $125.0 million of unsecured notes with a weighted average interest rate of 2.6% and weighted average maturity of 10.5 years; and
•Paid $3.8 million to terminate two interest rate swaps in connection with the pay down of our term loans.
Outlook
We intend to continue our focus on maximizing the financial performance of the communities in our existing portfolio. To accomplish this, we have introduced initiatives to expand our operating margin by enhancing the resident experience, making value-add investments, and implementing technology solutions and expense controls. We will actively manage our existing portfolio and strategically pursue acquisitions of multifamily communities in our target markets of Minneapolis, Minnesota and Denver, Colorado as opportunities arise and market conditions allow. We will explore potential new markets and acquisition opportunities, including in Nashville, Tennessee, as market conditions allow. Our continued management of a strong balance sheet should provide us with flexibility to pursue both internal and external growth.
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RESULTS OF OPERATIONS
Reconciliation of Operating Income (Loss) to Net Operating Income
The following table provides a reconciliation of operating income to net operating income (“NOI”), which is defined below.
 (in thousands, except percentages)
 Year Ended December 31,
20212020$ Change% Change
Operating income (loss)$29,892 $33,843 $(3,951)(11.7)%
Adjustments:
Property management expenses8,752 5,801 2,951 50.9 %
Casualty loss344 1,662 (1,318)(79.3)%
Depreciation and amortization92,165 75,593 16,572 21.9 %
General and administrative expenses16,213 13,440 2,773 20.6 %
(Gain) loss on sale of real estate and other investments(27,518)(25,503)(2,015)7.9 %
Net operating income$119,848 $104,836 $15,012 14.3 %
Consolidated Results of Operations
The following consolidated results of operations cover the years ended December 31, 2021 and 2020.
 (in thousands)
 Year Ended December 31,
 20212020$ Change% Change
Revenue
Same-store$166,326 $158,702 $7,624 4.8 %
Non-same-store29,298 5,424 23,874 440.2 %
Other2,831 2,147 684 31.9 %
Dispositions3,250 11,721 (8,471)(72.3)%
Total201,705 177,994 23,711 13.3 %
Property operating expenses, including real estate taxes
Same-store67,306 64,204 3,102 4.8 %
Non-same-store11,790 2,152 9,638 447.9 %
Other1,120 1,008 112 11.1 %
Dispositions1,641 5,794 (4,153)(71.7)%
Total81,857 73,158 8,699 11.9 %
Net operating income
Same-store99,020 94,498 4,522 4.8 %
Non-same-store17,508 3,272 14,236 435.1 %
Other1,711 1,139 572 50.2 %
Dispositions1,609 5,927 (4,318)(72.9)%
Total$119,848 $104,836 $15,012 14.3 %
Property management expense(8,752)(5,801)2,951 50.9 %
Casualty loss(344)(1,662)(1,318)(79.3)%
Depreciation and amortization(92,165)(75,593)16,572 21.9 %
General and administrative expenses(16,213)(13,440)2,773 20.6 %
Gain (loss) on sale of real estate and other investments27,518 25,503 (2,015)7.9 %
Interest expense(29,078)(27,525)1,553 5.6 %
Loss on extinguishment of debt(535)(23)512 2,226.1 %
Interest and other income (loss)(2,380)(1,552)(828)53.4 %
NET INCOME (LOSS)$(2,101)$4,743 $(6,844)(144.3)%
Dividends to preferred unitholders(640)(640)— — 
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units2,806 212 2,594 1,223.6 %
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities(94)126 (220)(174.6)%
Net income (loss) attributable to controlling interests(29)4,441 (4,470)(100.7)%
Dividends to preferred shareholders(6,428)(6,528)100 (1.5)%
Redemption of preferred shares— 297 (297)100.0 %
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS$(6,457)$(1,790)$(4,667)260.7 %
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 Year Ended December 31,
Weighted Average Occupancy (1)
20212020
Same-store94.4 %94.7 %
Non-same-store94.2 %93.8 %
Total94.3 %94.7 %
(1)Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rental revenue. Scheduled rental revenue represents the value of all homes, with occupied homes valued at contractual rental rates pursuant to leases and vacant homes valued at estimated market rents. When calculating actual rents for occupied homes and market rents for vacant homes, delinquencies and concessions are not taken into account. The currently offered effective rates on new leases at the community are used as the starting point in determination of the market rates of vacant homes. We believe that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and our calculation of weighted average occupancy may not be comparable to that disclosed by other real estate companies.
 December 31,
Number of Homes20212020
Same-store10,672 10,672 
Non-same-store3,769 647 
Total14,441 11,319 
Net operating income. NOI is a non-GAAP financial measure which we define as total real estate revenues less property operating expenses, including real estate taxes, which is reconciled to operating income (loss) in the table above. We believe that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, property management overhead, casualty losses, 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 common shareholders, or cash flow from operating activities as a measure of financial performance.
Throughout this Report, we have provided certain information on a same-store and non-same-store basis. Same-store apartment communities are owned or in service for substantially all of the periods being compared and, in the case of development properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, we determine the composition of our same-store pool for that year as well as adjust the previous year, which allows us to evaluate the performance of existing apartment communities and their contribution to net income. Management believes that measuring performance on a same-store basis is useful to investors because it enables evaluation of how our communities are performing year-over-year. Management uses this measure to assess whether or not it has been successful in increasing NOI, renewing the leases of existing residents, controlling operating costs, and making prudent capital improvements. The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from same-store apartment communities because changes from one year to another in real estate revenue and expenses from non-same-store communities are due to the addition of those properties to our real estate portfolio, and accordingly provide less useful information for evaluating the ongoing operational performance of our real estate portfolio.   
For the comparison of the twelve months ended December 31, 2021 and 2020, 59 apartment communities were classified as same-store and twenty-one apartment communities were non-same-store. See Item 2 - Properties for the list of communities classified as same-store and non-same-store. Sold communities are included in “Other” for the periods prior to the sale, which also includes non-multifamily properties and the non-multifamily components of mixed-use properties.
Revenue. Total revenue increased by 13.3% to $201.7 million for the year ended December 31, 2021 compared to $178.0 million in the year ended December 31, 2020. Revenue from 21 non-same-store apartment communities and other properties increased by $23.9 million and $684,000, respectively, offset by a decrease of $8.5 million from dispositions. Revenue from same-store communities increased by 4.8% or $7.6 million in the year ended December 31, 2021, compared to the same period in the prior year. Approximately 5.1% of the increase was due to higher average rental revenue, offset by a 0.3% decrease in occupancy as weighted average occupancy decreased from 94.7% to 94.4% for the years ended December 31, 2020 and 2021, respectively.
Property operating expenses, including real estate taxes. Total property operating expenses, including real estate taxes, increased by 11.9% to $81.9 million in the year ended December 31, 2021 compared to $73.2 million in the year ended December 31, 2020. Property operating expenses from non-same-store apartment communities increased by $9.6 million, offset by a decrease of $4.2 million from sold properties. Property operating expenses at same-store communities increased by 4.8% or $3.1 million in the year ended December 31, 2021, compared to the same period in the prior year. At same-store communities, controllable expenses (which exclude insurance and real estate taxes), increased by $1.5 million, primarily due to
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increases in utilities, compensation costs, turnover and maintenance, and marketing costs of $689,000, $284,000, $278,000, and $239,000, respectively. Non-controllable expenses at same-store communities increased by $1.7 million primarily due to insurance costs. Insurance and real estate taxes comprised $1.1 million and $632,000 of the increase, respectively.
Net operating income. NOI increased by 14.3% to $119.8 million in the year ended December 31, 2021 compared to $104.8 million in the year ended December 31, 2020. Net operating income from same-store and non-same-store communities increased by $4.5 million and $14.2 million, respectively, offset by a decrease of $4.3 million from dispositions.
Property management expense. Property management expense, consisting of property management overhead and property management fees paid to third parties increased by 50.9% to $8.8 million in the year ended December 31, 2021, compared to $5.8 million in the year ended December 31, 2020. The increase was primarily due to $1.2 million in non recurring technology initiatives as well as $1.2 million in compensation costs due to the filling of open positions and additional staffing related to the acquisition of 17 communities during the year.
Casualty gain (loss). Casualty loss decreased by 79.3% to $344,000 in the year ended December 31, 2021, compared to $1.7 million in the year ended December 31, 2020. The decrease was primarily due to weather-related losses that occurred in the prior year which did not occur in the current year.
Depreciation and amortization. Depreciation and amortization increased by 21.9% to $92.2 million in the year ended December 31, 2021, compared to $75.6 million in the year ended December 31, 2020, attributable to an increase of $21.6 million from non-same-store properties, offset by decreases of $2.3 million and $2.7 million at same-store communities and sold properties, respectively.
General and administrative expenses.  General and administrative expenses increased by 20.6% to $16.2 million in the year ended December 31, 2021, compared to $13.4 million in the year ended December 31, 2020, primarily attributable to increases of $1.3 million in incentive-based compensation costs related to company performance and share-based compensation arrangements due to the timing and form of grants and $808,000 in non-recurring technology initiatives.
Gain (loss) on sale of real estate and other investments.  In the years ended December 31, 2021 and 2020, we recorded gains on sale of real estate and other investments in continuing operations of $27.5 million and $25.5 million, respectively.
Operating income. Operating income decreased by 11.7% to $29.9 million in the year ended December 31, 2021, compared to $33.8 million in the year ended December 31, 2020.
Interest expense.  Interest expense increased 5.6% to $29.1 million in the year ended December 31, 2021, compared to $27.5 million in the year ended December 31, 2020, primarily due to maintaining a larger average daily balance on the line of credit compared to the same period of the prior year and the addition of new unsecured senior notes and the Fannie Mae credit facility, offset by a lower weighted average interest rate.
Loss on extinguishment of debt. Loss on extinguishment of debt increased to $535,000 in the year ended December 31, 2021, compared to $23,000 in the year ended December 31, 2020, primarily due to prepayment penalties associated with the disposal of assets and the write-off of unamortized loan costs.
Interest and other income (loss).  Interest and other income (loss) decreased to $2.4 million loss in the year ended December 31, 2021, compared to a loss of $1.6 million in the prior year. The decrease was primarily due to a $5.4 million loss related to the termination of interest rate swaps, compared to a $3.4 million loss from marketable securities in the prior year.
Funds from Operations and Core Funds From Operations
We believe that Funds from Operations (“FFO”), which is a non-GAAP standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation does not assume the value of real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation.
We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”). Nareit defines FFO as net income or loss calculated in accordance with GAAP, excluding:
•depreciation and amortization related to real estate;
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•gains and losses from the sale of certain real estate assets; and
•impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
The exclusion in Nareit’s definition of FFO of impairment write-downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods.
Due to limitations of the Nareit FFO definition, we have made certain interpretations in applying the definition. We believe all such interpretations not specifically provided for in the Nareit definition are consistent with the definition. Nareit's FFO White Paper 2018 Restatement clarified that impairment write-downs of land related to a REIT’s main business are excluded from FFO and a REIT has the option to exclude impairment write-downs of assets that are incidental to the main business.
While FFO is widely used by us as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP, nor is it indicative of funds available to fund all cash needs, including the ability to service indebtedness or make distributions to shareholders.
Core Funds from Operations ("Core FFO"), a non-GAAP measure, is FFO adjusted for non-routine items or items not considered core to business operations. By further adjusting for items that are not considered part of core business operations, the company believes that Core FFO provides investors with additional information to compare core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income or as any other GAAP measurement of performance, but rather should be considered an additional supplemental measure. Core FFO also does not represent cash generated from operating activities in accordance with GAAP, nor is it indicative of funds available to fund all cash needs, including the ability to service indebtedness or make distributions to shareholders. Core FFO is a non-GAAP and non-standardized financial measure that may be calculated differently by other REITs and that should not be considered a substitute for operating results determined in accordance with GAAP.
Net loss available to common shareholders for the year ended December 31, 2021 decreased to $6.5 million compared to a net loss of $1.8 million for the year ended December 31, 2020. FFO applicable to common shares and Units for the year ended December 31, 2021, increased to $54.9 million compared to $47.4 million for the year ended December 31, 2020, a change of 16.0%, primarily due to increased NOI from same-store and non-same-store communities as well as lower casualty losses and a prior year loss of $3.4 million on marketable securities that did not occur in the current year. These increases were offset by decreased NOI from sold properties, increases in interest expense, property management and general and administrative expenses, and a $5.4 million loss related to termination of interest rate swaps. For a comparison of FFO applicable to common shares and Units for the years ended December 31, 2020 and 2019, refer to our Annual Report on Form 10-K filed with the SEC on February 22, 2021.

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Reconciliation of Net Income Available to Common Shareholders to Funds from Operations and Core Funds From Operations
 (in thousands, except per share and unit amounts)
Year Ended December 31,
20212020
Net income (loss) available to common shareholders$(6,457)$(1,790)
Adjustments:
Noncontrolling interests – Operating Partnership(2,806)(212)
Depreciation and amortization92,165 75,593 
Less depreciation – non real estate(366)(353)
Less depreciation – partially owned entities(93)(379)
(Gain) loss on sale of real estate(27,518)(25,503)
FFO applicable to common shares and Units$54,925 $47,356 
Adjustments to Core FFO:
Casualty loss (recovery)$— $749 
Loss on extinguishment of debt535 23 
Rebranding costs— 402 
Technology implementation costs2,020 — 
(Gain) loss on marketable securities— 3,378 
(Discount) premium on redemption of preferred shares— (297)
Commercial lease termination proceeds(450)— 
Acquisition related costs230 — 
Interest rate swap termination, amortization, and mark-to-market4,942 — 
Amortization of assumed debt(53)— 
Other miscellaneous items(64)— 
Core FFO applicable to common shares and Units$62,085 $51,611 
FFO applicable to common shares and Units$54,925 $47,356 
Dividends to preferred unitholders640 640 
FFO applicable to common shares and Units - diluted$55,565 $47,996 
Core FFO applicable to common shares and Units$62,085 $51,611 
Dividends to preferred unitholders640 640 
Core FFO applicable to common shares and Units - diluted$62,725 $52,251 
Per Share Data
Earnings (loss) per common share - diluted$(0.47)$(0.15)
FFO per share and Unit - diluted$3.54 $3.47 
Core FFO per share and Unit - diluted$3.99 $3.78 
Weighted average shares and Units - diluted15,704 13,835 

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Liquidity and Capital Resources 
Overview
We strive to maintain a strong balance sheet and preserve financial flexibility, which we believe should enhance our ability to capitalize on appropriate investment opportunities as they may arise. We intend to continue to focus on core fundamentals, which include generating positive cash flows from operation, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs.
Our primary sources of liquidity are cash and cash equivalents on hand and cash flows generated from operations. Other sources include availability under our unsecured lines of credit, proceeds from property dispositions, including restricted cash related to net tax deferred proceeds, offerings of preferred and common shares under our shelf registration statement, including offerings of common shares under our 2021 ATM Program, and long-term unsecured debt and secured mortgages.
Our primary liquidity demands are normally-recurring operating and overhead expenses, debt service and repayments, capital improvements to our communities, distributions to the holders of our preferred shares, common shares, Series D preferred units, Series E preferred units, and Units, value-add redevelopment, common and preferred share buybacks, Unit redemptions, and acquisition of additional communities.
We have historically met our short-term liquidity requirements through net cash flows provided by our operating activities and, from time to time, through draws on our lines of credit. We believe our ability to generate cash from property operating activities and draws on our lines of credit to be adequate to meet all expected operating requirements and to make distributions to our shareholders in accordance with the REIT provisions of the Code. Budgeted expenditures for ongoing maintenance and capital improvements and renovations to our real estate portfolio are also generally expected to be funded from existing cash on hand, cash flow generated from property operations, draws on our lines of credit and/or new borrowings, and we believe we will have sufficient liquidity to meet our commitments over the next twelve months.
To maintain our qualification as a REIT, we must pay dividends to our shareholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. Under a separate requirement, we must distribute 100% of net capital gains or pay a corporate level tax in lieu thereof. While we have historically satisfied this distribution requirement by making cash distributions to our shareholders, we may choose to satisfy this requirement by making distributions of other property, including, in limited circumstances, our own common shares. As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund ongoing operations. We pay dividends from cash available for distribution. Until it is distributed, cash available for distribution is typically invested in investment grade securities or is used to reduce balances outstanding under our line of credit. In the event of deterioration in property operating results, we may need to consider additional cash preservation alternatives, including reducing development activities, capital improvements, and renovations. For the year ended December 31, 2021, we declared cash distributions of $42.7 million to common shareholders and unitholders of Centerspace, LP, as compared to net cash provided by operating activities of $84.0 million and FFO of $54.9 million. 
Factors that could increase or decrease our future liquidity include, but are not limited to, changes in interest rates or sources of financing, general volatility in capital and credit markets, changes in minimum REIT dividend requirements, and our ability to access the capital markets on favorable terms, or at all. As a result of the foregoing conditions or general economic conditions in our markets that affect our ability to attract and retain residents, we may not generate sufficient cash flow from operations. If we are unable to obtain capital from other sources, we may not be able to pay the distribution required to maintain our status as a REIT, make required principal and interest payments, make strategic acquisitions or make necessary routine capital improvements or undertake value add renovation opportunities with respect to our existing portfolio of operating assets. 
As of December 31, 2021, we had total liquidity of approximately $204.8 million, which included $173.5 million available on our line of credit based on the value of unencumbered properties and $31.3 million of cash and cash equivalents. As of December 31, 2020, we had total liquidity of approximately $97.5 million, which included $97.1 million available on our line of credit based on the value of properties contained in our unencumbered asset pool (“UAP”) and $392,000 of cash and cash equivalents.
Potential Impact of COVID-19-Related Effects on Continuing Debt Availability
Although we are in compliance with our covenants under all of our debt facilities and currently expect to continue to remain in compliance with these covenants, there can be no assurance that we will remain in compliance with those covenants or be able to access these funds depending on the length of the COVID-19 pandemic and the breadth of its impact on the U.S. economy
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generally and the credit markets in particular. Under the terms of our credit facility, we may be unable to obtain advances under our credit facility if:
•we are unable to make certain representations and warranties, including a certification that, since September 30, 2021, there has been no adverse change in our business, financial condition, operations, performance or properties, taken as a whole, which would reasonably be expected to have a material adverse effect;
•changes in our consolidated property NOI or capitalization rates applicable to the properties in our borrowing base reduce or eliminate availability under our credit facility; or
•changes in the nature and composition (including occupancy rate) of the properties in our borrowing base cause these properties to become ineligible to be part of our borrowing base, and if we are not able to replace such properties with other qualifying properties, such ineligibility could reduce or eliminate the availability under our credit facility.
Even if we remain in compliance with the foregoing representations, warranties, and covenants, we may be unable to access the full amount available under our credit facilities if our lenders fail to fund their commitments.
As of the date of this filing, we have not experienced any restrictions or limitations on the availability of credit in our markets or with our lenders, although there can be no assurance that we will continue to be able to access the credit markets generally or our credit facility in the future.
Debt
As of December 31, 2021, we had a multibank, revolving line of credit with total commitments and borrowing capacity of $250.0 million, based on the value of unencumbered properties. As of December 31, 2021, the additional borrowing availability was $173.5 million beyond the $76.0 million drawn. As of December 31, 2020, the line of credit borrowing capacity was $250.0 million based on the value of our unencumbered asset pool (“UAP”), of which $152.9 million was drawn on the line. The line of credit bears interest either at the lender’s base rate plus a margin ranging from 25 to 80 basis points, or LIBOR, plus a margin ranging from 125 to 180 basis points based on our consolidated leverage. The line of credit is utilized to refinance existing indebtedness, to finance property acquisitions, to finance capital expenditures, and for general corporate purposes. This credit facility matures in September 2025 and has an accordion option to increase borrowing capacity up to $400.0 million.
In January 2021, we amended and expanded our private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, "PGIM") to increase the aggregate amount available for issuance of unsecured promissory notes to $225.0 million. We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available, as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which $25.0 million was under the private shelf agreement with PGIM. The following table shows the notes issued under both agreements.
(in thousands)
AmountMaturity DateInterest Rate
Series A$75,000 September 13, 20293.84 %
Series B$50,000 September 30, 20283.69 %
Series C$50,000 June 6, 20302.70 %
Series 2021-A$35,000 September 17, 20302.50 %
Series 2021-B$50,000 September 17, 20312.62 %
Series 2021-C$25,000 September 17, 20322.68 %
Series 2021-D$15,000 September 17, 20342.78 %
In September 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for financing the acquisition of 16 apartment communities. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, and a blended weighted average interest rate of 2.78%. As of December 31, 2021, the FMCF had a balance of $198.9 million. The FMCF is included within mortgages payable on the Consolidated Balance Sheets.
Mortgage loan indebtedness, excluding the FMCF, was $284.9 million on December 31, 2021 and $298.4 million on December 31, 2020. As of December 31, 2021, the weighted average rate of interest on our mortgage debt was 3.81%, compared to 3.93% on December 31, 2020. Refer to Note 6 of our consolidated financial statements contained in this Report for the principal payments due on our mortgage indebtedness and other tabular information.
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We also have a $6.0 million unsecured operating line of credit. This operating line of credit is designed to enhance treasury management activities and more effectively manage cash balances. This operating line matures on November 29, 2022, with pricing based on a market spread plus the one-month LIBOR index rate.
All of our term debt is at fixed rates of interest, with staggered maturities. This reduces the exposure to changes in interest rates, which minimizes the effect of interest rate fluctuations on our results of operations and cash flows.
Equity
We had an equity distribution agreement in connection with the 2019 ATM Program through which we could offer and sell common shares having an aggregate gross sales price of up to $150.0 million. Under the 2019 ATM Program, we sold shares having an aggregate sales price of $149.9 million. We replaced the 2019 ATM Program with the 2021 ATM program, through which we may offer and sell common shares having an aggregate sales price of up to $250.0 million, in amounts and at times that we determine. The proceeds from the sale of common shares under the 2021 ATM Program are intended to be used for general corporate purposes, which may include the funding of acquisitions and the repayment of indebtedness. During the year ended December 31, 2021, we issued 1.8 million common shares under the 2019 and 2021 ATM Programs at an average price of $86.13 per share, net of commissions. Total consideration, net of commissions and issuance costs, was approximately $156.4 million. As of December 31, 2021, common shares having an aggregate offering price of up to $158.7 million remained available under the 2021 ATM Program.
On September 1, 2021, we issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83 per unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert.
As of December 31, 2021 and 2020, we had 3.9 million Series C preferred shares outstanding.
Changes in Cash, Cash Equivalents, and Restricted Cash
As of December 31, 2021, we had cash and cash equivalents of $31.3 million and restricted cash consisting of $2.4 million of escrows held by lenders for real estate taxes, insurance, and capital additions and $5.0 million in deposits for real estate acquisitions. As of December 31, 2020, we had cash and cash equivalents of $392,000 and restricted cash consisting of $1.9 million of escrows held by lenders for real estate taxes, insurance, and capital additions and $5.0 million in net tax-deferred exchange proceeds remaining from a portion of our dispositions.
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash which are presented in our consolidated statements of cash flows in Item 15 of this report.
In addition to cash flows from operations, during the year ended December 31, 2021, we generated capital from various activities, including:
•Receipt of $174.5 million, net of fees, from the issuance of unsecured senior notes;
•Receipt of $61.3 million, net of transaction costs, from the sale of five apartment communities in Rochester, Minnesota and a commercial property;
•Receipt of $196.7 million, net of fees, from the Fannie Mae credit facility which was used to pay off debt as partial consideration for the September 1,2021 portfolio acquisition; and
•Receipt of $156.0 million, net of fees, from the issuance of 1.8 million common shares under our 2019 and 2021 ATM Programs.
During the year ended December 31, 2021, we used capital for various activities, including:
•Acquisition of Union Pointe, a 256-home apartment community located in Longmont, Colorado, for an aggregate purchase price of $76.9 million;
•Acquisition of a portfolio of 17 apartment communities located in Minneapolis, Minnesota and St. Cloud, Minnesota, for $15.7 million in cash, the paydown of $106.7 million in existing mortgages, and the remainder through the issuance of Series E preferred units;
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•Funding mezzanine and construction loans of $18.6 million;
•Repaying approximately $36.3 million of mortgage principal;
•Paying off $145.0 million in term loans;
•Paying $3.8 million for the termination of interest rate swaps;
•Paying $76.9 million on our lines of credit;
•Paying distributions on common shares, Series E preferred units, and Units of $43.4 million; and
•Funding capital improvements for apartment communities of approximately $35.9 million.
Contractual Obligations and Other Commitments
Our primary contractual obligations relate to borrowings under our lines of credit, unsecured senior notes, and mortgages payable. The primary line of credit had a $76.0 million balance outstanding at December 31, 2021 and matures in September 2025. Our unsecured senior notes have an aggregate balance of $300.0 million at December 31, 2021 with varying maturities from September 2028 through September 2034.
 (in thousands)
  Less than  More than
 Total1 Year1-3 Years3-5 Years5 Years
Mortgages payable (principal and interest)$590,992 $43,056 $77,269 $105,374 $365,293 
Lines of credit (principal and interest)(1)
$84,665 $2,164 $4,584 77,917 — 
Total$675,657 $45,220 $81,853 $183,291 $365,293 
(1)The future interest payments on the lines of credit were estimated using the outstanding principal balance and interest rate in effect as of December 31, 2021.
We fund capital expenditures, primarily to maintain or renovate our apartment communities. The amounts of these expenditures can vary from year to year depending on the age of the apartment community, timing of planned improvements, and lease turnover.
As of December 31, 2021, we had no significant off-balance-sheet arrangements.
Inflation
Our apartment leases generally have terms of one year or less, which means that, in an inflationary environment, we would have the ability to increase rents upon the commencement of new leases or renewal of existing leases to manage the impact of inflation on our business. However, the cost to operate and maintain communities could increase at a rate greater than our ability to increase rents, which could adversely affect our results of operations. Extreme escalation of costs could have a negative impact on our residents and their ability to absorb rent increases. We also continue to monitor pressures surrounding supply chain challenges. A worsening of the current environment could contribute to delays in obtaining construction materials for maintenance or value add projects and result in higher than anticipated costs, which could prevent us from obtaining expected returns on value add projects.
Critical Accounting Policies

Estimates  

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

Report.

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 propertyasset 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 management. If we do not allocate these costs appropriately or incorrectly estimate the useful lives of our real estate, depreciation expense may be misstated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. We use a 20-4010-37 year estimated life for buildings and improvements and a 5-125-10 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 tentwenty years.

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Acquisition of Investments in Real Estate.Upon acquisitions of real estate, we assess 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 consider whether there were significant intangible assets acquired (for example, above-and below-market leases, the value of acquired in-place leases and tenantresident relationships) and assumed liabilities, and allocate the purchase price based on these assessments. The as-if-vacant value is allocated to land, buildings, and personal property based on management’sour determination of the relative fair value of these assets. 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 a relative fair value allocation if acquired in a merger or in a portfolio acquisition.

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Other intangible assets acquired include amounts for in-place lease values that are based upon our evaluation of the specific characteristics of the leases. Factors considered in the fair value analysis include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, consideration of current market conditions, and costs to execute similar leases. We also consider information about each property obtained during our pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired.

We follow the real estate project costs guidance in ASC 970, Real Estate – General in accounting for the costs of development and re-development projects. As real estate is undergoing development or redevelopment, all project costs directly associated with and attributable to the development and construction of a project, including interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period begins when development activities and expenditures begin and ends upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use upon completion of tenant improvements (in the case of commercial properties) or upon issuance of a certificate of occupancy (in the case of multifamily properties). General and administrative costs are expensed as incurred.

Property sales or dispositions are recorded when title transfers, we receive sufficient consideration and we have no significant continuing involvement with the property sold.

Real Estate Held For Sale.  Properties are classified as held for sale when they meet the necessary criteria, which include: (a) management, having the authority to approve the action, commits to a plan to sell the asset and (b) the sale of the asset is probable and expected to be completed within one year. We generally consider these criteria met when the transaction has been approved by our Board of Directors, there are no known significant contingencies related to the sale and management believes it is probable that the sale will be completed within one year. 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.

Prior to February 1, 2014, we reported in discontinued operations the results of operations and the related gains or losses of properties that had either been disposed of or classified as held for sale and otherwise met the classification of a discontinued operation. Effective February 1, 2014, we adopted Accounting Standards Update (“ASU”) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):  Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this standard, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

As a result of the adoption of ASU No. 2014-08, results of operations and gains or losses on sale for properties that are disposed or classified as held for sale in the ordinary course of business on or subsequent to February 1, 2014 would generally be included in continuing operations on our consolidated statements of operations, to the extent such disposals did not meet the criteria for classification as a discontinued operation described above.

Impairment.  We periodically evaluate our long-lived assets, including our investments in real estate, for impairment indicators. The impairment evaluation is performed on assets by property such that assets for a property form an asset group. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset groupproperty, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the long-lived asset groupproperty against the carrying amount of that asset group.property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, of the asset group, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset group.amount. If our anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

Allowance for Doubtful Accounts. We periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts (approximately $97,000 as of April 30, 2016) for estimated losses resulting from the

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inability of tenants to make required payments under their respective lease agreements. We also maintain an allowance for deferred rents receivable arising from the straight-lining of rents (approximately $333,000 as of April 30, 2016). 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, reported results would be impacted.

Revenue Recognition.  We have 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, we record a receivable from tenants for rents that we expect to collect over the remaining lease term as deferred rents receivable. When we acquire 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 healthcare tenant leases which are contingent upon the gross revenue of the tenant exceeding a defined threshold. These rents are recognized only after the contingency has been removed (i.e., gross revenue 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. We operate in a manner intended to enable us 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. We intend to distribute to our shareholders 100% of our taxable income. Therefore, no provision for Federal income taxes is required. If we fail to distribute the required amount of income to our shareholders, we would fail to qualify as a REIT and substantial adverse tax consequences may result.

We have one TRS, acquired during fiscal year 2014, which is subject to corporate federal and state income taxes on its taxable income at regular statutory rates. For fiscal year 2016, we estimate that the TRS will have no taxable income. There were no income tax provisions or material deferred income tax items for our TRS for the fiscal years ended April 30, 2016, 2015 and 2014. The TRS is the tenant in our Legends at Heritage Place senior housing facility.

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

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 appearing elsewhere in this Annual Report on Form 10-K.

Report.

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Fiscal 2016 Significant Events and Transactions

During fiscal year 2016, we have successfully completed the following significant transactions, including acquisition, development, disposition and financing transactions, and experienced the following significant events:

Implementation of our Strategic Plan:

In January 2015, we announced our strategic plan to explore the possibility of selling substantially all of our office and retail properties during the calendar year of 2015 and directing new investments primarily towards multifamily and healthcare properties. During fiscal year 2016, we sold substantially all of our office and retail properties, consisting of sales of 40 office and 18 retail properties, and we acquired six multifamily properties and one healthcare properties.

Acquisitions, Dispositions, and Development Projects Placed in Service:

During fiscal year 2016, we added approximately 1,517 apartment units to our multifamily portfolio, through our acquisition of six multifamily properties and the placement in service of four multifamily development projects. We sold eight student housing properties, with a total of 391 units, for a net addition to the Company’s multifamily portfolio in fiscal year 2016 of approximately 1,126 apartment units. We also acquired one healthcare property in Omaha, NE, for a purchase price of $6.5 million.

During fiscal year 2016, in addition to the sale of our eight multifamily properties, we sold 63 healthcare, office, retail, industrial and unimproved properties for sales prices totaling $414.1 million. 

On January 29, 2016, we transferred ownership of nine properties to the mortgage lender on a $122.6 million non-recourse loan and removed the debt obligation and accrued interest from our balance sheet. The properties had an estimated fair value of $89.3 million on the transfer date. Upon completion of this transfer, we recognized a gain on extinguishment of debt of $36.5 million, representing the difference between the loan and accrued interest payable extinguished over the carrying value of the properties, cash, accounts payable and accounts receivable transferred as of the transfer date and related closing costs. There can be no assurance that the mortgage lender will not bring a claim against us for the remaining liability.

Share Repurchase Program:

Our Board of Trustees authorized a share repurchase program of up to $50.0 million worth of our common shares over a one year period. Effective September 14, 2015 and December 15, 2015, as part of the implementation of the program, we established written trading plans (“Plans”) that provide for share repurchases in open market transactions for $25.0 million and $10.0 million, respectively, which are intended to comply with Rule 10b5-1 under the Securities Exchange Act. The program does not obligate us to repurchase any specific number of shares and may be suspended at any time in our discretion. During fiscal year 2016, we repurchased approximately 4.6 million common shares on the open market for an aggregate total of approximately $35.0 million.

CommitmentIncrease to Credit Facility:  

Under the terms of the First Amendment to the Amended and Restated Loan Agreement with First International Bank as lead bank, the commitment amount may be increased from $90.0 million up to $100.0 million upon meeting various conditions. During the first quarter of fiscal year 2016, we met such conditions, including providing additional collateral, and the total commitment amount was increased to $100.0 million.

Changes in our Board of Trustees:

On June 23, 2015, Jeffrey P. Caira was appointed as a Trustee of our Board of Trustees. On October 13, 2015, Pamela J. Moret tendered her letter of resignation from our Board of Trustees, and her resignation became effective on December 31, 2015. On April 19, 2016, Michael T. Dance and John A. Schissel were appointed as Trustees of our Board of Trustees.

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Market Conditions and Outlook

The demand for investment and institutional quality real estate in our markets is strong. Investors have abundant equity and access to debt to facilitate acquisitions and developments. Prices and sales volumes are strong. Fundamentals are favorable across property types. The exception for us is in Williston, ND, an energy-impacted market, where we are experiencing very high vacancies and offering rent concessions to attract residents.

Our healthcare segment consists of medical office properties. The same-store healthcare segment remains stable with occupancy at 95.6%. A significant portion of our medical office portfolio is on campus and located in the Minneapolis Metropolitan Statistical Area (“MSA”) which has an 11.4% on campus vacancy rate as of calendar year-end 2015 according to Colliers International. We developed one new medical office building on our Southdale campus in Edina, MN and the property is in lease-up.

We experienced generally stable trends across most of our apartment investments during the fiscal year ended April 30, 2016, except in energy impacted markets. According to AXIOMetris Inc., the national apartment occupancy rate as of April 30, 2016 was 95.1%. Our ability to maintain occupancy levels and raise rents remains dependent on continued healthy employment and wage growth. We continue to observe considerable multifamily development activity in our markets, and as this new construction is completed, we will experience increased competition for residents. However, developers of new apartment projects are pushing up market rents to support the increasing costs of new developments. Many existing apartment owners of modestly older properties are making significant upgrades to their units and raising rents. The economic outlook of the Ninth Federal Reserve District, which overlays most of our geographic footprint, for 2016 is good according to the Federal Reserve Bank of Minneapolis.  Increases in employment and personal income growth are projected. The biggest challenge facing employers is hiring qualified workers. The unemployment rate is generally below the national average in most of the district’s states.

Same-Store and Non-Same-Store Properties

Throughout this Annual Report on Form 10-K, we have provided certain information on a same-store and non-same-store properties basis. Information provided on a same-store properties basis includes the results of properties that we have owned and operated for the entirety of both periods being compared (except for properties for which significant redevelopment or expansion occurred during either of the periods being compared and properties classified as discontinued operations), and which, in the case of development or re-development properties, have achieved a target level of occupancy of 90% for multifamily properties and 85% for commercial properties.

For the comparison of fiscal years 2016 and 2015, all or a portion of 60 properties were non-same-store, of which non-same-store properties 16 were redevelopment or in-service development properties. For the fiscal year 2016 to 2015 comparison, all or a portion of 27 properties were added to non-same-store and all or a portion of 6 properties were moved to same-store compared to the designations for the fiscal year 2015 to 2014 comparison. For the comparison of fiscal years 2015 and 2014, all or a portion of 39 properties were non-same-store, of which non-same-store properties 11 were redevelopment or in-service development properties.

While there are judgments to be made regarding changes in designation, we typically move properties from same-store to non-same-store when redevelopment has or is expected to have a significant impact on property net operating income within the fiscal year. Sold properties and properties designated as held for sale are moved to the non-same store category when so classified, and acquisitions are moved to same-store once we have owned the property for the entirety of comparable periods and the property is not under significant redevelopment or expansion. Our development projects in progress are not included in our non-same-store properties category until they are placed in-service, which occurs upon the substantial completion of a commercial property and when a multifamily development project is tenantable, generally upon receipt of a certificate of occupancy. They are then subsequently moved from non-same-store to same-store when the property has been in-service for the entirety of both periods being compared and has reached the target level of occupancy specified above.

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RESULTS OF OPERATIONS

Consolidated Results of Operations

The discussion that follows is based on our consolidated results of operations for the fiscal years ended April 30, 2016, 2015 and 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended April 30, 

 

2016 vs. 2015

 

2015 vs. 2014

 

 

 

2016

    

2015

    

2014

    

$ Change

    

% Change

    

$ Change

    

% Change

 

Real estate rentals

 

$

170,698

 

$

159,969

 

$

145,028

 

$

10,729

 

6.7

%  

$

14,941

 

10.3

%

Tenant reimbursement

 

 

17,622

 

 

19,352

 

 

19,562

 

 

(1,730)

 

(8.9)

%  

 

(210)

 

(1.1)

%

TOTAL REVENUE

 

 

188,320

 

 

179,321

 

 

164,590

 

 

8,999

 

5.0

%  

 

14,731

 

9.0

%

Property operating expenses, excluding real estate taxes

 

 

58,859

 

 

53,535

 

 

50,552

 

 

5,324

 

9.9

%  

 

2,983

 

5.9

%

Real estate taxes

 

 

20,241

 

 

19,602

 

 

18,704

 

 

639

 

3.3

%  

 

898

 

4.8

%

Depreciation and amortization

 

 

49,832

 

 

42,784

 

 

39,712

 

 

7,048

 

16.5

%  

 

3,072

 

7.7

%

Impairment of real estate investments

 

 

5,543

 

 

4,663

 

 

7,700

 

 

880

 

18.9

%  

 

(3,037)

 

(39.4)

%

General and administrative expenses

 

 

11,267

 

 

11,824

 

 

10,743

 

 

(557)

 

(4.7)

%  

 

1,081

 

10.1

%

Acquisition and investment related costs

 

 

830

 

 

362

 

 

279

 

 

468

 

129.3

%  

 

83

 

29.7

%

Other expenses

 

 

2,231

 

 

1,647

 

 

1,850

 

 

584

 

35.5

%  

 

(203)

 

(11.0)

%

TOTAL EXPENSES

 

 

148,803

 

 

134,417

 

 

129,540

 

 

14,386

 

10.7

%  

 

4,877

 

3.8

%

Gain on involuntary conversion

 

 

 —

 

 

 —

 

 

2,480

 

 

 —

 

 —

%

 

(2,480)

 

(100.0)

%

Operating income

 

 

39,517

 

 

44,904

 

 

37,530

 

 

(5,387)

 

(12.0)

%  

 

7,374

 

19.6

%

Interest expense

 

 

(35,768)

 

 

(34,447)

 

 

(33,729)

 

 

(1,321)

 

3.8

%  

 

(718)

 

2.1

%

Loss on extinguishment of debt

 

 

(106)

 

 

 —

 

 

 —

 

 

(106)

 

 —

%

 

 —

 

 —

%

Interest income

 

 

2,256

 

 

2,238

 

 

1,906

 

 

18

 

0.8

%  

 

332

 

17.4

%

Other income

 

 

317

 

 

718

 

 

242

 

 

(401)

 

(55.8)

%  

 

476

 

196.7

%

Income before gain (loss) from sale of real estate and other investments, gain on bargain purchase and income (loss) from discontinued operations

 

 

6,216

 

 

13,413

 

 

5,949

 

 

(7,197)

 

(53.7)

%  

 

7,464

 

125.5

%

Gain (loss) from sale of real estate and other investments

 

 

9,640

 

 

6,093

 

 

(51)

 

 

3,547

 

58.2

%

 

6,144

 

(12,047.1)

%

Gain on bargain purchase

 

 

3,424

 

 

 —

 

 

 —

 

 

3,424

 

 —

%

 

 —

 

 —

%

Income from continuing operations

 

 

19,280

 

 

19,506

 

 

5,898

 

 

(226)

 

(1.2)

%  

 

13,608

 

230.7

%

Income (loss) from discontinued operations

 

 

57,322

 

 

9,178

 

 

(22,838)

 

 

48,144

 

524.6

%  

 

32,016

 

(140.2)

%

NET INCOME (LOSS)

 

 

76,602

 

 

28,684

 

 

(16,940)

 

 

47,918

 

167.1

%  

 

45,624

 

(269.3)

%

Net (income) loss attributable to noncontrolling interests – Operating Partnership

 

 

(7,032)

 

 

(1,526)

 

 

4,676

 

 

(5,506)

 

360.8

%  

 

(6,202)

 

(132.6)

%

Net loss (income) attributable to noncontrolling interests – consolidated real estate entities

 

 

2,436

 

 

(3,071)

 

 

(910)

 

 

5,507

 

(179.3)

%  

 

(2,161)

 

237.5

%

Net income (loss) attributable to Investors Real Estate Trust

 

 

72,006

 

 

24,087

 

 

(13,174)

 

 

47,919

 

198.9

%  

 

37,261

 

(282.8)

%

Dividends to preferred shareholders

 

 

(11,514)

 

 

(11,514)

 

 

(11,514)

 

 

 —

 

 —

%  

 

 —

 

 —

%

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

 

$

60,492

 

$

12,573

 

$

(24,688)

 

 

47,919

 

381.1

%  

 

37,261

 

(150.9)

%

2016 Annual Report 42

Table of Contents

Revenues.  Total revenues increased by 5.0% to $188.3 million in fiscal year 2016, compared to $179.3 million in fiscal year 2015. Total revenues increased by 9.0% to $179.3 million in fiscal year 2015, compared to $164.6 million in fiscal year 2014. These increases were primarily attributable to the addition of new income-producing real estate properties, net of decreases from sold properties.

For fiscal year 2016, the increase in revenue of $9.0 million resulted from:

(in thousands)

Revenue primarily from properties acquired and development projects placed in service in fiscal year 2016

$

8,791

Increase in revenue primarily from properties acquired and development projects placed in service in fiscal year 2015

7,891

Decrease in revenue from same-store properties, excluding straight line rent(1)

(210)

Net change in straight line rent on same-store properties(1)

(202)

Decrease in revenue from properties sold or classified as held for sale in fiscal years 2016 and 2015

(7,271)

Net increase in total revenue

$

8,999

(1)

See analysis of NOI by segment below for additional information.

For fiscal year 2015, the increase in revenue of $14.7 million resulted from:

(in thousands)

Revenue primarily from properties acquired and development projects placed in service in fiscal year 2015

$

6,616

Increase in revenue primarily from properties acquired and development projects placed in service in fiscal year 2014

6,431

Increase in revenue from same-store properties, excluding straight line rent(1)

4,322

Net change in straight line rent on same-store properties(1)

(765)

Decrease in revenue from properties sold or classified as held for sale in fiscal years 2015 and 2014

(1,873)

Net increase in total revenue

$

14,731

(1)

See analysis of NOI by segment below for additional information.

Property operating expenses, excluding real estate taxes.  Property operating expenses, excluding real estate taxes, increased by 9.9% to $58.9 million in fiscal year 2016 compared to $53.5 million in fiscal year 2015. Of this $5.3 million increase, $4.0 million was attributable to non-same-store properties. Same-store properties accounted for $1.3 million of the increase, which was primarily driven by increased labor costs in certain of our markets and general maintenance expense.

Property operating expenses, excluding real estate taxes, increased by 5.9% to $53.5 million in fiscal 2015 compared to $50.6 million in fiscal year 2014. Of this $3.0 million increase, $2.0 million was attributable to non-same-store properties. Same-store properties accounted for $1.0 million of the increase, which was primarily driven by increased labor costs in certain of our markets and by increased insurance premiums.

Real Estate Taxes.  Real estate taxes increased by 3.3% to $20.2 million in fiscal year 2016 compared to $19.6 million in fiscal year 2015. An increase of $732,000 was attributable to the addition of new income-producing real estate properties, while same-store properties realized a decrease of $93,000 when compared to the same period in the prior year. 

Real estate taxes increased by 4.8% to $19.6 million in fiscal year 2015, compared to $18.7 million in fiscal year 2014. An increase of $40,000 was attributable to the addition of new income-producing real estate properties. An increase of $858,000 was realized at same-store properties compared to the prior year primarily due to increased property valuations in our North Dakota markets. A property tax relief credit was in effect in the State of North Dakota for both periods, but the higher property valuations more than offset the effect of the credit for fiscal year 2015.

2016 Annual Report 43

Table of Contents

Depreciation and Amortization. Depreciation and amortization increased by 16.5% to $49.8 million in fiscal year 2016, compared to $42.8 million in fiscal year 2015. This increase was primarily attributable to the addition of depreciable assets from acquisitions, development projects placed in service, capital improvements and tenant improvements.

Depreciation and amortization related to real estate investments increased by 7.7% to $42.8 million in fiscal year 2015, compared to $39.7 million in fiscal year 2014. This increase was primarily attributable to the addition of depreciable assets from acquisitions, development projects placed in service, capital improvements and tenant improvements.

Impairment of Real Estate Investments.  During fiscal years 2016, 2015 and 2014, we incurred impairment losses of $5.5 million, $4.7 million and $7.7 million, respectively, in continuing operations. See Note 2 to our consolidated financial statements contained in this Annual Report on Form 10-K for additional information.

General and Administrative Expenses.  General and administrative expenses decreased by 4.7% to $11.3 million in fiscal year 2016, compared to $11.8 million in fiscal year 2015, primarily due to a decrease in compensation expense. General and administrative expenses increased by 10.1% to $11.8 million in fiscal year 2015, compared to $10.7 million in fiscal year 2014. This change was primarily due to an increase in share-based compensation expense.

Acquisition and Investment Related Costs.  Acquisition and investment related costs increased to approximately $830,000 in fiscal year 2016 compared to approximately $362,000 in fiscal year 2015, primarily due to increased costs related to development projects we are not pursuing.

Other Expenses.  Other expenses increased 35.5% to $2.2 million in fiscal year 2016, compared to $1.6 million in fiscal year 2015, primarily due to increased legal and consulting expenses.Other expenses decreased 11.0% to $1.6 million in fiscal year 2015, compared to $1.9 million in fiscal year 2014.

Gain on Involuntary Conversion.  No gains on involuntary conversion were recognized during fiscal years 2016 and 2015. During fiscal year 2014, we recognized a gain on involuntary conversion of $2.5 million. See Note 2 to our consolidated financial statements contained in this Annual Report on Form 10-K for additional information.

Interest Expense.  Components of interest expense in fiscal years 2016, 2015 and 2014 were as follows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended April 30, 

 

2016 vs. 2015

 

2015 vs. 2014

 

 

 

2016

 

2015

 

2014

 

$ Change

 

% Change

 

$ Change

 

% Change

 

Mortgage debt

 

$

33,631

    

$

32,382

    

$

33,273

    

$

1,249

    

3.9

    

$

(891)

    

(2.7)

%

Line of credit

 

 

1,629

 

 

2,039

 

 

691

 

 

(410)

 

(20.1)

%  

 

1,348

 

195.1

%

Other

 

 

508

 

 

26

 

 

(235)

 

 

482

 

1,853.8

%  

 

261

 

111.1

%

Total interest expense

 

$

35,768

 

$

34,447

 

$

33,729

 

$

1,321

 

3.8

%  

$

718

 

2.1

%

Mortgage interest increased by 3.9% to $33.6 million in fiscal year 2016, compared to $32.4 million in fiscal year 2015.  Mortgages on non-same-store properties added $3.1 million in fiscal year 2016, while mortgage interest on same-store properties decreased approximately $802,000 compared to fiscal year 2015, primarily due to loan payoffs.

Mortgage interest decreased by 2.7% to $32.4 million in fiscal year 2015, compared to $33.3 million in fiscal year 2014.  Mortgages on non-same-store properties added $1.1 million to our mortgage interest expense in fiscal year 2015, while mortgage interest on same-store properties decreased $1.0 million compared to fiscal year 2014, primarily due to loan payoffs.

Interest expense on our line of credit decreased by 20.1% to $1.6 million in fiscal year 2016, compared to $2.0 million in fiscal year 2015, primarily due to a lower average outstanding balance during fiscal year 2016 compared to the prior year. Interest expense on our line of credit increased by 195.1% to $2.0 million in fiscal year 2015, compared to approximately $691,000 in fiscal year 2014, primarily due to a higher average outstanding balance during fiscal year 2015 compared to the prior year.

Other interest consists of interest on our construction loans, security deposits and special assessments, as well as amortization of loan costs, offset by capitalized construction interest. Other interest increased by 1,853.8% to

2016 Annual Report 44

Table of Contents

approximately $508,000 in fiscal year 2016, compared to approximately $26,000 in fiscal year 2015, primarily due to interest on new construction loans. Other interest increased by 111.1%, or approximately 261,000, in fiscal year 2015 as compared to fiscal year 2014, primarily due to interest on new construction loans net of capitalized interest

Interest Income and Other Income.  We recorded interest income in fiscal years 2016, 2015 and 2014 of $2.3 million, $2.2 million and $1.9 million, respectively. The increase in interest income from fiscal year 2014 to fiscal year 2015 was primarily due to interest earned on a contract for deed that was in place for part of fiscal year 2014 and all of fiscal year 2015.

Other income consists of real estate tax appeal refunds and other miscellaneous income. We earned other income in fiscal years 2016, 2015 and 2014 of approximately $317,000, $718,000 and $242,000, respectively. The higher amount of other income in fiscal year 2015 was primarily due to an increase in real estate tax appeal and other refunds.

Gain on Sale of Real Estate and Other Investments. We recorded gains on sale of real estate and other investments in continuing operations of $9.6 million and $6.1 million in fiscal years 2016 and 2015 and a loss of approximately $51,000 in fiscal year 2014.

Gain on Bargain Purchase.    On March 22, 2016, we acquired a multifamily property in Rochester, MN, which had a fair value at acquisition of approximately $36.3 million, as appraised by a third party. The consideration exchanged for the property consisted of $15.0 million cash and approximately 2.5 million Units, valued at approximately $17.8 million. The fair value of the Units transferred was based on the closing market price of our common stock on the acquisition date of $7.09 per share. The acquisition resulted in a gain on bargain purchase because the fair value of assets acquired exceeded the total of the fair value of the consideration paid by approximately $3.4 million. The seller accepted consideration below the fair value of the property in order to do a partial tax-deferred exchange for Units.

Income from Discontinued Operations.    Prior to February 1, 2014, we reported, in discontinued operations, the results of operations and the related gains or losses of properties that had either been disposed of or classified as held for sale and otherwise met the classification of a discontinued operation. Effective February 1, 2014, we adopted ASU No. 2014-08.  Under this standard, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result of the adoption of ASU No. 2014-08, results of operations and gains or losses on sale for properties that are disposed or classified as held for sale in the ordinary course of business on or subsequent to February 1, 2014 would generally be included in continuing operations on our consolidated statements of operations, to the extent such disposals did not meet the criteria for classification as a discontinued operation.

Income from discontinued operations in fiscal years 2016 and 2015 was $57.3 million and $9.2 million, respectively. Loss from discontinued operations in fiscal year 2014 was $22.8 million. We realized a gain on sale of discontinued operations for fiscal years 2016, 2015 and 2014 of $23.8 million, $0 and $7.0 million, respectively. See Note 12 of the Notes to Consolidated Financial Statements in this report for further information on discontinued operations.

Occupancy

Occupancy as of April 30, 2016 compared to April 30, 2015 decreased 0.3% in our multifamily segment and increased 0.3% in our healthcare segment on a same-store basis. Occupancy represents the actual number of units or square footage leased divided by the total number of units or square footage at the end of the period.

Occupancy Levels on a Same-Store Property and All Property Basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-Store Properties

 

All Properties

 

 

 

As of April 30,

 

As of  April 30,

 

Segments

 

2016

    

2015

    

2014

    

2016

    

2015

    

2014

 

Multifamily

 

94.8

%  

95.1

%  

93.4

%  

90.8

%  

92.0

%  

93.0

%

Healthcare

 

95.6

%  

95.3

%  

92.2

%  

89.4

%  

91.5

%  

92.5

%

2016 Annual Report 45

Table of Contents

Net Operating Income

Net Operating Income (“NOI”) is a non-GAAP measure which we define as total real estate revenues and gain on involuntary conversion less real estate expenses (which consist of utilities, maintenance, real estate taxes, insurance, property management expenses and other property expenses). 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 common shareholders or cash flow from operating activities as a measure of financial performance.

The following tables show real estate revenues, real estate operating expenses, gain on involuntary conversion and NOI by reportable operating segment for fiscal years 2016, 2015 and 2014. For a reconciliation of net operating income of reportable segments to net income as reported, see Note 11 to our consolidated financial statements contained in this Annual Report on Form 10-K.

The tables also show net operating income by reportable operating segment on a same-store property and non-same-store property basis. Same-store properties are properties owned or in service 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 of 90% for multifamily properties and 85% for commercial properties. This comparison allows us to evaluate the performance of existing properties and their contribution to net income. Management believes that measuring performance on a same-store property basis is useful to investors because it enables evaluation of how our 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 same-store properties, since changes from one fiscal year to another in real estate revenue and expenses from non-same-store properties are due to the addition of those properties to our real estate portfolio, and accordingly provide less useful information for evaluating the ongoing operational performance of our real estate portfolio.   

2016 Annual Report 46

Table of Contents

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 years 2016, 2015 and 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended April 30, 

 

 

 

 

 

 

 

 

 

2016 vs 2015

 

 

 

 

 

 

 

 

2015 vs 2014

 

 

 

2016

 

2015

 

$ Change

 

% Change

 

 

2015

 

2014

 

$ Change

 

% Change

 

All Segments

 

 

    

 

 

    

 

 

    

 

    

 

 

 

    

 

 

    

 

 

    

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

153,010

 

$

153,422

 

$

(412)

 

(0.3)

%  

 

$

150,789

 

$

147,232

 

$

3,557

 

2.4

%

Non-same-store(1)(2)

 

 

35,310

 

 

25,899

 

 

9,411

 

36.3

%  

 

 

28,532

 

 

17,358

 

 

11,174

 

64.4

%

Total

 

$

188,320

 

$

179,321

 

$

8,999

 

5.0

%  

 

$

179,321

 

$

164,590

 

$

14,731

 

9.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

63,898

 

$

62,702

 

$

1,196

 

1.9

%  

 

$

62,636

 

$

60,740

 

$

1,896

 

3.1

%

Non-same-store(1)(2)

 

 

15,202

 

 

10,435

 

 

4,767

 

45.7

%  

 

 

10,501

 

 

8,516

 

 

1,985

 

23.3

%

Total

 

$

79,100

 

$

73,137

 

$

5,963

 

8.2

%  

 

$

73,137

 

$

69,256

 

$

3,881

 

5.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on involuntary conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

 —

 

$

 —

 

$

 —

 

 —

%

 

$

 —

 

$

 —

 

$

 —

 

 —

%

Non-same-store(1)(2)

 

 

 —

 

 

 —

 

 

 —

 

 —

%

 

 

 —

 

 

2,480

 

 

(2,480)

 

(100.0)

%

Total

 

$

 —

 

$

 —

 

$

 —

 

 —

%

 

$

 —

 

$

2,480

 

$

(2,480)

 

(100.0)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

89,112

 

$

90,720

 

$

(1,608)

 

(1.8)

%  

 

$

88,153

 

$

86,492

 

$

1,661

 

1.9

%

Non-same-store(1)(2)

 

 

20,108

 

 

15,464

 

 

4,644

 

30.0

%  

 

 

18,031

 

 

11,322

 

 

6,709

 

59.3

%

Total

 

$

109,220

 

$

106,184

 

$

3,036

 

2.9

%  

 

$

106,184

 

$

97,814

 

$

8,370

 

8.6

%

Depreciation/amortization

 

 

(49,832)

 

 

(42,784)

 

 

 

 

 

 

 

 

(42,784)

 

 

(39,712)

 

 

 

 

 

 

Impairment of real estate investments

 

 

(5,543)

 

 

(4,663)

 

 

 

 

 

 

 

 

(4,663)

 

 

(7,700)

 

 

 

 

 

 

General and administrative expenses

 

 

(11,267)

 

 

(11,824)

 

 

 

 

 

 

 

 

(11,824)

 

 

(10,743)

 

 

 

 

 

 

Acquisition and investment related costs

 

 

(830)

 

 

(362)

 

 

 

 

 

 

 

 

(362)

 

 

(279)

 

 

 

 

 

 

Other expenses

 

 

(2,231)

 

 

(1,647)

 

 

 

 

 

 

 

 

(1,647)

 

 

(1,850)

 

 

 

 

 

 

Interest expense

 

 

(35,768)

 

 

(34,447)

 

 

 

 

 

 

 

 

(34,447)

 

 

(33,729)

 

 

 

 

 

 

Loss on debt extinguishment

 

 

(106)

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

 —

 

 

 

 

 

 

Interest and other income

 

 

2,573

 

 

2,956

 

 

 

 

 

 

 

 

2,956

 

 

2,148

 

 

 

 

 

 

Income (loss) before gain (loss) on sale of real estate and other investments and income from discontinued operations

 

 

6,216

 

 

13,413

 

 

 

 

 

 

 

 

13,413

 

 

5,949

 

 

 

 

 

 

Gain (loss) on sale of real estate and other investments

 

 

9,640

 

 

6,093

 

 

 

 

 

 

 

 

6,093

 

 

(51)

 

 

 

 

 

 

Gain on bargain purchase

 

 

3,424

 

 

 —

 

 

 

 

 

 

 

 

 —

 

 

 —

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

19,280

 

 

19,506

 

 

 

 

 

 

 

 

19,506

 

 

5,898

 

 

 

 

 

 

Income from discontinued operations(3)

 

 

57,322

 

 

9,178

 

 

 

 

 

 

 

 

9,178

 

 

(22,838)

 

 

 

 

 

 

Net income (loss)

 

$

76,602

 

$

28,684

 

 

 

 

 

 

 

$

28,684

 

$

(16,940)

 

 

 

 

 

 

(1)

Non-same-store properties consist of the following properties for the comparative periods of fiscal years 2016 and 2015 (re-development and in-service development properties are listed in bold type):

Held for Investment -

Multifamily  -

71 France, Edina, MN; Arcata, Golden Valley, MN; Avalon Cove, Rochester, MN; Cardinal Point, Grand Forks, ND; Cascade Shores, Rochester, MN; Chateau II, Minot, ND; Colonial Villa, Burnsville, MN;  Commons at Southgate, Minot, ND; Crystal Bay, Rochester, MN; Cypress Court I and II, St. Cloud, MN;  Dakota Commons, Williston, ND;  Deer Ridge, Jamestown, ND; French Creek, Rochester, MN; Gardens, Grand Forks, ND; GrandeVille at Cascade Lake, Rochester, MN; Homestead Garden, Rapid City, SD;  Legacy Heights, Bismarck, ND; Northridge, Bismarck, ND; Red 20, Minneapolis, MN;  Renaissance Heights, Williston, ND and Silver Springs, Rapid City, SD.

Total number of units, 3,097.

Healthcare  -

Edina 6565 France SMC III, Edina, MN; Lakeside Medical Plaza, Omaha, NE and PrairieCare Medical, Brooklyn Park, MN.

Total rentable square footage, 156,199.

Other  -

Minot Southgate Retail, Minot, ND; Minot Southgate Wells Fargo Bank, Minot, ND and Roseville 3075 Long Lake Road, Roseville, MN.

Total rentable square footage, 233,518.

2016 Annual Report 47

Table of Contents

Held for Sale -

Multifamily  -

Pinecone Villas, Sartell, MN.

Total number of units, 24.

Healthcare  -

Sartell 2000 23rd St, Sartell, MN.

Total rentable square footage, 59,760.

Other  -

Stone Container, Fargo, ND.

Total rentable square footage, 195,075.

Total NOI for held for sale properties for the twelve months ended April 30, 2016 and 2015, respectively, $776 and $830.

Sold -

Multifamily  -

Campus Center, St. Cloud, MN; Campus Heights, St. Cloud, MN; Campus Knoll, St. Cloud, MN; Campus Plaza, St. Cloud, MN; Campus Side, St. Cloud, MN; Campus View, St. Cloud, MN; Cornerstone, St. Cloud, MN; Lancaster, St. Cloud, MN and University Park Place, St. Cloud, MN.

Healthcare  -

Jamestown Medical Office Building, Jamestown, ND and Nebraska Orthopaedic Hospital, Omaha, NE.

Other  -

2030 Cliff Road, Eagan, MN; Burnsville Bluffs II, Burnsville, MN; Dewey Hill Business Center, Edina, MN; Eagan 2785 & 2795 Hwy 55, Eagan, MN; Fargo Express Community, Fargo, ND; Kalispell Retail Center, Kalispell, MT; Minot Arrowhead First International, Minot, ND; Minot Plaza, Minot, ND; Northgate I, Maple Grove, MN; Northgate II, Maple Grove, MN; Plymouth I, Plymouth, MN; Plymouth II, Plymouth, MN; Plymouth III, Plymouth, MN; Plymouth IV-V, Plymouth, MN; Southeast Tech, Eagan, MN; Thresher Square, Minneapolis, MN; Weston Retail and Walgreens, Weston, WI; Whitewater Plaza, Minnetonka, MN and Wirth Corporate Center, Golden Valley, MN.

Total NOI for sold properties for the twelve months ended April 30, 2016 and 2015, respectively, $2,403 and $6,308.

(2)

Non-same-store properties consist of the following properties for the comparative periods of fiscal years 2015 and 2014 (re-development and in-service development properties are listed in bold type):

Held for Investment -

Multifamily  -

Arcata, Golden Valley, MN; Colonial Villa, Burnsville, MN;  Commons at Southgate, Minot, ND;  Cypress Court I and II, St. Cloud, MN;  Dakota Commons, Williston, ND; Homestead Garden, Rapid City, SD; Landing at Southgate, Minot, ND; Legacy Heights, Bismarck, ND; Northridge, Bismarck, ND; Pinecone Villas, Sartell, MN; Red 20, Minneapolis, MN;  Renaissance Heights, Williston, ND;River Ridge, Bismarck, ND; Silver Springs, Rapid City, SD and Southpoint, Grand Forks, ND.

Total number of units, 1,949.

Other -

Minot Southgate Wells Fargo Bank, Minot, ND and Roseville 3075 Long Lake Road, Roseville, MN.

Total rentable square footage, 225,555.

Held for Sale -

Healthcare  -

Nebraska Orthopaedic Hospital, Omaha, NE.

Total rentable square footage, 61,758.

Other  -

Thresher Square, Minneapolis, MN.

Total rentable square footage, 117,144.

Total NOI for held for sale properties for the twelve months ended April 30, 2015 and 2014, respectively, $1,945 and $1,931.

Sold -

Multifamily -

Lancaster, St. Cloud, MN.

Healthcare  -

Jamestown Medical Office Building, Jamestown, ND.

Other  -

2030 Cliff Road, Eagan, MN; Burnsville Bluffs II, Burnsville, MN; Dewey Hill Business Center, Edina, MN; Eagan 2785 & 2795 Hwy 55, Eagan, MN; Fargo Express Community, Fargo, ND; Kalispell Retail Center, Kalispell, MT; Northgate I, Maple Grove, MN; Northgate II, Maple Grove, MN; Plymouth I, Plymouth, MN; Plymouth II, Plymouth, MN; Plymouth III, Plymouth, MN; Plymouth IV-V, Plymouth, MN; Southeast Tech, Eagan, MN; Weston Retail and Walgreens, Weston, WI; Whitewater Plaza, Minnetonka, MN and Wirth Corporate Center, Golden Valley, MN.

Total NOI for sold properties for the twelve months ended April 30, 2015 and 2014, respectively, $3,724 and $3,904.

(3)

Discontinued operations include gain on disposals and income from operations for:

Held for Sale at April 30, 2016:  Casper 1930 E 12th St, Casper 3955 E 12th St, Cheyenne 4010 N College Dr, Cheyenne 4606 N College Dr, Edgewood Vista (“EV”) Belgrade, EV Billings, EV Bismarck, EV Brainerd, EV Columbus, EV East Grand Forks, EV Fargo, EV Fremont, EV Grand Island, EV Hastings, EV Hermantown I and II, EV Kalispell, EV Minot, EV Missoula, EV Norfolk, EV Omaha, EV Sioux Falls, EV Spearfish, EV Virginia, Laramie 1072 N 22nd St, Legends at Heritage Place, Spring Creek (“SC”) American Falls, SC Boise, SC Eagle, SC Fruitland, SC Meridian, SC Overland, SC Soda Springs and SC Ustick.

2016 Dispositions:  610 Business Center, 7800 West Brown Deer Road, American Corporate Center, Ameritrade, Barry Pointe Office Park, Benton Business Park, Brenwood, Brook Valley I, Burnsville Strip Center, Champlin South Pond, Chan West Village, Corporate Center West, Crosstown Centre, Duluth 4615 Grand, Duluth Denfeld Retail, Eden Prairie 6101 Blue Circle Drive, Farnam Executive Center, Flagship Corporate Center, Forest Lake Auto, Forest Lake Westlake Center, Gateway Corporate Center, Golden Hills Office Center, Grand Forks Medpark Mall, Granite Corporate Center, Great Plains, Highlands Ranch I and II, Interlachen Corporate Center, Intertech Building, Jamestown Buffalo Mall, Jamestown Business Center, Lakeville Strip Center, Mendota Office Center I-IV, Minnesota National Bank, Miracle Hills One,  Monticello C-Store, Northpark Corporate Center, Omaha 10802 Farnam Dr, Omaha Barnes & Noble, Pacific Hills, Pine City C-Store, Pine City Evergreen Square, Plaza VII, Plymouth 5095 Nathan Lane, Prairie Oak Business Center, Rapid City 900 Concourse Drive, Riverport, Rochester Maplewood Square, Spring Valley IV, V, X and XI, St. Cloud Westgate, Superior Office Building, TCA Building, Three Paramount Plaza, Timberlands, UHC Office, US Bank Financial Center, Wells Fargo Center, West River Business Park, Westgate and Woodlands Plaza IV.

2016 Annual Report 48

Table of Contents

An analysis of NOI by segment follows.

Multifamily

Real estate revenue from same-store properties in our multifamily segment decreased by 0.5% or $544,000 in the twelve months ended April 30, 2016 compared to the same period in the prior fiscal year. A decrease of $913,000 was attributable to increased vacancy, primarily in our energy impacted markets of Williston, North Dakota and Minot, North Dakota. This decrease in revenue was offset by an increase of $332,000 that was the result of a ratio utility billings system implemented in the current year to recapture tenant utility expenses. All other real estate revenue items combined increased by $37,000.

Real estate expenses at same-store properties increased by 5.3% or $2.4 million in the twelve months ended April 30, 2016 compared to the same period in the prior fiscal year. The primary factors were increased administrative expenses of $1.9 million and increased maintenance expenses of $987,000. These increases were offset by a decrease in insurance expenses of $611,000 while all other expenses combined increased by $132,000 when compared to the prior year. The increase in administrative expenses was due to increased internal property management and labor costs while the increase in maintenance expenses was due to more general maintenance items being completed when compared to the prior year. The decrease in insurance expenses was due to a decrease in insurance premiums as well as a decrease in deductibles paid on insurance claims.

Real estate revenue from same-store properties in our multifamily segment increased by 3.4% or $3.2 million in the twelve months ended April 30, 2015 compared to the same period in the prior fiscal year. The ability to raise rents, which was the result of continued levels of high occupancy, accounted for an increase of $2.7 million while an increase of $311,000 was attributable to increased occupancy. Other fee items combined increased by $196,000.

Real estate expenses at same-store properties increased by 2.9% or $1.2 million in the twelve months ended April 30, 2015 compared to the same period in the prior fiscal year. The primary factors were increased real estate taxes of $880,000 and increased insurance expenses of $476,000. These increases were offset by a decrease in utilities expense of $580,000, while all other expenses combined increased by $463,000 when compared to the prior year. The increase in real estate taxes was primarily attributable to increased property valuations in our North Dakota markets. A property tax relief credit was in effect in the State of North Dakota both periods, but the higher property valuations more than offset the effect of the credit for fiscal year 2015. Insurance premium rates at same-store properties decreased, but total insurance premium costs rose due to an increase in insured values compared to the prior fiscal year. The decrease in utility costs was attributable to a decrease in utility rates and the effects of a milder weather on heating costs.

2016 Annual Report 49

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended April 30

 

 

 

 

 

 

 

 

 

2016 vs 2015

 

 

 

 

 

 

 

 

2015 vs 2014

 

 

 

2016

 

2015

 

$ Change

 

% Change

 

 

2015

 

2014

 

$ Change

 

% Change

 

Multifamily

 

 

    

    

 

    

    

 

    

    

    

    

 

 

    

    

 

    

    

 

    

    

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

102,694

 

$

103,238

 

$

(544)

 

(0.5)

%  

 

$

99,072

 

$

95,831

 

$

3,241

 

3.4

%

Non-same-store

 

 

28,455

 

 

15,288

 

 

13,167

 

86.1

%  

 

 

19,454

 

 

6,228

 

 

13,226

 

212.4

%

Total

 

$

131,149

 

$

118,526

 

$

12,623

 

10.6

%  

 

$

118,526

 

$

102,059

 

$

16,467

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

47,186

 

$

44,794

 

$

2,392

 

5.3

%  

 

$

44,140

 

$

42,901

 

$

1,239

 

2.9

%

Non-same-store

 

 

13,291

 

 

6,378

 

 

6,913

 

108.4

%  

 

 

7,032

 

 

3,237

 

 

3,795

 

117.2

%

Total

 

$

60,477

 

$

51,172

 

$

9,305

 

18.2

%  

 

$

51,172

 

$

46,138

 

$

5,034

 

10.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on involuntary conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

 —

 

$

 —

 

$

 —

 

 —

%

 

$

 —

 

$

 —

 

$

 —

 

 —

%

Non-same-store

 

 

 —

 

 

 —

 

 

 —

 

 —

%

 

 

 —

 

 

2,480

 

 

(2,480)

 

(100.0)

%

Total

 

$

 —

 

$

 —

 

$

 —

 

 —

%

 

$

 —

 

$

2,480

 

$

(2,480)

 

(100.0)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

55,508

 

$

58,444

 

$

(2,936)

 

(5.0)

%  

 

$

54,932

 

$

52,930

 

$

2,002

 

3.8

%

Non-same-store

 

 

15,164

 

 

8,910

 

 

6,254

 

70.2

%  

 

 

12,422

 

 

5,471

 

 

6,951

 

127.1

%

Total

 

$

70,672

 

$

67,354

 

$

3,318

 

4.9

%  

 

$

67,354

 

$

58,401

 

$

8,953

 

15.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Occupancy

 

 

2016

 

    

2015

    

 

 

 

 

 

 

 

2015

 

 

2014

 

 

 

 

 

 

Same-store

 

 

94.8

%  

 

95.1

%  

 

 

 

 

 

 

 

94.7

%  

 

93.4

%

 

 

 

 

 

Non-same-store

 

 

78.4

%  

 

77.1

%  

 

 

 

 

 

 

 

78.6

%  

 

87.4

%

 

 

 

 

 

Total

 

 

90.8

%  

 

92.0

%  

 

 

 

 

 

 

 

92.0

%  

 

93.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Units

 

 

2016

 

    

2015

    

 

 

 

 

 

 

 

2015

 

 

2014

 

 

 

 

 

 

Same-store

 

 

9,853

 

 

9,854

 

 

 

 

 

 

 

 

9,895

 

 

9,896

 

 

 

 

 

 

Non-same-store

 

 

3,121

 

 

1,990

 

 

 

 

 

 

 

 

1,949

 

 

883

 

 

 

 

 

 

Total

 

 

12,974

 

 

11,844

 

 

 

 

 

 

 

 

11,844

 

 

10,779

 

 

 

 

 

 

Healthcare

Real estate revenue from same-store properties in our healthcare segment decreased by 0.4% or $170,000 in the twelve months ended April 30, 2016 compared to the same period in the prior fiscal year. The decrease in revenue was attributable to a decrease in the straight-line rent receivable of $356,000. This decrease was offset by an increase in tenant reimbursements of $200,000 while all other real estate revenue items combined decreased by $14,000.

Real estate expense from same-store properties decreased by 4.4% or $668,000 in the twelve months ended April 30, 2016 when compared to the same period of the prior fiscal year. The primary factors were decreases in other property expenses of $392,000 and real estate taxes of $248,000. The decrease in other property expenses, consisting of bad debt provision expenses, was due to a decrease in the estimated uncollectible accounts receivable. All other real estate expenses combined decreased by $28,000.

Real estate revenue from same-store properties in our healthcare segment increased by 0.7% or $297,000 in the twelve months ended April 30, 2015 compared to the same period in the prior fiscal year. Tenant reimbursements increased by $349,000 while all other real estate revenue items combined decreased by $52,000.

Real estate expenses from same-store properties decreased by 0.4% or $61,000 in the twelve months ended April 30, 2015 when compared to the same period from the prior fiscal year. The decrease in expenses was due to a decrease in utilities expense of $52,000 which resulted from a decrease in utility rates and a decrease in real estate taxes of $49,000. All other real estate expenses combined increased by $40,000.

2016 Annual Report 50

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended April 30

 

 

 

 

 

 

 

 

 

2016 vs 2015

 

 

 

 

 

 

 

 

2015 vs 2014

 

 

 

2016

 

2015

 

$ Change

 

% Change

 

 

2015

 

2014

 

$ Change

 

% Change

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

40,715

 

$

40,885

 

$

(170)

 

(0.4)

%  

 

$

41,047

 

$

40,750

 

$

297

 

0.7

%

Non-same-store

 

 

4,906

 

 

3,268

 

 

1,638

 

50.1

%  

 

 

3,106

 

 

3,348

 

 

(242)

 

(7.2)

%

Total

 

$

45,621

 

$

44,153

 

$

1,468

 

3.3

%  

 

$

44,153

 

$

44,098

 

$

55

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

14,541

 

$

15,209

 

$

(668)

 

(4.4)

%  

 

$

15,728

 

$

15,789

 

$

(61)

 

(0.4)

%

Non-same-store

 

 

1,480

 

 

1,031

 

 

449

 

43.5

%  

 

 

512

 

 

562

 

 

(50)

 

(8.9)

%

Total

 

$

16,021

 

$

16,240

 

$

(219)

 

(1.3)

%  

 

$

16,240

 

$

16,351

 

$

(111)

 

(0.7)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store

 

$

(26,174)

 

$

(25,676)

 

$

(498)

 

1.9

%  

 

$

(25,319)

 

$

(24,961)

 

$

(358)

 

1.4

%

Non-same-store

 

 

(3,426)

 

 

(2,237)

 

 

(1,189)

 

53.2

%  

 

 

(2,594)

 

 

(2,786)

 

 

192

 

(6.9)

%

Total

 

$

(29,600)

 

$

(27,913)

 

$

(1,687)

 

6.0

%  

 

$

(27,913)

 

$

(27,747)

 

$

(166)

 

0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Occupancy

 

 

2016

 

    

2015

    

 

 

 

 

 

 

 

2015

 

 

2014

 

 

 

 

 

 

Same-store

 

 

95.6

%  

 

95.3

%  

 

 

 

 

 

 

 

91.1

%  

 

92.2

%

 

 

 

 

 

Non-same-store

 

 

52.2

%  

 

50.8

%  

 

 

 

 

 

 

 

100.0

%  

 

96.5

%

 

 

 

 

 

Total

 

 

89.4

%  

 

91.5

%  

 

 

 

 

 

 

 

91.5

%  

 

92.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rentable Square Footage

 

 

2016

 

    

2015

    

 

 

 

 

 

 

 

2015

 

 

2014

 

 

 

 

 

 

Same-store

 

 

1,289,180

 

 

1,289,209

 

 

 

 

 

 

 

 

1,348,969

 

 

1,349,087

 

 

 

 

 

 

Non-same-store

 

 

215,959

 

 

121,518

 

 

 

 

 

 

 

 

61,758

 

 

106,980

 

 

 

 

 

 

Total

 

 

1,505,139

 

 

1,410,727

 

 

 

 

 

 

 

 

1,410,727

 

 

1,456,067

 

 

 

 

 

 

Comparison of Results from Multifamily, Healthcare and Other Properties

The following table presents an analysis of the relative investment in (corresponding to “Property owned” on the balance sheet, i.e., cost), and net operating income of, our properties over the past three fiscal years:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

 

Fiscal Years Ended April 30

 

2016

 

%

 

2015

 

%

 

2014

 

%

 

Real Estate Investments – (cost before depreciation)

    

 

    

    

    

    

 

    

    

    

    

 

    

    

    

 

Multifamily

 

$

1,243,909

 

74.0

%  

$

946,520

 

70.9

%  

$

753,731

 

60.7

%

Healthcare

 

 

337,920

 

20.1

%  

 

284,342

 

21.3

%  

 

313,114

 

25.2

%

Other

 

 

99,642

 

5.9

%  

 

104,825

 

7.8

%  

 

174,350

 

14.1

%

Total

 

$

1,681,471

 

100.0

%  

$

1,335,687

 

100.0

%  

$

1,241,195

 

100.0

%

Net Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

$

70,672

 

64.7

%  

$

67,354

 

63.4

%  

$

58,401

 

59.7

%

Healthcare

 

 

29,600

 

27.1

%  

 

27,913

 

26.3

%  

 

27,747

 

28.4

%

Other

 

 

8,948

 

8.2

%  

 

10,917

 

10.3

%  

$

11,666

 

11.9

%

Total

 

$

109,220

 

100.0

%  

$

106,184

 

100.0

%  

$

97,814

 

100.0

%

2016 Annual Report 51

Table of Contents

Analysis of Commercial Credit Risk and Leases

Credit Risk

The following table lists our top ten commercial tenants on April 30, 2016, for all commercial properties owned by us, including those held for sale, measured by percentage of total commercial minimum rents as of April 1, 2016. Our results of operations are dependent on, among other factors, the economic health of our tenants. We attempt to mitigate tenant credit risk by working to secure creditworthy tenants that meet our underwriting criteria and monitoring our portfolio to identify potential problem tenants. We believe that our credit risk is also mitigated by the fact that no individual tenant accounts for more than approximately 10% of our total real estate rentals, although affiliated entities of Edgewood Vista together accounted for approximately 28.4% of our total commercial minimum rents as of April 1, 2016.

As of April 30, 2016, 16 of our 47 commercial properties held for investment, along with our held for sale properties including all 20 of our Edgewood Vista properties, all 8 of our Idaho Spring Creek senior housing properties, and all 5 of our Wyoming senior housing properties, were leased under triple net leases under which the tenant pays a monthly lump sum base rent as well as all costs associated with the property, including property taxes, insurance, replacement, repair or restoration, in addition to maintenance. The failure by any of our triple net tenants to effectively conduct their operations or to maintain and improve our properties in accordance with the terms of their respective triple net leases could adversely affect their business reputations and ability to attract and retain residents and customers to our properties, which could have an indirect adverse effect on us.

We regularly monitor the relative credit risk of our significant tenants, including our triple net tenants. The metrics we use to evaluate a significant tenant’s liquidity and creditworthiness depend on facts and circumstances specific to that tenant and to the industry in which it operates, and include the tenant’s credit history and economic conditions related to the tenant, its operations and the markets in which it operates, that may change over time. Prior to signing a lease with a tenant, we generally assess the prospective tenant’s credit quality through a review of its financial statements and tax returns, and the result of that review is a factor in establishing the rent to be charged (e.g., higher risk tenants will be charged higher rent). Over the course of a lease, our property management and asset management personnel have regular contact with tenants and tenant employees, and, where the terms of the lease permit, receive tenant financial information for periodic review, or review publicly-available financial statements, in the case of public company tenants or non-profit entities, such as hospital systems, whose financial statements are required to be filed with state agencies. Through these means we monitor tenant credit quality.

% of Total Commercial

Minimum Rents

Lessee

 as of April 1, 2016

Affiliates of Edgewood Vista

28.4

%

Fairview Health Services

7.2

%

St. Lukes Hospital of Duluth, Inc.

6.3

%

PrairieCare Medical LLC

4.3

%

HealthEast Care System

3.4

%

Quality Manufacturing Corp

2.0

%

Westrock CP LLC

1.8

%

Allina Health

1.6

%

Children's Hospitals & Clinics

1.6

%

Noran Neurological Clinic

1.4

%

All Others

42.0

%

Total Monthly Commercial Rent as of April 1, 2016

100.0

%

Healthcare Leasing Activity

During fiscal year 2016, we executed new and renewal leases for our same-store healthcare properties on 201,989 square feet. Due to our leasing efforts, occupancy in our same-store healthcare portfolio increased to 95.6% as of April 30, 2016, up from 95.3% as of April 30, 2015. 

2016 Annual Report 52

Table of Contents

The total leasing activity for our same-store healthcare properties, expressed in square feet of leases signed during the period, and the resulting occupancy levels are as follows for the years ended April 30, 2016 and 2015 respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

Square Feet of

 

Square Feet of

 

Square Feet of

 

 

 

 

 

 

 

New Leases(1)

 

Leases Renewed(1)

 

Leases Executed(1)

 

Occupancy

 

Segment

    

2016

    

2015

    

2016

    

2015

    

2016

    

2015

    

2016

    

2015

 

Healthcare

 

45,446

 

21,153

 

156,543

 

109,661

 

201,989

 

130,814

 

95.6

%  

95.3

 

(1)

The leasing activity presented is based on leases signed or executed for our same-store rental properties during the period and is not intended to coincide with the commencement of rental revenue in accordance with GAAP. Prior periods reflect amounts previously reported and exclude retroactive adjustments for properties reclassified to discontinued operations or non-same-store in the current period.

New Leases

The following table sets forth the average effective rents and the estimated costs of tenant improvements and leasing commissions, on a per square foot basis, that we are obligated to fulfill under the new leases signed for our same-store healthcare properties during the years ended April 30, 2016 and 2015, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated Tenant

 

Leasing

 

 

 

Square Feet of

 

Average Term

 

Average

 

Improvement Cost

 

Commissions per

 

 

 

New Leases(1)

 

in Years

 

Effective Rent(2)

 

per Square Foot(1)

 

Square Foot(1)

 

Segment

    

2016

    

2015

    

2016

    

2015

    

2016

    

2015

    

2016

    

2015

    

2016

    

2015

 

Healthcare

    

45,446

    

21,153

    

6.6

    

5.4

    

19.97

    

17.57

    

12.99

    

31.58

    

3.24

    

5.81

 

(1)

The leasing activity presented is based on leases signed or executed for our same-store rental properties during the period and is not intended to coincide with the commencement of rental revenue in accordance with GAAP. Prior periods reflect amounts previously reported and exclude retroactive adjustments for properties reclassified to discontinued operations or non-same-store in the current period. Tenant improvements and leasing commissions presented are based on square feet leased during the period. 

(2)

Effective rents represent average annual base rental payments, on a straight-line basis for the term of each lease, excluding operating expense reimbursements. The underlying leases contain various expense structures including gross, modified gross, net and triple net.

Our ability to maintain or increase occupancy rates is a principal driver of maintaining and increasing the average effective rents in our healthcare segment. The increase in the average effective rental rates of new leases executed in our healthcare segment in fiscal year 2016 when compared to new leases executed in the prior year is due to the signing of a 3,174 square foot lease for storage space at our St. Paul, Minnesota Ritchie Medical Plaza property for $3.78 per square foot in fiscal year 2015. Absent this transaction, the average effective rental rate for leases executed in our healthcare segment in fiscal year 2015 would have been $20.00 per square foot.

Lease Renewals

The following table summarizes our lease renewal activity within our same-store healthcare segment for the years ended April 30, 2016 and 2015, respectively (square feet data in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated 

 

 

 

 

 

 

 

 

   

 

    

 

    

 

    

 

    

 

    

Weighted Average

    

Tenant Improvement

    

Leasing

 

 

 

Square Feet of

 

Percent of Expiring

 

Average Term

 

Growth (Decline)

 

Cost per Square

 

Commissions per

 

 

 

Leases Renewed(1)

 

Leases Renewed(2)

 

in Years

 

 in Effective Rents(3)

 

Foot(1)

 

Square Foot(1)

 

Segment

  

2016

 

2015

 

2016

    

2015

    

2016

 

2015

 

2016

 

2015

 

2016

    

2015

    

2016

    

2015

 

Healthcare

 

156,543

 

109,661

 

92.2

%  

73.2

%  

4.7

 

5.8

 

5.7

 

(3.5)

 

9.40

 

10.87

 

2.65

 

1.56

 

(1)

The leasing activity presented is based on leases signed or executed for our same-store rental properties during the period and is not intended to coincide with the commencement of rental revenue in accordance with GAAP.  Prior periods reflect amounts previously reported and exclude retroactive adjustments for properties reclassified to discontinued operations or non-same-store in the current period. Tenant improvements and leasing commissions are based on square feet leased during the period.    

(2)

Renewal percentage of expiring leases is based on square footage of renewed leases and not the number of leases renewed. Beginning in the first quarter of fiscal year 2015, the category of renewed leases does not include leases that have become month-to-month leases; these month-to-month leases are considered lease amendments.  Previous-period data has been revised to reflect this change.

(3)

Represents the percentage change in effective rent between the original leases and the renewal leases. Effective rents represent average annual base rental payments, on a straight-line basis for the term of each lease, excluding operating expense reimbursements. The underlying leases contain various expense structures including gross, modified gross, net and triple net.

2016 Annual Report 53

Table of Contents

The increase in the average growth in effective rents for the healthcare segment in fiscal year 2016 when compared to the prior fiscal year is due to a 45,081 square foot lease renewal executed with the existing single tenant at our Pavilion I property in Duluth, Minnesota in fiscal year 2015. This lease was renewed at a lower rate than the previous expiring lease due to very low leasing transaction costs associated with the lease renewal. Absent this transaction, the weighted average growth rate in effective rents for fiscal year 2015 would have been 3.8%

Lease Expirations

Our ability to maintain and improve occupancy rates and base rents primarily depends upon our continuing ability to re-lease expiring space. The following table reflects the in-service portfolio lease expiration schedule of our healthcare properties held for investment, including square footage and annualized base rent for expiring leases, as of April 30, 2016. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of Total

 

 

 

 

 

 

 

Percentage of Total

 

Annualized Base 

 

Commercial

 

Fiscal Year of Lease

 

 

 

Square Footage of

 

Commercial Segments

 

Rent of Expiring 

 

Segments

 

Expiration

    

# of Leases

    

 Expiring Leases(3)

    

Leased Square Footage

    

Leases at Expiration(2)

    

Annualized Base Rent

 

2017⁽¹⁾

 

42

 

128,903

 

9.6

%  

$

2,489,085

 

8.4

%

2018

 

19

 

179,143

 

13.3

%  

 

4,400,887

 

15.0

%

2019

 

17

 

206,208

 

15.3

%  

 

4,159,949

 

14.2

%

2020

 

13

 

68,513

 

5.1

%  

 

1,426,988

 

4.9

%

2021

 

22

 

109,019

 

8.1

%  

 

2,310,744

 

7.9

%

2022

 

13

 

67,243

 

5.0

%  

 

1,223,686

 

4.2

%

2023

 

11

 

52,511

 

3.9

%  

 

847,350

 

2.9

%

2024

 

25

 

154,575

 

11.5

%  

 

3,562,151

 

12.2

%

2025

 

5

 

76,691

 

5.7

%  

 

1,661,344

 

5.7

%

2026

 

8

 

99,024

 

7.4

%  

 

1,716,891

 

5.9

%

Thereafter

 

14

 

202,534

 

15.1

%  

 

5,476,247

 

18.7

%

Totals

 

189

 

1,344,364

 

100.0

%  

$

29,275,322

 

100.0

%

(1)

Includes month-to-month leases. As of April 30, 2016, month-to-month leases accounted for 20,687 square feet.

(2)

Annualized Base Rent is monthly scheduled rent as of April 1, 2016 multiplied by 12.

(3)

Assuming that none of the tenants exercise renewal or termination options, and including leases renewed prior to expiration. Also excludes 1,361 square feet of space occupied by us.

Because of the dispersed locations of a substantial portion of the portfolio’s properties in secondary and tertiary markets, information on current market rents is difficult to obtain, is highly subjective and is often not directly comparable between properties. As a result, we believe that the increase or decrease in effective rent on our recent leases is the most objective and meaningful information available regarding rent trends and the relationship between rents on leases expiring in the near-term and current market rents across our markets. We believe that rents on our new and renewed leases generally approximate market rents.

2016 Annual Report 54

Table of Contents

Property Acquisitions

IRET Properties added approximately $143.5 million of real estate properties to its portfolio through property acquisitions during fiscal year 2016, compared to $56.3 million in fiscal year 2015. The fiscal year 2016 and 2015 acquisitions are detailed below.

Fiscal 2016 (May 1, 2015 to April 30, 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

Total

 

 

Form of Consideration

 

 

Investment Allocation

 

 

 

Date

 

Acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible

 

Acquisitions

 

Acquired

 

Cost

 

 

Cash

 

Units(1)

 

 

Land

 

Building

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

    

 

    

 

 

    

 

 

 

    

 

 

    

 

 

 

    

 

 

    

 

 

 

74 unit - Gardens - Grand Forks, ND

 

2015-09-10

 

$

9,250

 

 

$

8,850

 

 

400

 

 

$

518

 

$

8,672

 

$

60

 

276 unit - GrandeVille at Cascade Lake - Rochester, MN

 

2015-10-29

 

 

56,000

 

 

 

56,000

 

 

 —

 

 

 

5,003

 

 

50,363

 

 

634

 

187 unit - Avalon Cove - Rochester, MN(2)

 

2016-03-22

 

 

36,250

 

 

 

15,000

 

 

17,826

 

 

 

1,616

 

 

34,145

 

 

489

 

90 unit - Cascade Shores - Rochester, MN

 

2016-03-22

 

 

18,500

 

 

 

18,500

 

 

 —

 

 

 

1,585

 

 

16,710

 

 

205

 

76 unit - Crystal Bay - Rochester, MN

 

2016-03-22

 

 

12,000

 

 

 

12,000

 

 

 —

 

 

 

433

 

 

11,425

 

 

142

 

40-unit - French Creek - Rochester, MN

 

2016-03-22

 

 

5,000

 

 

 

5,000

 

 

 —

 

 

 

201

 

 

4,735

 

 

64

 

 

 

 

 

 

137,000

 

 

 

115,350

 

 

18,226

 

 

 

9,356

 

 

126,050

 

 

1,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,819 sq ft Lakeside Medical Plaza - Omaha, NE

 

2015-08-20

 

 

6,500

 

 

 

6,500

 

 

 —

 

 

 

903

 

 

5,109

 

 

488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Acquisitions

 

 

 

$

143,500

 

 

$

121,850

 

$

18,226

 

 

$

10,259

 

$

131,159

 

$

2,082

 

(1)

Value of limited partnership units of the Operating Partnership based on the closing market price of our common stock on the acquisition date. The number of Units issued were approximately 44,000 and 2.5 million, respectively, for the Gardens and Avalon Cove acquisitions.

(2)

Acquisition resulted in a gain on bargain purchase of approximately $3.4 million. See Note 2 of our consolidated financial statements for additional information.

2016 Annual Report 55

Table of Contents

Fiscal 2015 (May 1, 2014 to April 30, 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

Total

 

 

Form of Consideration

 

 

Investment Allocation

 

 

 

Date

 

Acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible

 

Acquisitions

    

Acquired

    

Cost

    

 

Cash

    

Units(1)

    

Other(2)

    

 

Land

    

Building

    

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

152 unit - Homestead Garden - Rapid City, SD(3)

 

2014-06-02

 

$

15,000

 

 

$

5,092

 

$

 —

 

$

9,908

 

 

$

655

 

$

14,139

 

$

206

 

52 unit - Silver Springs - Rapid City, SD

 

2014-06-02

 

 

3,280

 

 

 

1,019

 

 

 —

 

 

2,261

 

 

 

215

 

 

3,006

 

 

59

 

68 unit - Northridge - Bismarck, ND

 

2014-09-12

 

 

8,500

 

 

 

8,400

 

 

100

 

 

 —

 

 

 

884

 

 

7,516

 

 

100

 

119 unit - Legacy Heights - Bismarck, ND(4)

 

2015-03-19

 

 

15,000

 

 

 

14,300

 

 

700

 

 

 —

 

 

 

1,207

 

 

13,742

 

 

51

 

 

 

 

 

 

41,780

 

 

 

28,811

 

 

800

 

 

12,169

 

 

 

2,961

 

 

38,403

 

 

416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Creekside Crossing - Bismarck, ND

 

2014-05-22

 

 

4,269

 

 

 

4,269

 

 

 —

 

 

 —

 

 

 

4,269

 

 

 —

 

 

 —

 

PrairieCare Medical - Brooklyn Park, MN

 

2014-06-05

 

 

2,616

 

 

 

2,616

 

 

 —

 

 

 —

 

 

 

2,616

 

 

 —

 

 

 —

 

71 France Phase I - Edina, MN(5)

 

2014-06-12

 

 

1,413

 

 

 

 —

 

 

 —

 

 

1,413

 

 

 

1,413

 

 

 —

 

 

 —

 

Monticello 7th Addition - Monticello, MN

 

2014-10-09

 

 

1,660

 

 

 

1,660

 

 

 —

 

 

 —

 

 

 

1,660

 

 

 —

 

 

 —

 

71 France Phase II & III - Edina, MN(5)

 

2014-11-04

 

 

3,309

 

 

 

 —

 

 

 —

 

 

3,309

 

 

 

3,309

 

 

 —

 

 

 —

 

Minot 1525 24th Ave SW - Minot, ND

 

2014-12-23

 

 

1,250

 

 

 

1,250

 

 

 —

 

 

 —

 

 

 

1,250

 

 

 —

 

 

 —

 

 

 

 

 

 

14,517

 

 

 

9,795

 

 

 —

 

 

4,722

 

 

 

14,517

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Acquisitions

 

 

 

$

56,297

 

 

$

38,606

 

$

800

 

$

16,891

 

 

$

17,478

 

$

38,403

 

$

416

 

(1)

Value of limited partnership units of the Operating Partnership based on the closing market price of our common stock on the acquisition date. The number of Units issued were approximately 11,000 and 77,000, respectively, for the Northridge and Legacy Heights acquisitions.

(2)

Consists of assumed debt (Homestead Garden I: $9.9 million, Silver Springs: $2.3 million) and value of land contributed by the joint venture partner (71 France: $4.7 million).

(3)

At acquisition we adjusted the assumed debt to fair value and recognized approximately $852,000 of goodwill.

(4)

At acquisition, the purchase price included assets in development (land: $804,000, building: $7.8 million, escrow $1.3 million).

(5)

Land was contributed to a joint venture in which we have an approximately 52.6% interest. The joint venture is consolidated in our financial statements.

2016 Annual Report 56

Table of Contents

Development Projects Placed in Service

IRET Properties placed approximately $211.8 million of development projects in service during fiscal year 2016, compared to $124.5 million in fiscal year 2015. The fiscal year 2016 and 2015 development projects placed in service are detailed below.

Fiscal 2016 (May 1, 2015 to April 30, 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

Date Placed

 

 

 

 

 

 

 

Development

 

Development Projects Placed in Service (1)

    

in Service

    

Land

    

Building

    

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

72 unit - Chateau II - Minot, ND (2)

 

2015-06-01

 

$

240

 

$

14,408

 

$

14,648

 

288 unit - Renaissance Heights - Williston, ND(3)

 

2015-07-27

 

 

3,080

 

 

59,434

 

 

62,514

 

163 unit - Deer Ridge - Jamestown, ND(4)

 

2016-02-22

 

 

700

 

 

24,137

 

 

24,837

 

251 unit - Cardinal Point - Grand Forks, ND(5)

 

2016-03-18

 

 

1,600

 

 

48,132

 

 

49,732

 

 

 

 

 

 

5,620

 

 

146,111

 

 

151,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

57,624 sq ft Edina 6565 France SMC III - Edina, MN(6)

 

2015-06-01

 

 

 —

 

 

33,041

 

 

33,041

 

70,756 sq ft PrairieCare Medical - Brooklyn Park, MN(7)

 

2015-09-08

 

 

2,610

 

 

21,830

 

 

24,440

 

 

 

 

 

 

2,610

 

 

54,871

 

 

57,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

7,963 sq ft Minot Southgate Retail - Minot, ND(8)

 

2015-10-01

 

 

889

 

 

1,734

 

 

2,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Development Projects Placed in Service

 

 

 

$

9,119

 

$

202,716

 

$

211,835

 

(1)

Development projects that are placed in service in phases are excluded from this table until the entire project has been placed in service. See Note 15 for additional information on the 71 France projects which was partially placed in service during the fiscal year ended April 30, 2016.

(2)

Costs paid in prior fiscal years totaled $12.3 million. Additional costs incurred in fiscal year 2016 totaled $2.3 million, for a total project cost at April 30, 2016 of $14.6 million.

(3)

Costs paid in prior fiscal years totaled $57.7 million. Additional costs incurred in fiscal year 2016 totaled $4.8 million, for a total project cost at April 30, 2016 of $62.5 million. The project is owned by a joint venture entity in which we currently have an approximately 70.0% interest. The joint venture is consolidated in our financial statements.

(4)

Costs paid in prior fiscal years totaled $14.3 million. Additional costs incurred in fiscal year 2016 totaled $10.5 million, for a total project cost at April 30, 2016 of $24.8 million.

(5)

Costs paid in prior fiscal years totaled $23.0 million. Additional costs incurred in fiscal year 2016 totaled $26.7 million, for a total project cost at April 30, 2016 of $49.7 million.

(6)

Costs paid in prior fiscal years totaled $20.8 million. Additional costs incurred in fiscal year 2016 totaled $12.2 million, for a total project cost at April 30, 2016 of $33.0 million.

(7)

Costs paid in prior fiscal years totaled $17.3 million. Additional costs incurred in fiscal year 2016 totaled $7.1 million, for a total project cost at April 30, 2016 of $24.4 million.

(8)

Costs paid in prior fiscal years totaled $2.1 million. Additional costs incurred in fiscal year 2016 totaled approximately $500,000, for a total project cost at April 30, 2016 of $2.6 million.

2016 Annual Report 57

Table of Contents

Fiscal 2015 (May 1, 2014 to April 30, 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

Date Placed

 

 

 

 

 

 

 

Development

 

Development Projects Placed in Service (1)

     

in Service

    

Land

    

Building

    

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

44 unit - Dakota Commons - Williston, ND(2)

 

2014-07-15

 

$

823

 

$

9,596

 

$

10,419

 

130 unit - Red 20 - Minneapolis, MN(3)

 

2014-11-21

 

 

1,900

 

 

26,412

 

 

28,312

 

233 unit - Commons at Southgate - Minot, ND(4)

 

2014-12-09

 

 

3,691

 

 

31,351

 

 

35,042

 

64 unit - Cypress Court II - St. Cloud, MN(5)

 

2015-01-01

 

 

447

 

 

6,320

 

 

6,767

 

165 unit - Arcata - Golden Valley, MN(6)

 

2015-01-01

 

 

2,088

 

 

29,640

 

 

31,728

 

 

 

 

 

 

8,949

 

 

103,319

 

 

112,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

4,998 sq ft Minot Southgate Wells Fargo Bank - Minot, ND(7)

 

2014-11-10

 

 

992

 

 

2,193

 

 

3,185

 

202,807 sq ft Roseville 3075 Long Lake Road - Roseville, MN

 

2015-02-02

 

 

 —

 

 

9,036

 

 

9,036

 

 

 

 

 

 

992

 

 

11,229

 

 

12,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Development Projects Placed in Service

 

 

 

$

9,941

 

$

114,548

 

$

124,489

 

(1)

Development projects that are placed in service in phases are excluded from this table until the entire project has been placed in service. See Note 15 for additional information on the Renaissance Heights project, which was partially placed in service during the fiscal year 2014 and the twelve months ended April 30, 2015.

(2)

Costs paid in prior fiscal years totaled $8.1 million. Additional costs paid in fiscal year 2015 totaled $2.3 million, for a total project cost at April 30, 2015 of $10.4 million.

(3)

Costs paid in prior fiscal years totaled $12.2 million. Additional costs paid in fiscal year 2015 totaled $16.1 million, for a total project cost at April 30, 2015 of $28.3 million. The project is owned by a joint venture entity in which we have an approximately 58.6% interest. The joint venture is consolidated in our financial statements.

(4)

Costs paid in prior fiscal years totaled $26.5 million, respectively. Additional costs paid in fiscal year 2015 totaled $8.1 million, for a total project cost at April 30, 2015 of $35.0 million. The project is owned by a joint venture entity in which we had an approximately 52.9% interest at April 30, 2015. The joint venture is consolidated in our financial statements.

(5)

Costs paid in prior fiscal years totaled $1.2 million. Additional costs paid in fiscal year 2015 totaled $5.5 million, for a total project cost at April 30, 2015 of $6.8 million. The project is owned by a joint venture entity in which we have an approximately 86.1% interest. The joint venture is consolidated in our financial statements.

(6)

Costs paid in prior fiscal years totaled $11.3 million, respectively. Additional costs paid in fiscal year 2015 totaled $19.1 million, for a total project cost at April 30, 2015 of $31.7 million.

(7)

Costs paid in fiscal year 2015 totaled $3.2 million, including land acquired in fiscal year 2013.

2016 Annual Report 58

Table of Contents

Property Dispositions

During fiscal year 2016, we sold 8 multifamily properties, 40 office properties, 2 healthcare properties, 18 retail properties, and 3 parcels of unimproved land for a total sales price of $414.1 million and transferred ownership of 9 office properties pursuant to a deed in lieu transaction, compared to dispositions totaling $76.0 million in fiscal year 2015. The fiscal year 2016 and 2015 dispositions are detailed below.

Fiscal 2016 (May 1, 2015 to April 30, 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

Date

 

 

 

 

Book Value

 

 

 

 

Dispositions

    

Disposed

    

Sales Price

    

and Sales Cost

    

Gain/(Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

391 unit - St. Cloud Student Housing Portfolio - St. Cloud, MN

 

2016-03-24

 

$

5,615

 

$

5,647

 

$

(32)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

61,758 sq ft Nebraska Orthopaedic Hospital - Omaha, NE

 

2016-04-01

 

 

24,494

 

 

16,512

 

 

7,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

117,144 sq ft Thresher Square – Minneapolis, MN

 

2015-05-18

 

 

7,000

 

 

7,175

 

 

(175)

 

2,549,222 sq ft Office Sale Portfolio(1)

 

2015-08-03

 

 

250,000

 

 

231,908

 

 

18,092

 

420,216 sq ft Mendota Office Center Portfolio – Mendota Heights, MN(2)

 

2015-08-12

 

 

40,000

 

 

41,574

 

 

(1,574)

 

1,027,208 sq ft Retail Sale Portfolio(3)

 

2015-09-30

 

 

78,960

 

 

72,000

 

 

6,960

 

48,700 sq ft Eden Prairie 6101 Blue Circle Drive – Eden Prairie, MN

 

2015-10-19

 

 

2,900

 

 

2,928

 

 

(28)

 

8,526 sq ft Burnsville I Strip Center – Burnsville, MN

 

2015-12-23

 

 

1,300

 

 

913

 

 

387

 

4,800 sq ft Pine City C-Store – Pine City, MN

 

2016-01-08

 

 

300

 

 

355

 

 

(55)

 

11,003 sq ft Minot Plaza – Minot, ND

 

2016-01-19

 

 

1,854

 

 

393

 

 

1,461

 

937,518 sq ft 9-Building Office Portfolio(4)(5)

 

2016-01-29

 

 

122,610

(5)  

 

86,154

(5)  

 

36,456

(5)

3,702 sq ft Arrowhead First International Bank - Minot, ND

 

2016-04-26

 

 

1,675

 

 

1,255

 

 

420

 

 

 

 

 

 

506,599

 

 

444,655

 

 

61,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

River Falls Unimproved Land - River Falls, WI

 

2016-04-06

 

 

20

 

 

21

 

 

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Dispositions

 

 

 

$

536,728

 

$

466,835

 

$

69,893

 

(1)

The properties included in this portfolio disposition are: 610 Business Center, 7800 West Brown Deer Road, Ameritrade, Barry Pointe Office Park, Benton Business Park, Brenwood, Brook Valley I, Crosstown Centre, Golden Hills Office Center, Granite Corporate Center, Great Plains, Highlands Ranch I, Highlands Ranch II, Interlachen Corporate Center, Intertech Building, Minnesota National Bank, Northpark Corporate Center, Omaha 10802 Farnam Dr, Plaza VII, Plymouth 5095 Nathan Lane, Prairie Oak Business Center, Rapid City 900 Concourse Drive, Spring Valley IV, Spring Valley V, Spring Valley X, Spring Valley XI, Superior Office Building, TCA Building & vacant land, Three Paramount Plaza, UHC Office, US Bank Financial Center, Wells Fargo Center, West River Business Park and Westgate.

(2)

The properties included in this portfolio disposition are: Mendota Office Center I, Mendota Office Center II, Mendota Office Center III, Mendota Office Center IV and American Corporate Center.

(3)

The properties included in this portfolio disposition are: Champlin South Pond, Chan West Village, Duluth 4615 Grand, Duluth Denfeld Retail, Forest Lake Auto, Forest Lake Westlake Center, Grand Forks Medpark Mall, Jamestown Buffalo Mall, Jamestown Business Center, Lakeville Strip Center, Monticello C Store & vacant land, Omaha Barnes & Noble, Pine City Evergreen Square, Rochester Maplewood Square and St. Cloud Westgate.

(4)

The properties included in this portfolio disposition are: Corporate Center West, Farnam Executive Center, Flagship Corporate Center, Gateway Corporate Center, Miracle Hills One, Pacific Hills, Riverport, Timberlands, and Woodlands Plaza IV.

(5)

On January 29, 2016, we transferred ownership of nine properties to the mortgage lender on a $122.6 million non-recourse loan and removed the debt obligation and accrued interest from our balance sheet. The properties had an estimated fair value of $89.3 million on the transfer date. Upon completion of this transfer, we recognized a gain on extinguishment of debt of $36.5 million, representing the difference between the loan and accrued interest payable extinguished over the carrying value of the properties, cash, accounts payable and accounts receivable transferred as of the transfer date and related closing costs.

2016 Annual Report 59

Table of Contents

Fiscal 2015 (May 1, 2014 to April 30, 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

Date

 

 

 

 

Book Value

 

 

 

 

Dispositions

    

Disposed

     

Sales Price

    

and Sales Cost

    

Gain/(Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

83 unit - Lancaster - St. Cloud, MN

 

2014-09-22

 

$

4,451

 

$

3,033

 

$

1,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

45,222 sq ft Jamestown Medical Office Building - Jamestown, MN

 

2015-02-05

 

 

12,819

 

 

8,710

 

 

4,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

73,338 sq ft Dewey Hill - Edina, MN

 

2014-05-19

 

 

3,100

 

 

3,124

 

 

(24)

 

198,600 sq ft Eagan 2785 & 2795 - Eagan, MN

 

2014-07-15

 

 

3,600

 

 

5,393

 

 

(1,793)

 

25,644 sq ft Weston Retail - Weston, WI

 

2014-07-28

 

 

n/a

 

 

1,176

 

 

(1,176)

 

74,568 sq ft Wirth Corporate Center - Golden Valley, MN

 

2014-08-29

 

 

4,525

 

 

4,695

 

 

(170)

 

52,000 sq ft Kalispell Retail - Kalispell, MT

 

2014-10-15

 

 

1,230

 

 

1,229

 

 

1

 

34,226 sq ft Fargo Express Center & SC Pad - Fargo, ND

 

2014-11-18

 

 

2,843

 

 

2,211

 

 

632

 

79,297 sq ft Northgate I – Maple Grove, MN

 

2014-12-01

 

 

7,200

 

 

6,881

 

 

319

 

14,820 sq ft Weston Walgreens – Weston, WI

 

2015-02-27

 

 

5,177

 

 

2,152

 

 

3,025

 

26,000 sq ft Northgate II - Maple Grove, MN

 

2015-03-02

 

 

2,725

 

 

1,727

 

 

998

 

45,019 sq ft Burnsville Bluffs II -  Burnsville, MN

 

2015-03-25

 

 

1,245

 

 

2,245

 

 

(1,000)

 

26,186 sq ft Plymouth I - Plymouth, MN

 

2015-03-25

 

 

1,985

 

 

1,492

 

 

493

 

26,186 sq ft Plymouth II - Plymouth, MN

 

2015-03-25

 

 

1,625

 

 

1,356

 

 

269

 

26,186 sq ft Plymouth III - Plymouth, MN

 

2015-03-25

 

 

2,500

 

 

1,977

 

 

523

 

126,936 sq ft Plymouth IV & V - Plymouth, MN

 

2015-03-25

 

 

12,910

 

 

11,706

 

 

1,204

 

58,300 sq ft Southeast Tech Center - Eagan, MN

 

2015-03-25

 

 

3,300

 

 

4,196

 

 

(896)

 

61,138 sq ft Whitewater Plaza - Minnetonka, MN

 

2015-03-25

 

 

3,035

 

 

4,625

 

 

(1,590)

 

13,374 sq ft 2030 Cliff Road - Eagan, MN

 

2015-04-21

 

 

950

 

 

834

 

 

116

 

 

 

 

 

 

57,950

 

 

57,019

 

 

931

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

Kalispell Unimproved - Kalispell, MT

 

2014-10-15

 

 

670

 

 

670

 

 

 —

 

Weston – Weston, WI

 

2015-02-17

 

 

158

 

 

158

 

 

 —

 

 

 

 

 

 

828

 

 

828

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Dispositions

 

 

 

$

76,048

 

$

69,590

 

$

6,458

 

2016 Annual Report 60

Table of Contents

Development and Re-Development Projects

The following tables provide additional detail, as of April 30, 2016 and 2015, on our in-service (completed) development and re-development projects and development and re-development projects in progress. All of these projects are excluded from the same-store pool. We measure initial yield on our development projects upon completion and achievement of target lease-up levels by measuring net operating income from the development against the cost of the project. Estimated initial yields on the projects in progress listed below range from approximately 6.0% to 6.3%.

Projects Placed in Service in Fiscal Year 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

    

 

    

Rentable

    

Percentage

    

 

 

    

 

 

    

 

 

    

 

    

 

 

 

 

 

 

Square Feet

 

Leased

 

Anticipated

 

Costs as of

 

Cost per

 

Date

 

Anticipated

 

 

 

 

 

or Number of

 

or

 

Total

 

April 30,

 

Square Foot

 

Placed in

 

Same-Store

 

Project Name and Location

 

Segment

 

Units

 

Committed

 

Cost(1)

 

2016(1)

 

or Unit(1)

 

Service

 

Date

 

Chateau II - Minot, ND

 

Multifamily

 

72 units

 

84.7

%  

$

14,711

 

$

14,648

 

$

204,319

 

Q1 2016

 

Q1 2019

 

Edina 6565 France SMC III - Edina, MN

 

Healthcare

 

57,624 sq ft

 

24.5

%  

 

33,281

 

 

33,041

 

 

578

 

Q1 2016

 

Q1 2019

 

Renaissance Heights - Williston, ND(2)

 

Multifamily

 

288 units

 

43.8

%  

 

62,514

 

 

62,514

 

 

217,063

 

Q1 2016

 

Q1 2019

 

Minot Southgate Retail - Minot, ND

 

Retail

 

7,963 sq ft

 

 —

%  

 

2,923

 

 

2,623

 

 

367

 

Q2 2016

 

Q1 2019

 

PrairieCare Medical - Brooklyn Park, MN

 

Healthcare

 

70,756 sq ft

 

100.0

%  

 

24,536

 

 

24,440

 

 

347

 

Q2 2016

 

Q1 2018

 

Cardinal Point - Grand Forks, ND

 

Multifamily

 

251 units

 

44.2

%  

 

52,344

 

 

49,732

 

 

208,542

 

Q4 2016

 

Q1 2019

 

Deer Ridge – Jamestown, ND

 

Multifamily

 

163 units

 

50.9

%  

 

24,837

 

 

24,837

 

 

152,374

 

Q4 2016

 

Q1 2019

 

 

 

 

 

 

 

 

 

$

215,146

 

$

211,835

 

 

 

 

 

 

 

 

(1)

Excludes tenant improvements and leasing commissions.

(2)

We are currently an approximately 70.0% partner in the joint venture entity constructing this project. The anticipated total cost amount given is the total cost to the joint venture entity.

Projects in Progress at April 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

(in thousands)

    

 

 

Project Name and Location

 

Planned Segment

 

Number of Units

 

Percentage Leased or Committed

 

Anticipated Total Cost

 

Costs as of April 30, 2016(1)

 

Anticipated Construction Completion

 

71 France I - Edina, MN (4)

 

Multifamily

 

241 units

 

49.4

%

 

73,290

 

 

71,727

 

1Q 2017

 

Monticello Crossing - Monticello, MN

 

Multifamily

 

202 units

 

5.5

%

 

31,784

 

 

17,507

 

2Q 2017

 

Other

 

n/a

 

n/a

 

n/a

 

 

n/a

 

 

3,729

 

n/a

 

 

 

 

 

 

 

 

 

$

105,074

 

$

92,963

 

 

 

(1)

Includes costs related to development projects that are placed in service in phases (71 France, $41.3 million).

(2)

The project will be constructed in three phases by a joint venture entity in which we currently have an approximately 52.6% interest. The anticipated total cost amount given is the total cost to the joint venture entity. The anticipated total cost includes approximately 21,772 square feet of retail space.

2016 Annual Report 61

Table of Contents

Projects Placed in Service in Fiscal Year 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

    

 

    

Rentable

    

Percentage

    

 

 

    

 

 

    

 

 

    

 

    

 

 

 

 

 

 

Square Feet

 

Leased

 

 

Anticipated

 

 

Costs as of

 

 

Cost per

 

Date

 

Anticipated

 

 

 

 

 

or Number of

 

or

 

 

Total

 

 

April 30,

 

 

Square Foot

 

Placed in

 

Same-Store

 

Project Name and Location

 

Segment

 

Units

 

Committed

 

 

Cost(1)

 

 

2015(1)

 

 

or Unit(1)

 

Service

 

Date

 

Dakota Commons - Williston, ND

 

Multifamily

 

44 units

 

95.5

%  

$

10,736

 

$

10,419

 

$

244,000

 

Q1 2015

 

Q1 2017

 

Commons at Southgate - Minot, ND(2)

 

Multifamily

 

233 units

 

92.7

%  

 

37,201

 

 

35,042

 

 

159,661

 

Q3 2015

 

Q1 2017

 

Minot Southgate Wells Fargo Bank - Minot, ND

 

Other

 

4,998 sq ft

 

100.0

%  

 

3,288

 

 

3,186

 

 

658

 

Q3 2015

 

Q1 2017

 

Cypress Court II – St. Cloud, MN(3)

 

Multifamily

 

64 units

 

96.9

%  

 

7,028

 

 

6,767

 

 

109,813

 

Q3 2015

 

Q1 2017

 

Arcata - Golden Valley, MN

 

Multifamily

 

165 units

 

20.0

%  

 

33,448

 

 

31,728

 

 

202,715

 

Q3 2015

 

Q1 2017

 

Red 20 - Minneapolis, MN(4)

 

Multifamily

 

130 units

 

75.4

%  

 

29,462

 

 

28,312

 

 

226,631

 

Q3 2015

 

Q1 2017

 

Roseville 3075 Long Lake Rd - Roseville, MN

 

Industrial

 

202,807

 

5.0

%  

 

13,915

 

 

9,036

 

 

69

 

Q4 2015

 

Q1 2017

 

 

 

 

 

 

 

 

 

$

135,078

 

$

124,490

 

 

 

 

 

 

 

 

(1)

Excludes tenant improvements and leasing commissions.

(2)

The project is owned by a joint venture in which we currently have an approximately 51.0% interest. The anticipated total cost amount given is the total cost to the joint venture entity.

(3)

The project is owned by a joint venture in which we currently have an approximately 86.1% interest. The anticipated total cost amount given is the total cost to the joint venture entity.

(4)

The project is owned by a joint venture in which we currently have an approximately 58.6% interest. The anticipated total cost amount given is the total cost to the joint venture entity.

Projects in Progress at April 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rentable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

Percentage

 

(in thousands)

 

Anticipated

 

 

 

Planned

 

or Number

 

Leased or

 

 

Anticipated

 

 

Costs as of

 

Construction

 

Project Name and Location

 

Segment

 

of Units

 

Committed

 

 

Total Cost

 

 

April 30, 2015(1)

 

Completion

 

Chateau II - Minot, ND

 

Multifamily

 

72 units

 

13.9

%  

$

14,711

 

$

13,129

 

1Q 2016

 

Edina 6565 France SMC III - Edina, MN(2)

 

Healthcare

 

57,479 sq ft

 

24.2

%  

 

36,752

 

 

22,549

 

1Q 2016

 

Minot Southgate Retail - Minot, ND

 

Retail

 

7,963 sq ft

 

 —

 

 

2,923

 

 

2,164

 

1Q 2016

 

Renaissance Heights - Williston, ND(3)

 

Multifamily

 

288 units

 

44.5

%  

 

62,362

 

 

59,087

 

1Q 2016

 

Deer Ridge – Jamestown, ND

 

Multifamily

 

163 units

 

8.6

%  

 

24,519

 

 

15,355

 

2Q 2016

 

PrairieCare Medical - Brooklyn Park, MN

 

Healthcare

 

72,895 sq ft

 

100.0

%  

 

24,251

 

 

19,457

 

2Q 2016

 

Cardinal Point - Grand Forks, ND

 

Multifamily

 

251 units

 

18.3

%  

 

40,042

 

 

26,450

 

3Q 2016

 

71 France Phases I, II, & III - Edina, MN(4)

 

Multifamily

 

241 units

 

6.2

%  

 

73,290

 

 

35,137

 

1Q 2017

 

Other

 

n/a

 

n/a

 

n/a

 

 

n/a

 

 

6,618

 

n/a

 

 

 

 

 

 

 

 

 

$

278,850

 

$

199,946

 

 

 

(1)

Includes costs related to development projects that are placed in service in phases (Renaissance Heights I - $11.5 million).

(2)

Anticipated total cost includes tenant improvements and leasing commissions.

(3)

We are an approximately 70.0% partner in the joint venture entity constructing this project. The anticipated total cost amount given is the total cost to the joint venture entity.

(4)

We are an approximately 52.6% partner in the joint venture entity constructing this project. The anticipated total cost amount given is the total cost to the joint venture entity.

Funds From Operations

We consider Funds from Operations (“FFO”) a useful measure of performance for an equity REIT. We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO to mean “net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.” In addition, in October 2011, NAREIT clarified its computation of FFO so as to exclude impairment charges for all periods presented. Because of limitations of the FFO definition adopted by NAREIT, we have made certain interpretations in applying the definition. We believe all such interpretations not specifically provided for in the NAREIT definition are consistent with the definition.

2016 Annual Report 62

Table of Contents

Our management considers that FFO, by excluding depreciation costs, the gains or losses from the sale of operating real estate properties and extraordinary items as defined by GAAP, is useful to investors in providing an additional perspective on our operating results. Historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation, that the value of real estate assets decreases predictably over time. However, real estate asset values have historically risen or fallen with market conditions. NAREIT’s definition of FFO, by excluding depreciation costs, reflects the fact that depreciation charges required by GAAP may not reflect underlying economic realities. Additionally, the exclusion in NAREIT’s FFO definition of gains and losses from the sales of previously depreciated operating real estate assets assists management and investors in identifying the operating results of the long-term assets that form the core of our investments and assists in comparing those operating results between periods. FFO is used by management and investors to identify trends in occupancy rates, rental rates and operating costs. 

While FFO is widely used by REITs as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies.

FFO should not be considered as an alternative to net income as determined in accordance with GAAP as a measure of our performance, but rather should be considered as an additional, supplemental measure, and should be viewed in conjunction with net income as presented in the consolidated financial statements included in this report. FFO does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions.

FFO applicable to common shares and limited partnership units for the fiscal year ended April 30, 2016 was $103.9 million, compared to $86.6 million and $79.9 million for the fiscal years ended April 30, 2015 and 2014, respectively.

Reconciliation of Net Income Attributable to Investors Real Estate Trust to Funds FromOperations

For the years ended April 30, 2016, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share and unit amounts)

 

Fiscal Years Ended April 30,

 

2016

 

 

2015

 

2014

 

 

    

    

 

    

    

    

Per

    

 

    

 

    

    

    

Per

    

    

 

    

    

    

Per

 

 

 

 

 

 

Weighted Avg

 

Share

 

 

 

 

 

Weighted Avg

 

Share

 

 

 

 

Weighted Avg

 

Share

 

 

 

 

 

 

Shares and

 

and

 

 

 

 

 

Shares and

 

and

 

 

 

 

Shares and

 

and

 

 

 

Amount

 

Units(1)

 

Unit(2)

 

 

Amount

 

Units(1)

 

Unit(2)

 

Amount

 

Units(1)

 

Unit(2)

 

Net income (loss) attributable to Investors Real Estate Trust

 

$

72,006

 

 

 

$

 

 

 

$

24,087

 

 

 

$

 

 

$

(13,174)

 

 

 

$

 

 

Less dividends to preferred shareholders

 

 

(11,514)

 

 

 

 

 

 

 

 

(11,514)

 

 

 

 

 

 

 

(11,514)

 

 

 

 

 

 

Net income (loss) available to common shareholders

 

 

60,492

 

123,094

 

 

0.49

 

 

 

12,573

 

118,004

 

 

0.11

 

 

(24,688)

 

105,331

 

 

(0.23)

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests – Operating Partnership

 

 

7,032

 

14,278

 

 

 

 

 

 

1,526

 

16,594

 

 

 

 

 

(4,676)

 

21,697

 

 

 

 

Depreciation and amortization

 

 

63,789

 

 

 

 

 

 

 

 

70,450

 

 

 

 

 

 

 

71,830

 

 

 

 

 

 

Impairment of real estate

 

 

5,983

 

 

 

 

 

 

 

 

6,105

 

 

 

 

 

 

 

44,426

 

 

 

 

 

 

Gains on depreciable property sales attributable to Investors Real Estate Trust

 

 

(33,422)

 

 

 

 

 

 

 

 

(4,079)

 

 

 

 

 

 

 

(6,948)

 

 

 

 

 

 

Funds from operations applicable to common shares and Units

 

$

103,874

 

137,372

 

$

0.76

 

 

$

86,575

 

134,598

 

$

0.64

 

$

79,944

 

127,028

 

$

0.63

 

(1)

Pursuant to Exchange Rights, limited partnership units of the Operating Partnership are redeemable for cash, or, at our discretion, may be exchangeable for common shares on a one-for-one basis.

(2)

Net income attributable to us is calculated on a per common share basis. FFO is calculated on a per common share and limited partnership unit basis.

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Cash Distributions

The following cash distributions were paid to our common shareholders and unitholders during fiscal years 2016, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Years

 

Quarters

    

2016

    

2015

    

2014

 

First

 

$

0.1300

 

$

0.1300

 

$

0.1300

 

Second

 

 

0.1300

 

 

0.1300

 

 

0.1300

 

Third

 

 

0.1300

 

 

0.1300

 

 

0.1300

 

Fourth

 

 

0.1300

 

 

0.1300

 

 

0.1300

 

 

 

$

0.5200

 

$

0.5200

 

$

0.5200

 

Liquidity and Capital Resources

Overview

Our principal liquidity demands are maintaining distributions to the holders of our common and preferred shares and limited partnership units of IRET Properties, capital improvements and repairs and maintenance to our properties, acquisition of additional properties, property development, tenant improvements and debt service and repayments.

We have historically met our short-term liquidity requirements through net cash flows provided by our operating activities, and, from time to time, through draws on our lines of credit. Management considers our ability to generate cash from property operating activities, cash-out refinancing of existing properties and draws on our line of credit to be adequate to meet all operating requirements and to make distributions to our shareholders in accordance with the REIT provisions of the Internal Revenue Code. Budgeted expenditures for ongoing maintenance and capital improvements and renovations to our real estate portfolio are also generally expected to be funded from existing cash on hand, cash flow generated from property operations, cash-out refinancing of existing properties and/or new borrowings, and we believe we will have sufficient cash to meet our commitments over the next twelve months, including an estimated $30.9 million in capital expenditures (excluding capital expenditures recoverable from tenants and tenant improvements). However, the real estate markets continue to experience challenges including reduced occupancies and rental rates as well as some restrictions on the availability of financing. In the event of deterioration in property operating results, or absent our ability to successfully continue cash-out refinancing of existing properties and/or new borrowings, we may need to consider additional cash preservation alternatives, including scaling back development activities, capital improvements and renovations. For the fiscal year ended April 30, 2016, we paid distributions of $67.2 million in cash and issued $4.0 million worth of common shares under to our Distribution Reinvestment and Share Purchase Plan (“DRIP”) to common shareholders and unitholders of IRET Properties, as compared to net cash provided by operating activities of $66.5 million and FFO of $103.9 million. 

To the extent we do not satisfy our long-term liquidity requirements, which consist primarily of maturities under our long-term debt, construction and development activities and potential acquisition opportunities, through net cash flows provided by operating activities and our credit facilities, we intend to satisfy such requirements through a combination of funding sources which we believe will be available to it, including the issuance of limited partnership units, additional common or preferred equity, proceeds from the sale of properties and additional long-term secured or unsecured indebtedness. However, our ability to raise funds through the sale of equity securities, the sale of properties and additional long-term secured or unsecured borrowings is dependent on, among other things, general economic conditions, general market conditions for REITs, our operating performance and the current trading price of our common shares, and the capital and debt markets may not consistently be available at all or on terms that we consider attractive. In particular, as a result of the economic downturn and turmoil in the capital markets, the availability of secured and unsecured loans was for a time sharply curtailed. We cannot predict whether these conditions will recur. As a result of general economic conditions in our markets, economic downturns affecting the ability to attract and retain tenants, unfavorable fluctuations in interest rates or our share price, unfavorable changes in the supply of competing properties, or our properties not performing as expected, we may not generate sufficient cash flow from operations or otherwise have access to capital on favorable terms, or at all. If we are unable to obtain capital from other sources, we may not be able to pay the distribution required to maintain our status as a REIT, make required principal and interest payments, make strategic acquisitions or make necessary routine capital improvements or undertake re-development opportunities

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with respect to our existing portfolio of operating assets. In addition, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the holder of the mortgage could foreclose on the property, resulting in loss of income and asset values.

Sources and Uses of Cash

As of April 30, 2016, we, through our Operating Partnership as borrower, had one secured line of credit with First International Bank as lead bank. This revolving, multi-bank line of credit has lending commitments of $100.0 million,  a maturity date of September 1, 2017 and a minimum outstanding principal balance requirement of $17.5 million, and is secured by mortgages on properties. Under the terms of the line of credit, properties may be added and removed from the collateral pool with the agreement of the lenders. As of April 30, 2016, participants included, in addition to First International Bank, the following financial institutions: The Bank of North Dakota, First Western Bank and Trust, Dacotah Bank, United Community Bank, American State Bank & Trust Company, Town & Country Credit Union,  Highland Bank and United Bankers’ Bank. The interest rate on borrowings under the line of credit is the Wall Street Journal Prime Rate plus 1.25%, with a floor of 4.75% and a cap of 8.65% during the initial term of the line of credit. The current interest rate is 4.75%. Interest-only payments are due monthly based on the total amount of advances outstanding. The line of credit may be prepaid at par at any time, and includes covenants and restrictions requiring us to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and we are required to maintain minimum depository account(s) totaling $6.0 million with First International Bank, of which $1.5 million is to be held in a non-interest bearing account. As of April 30, 2016, 17 properties with a total cost of $162.1 million collateralized this line of credit, and our outstanding principal balance under the line of credit was $17.5 million. As of April 30, 2016, we believe we are in compliance with its covenants.

We maintain compensating balances, not restricted as to withdrawal, with several financial institutions in connection with financing received from those institutions and/or to ensure future credit availability. At April 30, 2016, our compensating balances totaled $13.2 million and consisted of the following:

Financial Institution

First International Bank, Watford City, ND

$

6,000,000

Associated Bank, Green Bay, WI

3,000,000

The Private Bank, Minneapolis, MN

2,000,000

Bremer Bank, Saint Paul, MN

1,285,000

Dacotah Bank, Minot, ND

350,000

Peoples State Bank, Velva, ND

225,000

American National Bank, Omaha, NE

200,000

Commerce Bank a Minnesota Banking Corporation

100,000

Total

$

13,160,000

During the second quarter of fiscal year 2014, we and our Operating Partnership entered into an at-the-market, or ATM, sales agreement with Robert W. Baird & Co. Incorporated as sales agent, where we may from time to time sell our common shares having an aggregate offering price of up to $75 million. The shares issuable under this agreement are registered with the SEC on our Registration Statement on Form S-3 (No. 333-189637), pursuant to a prospectus supplement dated August 30, 2013 to the prospectus dated June 27, 2013. We issued no common shares under this program during fiscal years 2016 and 2015. On June 1, 2016, we terminated this agreement according to its terms.

During fiscal year 2016, credit markets continued to be stable, with credit availability relatively unconstrained and benchmark interest rates remaining at or near historic lows. While to date there has been no material negative impact on our ability to borrow in our multifamily segment, we continue to monitor the roles of the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) in financing multifamily properties and their general capacity to lend given allocations set by the Federal Housing Finance Agency. We consider that one of the consequences of a modification in the agencies’ roles in recent years could potentially lead to a narrowing of their lending focus away from the smaller secondary or tertiary markets which we generally target, to multifamily properties in major metropolitan markets. We have historically obtained a significant portion of our multifamily debt from Freddie Mac, and we continue to plan to refinance portions of our maturing multifamily debt with these two entities, so any change in their ability or willingness to lend going forward could result in higher loan costs and/or more

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constricted availability of financing for us. Underwriting on commercial real estate continues to be more conservative compared to the underwriting standards employed prior to the recessionary period and we continue to find recourse security more frequently required, lower amounts of proceeds available and lenders limiting the amount of financing available in an effort to manage capital allocations and credit risk. While we continue to expect to be able to refinance our debt maturing in the next twelve months without significant issues, we also expect lenders to continue to employ conservative underwriting regarding asset quality, occupancy levels and tenant creditworthiness. As we were in regard to fiscal year 2016, we remain cautious regarding our ability in fiscal year 2017 to rely on cash-out refinancing at levels we had achieved in recent years to provide funds for investment opportunities and other corporate purposes.

As of April 30, 2016, approximately 88.7%, or $73.7 million of our mortgage debt maturing in the next twelve months is placed on multifamily assets, and approximately 11.3%, or $9.4 million, is placed on properties in our healthcare assets. Mortgage debt maturing in the first two quarters of fiscal year 2017 totals approximately $40.2 million. Of this $40.2 million, we paid off $6.5 million on May 11, 2016. We expect to pay off an additional $32.0 million in the first two quarters of fiscal year 2017 and expect to extend $1.7 million in the first two quarters of fiscal year 2017. We typically seek to refinance our maturing mortgage debt, although under certain circumstances we may choose to repay the debt rather than refinance, depending on the loan amount outstanding, our plans for the property securing the debt, interest rates and other loan terms available, and other factors specific to a particular property. Under present market conditions, we currently expect to be able to refinance our individual mortgage loans maturing in the next twelve months, should we choose to refinance rather than pay off some or all of these loans.

During fiscal year 2016, we acquired properties with an investment cost totaling $143.5 million. In fiscal year 2016, we sold 8 multifamily properties, 40 office properties, 2 healthcare properties, 18 retail properties and 3 parcels of unimproved land for a total sales price of $414.1 million and transferred ownership of 9 office properties pursuant to a deed in lieu transaction, compared to dispositions totaling $76.0 million in fiscal year 2015.

Our DRIP provides an opportunity for existing holders of common shares and limited partnership units and new investors to purchase our common shares by automatically reinvesting their cash distributions on all or a portion of their common shares and units and by making additional voluntary cash contributions. The maximum monthly voluntary cash contribution permitted under the DRIP is currently $10,000. However, we may issue waivers to such investment limitation subject to a pre-approval process. No waivers were issued in fiscal year 2016. We issued the following common shares pursuant to such waivers:  during fiscal year 2015, approximately 926,000 shares at an average price of $8.64 per share, for total net proceeds of $8.0 million; and during fiscal year 2014, approximately 1.4 million shares at an average price of $8.88 per share, for total net proceeds of $12.0 million. Collectively, we issued the following common shares under the DRIP: during fiscal year 2016, approximately 821,000 common shares with a total value of $5.6 million; during fiscal year 2015, 8.1 million common shares with a total value of $64.9 million; and during fiscal year 2014, 6.6 million common shares with a total value of $55.8 million.

The issuance of limited partnership units for property acquisitions continues to be a source of capital for us. We issued the following units in connection with property acquisitions: during fiscal year 2016, 2.6 million units, valued at issuance at $18.2 million; during fiscal year 2015, approximately 89,000 units, valued at issuance at approximately $800,000; and during fiscal year 2014, approximately 361,000 units, valued at issuance at $3.5 million.

Under our previously announced share repurchase program, during fiscal year 2016, we repurchased approximately 4.6 million common shares for approximately $35.0 million. There were no repurchases of common shares in fiscal 2015 or 2014.

Cash and cash equivalents on April 30, 2016 totaled $66.7 million, compared to $49.0 million and $47.3 million on the same date in 2015 and 2014, respectively. Net cash provided by operating activities decreased to $66.5 in fiscal year 2016 from $114.2 in fiscal year 2015 primarily due to a decrease in accounts payable and a decrease in net income adjusted for depreciation, gain on sale of discontinued operations, gain on debt extinguishment and gain on bargain purchase. Net cash provided by operating activities increased to $114.2 million in fiscal year 2015 from $92.5 million in fiscal year 2014 due primarily to an increase in net income.

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Net cash provided by investing activities was $134.3 million in fiscal year 2016. The decrease in net cash used by investing activities from fiscal year 2015 to fiscal year 2016 was due primarily to an increase in proceeds from discontinued operations net of an increase in payments for acquisitions of real estate assets and a decrease in payments for improvements of real estate. Net cash used by investing activities increased to $176.4 million in fiscal year 2015, compared to $121.8 million in fiscal year 2014. The increase in net cash used by investing activities is fiscal year 2015 compared to fiscal year 2014 was due primarily to an increase in payments for development and re-development of real estate assets net of an increase in proceeds from sale of real estate and other investments and a decrease in proceeds from discontinued operations. Net cash used by financing activities was $183.0 million in fiscal year 2016 compared to net cash provided by financing activities of $63.9 in fiscal year 2015, with the change due primarily to an increase in payments on mortgages payable and payments on revolving lines of credit and the repurchase of common shares during fiscal year 2016. In addition, as of October 1, 2015, shares acquired under our Distribution Reinvestment and Share Purchase Plan for distribution reinvestment and voluntary cash contributions were no longer issued directly by us but rather acquired through open market purchases, thereby increasing the cash used for distributions. Net cash provided by financing activities was $63.9 million in fiscal year 2015, compared to $17.5 million net cash used by financing activities in fiscal year 2014, with the change due primarily to an increase in proceeds from mortgages payable and proceeds from construction debt.

Financial Condition

Mortgage Loan Indebtedness. Mortgage loan indebtedness, including mortgages on properties held for sale, was $886.1 million on April 30, 2016 and $974.8 million on April 30, 2015. Approximately 77.8% of such mortgage debt is at fixed rates of interest, with staggered maturities. This limits our exposure to changes in interest rates, which minimizes the effect of interest rate fluctuations on our results of operations and cash flows. As of April 30, 2016, the weighted average rate of interest on our mortgage debt was 4.54% compared to 5.16% on April 30, 2015.

Construction Loan Indebtedness. Construction loan indebtedness was $82.0 million on April 30, 2016 and $136.2 million on April 30, 2015. As of April 30, 2016, the weighted average rate of interest on construction loan indebtedness was 2.74%, compared to 3.38% on April 30, 2015.

Revolving line of credit. As of April 30, 2016, $17.5 million was outstanding under our line of credit with First International Bank, as lead bank, with a current interest rate of 4.75%. This line of credit, as of April 30, 2016, was  secured by 17 properties with a total cost of $162.1 million.

Property Owned. Property owned increased to $1.7 billion at April 30, 2016, compared to $1.3 billion at April 30, 2015. Acquisitions, developments and improvements to existing properties in fiscal year 2016, partially offset by fiscal year 2016 dispositions, resulted in the net increase in property owned as of April 30, 2016 compared to April 30, 2015.

Cash and Cash Equivalents. Cash and cash equivalents on April 30, 2016 totaled $66.7 million, compared to $49.0 million on April 30, 2015. The increase in cash on hand on April 30, 2016, as compared to April 30, 2015, was due primarily to proceeds from sale of real estate and proceeds from mortgage and construction debt net of acquisitions and development of property.

Other Investments. Other investments, consisting of bank certificates of deposit, was $50,000 and $329,000 on April 30, 2016 and 2015, respectively.

Operating Partnership Units. Outstanding limited partnership units in the Operating Partnership increased to 16.3 million units on April 30, 2016, compared to 14.0 million units on April 30, 2015. The increase in units outstanding at April 30, 2016 as compared to April 30, 2015, resulted from the issuance of units in exchange for property, net of the conversion of units to shares.

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Common and Preferred Shares. Common shares outstanding on April 30, 2016 totaled 121.1 million, compared to 124.5 million common shares outstanding on April 30, 2015. This decrease in common shares outstanding from April 30, 2015 to April 30, 2016 was due to our repurchase of outstanding common shares under the share repurchase program net of issuances of common shares in exchange for limited partnership units of our Operating Partnership and under our DRIP.

We did not issue common shares under the ATM sales agreement with Baird during fiscal years 2016 or 2015. On June 1, 2016, we and our Operating Partnership terminated this agreement according to its terms.

During fiscal year 2016, we issued approximately 821,000 million common shares pursuant to the DRIP, for a total value of approximately $5.6 million, and approximately 273,000 million common shares in exchange for an equal number of limited partnership units pursuant to exercises of Exchange Rights during fiscal year 2016, for a total of approximately $1.5 million in shareholders’ equity. Such issuances increased the number of our outstanding common shares during the twelve months ended April 30, 2016 compared to the twelve months ended April 30, 2015.

As of April 30, 2016, we had 1.15 million Series A preferred shares and 4.6 million Series B preferred shares outstanding.

Contractual Obligations and Other Commitments

Our primary contractual obligations relate to our borrowings under the line of credit and mortgage notes payable. The  line of credit matures in September 2017 and had $17.5 million in loans outstanding at April 30, 2016. The principal and interest payments on the mortgage notes payable, including mortgages on properties held for sale, for the years subsequent to April 30, 2016, are included in the table below as “Long-term debt.” Interest due on variable rate mortgage notes is calculated using rates in effect on April 30, 2016. The “Other Debt” category consists primarily of principal and interest payments on construction loans.

As of April 30, 2016, we are the tenant under operating ground or air rights leases on nine of our properties. We pay a total of approximately $329,000 per year in rent under these leases, which have remaining terms ranging from 14 to 85 years, and expiration dates ranging from February 2031 to October 2100.

Our purchase obligations represent those costs that we are contractually obligated to pay in the future. Our significant purchase obligations as of April 30, 2016, which we expect to finance through debt and operating cash, are summarized in the following table. The significant components in the purchase obligation category are costs for construction and expansion projects and capital improvements at our properties. Service orders or contracts for the provision of routine maintenance services at our properties, such as landscaping and grounds maintenance, are not included in the table below since these arrangements are generally based on current needs, are filled by our service providers within short time horizons and may be cancelled without penalty. The expected timing of payment of the obligations discussed below is estimated based on current information.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

 

 

    

Less than

    

 

 

    

 

 

    

More than

 

 

 

Total

 

1 Year

 

1-3 Years

 

3-5 Years

 

5 Years

 

Long-term debt (principal and interest)

 

$

1,058,246

 

$

180,250

 

$

273,430

 

$

310,677

 

$

293,889

 

Line of credit (principal and interest)(1)

 

$

18,684

 

$

831

 

$

17,853

 

$

0

 

$

0

 

Other debt (principal and interest)

 

$

86,220

 

$

2,277

 

$

83,943

 

$

0

 

$

0

 

Operating lease obligations

 

$

10,164

 

$

330

 

$

663

 

$

668

 

$

8,503

 

Purchase obligations

 

$

20,872

 

$

20,872

 

$

 —

 

$

 —

 

$

 —

 

Total

 

$

1,194,186

 

$

204,560

 

$

375,889

 

$

311,345

 

$

302,392

 

(1)

The future interest payments on the line of credit were estimated using the outstanding principal balance and interest rate in effect as of April 30, 2016.

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Off-Balance-Sheet Arrangements

As of April 30, 2016, we had no significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Recent Developments

Common and Preferred Share Distributions. On June 2, 2016, our Board of Trustees declared the following distributions:

Quarterly Amount

Class of shares/units

per Share or Unit

Record Date

Payment Date

Common shares and limited partnership units

$

0.1300

June 15, 2016

July 1, 2016

Preferred shares:

Series A

$

0.5156

June 15, 2016

June 30, 2016

Series B

$

0.4968

June 15, 2016

June 30, 2016

Strategic Plan Update. On June 6, 2016, we announced our plan to move towards becoming a pure play multifamily REIT and our intention to sell our remaining commercial properties.

Termination of the ATM Sales Agreement. On June 1, 2016, we and our Operating Partnership terminated the ATM sales agreement with Baird according to its terms.

Completed Disposition.  On May 6, 2016, we sold a parcel of unimproved land in Grand Chute, WI, for a sale price of $250,000.

Pending Dispositions.  On May 2, 2016, the tenant in our eight Spring Creek senior housing properties exercised its option to purchase the properties for a sale price of $43.5 million. On May 3, 2016, we signed an agreement to sell an industrial property in Fargo, ND, for a sale price of $13.4 million. These pending dispositions are subject to various closing conditions and contingencies, and no assurances can be given that the transaction will be completed on the terms currently expected, or at all.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Risk  

Our exposure to market risk is limited primarily related to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations,obligations. We have used interest rate swaps to offset the impact of interest rate fluctuations on our variable-rate debt. During the year ended December 31, 2021, we prepaid two variable rate term loans and secondarilyterminated two of our four interest rate swaps. As of December 31, 2021, we had a swap with a notional of $75.0 million on the line of credit and which has an average pay rate of 2.81% and a forward swap with a notional of $70.0 million. The aggregate fair value of our interest rate swaps is a liability of $5.7 million, as of December 31, 2021. We do not enter into derivative instruments for trading or speculative purposes. The interest rate swaps expose us to credit risk in the event of non-performance by the counterparty under the terms of the agreement.
We have a private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, PGIM) for the issuance of up to $225.0 million of unsecured senior promissory notes (“unsecured senior notes”). We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which $25.0 million was under the private shelf agreement with PGIM. The following table shows the notes issued under both agreements. The table below shows the notes issued under both agreements.
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(in thousands)
AmountMaturity DateInterest Rate
Series A$75,000 September 13, 20293.84 %
Series B$50,000 September 30, 20283.69 %
Series C$50,000 June 6, 20302.70 %
Series 2021-A$35,000 September 17, 20302.50 %
Series 2021-B$50,000 September 17, 20312.62 %
Series 2021-C$25,000 September 17, 20322.68 %
Series 2021-D$15,000 September 17, 20342.78 %
During the year ended December 31, 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for the financing of 16 apartment communities acquired. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, and a blended weighted average interest rate of 2.78%. As of December 31, 2021, the FMCF had a balance of $198.9 million.
As of December 31, 2021, we had no variable-rate mortgage debt outstanding and $76.0 million of variable-rate borrowings under our line of credit, of which $75.0 million is fixed through interest rate swaps. We estimate that a change in 30-day LIBOR of 100 basis points with constant risk spreads would not have a significant impact on our net income due to our depositsinterest rate swap on our line of credit.
Mortgage loan indebtedness, excluding the FMCF, decreased by $13.5 million as of December 31, 2021, compared to December 31, 2020, primarily due to loan maturities and prepayments. As of December 31, 2021 and 2020, 100.0% of our $284.9 million of mortgage debt was at fixed rates of interest, with and investments in certain products issued by various financial institutions.

Variablestaggered maturities. As of December 31, 2021, the weighted average rate of interest rates. Approximately 77.8%, 92.8% and 97.9% ofon our mortgage debt including mortgageswas 3.81%, compared to 3.93% on properties held for sale, as of April 30, 2016, 2015 and 2014, respectively, are at fixed interest rates. Therefore, we have little exposure to interest rate fluctuation risk on our existing mortgage debt.December 31, 2020. Even though our goal is to maintain a fairly low exposure to interest rate risk, we may become vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt and onor future debt.

2016 Annual Report 69

The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Average variable rates are based on rates in effect at the reporting date.

 
Future Principal Payments (in thousands, except percentages)
        Fair
Debt20222023202420252026ThereafterTotalValue
Fixed Rate$27,113 $45,067 $4,054 $32,850 $49,047 $625,653 $783,784 $791,698 
Average Interest Rate(1)
3.85 %3.83 %3.80 %3.80 %3.84 %3.15 %3.25 % 
Variable Rate(2)
$— $— — $76,000 $— — $76,000 $76,000 
Average Interest Rate(1)
— — — 2.74 %— — 2.74 % 

Table of Contents

We primarily use long-term (more than nine years)(1)Interest rate is annualized and medium term (five to seven years) debt as a sourceincludes the effect of capital. We do not currently use derivative securities, interest-rate swaps or any other type of hedging activity to manage our interest rate risk. As of April 30, 2016, we had the following amounts of future principal and interest payments due on mortgages, including mortgages held for sale, secured byswaps.

(2)Includes our real estate.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Future Principal Payments (in thousands, except percentages)

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Fair

 

Long Term Debt

 

2017

 

2018

 

2019

 

2020

 

2021

 

Thereafter

 

Total

 

Value

 

Fixed Rate

 

$

34,344

 

$

38,004

 

$

79,258

 

$

57,133

 

$

154,389

 

$

257,395

 

$

620,523

 

$

669,848

 

Average Fixed Interest Rate

 

 

4.86

%  

 

4.80

%  

 

4.64

%  

 

4.44

%  

 

3.79

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable Rate

 

$

68,292

 

$

16,927

 

$

65,178

 

$

46,404

 

$

 —

 

$

 —

 

$

196,801

 

$

196,801

 

Average Variable Interest Rate

 

 

3.48

%  

 

3.62

%  

 

4.06

%  

 

4.82

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held for Sale

 

$

48,046

 

$

1,106

 

$

6,921

 

$

612

 

$

4,901

 

$

7,237

 

$

68,823

 

$

78,690

 

Avg Fixed Interest Rate

 

 

3.94

%  

 

5.74

%  

 

4.73

%  

 

5.86

%  

 

4.96

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

886,147

 

$

945,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Future Interest Payments (in thousands)

 

Long Term Debt

    

2017

    

2018

    

2019

    

2020

    

2021

    

Thereafter

    

Total

 

Fixed Rate

 

$

30,091

 

$

28,455

 

$

25,731

 

$

21,127

 

$

15,619

 

$

28,941

 

$

149,964

 

Variable Rate

 

 

5,957

 

 

4,687

 

 

3,440

 

 

1,472

 

 

 —

 

 

 —

 

 

15,556

 

Held for Sale

 

 

2,790

 

 

1,193

 

 

930

 

 

747

 

 

603

 

 

316

 

 

6,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

172,099

 

As of April 30, 2016, the weighted-average interest rate on our fixed rate and variable rate loans was 4.87% and 3.37%, respectively. The weighted-average interest rate on all of our mortgage debt as of April 30, 2016 was 4.54%. Any fluctuations in variable interest rates could increase or decrease our interest expenses. For example, an increase of one percent per annum on our $196.8 million of variable rate mortgage indebtedness would increase our annual interest expense by $2.0 million.

Exposure to interest rate fluctuation risk on our $100.0 million secured line of credit, of which $75.0 million is limited by a cap on the interest rate. Thesynthetically fixed with an interest rate on borrowings under the line of credit is the Wall Street Journal Prime Rate plus 1.25%, with a floor of 4.75% and a cap of 8.65%. The line of credit may be prepaid at par at any time, matures in September 2017 and had an outstanding balance of $17.5 million at April 30, 2016.

Investments with Certain Financial Institutions. We have entered into a cash management arrangement with First Western Bank (the “Bank”) with respect to deposit accounts that exceed Federal Deposit Insurance Corporation (“FDIC”) coverage. On a daily basis, account balances are swept into a repurchase account. The Bank pledges fractional interests in US Government Securities owned by the Bank at an amount equal to the excess over the uncollected balance in the repurchase account. The amounts deposited by us pursuant to the repurchase agreement are not insured by FDIC. At April 30, 2016 and 2015, these amounts totaled $36.7 million and $9.7 million, respectively.

Deposits exceeding FDIC insurance. We are potentially exposed to off-balance-sheet risk in respect of cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts.

swap.

2016 Annual Report 70

Table of Contents

Item 8. Financial Statements and Supplementary Data

Data

Our consolidated financial statements and related notes, together with the Report of the Independent Registered Public Accounting Firm, are set forth beginning on page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.

Item 9. Changes in and Disagreements with AccountantsAccountants on Accounting andFinancial Disclosure

Not applicable.

None.

39
Table of Contents
Item 9A. Controls and Procedures

Procedures 

Disclosure Controls and Procedures: As of April 30, 2016,December 31, 2021, the end of the period covered by this Annual Report, on Form 10-K, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in RuleRules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting: There have been no changes in our internal control over financial reporting (as defined in RuleRules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2016 AnnualManagement’s Report 71

on Internal Control Over Financial Reporting

Table of Contents

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting as of April 30, 2016.December 31, 2021. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with United States GAAP.

As of April 30, 2016,December 31, 2021, management conducted an assessment of the effectiveness of our internal control over financial reporting, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has determined that our internal control over financial reporting as of April 30, 2016,December 31, 2021, was effective.

Our internal control over financial reporting includes policies and procedures that (i) that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions, acquisitions and dispositions of assets; (ii)
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and the trustees; and (iii)
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements. Because of
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because ofdue to changes in conditions or thatdeterioration in the degree of compliance with the policies or procedures may deteriorate.

procedures.

Our internal control over financial reporting as of April 30, 2016December 31, 2021 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report on page F-3F-4 of our consolidated financial statements contained in our Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of April 30, 2016.

(The remainder of this page has been intentionally left blank.)

December 31, 2021.

2016 Annual Report 72

Table of Contents

Item 9B.  Other Information

Information

None.

PART III

The information required in III 

Item 10 (Directors,10. Trustees, Executive Officers and Corporate Governance),Governance
The information required by this Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and Director Independence), and Item 14 (Principal Accountant Fees and Services) will beregarding Trustees is incorporated by reference to the information under “Election of Trustees,” “Information About Our Executive Officers,” “Code of Conduct and Code of Ethics for Senior Financial Officers,”
40
Table of Contents
and “Board Committees” in our definitive proxy statement for our 20162022 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Report.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the information under “Trustee Compensation,” “Compensation Discussion and Analysis” and “Executive Officer Compensation Tables” in our definitive proxy statement for our 2022 Annual Report on Form 10-K.

Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by this Item is incorporated by reference to the information under “Securities Authorized for Issuance Under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2022 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
Item 13. Certain Relationships and Related Transactions, and Trustee Independence
The information required by this Item is incorporated by reference to the information under “Relationships and Related Party Transactions” and “Corporate Governance and Board Matters” in our definitive proxy statement for our 2022 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated by reference to the information under “Accounting and Audit Committee Matters” in our definitive proxy statement for our 2022 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
PART IV

IV 

Item 15. Exhibits, Financial Statement Schedules  

Schedules  

(a)

The following documents are filed as part of this report:  

The following documents are filed as part of this report:  

1. Financial Statements

See the “Table of Contents” to our consolidated financial statements on page F-1 of this Annual Report on Form 10-K.

Report.

2.Financial Statement Schedules

See the “Table of Contents” to our consolidated financial statements on page F-1 of this Annual Report on Form 10-K.

Report.

The following financial statement schedules should be read in conjunction with the financial statements referenced in Part II, Item 8 of this Annual Report on Form 10-K:Report: Schedule III Real Estate and Accumulated Depreciation

3. Exhibits

See the Exhibit Index set forth in part (b) below.

The Exhibit Index below lists the exhibits to this Report. We will furnish a printed copy of any exhibit listed below to any security holder who requests it upon payment of a fee of 15 cents per page. All Exhibits are either contained in this Report or are incorporated by reference as indicated below.
Item 16. 10-K Summary
None.
41
Table of Contents
EXHIBIT INDEX

(b)

The

EXHIBIT NO.DESCRIPTION
1.1
1.2
8-K filed with the Commission on September 10, 2021.

2016 Annual Report 73

Table of Contents

EXHIBIT INDEX

EXHIBIT NO.

DESCRIPTION

3.1.

3.2

Fourth

3.3
4.1

3.3

4.2

4.3
4.4
4.5

4.6

4.7
4.8
4.9
4.10
4.11
4.12
42
Table of Contents
EXHIBIT NO.DESCRIPTION
4.13
4.14
4.15
10.1**

10.2**†

10.3†

10.4**†

10.5**†

10.6**

10.7**

10.8**

10.9**

10.10**

10.11**


 

10.2**
10.3**
10.4**
10.5**
10.6**
10.7**
10.8**
10.9**
10.10**
10.11**
10.12
10.13
10.14
10.15
43
Table of Contents
EXHIBIT NO.DESCRIPTION
10.16
10.17

10.12**

10.18

Short-Term Incentive Program

10.13**

10.19

Long-Term Incentive Program dated May 1, 2012

2016 Annual Report 74

Table of Contents

EXHIBIT NO.

10.20

DESCRIPTION

10.14

Amended and Restated Loan

10.15

10.21

First

10.22
10.23

10.16

21.1†

Construction Loan Agreement datedJanuary 22, 2015 by and between IRET-71 France, LLC, as borrower, the lending institutions party thereto as lenders, PNC Bank, NA, as Administrative Agent, and PNC Capital Markets, LLC, as Lead Arranger (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 28, 2015).

10.17

23.1†

Agreement for Sale and Purchase of Property dated June 12, 2015 by and between IRET Properties, as seller, and LSREF4 Bison Acquisitions, LLC, as buyer (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 18, 2015).

10.18

Agreement for Sale and Purchase of Property dated June 25, 2015 by and between IRET Properties, as seller, and Glenborough, LLC, as agent on behalf of a joint venture between Glenborough and Oaktree Capital Management, L.P., as buyer (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 26, 2015).

12.1†

Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Share Dividends

21.1†

Subsidiaries of Investors Real Estate Trust

23.1†

31.1

24.1†

Power of Attorney (included on the signature page to this Annual Report on Form 10-K and incorporated by reference herein).

31.1†

31.2†

32.1†

32.2†

101†

The following materials from our Annual Report on Form 10-K for the fiscal yeartwelve-months ended April 30, 2016December 31, 2021 formatted in Inline eXtensible Business Reporting Language ("XBRL"iXBRL"): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Equity, (iv) the Consolidated Statements of Cash Flows, and (v) notes to these consolidated financial statements.

statements, and (vi) the Cover Page to our Annual Report on From 10-K.
104Cover Page Interactive Data File (formatted as Inline iXBRL and contained in Exhibit 101)

† Filed herewith

** Indicates management compensatory plan, contract or arrangement.

2016 Annual Report 75

44

Table of Contents

Signatures

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 29, 2016

February 28, 2022

Investors Real Estate Trust

Centerspace

By:

/s/ Timothy P. Mihalick

Mark O. Decker, Jr.

Timothy P. Mihalick

Mark O. Decker, Jr.

President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature

Title

Date

Signature

Title

Date

/s/ Jeffrey L. Miller

Jeffrey L. Miller

/s/ John A. Schissel

John A. SchisselTrustee & Chairman

June 29, 2016

February 28, 2022

/s/ John D. Stewart

Mark O. Decker, Jr.

John D. Stewart

Mark O. Decker, Jr.

Trustee & Vice Chairman

June 29, 2016

/s/ Timothy P. Mihalick

Timothy P. Mihalick

President & Chief Executive Officer


(Principal Executive Officer); Trustee

June 29, 2016

February 28, 2022

/s/ Ted E. Holmes

Bhairav Patel

Ted E. Holmes

Bhairav Patel

Executive Vice President &and Chief Financial Officer (Principal
(Principal Financial and Accounting Officer)

June 29, 2016

February 28, 2022

/s/ Nancy B. Andersen

Michael T. Dance

Nancy B. Andersen

Michael T. Dance

Vice President & Principal Accounting Officer (Principal Accounting Officer)

Trustee

June 29, 2016

February 28, 2022

/s/ Emily Nagle Green

Emily Nagle GreenTrusteeFebruary 28, 2022
/s/ Linda J. Hall
Linda J. HallTrusteeFebruary 28, 2022
/s/ Jeffrey P. Caira

Jeffrey P. Caira

Trustee

June 29, 2016

February 28, 2022

/s/ Michael T. Dance

Mary J. Twinem

Michael T. Dance

Mary J. Twinem

Trustee

June 29, 2016

February 28, 2022

/s/ Linda J. Hall

Rodney Jones-Tyson

Linda J. Hall

Rodney Jones-Tyson

Trustee

June 29, 2016

February 28, 2022

/s/ Terrance P. Maxwell

Terrance P. Maxwell

Trustee

June 29, 2016

/s/ John A. Schissel

John A. Schissel

Trustee

June 29, 2016

/s/ Stephen L. Stenehjem

Stephen L. Stenehjem

Trustee

June 29, 2016

/s/ Jeffrey K. Woodbury

Jeffrey K. Woodbury

Trustee

June 29, 2016

45

2016 Annual Report 76

Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF April 30, 2016 AND 2015,

AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,

EQUITY AND CASH FLOWS FOR EACH OF

THE FISCAL YEARS IN THE THREE YEARS ENDED April 30, 2016.

ADDITIONAL INFORMATION

FOR THE YEAR ENDED

April 30, 2016

and

REPORTS OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

1400 31st Avenue SW, Suite 60

Post Office Box 1988

Minot, ND 58702-1988

701-837-4738

fax: 701-838-7785

info@iret.com

www.iret.com

2016 Annual Report

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

TABLE OF CONTENTS

PAGE

F-2

F-2

CONSOLIDATED FINANCIAL STATEMENTS

F-4

F-5

F-5

F-6

F-7

F-6

F-8

F-8

F-9

F-10

F-11

ADDITIONAL INFORMATION

F-50

F-31

Schedules other than those listed above are omitted since they are not requiredor are not applicable, or the required information is shown in the consolidatedfinancial statements or notes thereon.


2016 Annual Report

F-1

Table of Contents




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FIRM


Board of Trustees and Shareholders

Investors Real Estate Trust

Centerspace

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Investors Real Estate TrustCenterspace (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of April 30, 2016December 31, 2021 and 2015, and2020, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2016. Our auditsDecember 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the basic consolidatedPublic Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial statements included the financial statement schedule listedreporting as of December 31, 2021, based on criteria established in the index appearing under Item 15. 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2022 expressed an unqualified opinion.
Basis for opinion
These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s financial statements and financial statement schedule based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.

In

Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Investors Real Estate Trust and subsidiaries as of April 30, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements, taken as a whole, presents fairly,and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Accounting for Series E preferred units issued.
As described in Note 4 to the financial statements, in September 2021, the Company issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83.00 per unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert. The Company recorded the Series E preferred units as a noncontrolling interest within permanent equity on the consolidated balance sheet at fair value. We have identified the accounting for the Series E preferred units as a critical audit matter.
The principal consideration for our determination that accounting for the Series E preferred units is a critical audit matter is it involved a high degree of judgment in assessing management’s conclusions that the Series E preferred units are a noncontrolling interest within permanent equity.
Our audit procedures related to the accounting for the Series E preferred units included the following, among others.
•We tested the design and operating effectiveness of management’s internal controls over their accounting of the Series E preferred units, including controls over the evaluation and application of the appropriate accounting principles.
•We inspected the contribution agreements, Series E preferred unit agreement, and operating partnership agreement to identify and understand the rights of the unit holders and provisions relevant to management’s conclusions.
F-2
Table of Contents
•We evaluated relevant provisions within these agreements to determine whether management’s conclusions were consistent with the relevant accounting guidance, specifically whether the Series E preferred units were a noncontrolling interest within permanent equity.
•We consulted our firm’s subject matter expert regarding the appropriateness of management’s conclusions on the accounting for the Series E preferred units.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2013.

Minneapolis, Minnesota
February 28, 2022

F-3
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trustees and Shareholders
Centerspace
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Centerspace (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the information set forth therein.

2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control overconsolidated financial reportingstatements of the Company as of April 30, 2016, based on criteria established inand for the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),year ended December 31, 2021, and our report dated June 29, 2016February 28, 2022 expressed an unqualified opinion thereon.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota

June 29, 2016

on those financial statements.

2016 Annual Report F-2

Basis for opinion

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Trustees and Shareholders

Investors Real Estate Trust

We have audited the internal control over financial reporting of Investors Real Estate Trust (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of April 30, 2016, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2016, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended April 30, 2016, and our report dated June 29, 2016 expressed an unqualified opinion on those financial statements.


/s/ GRANT THORNTON LLP

Minneapolis, Minnesota

June 29, 2016

February 28, 2022

2016 Annual Report F-3


F-4

Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SHEETS

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

April 30, 2016

    

April 30, 2015

 

ASSETS

 

 

 

 

 

 

 

Real estate investments

 

 

 

 

 

 

 

Property owned

 

$

1,681,471

 

$

1,335,687

 

Less accumulated depreciation

 

 

(312,889)

 

 

(279,417)

 

 

 

 

1,368,582

 

 

1,056,270

 

Development in progress

 

 

51,681

 

 

153,994

 

Unimproved land

 

 

20,939

 

 

25,827

 

Total real estate investments

 

 

1,441,202

 

 

1,236,091

 

Assets held for sale and assets of discontinued operations

 

 

220,761

 

 

675,764

 

Cash and cash equivalents

 

 

66,698

 

 

48,970

 

Other investments

 

 

50

 

 

329

 

Receivable arising from straight-lining of rents, net of allowance of $333 and $222, respectively

 

 

7,179

 

 

6,504

 

Accounts receivable, net of allowance of $97 and $439, respectively

 

 

1,524

 

 

2,390

 

Real estate deposits

 

 

0

 

 

2,489

 

Prepaid and other assets

 

 

2,937

 

 

3,134

 

Intangible assets, net of accumulated amortization of $6,230 and $6,112, respectively

 

 

1,858

 

 

1,388

 

Tax, insurance, and other escrow

 

 

5,450

 

 

9,499

 

Property and equipment, net of accumulated depreciation of $1,058 and $1,374, respectively

 

 

1,011

 

 

1,027

 

Goodwill

 

 

1,680

 

 

1,718

 

Deferred charges and leasing costs, net of accumulated amortization of $8,716 and $7,524, respectively

 

 

9,827

 

 

8,534

 

TOTAL ASSETS

 

$

1,760,177

 

$

1,997,837

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Liabilities held for sale and liabilites of discontinued operations

 

$

77,712

 

$

401,299

 

Accounts payable and accrued expenses

 

 

39,727

 

 

55,540

 

Revolving line of credit

 

 

17,500

 

 

60,500

 

Mortgages payable

 

 

817,324

 

 

596,965

 

Construction debt and other

 

 

82,130

 

 

136,211

 

TOTAL LIABILITIES

 

 

1,034,393

 

 

1,250,515

 

COMMITMENTS AND CONTINGENCIES (NOTE 15)

 

 

 

 

 

 

 

REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES

 

 

7,522

 

 

6,368

 

EQUITY

 

 

 

 

 

 

 

Investors Real Estate Trust shareholders’ equity

 

 

 

 

 

 

 

Series A Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 1,150,000 shares issued and outstanding at April 30, 2016 and April 30, 2015, aggregate liquidation preference of $28,750,000)

 

 

27,317

 

 

27,317

 

Series B Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 4,600,000 shares issued and outstanding at April 30, 2016 and April 30, 2015, aggregate liquidation preference of $115,000,000)

 

 

111,357

 

 

111,357

 

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 121,091,249 shares issued and outstanding at April 30, 2016, and 124,455,624 shares issued and outstanding at April 30, 2015)

 

 

922,084

 

 

951,868

 

Accumulated distributions in excess of net income

 

 

(442,000)

 

 

(438,432)

 

Total Investors Real Estate Trust shareholders’ equity

 

 

618,758

 

 

652,110

 

Noncontrolling interests – Operating Partnership (16,285,239 units at April 30, 2016 and 13,999,725 units at April 30, 2015)

 

 

78,484

 

 

58,325

 

Noncontrolling interests – consolidated real estate entities

 

 

21,020

 

 

30,519

 

Total equity

 

 

718,262

 

 

740,954

 

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

$

1,760,177

 

$

1,997,837

 

 (in thousands, except per share data)
 December 31, 2021December 31, 2020
ASSETS 
Real estate investments 
Property owned$2,271,170 $1,812,557 
Less accumulated depreciation(443,592)(399,249)
 1,827,578 1,413,308 
Mortgage loans receivable43,276 24,661 
Total real estate investments1,870,854 1,437,969 
Cash and cash equivalents31,267 392 
Restricted cash7,358 6,918 
Other assets30,582 18,904 
TOTAL ASSETS$1,940,061 $1,464,183 
LIABILITIES, MEZZANINE EQUITY, AND EQUITY  
LIABILITIES  
Accounts payable and accrued expenses$62,403 $55,609 
Revolving lines of credit76,000 152,871 
Notes payable, net of unamortized loan costs of $656 and $754, respectively
299,344 269,246 
Mortgages payable, net of unamortized loan costs of $3,187 and $1,371, respectively
480,703 297,074 
TOTAL LIABILITIES$918,450 $774,800 
COMMITMENTS AND CONTINGENCIES (NOTE 12)00
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 166 units issued and outstanding at December 31, 2021 and 2020, aggregate liquidation preference of $16,560)$25,331 $16,560 
EQUITY  
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 3,881 shares issued and outstanding at December 31, 2021 and 2020, aggregate liquidation preference of $97,036)93,530 93,530 
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 15,016 shares issued and outstanding at December 31, 2021 and 13,027 shares issued and outstanding at December 31, 2020)1,157,255 968,263 
Accumulated distributions in excess of net income(474,318)(427,681)
Accumulated other comprehensive income (loss)(4,435)(15,905)
Total shareholders’ equity$772,032 $618,207 
Noncontrolling interests – Operating Partnership and Series E preferred units223,600 53,930 
Noncontrolling interests – consolidated real estate entities648 686 
TOTAL EQUITY$996,280 $672,823 
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY$1,940,061 $1,464,183 

See Notes to Consolidated Financial Statements.

2016 Annual Report F-4

F-5

Table of Contents

INVESTORS REAL ESTATE TRUSTCENTERSPACE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

Years Ended April 30,

 

 

 

2016

    

2015

    

2014

 

REVENUE

 

 

 

 

 

 

 

 

 

 

Real estate rentals

 

$

170,698

 

$

159,969

 

$

145,028

 

Tenant reimbursement

 

 

17,622

 

 

19,352

 

 

19,562

 

TOTAL REVENUE

 

 

188,320

 

 

179,321

 

 

164,590

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

Property operating expenses, excluding real estate taxes

 

 

58,859

 

 

53,535

 

 

50,552

 

Real estate taxes

 

 

20,241

 

 

19,602

 

 

18,704

 

Depreciation and amortization

 

 

49,832

 

 

42,784

 

 

39,712

 

Impairment of real estate investments

 

 

5,543

 

 

4,663

 

 

7,700

 

General and administrative expenses

 

 

11,267

 

 

11,824

 

 

10,743

 

Acquisition and investment related costs

 

 

830

 

 

362

 

 

279

 

Other expenses

 

 

2,231

 

 

1,647

 

 

1,850

 

TOTAL EXPENSES

 

 

148,803

 

 

134,417

 

 

129,540

 

Gain on involuntary conversion

 

 

 —

 

 

 —

 

 

2,480

 

Operating income

 

 

39,517

 

 

44,904

 

 

37,530

 

Interest expense

 

 

(35,768)

 

 

(34,447)

 

 

(33,729)

 

Loss on extinguishment of debt

 

 

(106)

 

 

 —

 

 

 —

 

Interest income

 

 

2,256

 

 

2,238

 

 

1,906

 

Other income

 

 

317

 

 

718

 

 

242

 

Income before gain (loss) on sale of real estate and other investments, gain on bargain purchase and income (loss) from discontinued operations

 

 

6,216

 

 

13,413

 

 

5,949

 

Gain (loss) on sale of real estate and other investments

 

 

9,640

 

 

6,093

 

 

(51)

 

Gain on bargain purchase

 

 

3,424

 

 

 —

 

 

 —

 

Income from continuing operations

 

 

19,280

 

 

19,506

 

 

5,898

 

Income (loss) from discontinued operations

 

 

57,322

 

 

9,178

 

 

(22,838)

 

NET INCOME (LOSS)

 

 

76,602

 

 

28,684

 

 

(16,940)

 

Net (income) loss attributable to noncontrolling interests – Operating Partnership

 

 

(7,032)

 

 

(1,526)

 

 

4,676

 

Net loss (income) attributable to noncontrolling interests – consolidated real estate entities

 

 

2,436

 

 

(3,071)

 

 

(910)

 

Net income (loss) attributable to Investors Real Estate Trust

 

 

72,006

 

 

24,087

 

 

(13,174)

 

Dividends to preferred shareholders

 

 

(11,514)

 

 

(11,514)

 

 

(11,514)

 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

 

$

60,492

 

$

12,573

 

$

(24,688)

 

Earnings (loss) per common share from continuing operations – Investors Real Estate Trust – basic and diluted

 

$

0.08

 

$

0.04

 

$

(0.05)

 

Earnings per common share from discontinued operations – Investors Real Estate Trust – basic and diluted

 

 

0.41

 

 

0.07

 

 

(0.18)

 

NET INCOME (LOSS) PER COMMON SHARE – BASIC & DILUTED

 

$

0.49

 

$

0.11

 

$

(0.23)

 

 
(in thousands, except per share data)
 Year Ended December 31,
 202120202019
REVENUE$201,705 $177,994 $185,755 
EXPENSES   
Property operating expenses, excluding real estate taxes57,753 51,625 57,249 
Real estate taxes24,104 21,533 21,066 
Property management expense8,752 5,801 6,186 
Casualty loss344 1,662 1,116 
Depreciation and amortization92,165 75,593 74,271 
General and administrative expenses16,213 13,440 14,450 
TOTAL EXPENSES199,331 169,654 174,338 
Gain (loss) on sale of real estate and other investments27,518 25,503 97,624 
Operating income (loss)29,892 33,843 109,041 
Interest expense(29,078)(27,525)(30,537)
Loss on extinguishment of debt(535)(23)(2,360)
Interest and other income (loss)(2,380)(1,552)2,092 
Gain (loss) on litigation settlement— — 6,586 
NET INCOME (LOSS)(2,101)4,743 84,822 
Dividends to preferred unitholders(640)(640)(537)
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units2,806 212 (6,752)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities(94)126 1,136 
Net income (loss) attributable to controlling interests(29)4,441 78,669 
Dividends to preferred shareholders(6,428)(6,528)(6,821)
Redemption of preferred shares— 297 — 
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS$(6,457)$(1,790)$71,848 
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC$(0.47)$(0.15)$6.06 
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED$(0.47)$(0.15)$6.00 
Weighted average shares - basic13,80312,56411,744
Weighted average shares - dilutive15,70413,59413,182
See Notes to Consolidated Financial Statements.


2016 Annual Report F-5

F-6

Table of Contents

INVESTORS REAL ESTATE TRUSTCENTERSPACE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY  

COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

 

    

 

 

    

NUMBER

    

 

 

    

ACCUMULATED

    

 

 

   

 

 

 

 

 

NUMBER OF

 

 

 

 

OF

 

 

 

 

DISTRIBUTIONS

 

NONREDEEMABLE

 

 

 

 

 

 

PREFERRED

 

PREFERRED

 

COMMON

 

COMMON

 

IN EXCESS OF

 

NONCONTROLLING

 

TOTAL

 

 

 

SHARES

 

SHARES

 

SHARES

 

SHARES

 

NET INCOME

 

INTERESTS

 

EQUITY

 

BALANCE APRIL 30, 2014

 

5,750

 

$

138,674

 

109,019

 

$

843,268

 

$

(389,758)

 

$

128,362

 

$

720,546

 

Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

24,087

 

 

4,432

 

 

28,519

 

Distributions - common shares and units

 

 

 

 

 

 

 

 

 

 

 

 

(61,247)

 

 

(8,607)

 

 

(69,854)

 

Distributions – Series A preferred shares

 

 

 

 

 

 

 

 

 

 

 

 

(2,372)

 

 

 

 

 

(2,372)

 

Distributions – Series B preferred shares

 

 

 

 

 

 

 

 

 

 

 

 

(9,142)

 

 

 

 

 

(9,142)

 

Distribution reinvestment and share purchase plan

 

 

 

 

 

 

8,102

 

 

64,856

 

 

 

 

 

 

 

 

64,856

 

Shares issued and share-based compensation

 

 

 

 

 

 

151

 

 

2,626

 

 

 

 

 

 

 

 

2,626

 

Partnership units issued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

800

 

 

800

 

Redemption of units for common shares

 

 

 

 

 

 

7,183

 

 

41,264

 

 

 

 

 

(41,264)

 

 

 —

 

Contributions from nonredeemable noncontrolling interests – consolidated real estate entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,909

 

 

8,909

 

Distributions to nonredeemable noncontrolling interests – consolidated real estate entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,926)

 

 

(3,926)

 

Other

 

 

 

 

 

 

 

 

 

(146)

 

 

 

 

 

138

 

 

(8)

 

BALANCE APRIL 30, 2015

 

5,750

 

$

138,674

 

124,455

 

$

951,868

 

$

(438,432)

 

$

88,844

 

$

740,954

 

Net income attributable to Investors Real Estate Trust and nonredeemable noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

72,006

 

 

4,562

 

 

76,568

 

Distributions - common shares and units

 

 

 

 

 

 

 

 

 

 

 

 

(64,060)

 

 

(7,230)

 

 

(71,290)

 

Distributions – Series A preferred shares

 

 

 

 

 

 

 

 

 

 

 

 

(2,372)

 

 

 

 

 

(2,372)

 

Distributions – Series B preferred shares

 

 

 

 

 

 

 

 

 

 

 

 

(9,142)

 

 

 

 

 

(9,142)

 

Distribution reinvestment and share purchase plan

 

 

 

 

 

 

821

 

 

5,619

 

 

 

 

 

 

 

 

5,619

 

Shares issued and share-based compensation

 

 

 

 

 

 

185

 

 

1,728

 

 

 

 

 

 

 

 

1,728

 

Partnership units issued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,226

 

 

18,226

 

Redemption of units for common shares

 

 

 

 

 

 

273

 

 

1,477

 

 

 

 

 

(1,477)

 

 

 —

 

Shares repurchased

 

 

 

 

 

 

(4,643)

 

 

(35,000)

 

 

 

 

 

 

 

 

(35,000)

 

Contributions from nonredeemable noncontrolling interests – consolidated real estate entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

 

 —

 

Distributions to nonredeemable noncontrolling interests – consolidated real estate entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,029)

 

 

(7,029)

 

Adjustments to prior year redemption of units for common shares

 

 

 

 

 

 

 

 

 

(3,608)

 

 

 

 

 

3,608

 

 

 —

 

BALANCE APRIL 30, 2016

 

5,750

 

$

138,674

 

121,091

 

$

922,084

 

$

(442,000)

 

$

99,504

 

$

718,262

 

(in thousands)
Year Ended December 31,
 202120202019
NET INCOME (LOSS)$(2,101)$4,743 $84,822 
Other comprehensive income:
Unrealized gain (loss) from derivative instrument2,383 (11,068)(7,040)
(Gain) loss on derivative instrument reclassified into earnings9,087 2,770 289 
Total comprehensive income (loss)$9,369 $(3,555)$78,071 
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units4,407 882 (6,058)
Net comprehensive (income) loss attributable to noncontrolling interests – consolidated real estate entities(94)126 1,136 
Comprehensive income (loss) attributable to controlling interests$13,682 $(2,547)$73,149 


See Notes to Consolidated Financial Statements.

2016 Annual Report F-6

F-7

Table of Contents

INVESTORS REAL ESTATE TRUSTCENTERSPACE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY(continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

 

    

 

 

    

NUMBER

    

 

 

    

ACCUMULATED

    

 

 

    

 

 

 

 

 

NUMBER OF

 

 

 

 

OF

 

 

 

 

DISTRIBUTIONS

 

NONREDEEMABLE 

 

 

 

 

 

 

PREFERRED

 

PREFERRED

 

COMMON

 

COMMON

 

IN EXCESS OF

 

NONCONTROLLING

 

TOTAL

 

 

 

SHARES

 

SHARES

 

SHARES

 

SHARES

 

NET INCOME

 

INTERESTS

 

EQUITY

 

BALANCE APRIL 30, 2013

 

5,750

 

$

138,674

 

101,488

 

$

784,454

 

$

(310,341)

 

$

142,657

 

$

755,444

 

Net income attributable to Investors Real Estate Trust and noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

(13,174)

 

 

(4,033)

 

 

(17,207)

 

Distributions - common shares and units

 

 

 

 

 

 

 

 

 

 

 

 

(54,729)

 

 

(11,283)

 

 

(66,012)

 

Distributions – Series A preferred shares

 

 

 

 

 

 

 

 

 

 

 

 

(2,372)

 

 

 

 

 

(2,372)

 

Distributions – Series B preferred shares

 

 

 

 

 

 

 

 

 

 

 

 

(9,142)

 

 

 

 

 

(9,142)

 

Distribution reinvestment and share purchase plan

 

 

 

 

 

 

6,615

 

 

55,793

 

 

 

 

 

 

 

 

55,793

 

Shares issued and share-based compensation

 

 

 

 

 

 

13

 

 

112

 

 

 

 

 

 

 

 

112

 

Partnership units issued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,480

 

 

3,480

 

Redemption of units for common shares

 

 

 

 

 

 

903

 

 

4,353

 

 

 

 

 

(4,353)

 

 

 —

 

Contributions from nonredeemable noncontrolling interests – consolidated real estate entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,895

 

 

3,895

 

Other

 

 

 

 

 

 

 

 

 

(1,444)

 

 

 

 

 

(2,001)

 

 

(3,445)

 

BALANCE APRIL 30, 2014

 

5,750

 

$

138,674

 

109,019

 

$

843,268

 

$

(389,758)

 

$

128,362

 

$

720,546

 

 (in thousands, except per share amounts)
  NUMBER ACCUMULATEDACCUMULATED  
  OF DISTRIBUTIONSOTHERNONREDEEMABLE 
 PREFERREDCOMMONCOMMONIN EXCESS OFCOMPREHENSIVENONCONTROLLINGTOTAL
 SHARESSHARESSHARESNET INCOMEINCOMEINTERESTSEQUITY
Balance at December 31, 2018$99,456 11,942 $899,234 $(429,048)$(856)$74,663 $643,449 
Net income (loss) attributable to controlling interest and noncontrolling interests   78,669 5,790 84,459 
Change in fair value of derivatives(6,751)(6,751)
Distributions – common shares and Units ($2.80 per share and Unit)   (32,996)(3,414)(36,410)
Distributions – Series C preferred shares ($1.65625 per Series C share)   (6,821) (6,821)
Share-based compensation, net of forfeitures 11 1,905   1,905 
Sale of common shares, net308 22,019 22,019 
Redemption of Units for common shares 173 7,823  (7,823)— 
Redemption of Units for cash(8,147)(8,147)
Shares repurchased0(329)(18,023)0(18,023)
Acquisition of redeemable noncontrolling interests4,529 4,529 
Other(7)(87) (220)(307)
Balance at December 31, 2019$99,456 12,098 $917,400 $(390,196)$(7,607)$60,849 $679,902 
Net income (loss) attributable to controlling interests and noncontrolling interests   4,441 (338)4,103 
Change in fair value of derivatives(8,298)(8,298)
Distributions – common shares and Units ($2.80 per share and Unit)   (35,695)(2,842)(38,537)
Distributions – Series C preferred shares ($1.65625 per Series C share)   (6,528) (6,528)
Share-based compensation, net of forfeitures 20 2,106   2,106 
Sale of common shares, net829 58,852 58,852 
Redemption of Units for common shares 81 (1,750) 1,750 — 
Shares repurchased(5,926)00297  (5,629)
Acquisition of nonredeemable noncontrolling interests – consolidated real estate entities(7,584)(4,637)(12,221)
Other(1)(761)(166)(927)
Balance at December 31, 2020$93,530 13,027 $968,263 $(427,681)$(15,905)$54,616 $672,823 
Net income (loss) attributable to controlling interests and noncontrolling interests(29)(2,712)(2,741)
Change in fair value of derivatives11,470 11,470 
Distributions – common shares and Units ($2.84 per share and Unit)(40,180)(2,489)(42,669)
Distributions – Series C preferred shares ($1.65625 per Series C share)(6,428)(6,428)
Distributions – Series E preferred units ($1.301667 per unit)(2,343)(2,343)
Share-based compensation, net of forfeitures28 2,689 2,689 
Sale of common shares, net1,817 156,038 156,038 
Issuance of Series E preferred units44,905 172,608 217,513 
Redemption of Units for common shares144 (4,714)4,714 — 
Change in value of Series D preferred units— (8,771)(8,771)
Other— (1,155)(146)(1,301)
Balance at December 31, 2021$93,530 15,016 $1,157,255 $(474,318)$(4,435)$224,248 $996,280 

See Notes to Consolidated Financial Statements.


2016 Annual Report F-7


F-8

Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWFLOWS
 (in thousands)
 Year Ended December 31,
 202120202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)$(2,101)$4,743 $84,822 
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
Depreciation and amortization93,110 76,596 75,408 
(Gain) loss on sale of real estate, land, and other investments(27,518)(25,503)(97,624)
Realized (gain) loss on marketable securities— 3,378 — 
(Gain) loss on extinguishment of debt and discontinued operations535 23 2,360 
(Gain) loss on litigation settlement— — (1,349)
Share-based compensation expense2,687 2,106 1,905 
(Gain) loss on interest rate swap termination, amortization, and mark-to-market4,931 — — 
Bad debt expense2,304 2,332 1,050 
Other, net(268)1,310 46 
Changes in other assets and liabilities: 
Other assets(5,402)(4,818)1,076 
Accounts payable and accrued expenses15,750 1,061 1,930 
Net cash provided (used) by operating activities$84,028 $61,228 $69,624 
CASH FLOWS FROM INVESTING ACTIVITIES 
Proceeds from repayment of mortgage loans receivable— 10,020 — 
Proceeds from sale of marketable securities— 3,856 — 
Increase in mortgages and notes receivable(18,614)(24,862)(6,279)
Purchase of marketable securities— (179)(6,942)
Proceeds from sale of real estate and other investments61,334 43,686 199,282 
Payments for acquisitions of real estate assets(273,566)(168,696)(158,466)
Payments for improvements of real estate assets(35,877)(30,315)(20,954)
Other investing activities(502)1,525 366 
Net cash provided (used) by investing activities$(267,225)$(164,965)$7,007 
CASH FLOWS FROM FINANCING ACTIVITIES 
Proceeds from mortgages payable196,725 — 59,900 
Principal payments on mortgages payable(36,282)(33,422)(177,743)
Proceeds from revolving lines of credit258,580 155,028 245,397 
Principal payments on revolving lines of credit(335,451)(52,235)(252,818)
Proceeds from notes payable and other debt174,544 — 124,878 
Principal payments on notes payable and other debt(145,000)— — 
Payments for termination of interest rate swaps(3,804)— — 
Proceeds from sale of common shares, net of issuance costs156,038 58,852 22,019 
Payments for acquisition of noncontrolling interests – consolidated real estate entities— (12,221)(1,260)
Repurchase of common shares— — (18,023)
Repurchase of preferred shares— (5,629)— 
Repurchase of partnership units— (50)(8,147)
Distributions paid to common shareholders(38,487)(35,045)(32,891)
Distributions paid to preferred shareholders(6,428)(6,528)(6,821)
Distributions paid to noncontrolling interests – Operating Partnership and Series E preferred units(4,916)(2,900)(3,630)
Distributions paid to preferred unitholders(640)(640)(377)
Other financing activities(367)(280)(254)
Net cash provided (used) by financing activities$214,512 $64,930 $(49,770)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH31,315 (38,807)26,861 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF YEAR7,310 46,117 19,256 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF YEAR$38,625 $7,310 $46,117 

F-9
Table of ContentsS

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

Year Ended April 30, 

 

 

 

2016

    

2015

    

2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

76,602

 

$

28,684

 

$

(16,940)

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

50,978

 

 

43,762

 

 

41,976

 

Depreciation and amortization from discontinued operations

 

 

14,477

 

 

28,316

 

 

31,747

 

Gain on sale of real estate, land, other investments and discontinued operations

 

 

(33,423)

 

 

(6,093)

 

 

(6,948)

 

Gain on involuntary conversion

 

 

 —

 

 

 —

 

 

(2,480)

 

Gain on extinguishment of debt and discontinued operations

 

 

(35,552)

 

 

 —

 

 

 —

 

Gain on bargain purchase

 

 

(3,424)

 

 

 —

 

 

 —

 

Share-based compensation expense

 

 

2,256

 

 

2,215

 

 

 —

 

Impairment of real estate investments

 

 

5,983

 

 

6,105

 

 

44,426

 

Bad debt expense

 

 

651

 

 

967

 

 

434

 

Changes in other assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Receivable arising from straight-lining of rents

 

 

(437)

 

 

(64)

 

 

(2,293)

 

Accounts receivable

 

 

1,815

 

 

4,058

 

 

1,880

 

Prepaid and other assets

 

 

762

 

 

(150)

 

 

(555)

 

Tax, insurance and other escrow

 

 

1,463

 

 

1,445

 

 

(1,046)

 

Deferred charges and leasing costs

 

 

(1,366)

 

 

(2,300)

 

 

(4,708)

 

Accounts payable, accrued expenses and other liabilities

 

 

(14,292)

 

 

7,234

 

 

7,021

 

Net cash provided by operating activities

 

 

66,493

 

 

114,179

 

 

92,514

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Proceeds from real estate deposits

 

 

5,203

 

 

1,168

 

 

991

 

Payments for real estate deposits

 

 

(2,714)

 

 

(3,512)

 

 

(940)

 

Decrease in other investments

 

 

279

 

 

 —

 

 

314

 

Decrease in lender holdbacks for improvements

 

 

4,347

 

 

10,738

 

 

3,780

 

Increase in lender holdbacks for improvements

 

 

(1,136)

 

 

(1,204)

 

 

(11,045)

 

Proceeds from sale of discontinued operations

 

 

365,845

 

 

 —

 

 

78,879

 

Proceeds from sale of real estate and other investments

 

 

40,306

 

 

73,835

 

 

682

 

Insurance proceeds received

 

 

1,320

 

 

2,678

 

 

2,491

 

Payments for acquisitions of real estate assets

 

 

(121,821)

 

 

(38,704)

 

 

(38,283)

 

Payments for development and re-development of real estate assets

 

 

(122,801)

 

 

(189,091)

 

 

(123,744)

 

Payments for improvements of real estate assets

 

 

(28,976)

 

 

(21,327)

 

 

(25,974)

 

Payments for improvements of real estate assets from discontinued operations

 

 

(5,600)

 

 

(10,988)

 

 

(8,985)

 

Net cash provided (used) by investing activities

 

 

134,252

 

 

(176,407)

 

 

(121,834)

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Proceeds from mortgages payable

 

 

143,574

 

 

90,749

 

 

50,333

 

Principal payments on mortgages payable

 

 

(234,885)

 

 

(127,622)

 

 

(101,867)

 

Proceeds from revolving lines of credit

 

 

82,000

 

 

55,000

 

 

12,500

 

Principal payments on revolving lines of credit

 

 

(125,000)

 

 

(17,000)

 

 

0

 

Proceeds from construction debt

 

 

94,142

 

 

93,643

 

 

55,199

 

Principal payments on construction debt

 

 

(24,754)

 

 

(12,685)

 

 

(17,443)

 

Proceeds from financing liability

 

 

 —

 

 

 —

 

 

7,900

 

Proceeds from sale of common shares under distribution reinvestment and share purchase program

 

 

1,493

 

 

48,701

 

 

41,194

 

Proceeds from noncontrolling partner – consolidated real estate entities

 

 

1,120

 

 

2,284

 

 

994

 

Payments for acquisition of noncontrolling interests – consolidated real estate entities

 

 

 —

 

 

 —

 

 

(2,505)

 

Repurchase of common shares

 

 

(35,000)

 

 

 —

 

 

 —

 

Distributions paid to common shareholders

 

 

(60,063)

 

 

(45,728)

 

 

(40,764)

 

Distributions paid to preferred shareholders

 

 

(11,514)

 

 

(11,514)

 

 

(11,514)

 

Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership

 

 

(7,101)

 

 

(7,971)

 

 

(10,649)

 

Distributions paid to noncontrolling interests – consolidated real estate entities

 

 

(7,029)

 

 

(3,926)

 

 

(924)

 

Net cash (used) provided by financing activities

 

 

(183,017)

 

 

63,931

 

 

(17,546)

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

17,728

 

 

1,703

 

 

(46,866)

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 

 

48,970

 

 

47,267

 

 

94,133

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

 

$

66,698

 

$

48,970

 

$

47,267

 


CENTERSPACE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)
Year Ended December 31,
202120202019
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES 
Accrued capital expenditures$(802)$(1,420)$1,273 
Operating partnership units converted to shares(4,714)(1,750)7,823 
Distributions declared but not paid11,411 9,802 9,210 
Retirement of shares withheld for taxes933 — — 
Real estate assets acquired through assumption of debt20,000 — — 
Fair value adjustment to debt2,367 — — 
Property acquired through issuance of Series D preferred units— — 16,560 
Real estate assets acquired through exchange of note receivable— 17,663 — 
Note receivable exchanged through real estate acquisition— (17,663)— 
Real estate acquired through issuance of Series E preferred units217,513 — — 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
Cash paid for interest26,528 26,051 28,679 
(in thousands)
Balance sheet descriptionDecember 31, 2021December 31, 2020December 31, 2019
Cash and cash equivalents$31,267 $392 $26,579 
Restricted cash7,358 6,918 19,538 
Total cash, cash equivalents and restricted cash$38,625 $7,310 $46,117 
See Notes to Consolidated Financial Statements.


2016 Annual Report F-8





F-10

Table of Contents

INVESTORS REAL ESTATE TRUSTCENTERSPACE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

Year Ended April 30, 

 

 

 

2016

    

2015

    

2014

 

SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Distribution reinvestment plan – shares issued

 

$

3,997

 

$

15,519

 

$

13,965

 

Operating partnership distribution reinvestment plan – shares issued

 

 

130

 

 

636

 

 

634

 

Operating partnership units converted to shares

 

 

1,477

 

 

41,264

 

 

4,353

 

Real estate assets acquired through the issuance of operating partnership units

 

 

18,226

 

 

800

 

 

3,480

 

Real estate assets acquired through assumption of indebtedness and accrued costs

 

 

 —

 

 

12,169

 

 

 —

 

(Decrease) increase  to accounts payable included within real estate investments

 

 

(10,420)

 

 

5,116

 

 

1,767

 

Real estate assets contributed by noncontrolling interests – consolidated real estate entities

 

 

 —

 

 

6,624

 

 

2,901

 

Involuntary conversion of assets due to flood and fire damage

 

 

 —

 

 

 —

 

 

7,052

 

Construction debt reclassified to mortgages payable

 

 

123,553

 

 

 —

 

 

 —

 

Forfeiture of note payable in conjunction with sale of property

 

 

 —

 

 

 —

 

 

600

 

Decrease in real estate assets in connection with transfer of real estate assets in settlement of debt

 

 

87,213

 

 

 —

 

 

 —

 

Decrease in debt in connection with transfer of real estate assets in settlement of debt

 

 

122,610

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

Cash paid for interest, net of amounts capitalized of $4,396, $4,903 and $2,855, respectively

 

$

39,668

 

$

51,283

 

$

54,071

 

See Notes to Consolidated Financial Statements.

2016 Annual Report F-9

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2016, 2015,STATEMENTS

December 31, 2021, 2020, and 2014

2019


NOTE 1 • ORGANIZATION

Investors Real Estate Trust

Centerspace (“IRET”, “we”Centerspace,” “we,” “our,” or “us”) is a self-advised equity real estate investment trust engaged in acquiring, owning and leasing real estate. We have elected to be taxed as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended. As a REIT, we 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, except for taxes on undistributed REIT taxable income and taxesfocused on the income generated by our taxable REIT subsidiary (“TRS”). Our TRS is subject to corporate federalownership, management, acquisition, redevelopment and state income tax on its taxable income at regular statutory rates. We have considered estimated future taxable income and have determined that there were no material income tax provisions or material net deferred income tax items for our TRS for the years ended April 30, 2016, 2015 and 2014. Our properties are located mainly in the statesdevelopment of North Dakota and Minnesota, but also in the states of Idaho, Iowa, Kansas, Montana, Nebraska, South Dakota, Wisconsin and Wyoming.apartment communities. As of April 30, 2016,December 31, 2021, we held for investment 99 multifamily properties79 apartment communities with 12,950 apartment units and 47 commercial properties, consisting of healthcare, industrial, office and retail, totaling 2.9 million net rentable square feet. As of April 30, 2016, we held for sale 1 multifamily property, 36 commercial properties and 3 parcels of land.14,441 homes. We conduct a majority of our business activities through our consolidated operating partnership, IRET Properties, a North Dakota Limited PartnershipCenterspace, LP, (the “Operating Partnership”), as well as through a number of other subsidiary entities.

All references to IRET,Centerspace, we, our, or us refer to Investors Real Estate TrustCenterspace and its consolidated subsidiaries.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation. Our fiscal year ends April 30th.

Our interest in the Operating Partnership as of December 31, 2021 and 2020 was 88.1%83.3% and 89.9%93.0%, respectively, of the limited partnership units of the Operating Partnership (“Units”) as of April 30, 2016 and 2015,, which includes 100% of the general partnership interest.

Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their Units for cash any time following the first anniversary of the date they acquired such Units (“Exchange Right”). When a limited partner exercises the Exchange Right, we have the right, in our sole discretion, to acquire such Units by either making a cash payment or exchanging the Units for our common shares of beneficial interest (“Common Shares”), on a one-for-one basis. The Exchange Right is subject to certain conditions and limitations, including the limited partner may not exercise the Exchange Right more than two times during a calendar year and the limited partner may not exercise for less than 1,000 Units, or, if such limited partner holds less than 1,000 Units, for less than 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, a greater number of redemptions during a calendar year or other limitations to their Exchange Right.

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 partnerspartner’s or controlling interest. These entities are consolidated into our other operations with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.

2016 Annual Report F-10

Table of Contents

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current accounting principles generally accepted in the United States of America (“U.S. GAAP”) and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 does not apply to lease contracts accounted for under ASC 840, Leases.The ASU is effective for fiscal years beginning after December 15, 2017. We do not expect adoption of this update to have a material impact on our operating results or financial position.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis. ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidated analysis of reporting entities that are involved with variable interest entities, and (iv) provide a scope exception for certain entities. The ASU is effective for fiscal years beginning after December 15, 2015. We do not expect adoption of this update to have a material impact on our operating results or financial position.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability to which they relate, consistent with debt discounts, as opposed to being presented as assets. The ASU is effective for fiscal years beginning after December 15, 2015. We do not expect adoption of this update to have a material impact on our operating results or financial position.

In April 2015, the FASB issued ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. Under ASU 2015-05, if a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The ASU is effective for fiscal years beginning after December 15, 2015. We do not expect adoption of this update to have a material impact on our operating results or financial position.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We do not expect adoption of this update to have a material impact on our operating results or financial position.

In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 amends existing accounting standards for lease accounting, including by requiring lessees to recognize most leases on the balance sheet and making certain changes to lessor accounting. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We are currently evaluating the impact the new standard may have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, accrual of compensation cost, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. We are currently evaluating the impact the new standard may have on our consolidated financial statements.

2016 Annual Report F-11

Table of Contents

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS
The following table provides a brief description of recent GAAP accounting standards updates (“ASUs”).
StandardDescriptionDate of AdoptionEffect on the Financial Statements or Other Significant Matters
ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting
This ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.This ASU is optional and may be elected over time.We adopted this guidance in June 2021 on a prospective basis. This adoption did not have a material impact on the Consolidated Financial Statements.
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entitiy's Own Equity
This ASU simplifies accounting for convertible instruments and removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. This ASU also simplifies the diluted earnings per share calculation in certain areas and provide updated disclosure requirements.This ASU is effective for annual reporting periods beginning after December 31, 2021. Early adoption is permitted.We early adopted this guidance in the first quarter of 2021 using the modified retrospective method. The adoption did not have a material impact on the Consolidated Financial Statements.

F-11
Table of Contents
RECLASSIFICATIONS

Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. OnThese reclassifications had no impact on net income as reported in the Consolidated Statements of Operations, we combined utilities, maintenance, insurance, property management expenses and other property expenses onto a single line called property operating expenses, excluding real estate taxes. We also combined depreciation/amortization related to real estate investments and amortization related to non-real estate investments onto a single line called depreciation and amortization. Additionally on the Consolidated Statements of Operations, we reclassed acquisition and project costs from other expenses to acquisition and investment related costs. On the Consolidated Balance Sheets, we reclassified assets and liabilities related to properties classified as held for sale.

We report, in discontinued operations, the resultsconsolidated statement of operations, total assets, liabilities or equity as reported in the consolidated balance sheets and the related gains or losses of properties that have either been disposed of or classified as held for sale and for which the disposition represents a strategic shift that has or will have a major effect on our operations and financial results. As the result of discontinued operations, retroactive reclassifications that change prior period numbers have been made. See Note 12 for additional information. During the first quarter of fiscal year 2016, we classified as discontinued operations 48 office properties, 17 retail properties and 1 healthcare property. During the fourth quarter of fiscal year 2016, we classified as discontinued operations 34 senior housing properties.

total shareholder’s equity.

REAL ESTATE INVESTMENTS

Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any. AcquisitionsProperty, consisting primarily of real estate are recorded based upon preliminary allocationsinvestments, totaled $1.8 billion and $1.4 billion as of December 31, 2021 and 2020, respectively. Upon acquisitions of real estate, we assess the purchase price which are subject to adjustment as additional information is obtained, but in no case more than one year after the datefair value of acquisition. We allocate the purchase price based on the relative fair values of theacquired tangible and intangible assets of an acquired property (which includes the(including land, buildingbuildings and personal property), which areis determined by valuing the property as if it were vacant, and fairconsider whether there were significant intangible assets acquired (for example, above- and below-market leases, the value of acquired in-place leases and resident relationships) and assumed liabilities, and allocate the intangible assets (which include in-place leases.)purchase price based on these assessments. The as-if-vacant value is allocated to land, buildings, and personal property based on management’sour determination of the relative fair values 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 comparables. A landcomparable 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 estimateda relative fair value allocation if acquired in a merger or in a single or portfolio acquisition.

Acquired above- and below-market lease values are recorded as the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments to rental revenue over the remaining terms of the respective leases, which includes fixed rate renewal options for below-market leases if it is determined probable the tenant will execute a bargain renewal option.

Other intangible assets acquired include amounts for in-place lease values that are based upon our evaluation of the specific characteristics of the leases. Factors considered in the fair value analysis include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. We also consider information about each property obtained during pre-acquisition due diligence, marketing, and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired.

Acquired above- and below-market lease values are recorded as the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments to rental revenue over the remaining terms of the respective leases.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. We use a 20-4010-37 year estimated life for buildings and improvements and a 5-125-10 year estimated life for furniture, fixtures, and equipment.

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We follow the real estate project costs guidance in ASC 970, Real Estate – General,in accounting for the costs of development and re-developmentredevelopment projects. As real estate is undergoing development or redevelopment, all project costs directly associated with and attributable to the development and construction of a project, including interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period begins when development activities and expenditures begin and are identifiable to a specific property and ends upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use upon completion of tenant improvements (in the case of commercial properties) or upon issuance of a certificate of occupancy (in the case of multifamily properties).occupancy. General and administrative costs are expensed as incurred.

We did 0t capitalize interest during the years ended December 31, 2021, 2020, and 2019.

Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful life, generally five to tentwenty years. Property sales or dispositions are recorded when titlecontrol of the assets transfers we have received sufficient considerationto the buyer and we have no significant continuing involvement with the property sold.

We periodically evaluate our long-lived assets, including real estate investments, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset groupproperty, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the long-lived asset groupproperty against the carrying amount of that asset.property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, of the asset, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset group.amount. If our anticipated holding period for properties, the estimated fair value of properties or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future physical occupancy, rental rates, and capital
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requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

During fiscal year 2016,the years ended December 31, 2021, 2020, and 2019 we incurreddid not incur a non-cash loss of $6.0 million due tofor impairment of one office property, one healthcare property, two parcels of land and eight multifamily properties of which approximately $440,000 is reflected in discontinued operations. See Note 12 for additional information on discontinued operations. We recognized impairments of approximately $440,000 on an office property in Eden Prairie, Minnesota; $1.9 million on a healthcare property in Sartell, Minnesota; $1.6 million on a parcel of land in Grand Chute, Wisconsin; $1.9 million on eight multifamily properties in St. Cloud, Minnesota; and $162,000 on a parcel of land in River Falls, Wisconsin. These properties were written-down to estimated fair value during fiscal year 2016 based on receipt of individual market offers to purchase and our intent to dispose of the properties or, in the case of the Grand Chute, Wisconsin, the sale listing price and our intent to dispose of the property. The Sartell, Minnesota property is classified as held for sale at April 30, 2016.

During fiscal year 2015, we incurred a non-cash loss of $6.1 million due to impairment of four commercial properties and two parcels of unimproved land of which $1.4 million is reflected in discontinued operations. See Note 12 for additional information on discontinued operations. We recognized impairments of $2.1 million on a retail property in Kalispell, Montana; approximately $183,000 on an office property in Golden Valley, Minnesota; $1.8 million on an office property in Minneapolis, Minnesota; $1.4 million on an office property in Boise, Idaho; approximately $98,000 on unimproved land in Eagan, Minnesota; and approximately $442,000 on unimproved land in Weston, Wisconsin. These properties were written-down to estimated fair value during fiscal year 2015 based on receipt of individual market offers to purchase and our intent to dispose of the properties or, in the case of the Boise and Weston properties, an independent appraisal. The Kalispell and Golden Valley properties were sold in the second quarter of fiscal year 2015. The Minneapolis property is classified as held for sale at April 30, 2015.

During fiscal year 2014, we incurred a non-cash loss of $44.4 million due to impairment of 15 properties, of which $36.7 million is reflected in discontinued operations. See Note 12 for additional information on discontinued operations. We recognized impairments of approximately $864,000 on an industrial property in St. Louis Park, Minnesota; $329,000 on an office property in Bloomington, Minnesota; $265,000 on a retail property in Anoka, Minnesota; $402,000 on an industrial property in Clive, Iowa; and $4.8 million on an industrial property in Roseville, Minnesota. These properties were written-down to estimated fair value based on receipt of individual market offers to purchase and our intent to dispose of the properties or, in the case of the Roseville, Minnesota property, a commitment to dispose of a significant portion of the property due to planned redevelopment. The approximately $835,000 impairment of the Edina, Minnesota, office

real estate.

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property was based on receipt of a market offer to purchase and our intent to dispose of the property (we signed a purchase agreement in the fourth quarter of fiscal year 2014). This property was classified as held for sale at April 30, 2014. An impairment loss of $2.1 million was recognized during fiscal year 2014 for the Golden Valley, Minnesota, office property based on receipt of a market offer to purchase and our intent to dispose of the property (we signed a purchase agreement in the first quarter of fiscal year 2015).

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. Our determination of fair value is based on inputs management believes are consistent with those that market participants would use. Estimates are significantly impacted by estimates of sales price, selling velocity, and other factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. Depreciation is not recorded on assets classified as held for sale.

We classify properties as held for sale when they meet the U.S. GAAP criteria, which include: (a) management commits to and initiates a plan to sell the asset (disposal group),asset; (b) the sale is probable and expected to be completed within one year under terms that are usual and customary for sales of such assets (disposal groups),assets; and (c) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. We generally consider these criteria met when the transaction has been approved by our Board of Directors,Trustees, there are no known significant contingencies related to the sale, and management believes it is probable that the sale will be completed within one year. 35 healthcareWe had no properties one multifamily property, one industrial property and three parcels of unimproved land were classified as held for sale at April 30, 2016. One office propertyDecember 31, 2021 and one healthcare property were classified as held for sale at April 30, 2015. In addition, properties classified as discontinued operations during fiscal year 2016 were reclassified as assets and liabilities held for sale as of April 30, 2015. See Note 12 for additional information.

Prior to February 1, 2014, we reported, in discontinued operations, the results of operations and the related gains or losses of properties that had either been disposed of or classified as held for sale and otherwise met the classification of a discontinued operation. Effective February 1, 2014, we adopted ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this standard, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

As a result of the adoption of ASU 2014-08, results of operations and gains or losses on sale for properties that are disposed or classified as held for sale in the ordinary course of business on or subsequent to February 1, 2014 would generally be included in continuing operations on our consolidated statements of operations, to the extent such disposals did not meet the criteria for classification as a discontinued operation described above.

IDENTIFIED INTANGIBLE ASSETS2020.

CASH, CASH EQUIVALENTS, AND LIABILITIES AND GOODWILL

Upon acquisition of real estate, we record the intangible assets and liabilities acquired (for example, if the leases in place for the real estate property acquired carry rents above the market rent, the difference is classified as an intangible asset) at their estimated fair value separate and apart from goodwill. We amortize identified intangible assets and liabilities that are determined to have finite lives based on the period over which the assets and liabilities are expected to affect, directly or indirectly, the future cash flows of the real estate property acquired (generally the life of the lease). In the twelve months ended April 30, 2016 and 2015, respectively, we added $2.2 million and approximately $416,000 of new intangible assets and approximately $101,000 and $0 of new intangible liabilities. The weighted average lives of the intangible assets acquired in the twelve months ended April 30, 2016 and 2015 are 0.7 years and 0.5 years, respectively.  Amortization of intangibles related to above or below-market leases is recorded in real estate rentals in the Consolidated Statements of Operations. Amortization of other intangibles is recorded in depreciation/amortization related to real estate investments in the Consolidated Statements of Operations. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its estimated fair value.

RESTRICTED CASH

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The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Our goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill book value as of April 30, 2016 and 2015 was $1.7 million and $1.7 million, respectively. The annual reviews of goodwill compared the fair value of the reporting units that have been assigned goodwill to their carrying value (investment cost less accumulated depreciation), with the results for these periods indicating no impairment. In fiscal year 2016, we disposed of eight commercial properties that had goodwill assigned, and as a result, approximately $196,000 of goodwill was derecognized. In fiscal year 2015, we recognized approximately $852,000 of goodwill from the acquisition of the Homestead Garden multifamily property and disposed of one multifamily property and two commercial properties to which goodwill had been assigned, and as a result, approximately $40,000 of goodwill was derecognized. In fiscal years 2014, we disposed of property that had goodwill assigned, and as a result, approximately $7,000 of goodwill was derecognized.

PROPERTY AND EQUIPMENT

Property and equipment consists of the equipment contained at our headquarters in Minot, North Dakota, corporate offices in Minneapolis and St. Cloud, Minnesota, and additional property management offices located in the states where we own properties. The balance sheet reflects these assets at cost, net of accumulated depreciation. As of April 30, 2016 and 2015, property and equipment cost was $2.1 million and $2.4 million, respectively. Accumulated depreciation was $1.1 million and $1.4 million as of April 30, 2016 and 2015, respectively.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three months or less. Cash and cash equivalents consist of our bank deposits, and short-term investment certificates acquired subject to repurchase agreements, and our deposits in a money market mutual fund. At times, these deposits may exceed the FDIC limit.

COMPENSATING BALANCES AND OTHER INVESTMENTS; LENDER HOLDBACKS

We maintain compensating balances, not restricted asare potentially exposed to withdrawal,credit risk for cash deposited with severalFDIC-insured financial institutions in connection with financing received from those institutions and/or to ensure future credit availability. At April 30, 2016, our compensating balances totaled $13.2 million andaccounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts.

As of December 31, 2021 restricted cash consisted of the following:

Financial Institution

First International Bank, Watford City, ND

$

6,000,000

Associated Bank, Green Bay, WI

3,000,000

The PrivateBank, Minneapolis, MN

2,000,000

Bremer Bank, Saint Paul, MN

1,285,000

Dacotah Bank, Minot, ND

350,000

Peoples State Bank, Velva, ND

225,000

American National Bank, Omaha, NE

200,000

Commerce Bank a Minnesota Banking Corporation

100,000

Total

$

13,160,000

A portion$5.0 million of the deposit at Dacotah Bank isreal estate deposits for property acquisitions and $2.4 million in escrows held as a certificateby lenders. As of deposit and comprises the $50,000 in other investments on the Consolidated Balance Sheets. The certificateDecember 31, 2020, restricted cash consisted primarily of deposit has anet tax-deferred exchange proceeds remaining term of less than six months and we intend to hold it to maturity.

We have a number of mortgage loans under which the lender retainsfrom a portion of the loan proceeds or requires a deposit for the payment of construction costs or tenant improvements. The decrease of $4.3 million in lender holdbacks for improvements reflected in the Consolidated Statements of Cash Flows for the fiscal year ended April 30, 2016 is due primarily to the release of loan proceeds to us upon completion of these constructionour dispositions and tenant improvement projects, while the increase of $1.1 million represents additional amounts retainedescrows held by lenders for new projects.

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ALLOWANCE FOR DOUBTFUL ACCOUNTS

Management evaluates the appropriate amount of the allowance for doubtful accounts by assessing the recoverability of individual real estate mortgage loans and rent receivables, through a comparison of their carrying amount with their estimated realizable value. Management considers tenant financial condition, credit history and current economic conditions in establishing these allowances. Receivable balances are written off when deemed uncollectible. Recoveries of receivables previously written off, if any, are recorded when received. A summary of the changes in the allowance for doubtful accounts including properties held for sale for fiscal years ended April 30, 2016, 2015 and 2014 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

2014

 

Balance at beginning of year

 

$

1,156

 

$

1,044

 

$

1,393

 

Provision

 

 

651

 

 

967

 

 

434

 

Write-off

 

 

(861)

 

 

(855)

 

 

(783)

 

Balance at close of year

 

$

946

 

$

1,156

 

$

1,044

 

TAX, INSURANCE, AND OTHER ESCROW

Tax, insurance and other escrow includeslenders. Escrows include funds deposited with a lender for payment of real estate taxtaxes and insurance, and reserves for funds to be used for replacement of structural elements and mechanical equipment ofat certain projects.communities. The funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender.

REAL ESTATE DEPOSITS

Real

LEASES
As a lessor, we primarily lease multifamily apartment homes which qualify as operating leases with terms that are generally one year or less. Rental revenues are recognized in accordance with ASC 842, Leases, using a method that represents a straight-line basis over the term of the lease. Rental income represents approximately 98.2% of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 1.8% of our total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time.
Some of our apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from three to fifteen years. The leases for commercial spaces generally include options to extend the lease for additional terms.
Beginning in April 2020, we abated rent, common area maintenance, and real estate deposits include funds heldtaxes for commercial tenants that experienced government-mandated interruptions or closures of their businesses. We elected to account for these accommodations as though enforceable rights and obligations existed without evaluating if such a right or obligation existed under the lease agreement, as allowed by escrow agentsthe FASB Q&A released on April 10, 2020. The accommodations were recognized as variable lease payments. During the years ended December 31, 2021 and 2020, we recognized a reduction in revenue of $47,000 and $656,000, respectively, due to the abatement of amounts due from our commercial tenants.
Many of our leases contain non-lease components for utility reimbursement from our residents. We have elected the practical expedient to combine lease and non-lease components for all asset classes. The combined components are included in lease income and are accounted for under ASC 842.
The aggregate amount of future scheduled lease income on our operating leases for commercial spaces, excluding any variable lease income and non-lease components, as of December 31, 2021, was as follows:
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(in thousands)
2022$2,447 
20232,455 
20242,453 
20252,400 
20261,804 
Thereafter880 
Total scheduled lease income - operating leases$12,439 
REVENUE
Revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration the company expects to be applied towardentitled for those goods and services.
Revenue streams that are included in revenues from contracts with customers include:
•Other property revenues: We recognize revenue for rental related income not included as a component of a lease, such as other application fees, as earned, and have concluded that this is appropriate under the purchasenew standard.
•Gains or losses on sales of real estate: A gain or loss is recognized when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold. As a result, we may recognize a gain on real estate disposition transactions that previously did not qualify as a sale or for full profit recognition under the paymentprevious accounting standard. Any gain or loss on real estate dispositions is net of loancertain closing and other costs associated with loan placement or refinancing.

DEFERRED CHARGES AND LEASING COSTS

Coststhe disposition.

The following table presents the disaggregation of revenue streams of our rental income for the years ended December 31, 2021, 2020, and commissions incurred in obtaining tenant leases are amortized on the straight-line method over the terms of the related leases. Costs incurred in obtaining long-term financing are amortized to interest expense over the life of the loan using the straight-line method, which approximates the effective interest method.

2019:

(in thousands)
Year ended December 31,
Revenue StreamApplicable Standard202120202019
Fixed lease income - operating leasesLeases$189,452 $168,119 $176,706 
Variable lease income - operating leasesLeases8,565 7,068 5,586 
Other property revenueRevenue from contracts with customers3,688 2,807 3,463 
Total revenue$201,705 $177,994 $185,755 
INCOME TAXES

We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended.Code. Under those sections, a REIT which distributes at least 90% of its REIT taxable income, excluding capital gains, as a dividend 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 shareholders. For the fiscal years ended April 30, 2016, 2015December 31, 2021, 2020, and 2014,2019, we distributed in excess of 90% of itsour taxable income and realized capital gains from property dispositions within the prescribed time limits. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years. Even as a REIT, we may be subject to certain state and local income and property taxes, and to federal income and excise taxes on undistributed taxable income. In general, however, if we qualifiequalify as a REIT, no provisions for federal income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by a taxable REIT subsidiary (TRS).

We have one1 TRS, acquired during the second quarter of fiscal year 2014, which is subject to corporate federal and state income taxes on its taxable income at regular statutory rates. For fiscal year 2016, we estimate that the TRS will have no taxable income. There were no income tax provisions or material deferred income tax items for our TRS for the fiscal years ended April 30, 2016, 2015December 31, 2021, 2020, and 2014. Our TRS is the tenant in our Legends at Heritage Place senior housing facility.

2019.

We conduct our business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) through our Operating Partnership. UPREIT status allows us to accept the contribution of real estate in exchange for Units.

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Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated real estate.

Distributions for the calendar year ended December 31, 2015

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The following table indicates how distributions were characterized for federal income tax purposes as 36.28% ordinary income, 11.99% capital gain and 51.73% return of capital. Distributions for the calendaryears ended December 31, 2021, 2020, and 2019:
CALENDAR YEAR 202120202019
Tax status of distributions
Capital gain0.92 %13.62 %38.53 %
Ordinary income7.82 %7.91 %23.43 %
Return of capital91.26 %78.47 %38.04 %
VARIABLE INTEREST ENTITY
We have determined that our Operating Partnership and each of our less-than-wholly owned real estate partnerships is a variable interest entity (“VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on our balance sheet because we have a controlling financial interest in the VIEs and have both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because our Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE.
OTHER ASSETS
As of December 31, 2021 and 2020, other assets consisted of the following amounts:
in thousands
December 31, 2021December 31, 2020
Receivable arising from straight line rents$343 $336 
Accounts receivable, net of allowance
667 523 
Real estate related loans receivable6,208 6,332 
Prepaid and other assets9,693 5,702 
Intangible assets, net of accumulated amortization
7,370 1,150 
Property and equipment, net of accumulated depreciation
3,370 2,674 
Goodwill866 986 
Deferred charges and leasing costs2,065 1,201 
Total Other Assets$30,582 $18,904 
Intangible assets consist of in-place leases valued at the time of acquisition. For the years ended December 31, 2021, 2020, and 2019, we recognized $13.5 million, $3.1 million, and $2.0 million, respectively, of amortization expense related to these intangibles, included within depreciation and amortization in the consolidated statements of operations. The intangible assets remaining at December 31, 2021 will be amortized in 2022.
PROPERTY AND EQUIPMENT
Property and equipment consists primarily of office equipment located at our corporate offices in Minot, North Dakota and in Minneapolis, Minnesota. The consolidated balance sheets reflects these assets at cost, net of accumulated depreciation, and are included within Other Assets. As of December 31, 2021 and 2020, property and equipment cost was $4.7 million and $4.7 million, respectively. Accumulated depreciation was $1.4 million and $2.0 million as of December 31, 2021 and 2020, respectively, and are included within other assets in the consolidated balance sheets.
MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE
In March 2020, in connection with our acquisition of Ironwood, an apartment community in New Hope, Minnesota, we acquired a tax increment financing note receivable (“TIF”) with an initial principal balance of $6.6 million. As of December 31, 2021 and 2020, the principal balance was $6.4 million and $6.6 million, respectively, which appears within Other Assets in our Consolidated Balance Sheets. The note bears an interest rate of 4.5% with payments due in February and August of each year.
In December 2019, we originated a $29.9 million construction loan and a $15.3 million mezzanine loan for the development of a multifamily development located in Minneapolis, Minnesota. The construction and mezzanine loans bear interest at 4.5% and
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11.5%, respectively. As of December 31, 2021, we had fully funded the $29.9 million construction loan and $13.4 million of the mezzanine loan, both of which appear within mortgage loans receivable in our Consolidated Balance Sheets. As of December 31, 2020, we had funded $24.7 million of the construction loan. The loans are secured by mortgages and mature on December 31, 2023, and the agreement provides us with an option to purchase the development. The loans represent an investment in an unconsolidated variable interest entity. We are not the primary beneficiary of the VIE as we do not have the power to direct the activities which most significantly impact the entity’s economic performance nor do we have significant influence over the entity.
MARKETABLE SECURITIES
Marketable securities consisted of equity securities. We report equity securities at fair value based on quoted market prices (Level 1 inputs). Any unrealized gains or losses are included in interest and other income (loss) on the consolidated statements of operations. During the year ended December 31, 20142020, we had a realized loss of $3.4 million arising from marketable securities which were characterized, for federal income tax purposes, as 25.74% ordinary income, 23.09% capitaldisposed during the year ended December 31, 2020. As of December 31, 2021 and 2020, we had no marketable securities.
GAIN ON LITIGATION SETTLEMENT
During the year ended December 31, 2019, we recorded a gain on litigation settlement of $6.6 million from the settlement on a construction defect claim. The gain consisted of $5.2 million of cash received and 51.17% return$1.4 million of capital.

REVENUE RECOGNITION

Multifamily rental properties are leasedliabilities waived under operating leases with terms generally of one year or less. Commercial properties are leased under operating leases to tenants for various terms generally exceeding one year. Lease terms often include renewal options. Rental revenue is recognized on the straight-line basis, which averages minimum required rents over the terms of the leases. Rents recognized in advance of collection are reflected as receivable arising from straight-lining of rents, net of allowance for doubtful accounts. Rent concessions, including free rent, are amortized on a straight-line basis over the terms of the related leases.

Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenditures are incurred. We receive payments for these reimbursements from substantially all of our tenants at multi-tenant commercial properties throughout the year. A number of the commercial leases provide for a base rent plus a percentage rent based on gross sales in excess of a stipulated amount. These percentage rents are recorded once the required sales level is achieved.

NET INCOMEsettlement.

NOTE 3 • EARNINGS PER SHARE

Basic net incomeearnings per share is computed asby dividing net income available to common shareholders divided by the weighted average number of common shares outstanding forduring the period. We have no potentiallyissued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under our 2015 Incentive Plan, Series D Convertible Preferred Units (“Series D preferred units”), and Series E Convertible Preferred Units (“Series E preferred units”), which could have a dilutive financial interests. The potentialeffect on our earnings per share upon exercise of the RSUs, ISOs, or upon conversion of the Series D or Series E preferred units (refer to Note 4 for further discussion of the preferred units). Other than the issuance of RSUs, ISOs, Series D preferred units, and Series E preferred units, we have no outstanding options, warrants, convertible stock, or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings. Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their limited partnership units (“Units”) any time following the first anniversary of the date they acquired such Units (“Exchange Right”). Upon the exercise of Exchange Rights, and in our sole discretion, we may issue common shares in exchange for Units on a 1-for-one-basis.
For the years ended December 31, 2021, 2020, and 2019, performance-based restricted stock awards of 31,821, 26,994, and 37,822 were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of the common shares for the periods presented and, therefore, were anti-dilutive. Refer to Note 16 - Share-Based Compensation for discussion of the terms for these awards.
For the year ended December 31, 2020, Series D preferred units of 228,000, stock options of 86,000, and time-based RSUs of 13,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Including these items would have improved earnings per share.
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 years ended December 31, 2021, 2020, and 2019:
F-16
Table of Contents
 (in thousands, except per share data)
 Year Ended December 31,
 202120202019
NUMERATOR  
Net income (loss) attributable to controlling interests(29)4,441 78,669 
Dividends to preferred shareholders(6,428)(6,528)(6,821)
Redemption of preferred shares— 297 — 
Numerator for basic earnings per share – net income (loss) available to common shareholders(6,457)(1,790)71,848 
Noncontrolling interests – Operating Partnership and Series E preferred units(2,806)(212)6,752 
Dividends to preferred unitholders640 640 537 
Numerator for diluted earnings (loss) per share$(8,623)$(1,362)$79,137 
DENOMINATOR  
Denominator for basic earnings per share weighted average shares13,803 12,564 11,744 
Effect of redeemable operating partnership units899 1,030 1,237 
Effect of Series D preferred units228 — 193 
Effect of Series E preferred units729 — — 
Effect of diluted restricted stock awards and restricted stock units45 — 8 
Denominator for diluted earnings per share15,704 13,594 13,182 
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC$(0.47)$(0.15)$6.06 
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED$(0.47)$(0.15)$6.00 
NOTE 4 • EQUITY AND MEZZANINE EQUITY
Operating Partnership Units. Outstanding Units in the Operating Partnership were 832,000 Units at December 31, 2021 and 977,000 Units at December 31, 2020.
Exchange Rights. Pursuant to the exercise of Exchange Rights, we redeemed Units in exchange for common shares pursuantduring the years ended December 31, 2021 and 2020 as detailed in the table below.
(in thousands)
Number ofTotal Book
UnitsValue
Year ended December 31, 2021144 $(4,714)
Year ended December 31, 202081 $(1,750)
Series E Preferred Units (Noncontrolling interest). On September 1, 2021, we issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83 per unit. We have the option, at our sole election, to the Exchange Right will have no effect on net incomeconvert Series E preferred units into OP Units if our stock has traded at or above $83 per share because Unitholdersfor 15 of 30 consecutive trading days and common shareholders effectively share equally in the net incomewe have made at least 3 consecutive quarters of distributions with a rate of at least $0.804 per OP unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Operating Partnership.

PROCEEDS FROM FINANCING LIABILITY

Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert.

Common Shares and Equity Awards. Common shares outstanding on December 31, 2021 and 2020, totaled 15.0 million and 13.0 million, respectively. During the first quarteryears ended December 31, 2021 and 2020, we issued approximately 27,351 and 21,000 common shares, respectively, with a total grant-date value of fiscal year 2014, we sold a non-core assisted living property in exchange$1.0 million, under our 2015 Incentive Plan, as share-based compensation for $7.9 million in cashemployees and a $29.0 million contract for deed which matures August 1, 2018. The buyer leasedtrustees. During the property back to us,years ended December 31, 2021 and also granted us an option to repurchase2020, approximately 500 and 2,400 common shares were forfeited under the property at a specified price at or prior to July 31, 2018. We accounted for the transaction as a financing due to our continuing involvement with the property and recorded the $7.9 million in sales proceeds within other liabilities on the Consolidated Balance Sheets. The balance of the liability as of April 30, 2016 is $7.9 million.

VARIABLE INTEREST ENTITY

On November 27, 2012,2015 Incentive Plan, respectively.

Equity Distribution Agreement. In September 2021, we entered into a joint venture operatingan equity distribution agreement in connection with a real estate development companynew at-the-market offering program (“2021 ATM Program”), replacing our prior at-the-market offering program (“2019 ATM Program”). Under the 2021 ATM Program, we may offer and sell common shares having an aggregate sales price of up to construct an apartment project$250.0 million, in Minot, North Dakota as IRET – Minot Apartments, LLC, with approximately 69%amounts and at times determined by management. Under the 2021 ATM Program, we may enter into separate forward sale agreements. The proceeds from the sale of common shares under the project financed with third-party debt and approximately 7% financed with debt from us2021 ATM Program are intended to be used for general purposes, which may include the joint venture entity. The two-phase project was substantially completed in the third quarterfunding of fiscal year 2015. As of April 30, 2016, we are the approximately 51.0% owner of the joint venture and have management and leasing responsibilities and the real estate development company owns approximately 49.0% of the joint venture and was responsible for the development andacquisitions, construction of the property. We have determined that the joint venture is a variable interest entity (“VIE”), primarily based on the fact that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support. We have also determined that we are the primary beneficiary of the VIE due to the fact that we are providing more than 50% of the equity contributions, the subordinated debt and a guarantee on the third party debt and have the power to direct the most significant activities that impact the entity’s economic performance.

2016 Annual Report F-17

or mezzanine loans, community

F-17
Table of Contents

On June 12, 2014, we entered into a joint venture operating agreement with a real estate development companyrenovations, and two other partners to construct a three-phase apartment project in Edina, Minnesota as IRET – 71 France, LLC. We estimate total costs for the project at $73.3 million, with approximately 69%repayment of the project financed with third-party debt and approximately 7% financed with debt from us to the joint venture entity. The first phase of the project was substantially completed in the second quarter of fiscal year 2016, the second phase of the project was substantially completed in the third quarter of fiscal year 2016 and construction of the third phase is expected to be completed in the first quarter of fiscal year 2017. See Development, Expansion and Renovation Projects in Note 10 for additional information.indebtedness. As of April 30, 2016,December 31, 2021, we arehad common shares having an aggregate offering price of up to $158.7 million remaining available under the approximately 52.6% owner of the joint venture and will have management and leasing responsibilities after the project has been in service for 24 months and the real estate development company and the other two partners own approximately 47.4% of the joint venture and are responsible for the development, construction and initial leasing of the property. We have determined that the joint venture is a VIE, primarily based2021 ATM Program.

The table below provides details on the fact thatsale of common shares during the equity investment at riskyears ended December 31, 2021 and 2020.
(in thousands, except per share amounts)
Number of Common Shares
Total Consideration(1)
Average Price Per Share(1)
Year ended December 31, 20211,817 $156,449 $86.13 
Year ended December 31, 2020829 $59,187 $71.39 
(1)Total consideration is not sufficient to permit the entity to finance its activities without additional subordinated financial support. We have also determined that we are the primary beneficiarynet of the VIE due to the fact that we are providing more than 50% of the equity contributions, the subordinated debt and a guarantee on the third party debt and have the power to direct the most significant activities that impact the entity’s economic performance.

INVOLUNTARY CONVERSION OF ASSETS

In February 2012, one of the buildings of the Chateau Apartments property was completely destroyed by fire (the “2012 Fire”). Final settlement of the 2012 Fire insurance claim was reached in fiscal year 2014 with total proceeds received of $5.1 million for redevelopment. Insurance proceeds exceeded the basis in the assets requiring replacement, resulting in recognition of a gain from involuntary conversion of $2.5 million in fiscal year 2014.

In December 2013, 15-unit and 57-unit buildings at the Chateau Apartments property were destroyed by fire (the “2013 Fire”). Rebuilding was completed in the first quarter of fiscal year 2016. We received proceeds for the 2013 Fire claim of $1.0 million in fiscal year 2014 and $6.0 million fiscal 2015, which reduced to zero the accounts receivable recorded at the time of the fire for expected proceeds. No gain or loss on involuntary conversion was recorded due to the settlement of the claim.

GAIN ON BARGAIN PURCHASE

On March 22, 2016, we acquired a multifamily property in Rochester, MN, which had a fair value at acquisition of approximately $36.3 million, as appraised by a third party. The consideration exchanged for the property consisted of $15.0 million cash and approximately 2.5 million Units, valued at approximately $17.8 million. The fair value of the Units transferred was based on the closing market price of our common stock on the acquisition date of $7.09 per share. The acquisition resulted in a gain on bargain purchase because the fair value of assets acquired exceeded the total of the fair value of the consideration paid by approximately $3.4 million. The seller accepted consideration below the fair value of the property in order to do a partial tax-deferred exchange for Units.

NOTE 3 • CREDIT RISK

We are potentially exposed to credit risk for cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts.

We have entered into a cash management arrangement with First Western Bank (the “Bank”) with respect to deposit accounts that exceed FDIC Insurance coverage. On a daily basis, account balances are swept into a repurchase account.  The Bank pledges fractional interests in U.S. Government Securities owned by the Bank at an amount equal to the excess over the uncollected balance in the repurchase account. The amounts deposited by us pursuant to the repurchase agreement are not insured by FDIC. At April 30, 2016 and 2015, these amounts totaled $36.7$2.1 million and $9.7 million, respectively.

2016 Annual Report F-18

Table of Contents

NOTE 4 • PROPERTY OWNED

Property, consisting principally of real estate, is stated at cost less accumulated depreciation and totaled $1.4 billion and $1.1 billion as of April 30, 2016 and 2015, respectively.

Construction period interest of approximately $4.9 million, $4.9 million and $2.9 million has been capitalized$901,000 in commissions for the years ended April 30, 2016, 2015December 31, 2021 and 2014,2020, respectively.

Share Repurchase Program. On December 5, 2019, our Board of Trustees terminated the existing share repurchase program and authorized a new share purchase program to repurchase up to $50 million of our common or preferred shares over a one-year period. Under this repurchase program, we could repurchase common or preferred shares in open-market purchases, including pursuant to Rule 10b5-1 and Rule 10b-18 plans, as determined by management and in accordance with the requirements of the SEC. This program expired on December 5, 2020. Shares repurchased during the year ended December 31, 2020 are detailed in the table below.
(in thousands, except per share amounts)
Number of Preferred Shares
Aggregate Cost(1)
Average Price Per Share(1)
Year ended December 31, 2020237 $5,629 $23.75 
(1)Amount includes commissions.
Issuance of Series C Preferred Shares. On October 2, 2017, we issued 4.1 million shares of our 6.625% Series C Cumulative Redeemable Preferred Shares (“Series C preferred shares”). As of December 31, 2021 and 2020, we had 3.9 million Series C preferred shares outstanding. The future minimum lease receiptsSeries C preferred shares are nonvoting and redeemable for cash at $25.00 per share at our option on or after October 2, 2022. Holders of these shares are entitled to be received under non-cancellable leases for commercial properties held for investmentcumulative distributions, payable quarterly (as and if declared by the Board of Trustees). Distributions accrue at an annual rate of $1.65625 per share, which is equal to 6.625% of the $25.00 per share liquidation preference ($97.0 million liquidation preference in the aggregate, as of April 30, 2016, assuming that no optionsDecember 31, 2021 and 2020).
Series D Preferred Units (Mezzanine Equity). On February 26, 2019, we issued 165,600 Series D preferred units at an issuance price of $100 per preferred unit as partial consideration for the acquisition of SouthFork Townhomes. The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year. The Series D preferred units have a put option which allows the holder to renewredeem any or buy outall of the leaseSeries D preferred units for cash equal to the issue price. Each Series D preferred unit is convertible, at the holder's option, into 1.37931 Units, representing a conversion exchange rate of $72.50 per unit. Changes in the redemption value are exercised,based on changes in the trading value of our common shares and are as follows:

 

 

 

 

 

Year Ended April 30, 

    

(in thousands)

 

2017

 

$

28,558

 

2018

 

 

26,235

 

2019

 

 

22,289

 

2020

 

 

18,423

 

2021

 

 

17,216

 

Thereafter

 

 

112,551

 

 

 

$

225,272

 

See Real Estate Investmentscharged to common shares on our Consolidated Balance Sheets each quarter. The holders of the Series D preferred units do not have any voting rights. Distributions to Series D unitholders are presented in the consolidated statements of equity within Note 2 for information about impairment losses recorded during fiscal years 2016net income (loss) attributable to controlling interests and 2015.

noncontrolling interests.

NOTE 5 • IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES

Our identified intangible assets and intangible liabilities at April 30, 2016 and 2015 were as follows:

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

April 30, 2016

    

April 30, 2015

 

Identified intangible assets (included in intangible assets):

 

 

 

 

 

 

 

Gross carrying amount

 

$

8,088

 

$

7,500

 

Accumulated amortization

 

 

(6,230)

 

 

(6,112)

 

Net carrying amount

 

$

1,858

 

$

1,388

 

 

 

 

 

 

 

 

 

Identified intangible liabilities (included in other liabilities):

 

 

 

 

 

 

��

Gross carrying amount

 

$

159

 

$

82

 

Accumulated amortization

 

 

(55)

 

 

(61)

 

Net carrying amount

 

$

104

 

$

21

 

The amortization of acquired below-market leases and acquired above-market leases reduced rental income by approximately $14,000, $24,000 and $25,000 for the twelve months ended April 30, 2016, 2015 and 2014, respectively. The estimated annual amortization of acquired below-market leases, net of acquired above-market leases for each of the five succeeding fiscal years, is as follows:

 

 

 

 

 

Year Ended April 30,

    

(in thousands)

 

2017

 

$

5

 

2018

 

 

(11)

 

2019

 

 

(20)

 

2020

 

 

(16)

 

2021

 

 

(13)

 

2016 Annual Report F-19

Table of Contents

Amortization of all other identified intangible assets (a component of depreciation and amortization expense) was $1.7 million, $1.5 million and $2.1 million for the twelve months ended April 30, 2016, 2015 and 2014, respectively. The estimated annual amortization of all other identified intangible assets for each of the five succeeding fiscal years is as follows:

 

 

 

 

 

Year Ended April 30,

    

(in thousands)

 

2017

 

$

1,171

 

2018

 

 

269

 

2019

 

 

170

 

2020

 

 

104

 

2021

 

 

78

 

NOTE 6 • NONCONTROLLING INTERESTS

Interests in the Operating Partnership held by limited partners are represented by Units. The Operating Partnership’s income is allocated to holders of Units based upon the ratio of their holdings to the total Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the Operating Partnership’s Agreement of Limited Partnership.

We reflect noncontrolling interests in consolidated real estate entities on the balance sheetBalance Sheet for the portion of properties consolidated by us that are not wholly owned by us. The earnings or losses from these properties attributable to the noncontrolling interests are reflected as net income attributable to noncontrolling interests –‑– consolidated real estate entities in the Consolidated Statementsconsolidated statements of Operations. operations.
During fiscalthe year 2016, Mendota Properties LLC disposed ofended December 31, 2020, we acquired the five properties held by47.4% noncontrolling interests in the entity. real estate partnership that owns 71 France for $12.2 million.
Our noncontrolling interests – consolidated real estate entities at April 30, 2016December 31, 2021 and 20152020 were as follows:

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

April 30, 2016

    

April 30, 2015

 

IRET-71 France, LLC

 

$

8,070

 

$

8,630

 

IRET-Cypress Court Apartments, LLC

 

 

1,042

 

 

1,089

 

IRET-RED 20, LLC

 

 

2,410

 

 

3,072

 

IRET-Williston Garden Apartments, LLC

 

 

3,014

 

 

3,090

 

IRET - WRH 1, LLC

 

 

5,266

 

 

6,138

 

Mendota Properties LLC

 

 

 —

 

 

7,294

 

WRH Holding, LLC

 

 

1,195

 

 

1,206

 

Other

 

 

23

 

 

 —

 

Noncontrolling interests – consolidated real estate entities

 

$

21,020

 

$

30,519

 

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Table of Contents
 (in thousands)
 December 31, 2021December 31, 2020
IRET - Cypress Court Apartments, LLC$648 $686 
NOTE 76 • LINE OF CREDIT

DEBT

As of April 30, 2016, we, throughDecember 31, 2021, 48 apartment communities were not encumbered by mortgages and are available to provide credit support for our Operating Partnership as Borrower, had one securedunsecured borrowings. Our primary unsecured credit facility (“unsecured credit facility”) is a revolving, multi-bank line of credit, with First Internationalthe Bank and Trust, Watford City, North Dakota (“First International Bank”),of Montreal serving as lead bank. Theadministrative agent. Our line of credit has lendingtotal commitments and borrowing capacity of $100.0$250.0 million, a currentbased on the value of unencumbered properties. As of December 31, 2021, we had additional borrowing availability of $173.5 million beyond the $76.0 million drawn, priced at an interest rate of 4.75%2.74%, aincluding the impact of our interest rate swap. At December 31, 2020, the line of credit borrowing capacity was $250.0 million based on the value of our unencumbered asset pool (“UAP”), of which $152.9 million was drawn on the line. This credit facility was amended on September 30, 2021 to extend the maturity date to September 2025 and has an accordion option to increase borrowing capacity up to $400.0 million.
Prior to the amendment, the unsecured credit facility also had unsecured term loans of September 1, 2017$70.0 million and a minimum outstanding principal$75.0 million, included within notes payable on the consolidated balance requirementsheets. These terms loans were paid in full as of $17.5 million.  As of April 30, 2016, participants included, in addition to First International Bank, the following financial institutions: The Bank of North Dakota; First Western Bank and Trust; Dacotah Bank; United Community Bank; American State Bank & Trust Company; Town & Country Credit Union; Highland Bank and United Bankers’ Bank. December 31, 2021.
The interest rate on borrowings under the line of credit is based, at our option, on the Wall Street Journal Primelender's base rate plus a margin, ranging from 25-80 basis points, or the London Interbank Offered Rate (“LIBOR”), plus 1.25%, with a floor of 4.75% and a cap of 8.65% during the initial term of the line of credit. Interest-only payments are due monthlymargin that ranges from 125-180 basis points based on the total amount of advances outstanding. As of April 30, 2016, we had advanced $17.5 millionour consolidated leverage, as defined under the line of credit.

2016 Annual Report F-20

Table of Contents

The line ofThird Amended and Restated Credit Agreement. Our unsecured credit may be prepaid at par at any time. The facility includesand unsecured senior notes are subject to customary financial covenants and restrictions requiring us to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and we are also required to maintain minimum depository account(s) totaling $6.0 million with First International Bank, of which $1.5 million is to be held in a non-interest bearing account. As of April 30, 2016, 17 properties with a total cost of $162.1 million collateralized this line of credit. As of April 30, 2016, welimitations. We believe that we are in compliance with all such financial covenants and limitations as of December 31, 2021.

In January 2021, we amended and expanded our private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, PGIM) to increase the lineaggregate amount available for issuance of credit’s covenants. This credit facilityunsecured senior promissory notes (“unsecured senior notes”) to $225.0 million. We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes. The following table shows the notes issued under both agreements.
(in thousands)
AmountMaturity DateInterest Rate
Series A$75,000 September 13, 20293.84 %
Series B$50,000 September 30, 20283.69 %
Series C$50,000 June 6, 20302.70 %
Series 2021-A$35,000 September 17, 20302.50 %
Series 2021-B$50,000 September 17, 20312.62 %
Series 2021-C$25,000 September 17, 20322.68 %
Series 2021-D$15,000 September 17, 20342.78 %
In September 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for financing the acquisition of 16 apartment communities. The FMCF is summarized incurrently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, and a blended weighted average interest rate of 2.78%. As of December 31, 2021, the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

    

 

 

  �� 

 

 

    

 

 

    

 

    

 

    

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Int.

 

 

 

 

 

 

Amount

 

Amount

 

Applicable

 

 

 

Rate on

 

 

 

 

 

 

Outstanding

 

Outstanding

 

Interest Rate

 

 

 

Borrowings

 

 

 

Amount

 

as of April 30,

 

as of April 30,

 

as of April 30,

 

Maturity

 

during fiscal

 

Financial Institution

 

Available

 

2016

 

2015

 

2016

 

Date

 

year 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First International Bank & Trust

 

$

100,000

 

$

17,500

 

$

60,500

 

4.75

%  

9/1/17

 

4.75

%

NOTE 8 • MORTGAGES PAYABLE AND CONSTRUCTION DEBT

MostFMCF had a balance of our properties$198.9 million. The FMCF is included within mortgages payable on the Consolidated Balance Sheets.

As of December 31, 2021, we owned individually serve15 apartment communities that served as collateral for separate mortgage loans, on single properties or groups of properties. The majorityin addition to the apartment communities secured by the FMCF. All of these mortgages payable aremortgage loans were non-recourse to us other than for standard carve-out obligations such as fraud, waste, failure to insure, environmental conditions and failure to pay real estate taxes.obligations. Interest rates on mortgages payablemortgage loans range from 2.44%3.47% to 7.94%4.31%, and the mortgagesmortgage loans have varying maturity dates from July 1, 20162022, through JulySeptember 1, 2036.2031. As of April 30, 2016, management believesDecember 31, 2021, we believe there are no material defaults or instances of material compliance issuesnoncompliance in regards to any of these mortgages payable.

Ofmortgage loans.

F-19
Table of Contents
We also have a $6.0 million unsecured operating line of credit. This operating line of credit is designed to enhance treasury management activities and more effectively manage cash balances. This operating line matures on November 29, 2022, with pricing based on a market spread plus the mortgagesone-month LIBOR index rate.
The following table summarizes our indebtedness:
(in thousands)
December 31, 2021December 31, 2020Weighted Average Maturity in Years
Lines of credit$76,000 $152,871 3.75
Term loans(1)
— 145,000 0
Unsecured senior notes(1)
300,000 125,000 8.63
Unsecured debt376,000 422,871 7.84
Mortgages payable - Fannie Mae credit facility198,850 — 9.56
Mortgages payable - other284,934 298,445 4.93
Total debt$859,784 $721,316 7.19
Annual Weighted Average Interest Rates
Lines of credit (rate with swap) (2)
2.74 %2.85 %
Term loans (rate with swaps)— 4.15 %
Unsecured senior notes3.12 %3.78 %
Mortgages payable - Fannie Mae credit facility2.78 %— 
Mortgages payable - other3.81 %3.93 %
Total debt3.26 %3.62 %
(1)Included within notes payable including mortgages on properties held for sale,our consolidated balance sheets.
(2)The current rate on our line of credit is LIBOR plus 150 basis points. The LIBOR exposure on the balanceline of credit as of December 31, 2021 was hedged using an interest rate swap with a notional of $75.0 million and a fixed rate mortgages totaled $689.3 million and $904.9 million at April 30, 2016 and 2015, respectively, and the balances of variable2.81%. The interest rate mortgages totaled $196.8 million and $70.0 million as of April 30, 2016, and 2015, respectively. We do not utilize derivative financial instruments to mitigate our exposure to changesswap was terminated in market interest rates. Most of the fixed rate mortgages have substantial pre-payment penalties. As of April 30, 2016, the weighted-average rate of interest on our mortgage debt was 4.54%, compared to 5.16% on April 30, 2015. February 2022.
The aggregate amount of required future principal payments on mortgages payable, notes payable, and lines of credit as of April 30, 2016,December 31, 2021 is as follows

follows:

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

Mortgages

 

Mortgages

 

 

 

 

on Properties

 

on Properties

 

 

 

 

Held for

 

Held for

 

Year Ended April 30,

 

 

Investment

 

Sale

 

2017

 

$

102,636

$

48,046

 

2018

 

 

54,931

 

1,106

 

2019

 

 

144,436

 

6,921

 

2020

 

 

103,537

 

612

 

2021

 

 

154,389

 

4,901

 

Thereafter

 

 

257,395

 

7,237

 

Total payments

 

$

817,324

$

68,823

 

(in thousands)
2022$27,113 
202345,067 
20244,054 
2025108,850 
202649,047 
Thereafter625,653 
Total payments$859,784 

In addition

NOTE 7 • DERIVATIVE INSTRUMENTS
Our objective in using interest rate derivatives is to mortgage loans comprisingadd stability to interest expense and to manage our $886.1 millionexposure to interest rate fluctuations. To accomplish this objective, we primarily use interest rate swap contracts to fix the variable rate interest debt.
The ineffective portion of mortgage indebtedness,a hedging instrument is not recognized currently in earnings or disclosed. Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income for our revolving, multi-bank securedinterest rate swaps will be reclassified to interest expense as interest payments are made on our term loan and line of credit discussed in Note 7 is securedcredit. During the next 12 months, we estimate an additional $1.5 million will be reclassified as an increase to interest expense.
At December 31, 2021, we had 1 interest rate swap contract designated as a cash flow hedge of April 30, 2016, by mortgagesinterest rate risk with a total notional amount of $75.0 million to fix the interest rate on 17 properties. Thisthe line of creditcredit. We also had 1 interest rate swap with a notional amount of $70.0 million that is not includedeffective until January 31, 2023 and was not designated as a hedge in our mortgage indebtedness total. We currently have 29 unencumbered properties.

Our construction debt totaled $82.0a qualifying hedging relationship.

At December 31, 2020, we had 3 interest rate swap contracts designated as cash flow hedges of interest rate risk with a total notion amount of $195.0 million and $136.2 million1 additional interest rate swap that becomes effective on April 30, 2016 and 2015, respectively. The weighted averageJanuary 31, 2023, with a
F-20
Table of Contents
notional amount of $70.0 million. These interest rate ofswaps fixed the interest on the construction debt as of April 30, 2016 was 2.74%, compared to 3.38% as of April 30, 2015. The total available to be drawn on the constructionterm loans was $26.2 million at April 30, 2016.

2016 Annual Report F-21

Table of Contents

NOTE 9 • TRANSACTIONS WITH RELATED PARTIES

BANKING SERVICES – FIRST INTERNATIONAL BANK AND TRUST

We have an ongoing banking relationship with First International Bank. Stephen L. Stenehjem, a member of our Board of Trustees, is the Chief Executive Officer and Chairman of First International Bank and the Chief Executive Officer of Watford City BancShares, Inc., its bank holding company, and the bank holding company is owned by Mr. Stenehjem and members of his family. We have one mortgage loan outstanding with First International Bank, with an original principal balance of $43.0 million (Renaissance Heights I) bearing variable interest at 5.24% per annum as of April 30, 2016. We paid interest on this loan of $2.2 million in fiscal year 2016 and it had a balance of $42.2 million at April 30, 2016. We have a multi-bank line of credit with a capacity of $100.0 million, of which First International Bank is the lead bank and a participant with an $11.0 million commitment. In fiscal year 2016, we paid First International Bank a total of approximately $186,000 in interest on First International Bank’s portion of the outstanding balanceline of this credit line,credit.

In September 2021, we paid $3.8 million to terminate our $50.0 million interest rate swap and paid fees of $77,000. Inour $70.0 million interest rate swap in connection with this multi-bank linethe pay down of credit, we maintain compensating balances with First International Bank totaling $6.0our term loans (see Note 6 - Debt for additional details). We accelerated the reclassification of a $5.4 million loss from OCI into other income loss in Consolidated Statements of which $1.5 million is held inOperations as a non-interest bearing account,result of the hedged transactions becoming probable not to occur.
Derivatives not designated as hedges are not speculative and $4.5 million is held in an account that pays usare used to manage our exposure to interest on the deposited amount of 0.20% per annum. We also maintain checking accounts with First International Bank. In fiscal year 2016, we paid less than $500 in total in various bank servicerate movements and other fees charged on these checking accounts.

In fiscal years 2015 and 2014, we paid interest and fees on outstanding mortgage and construction loansidentified risks but do not meet the strict hedge accounting requirements. Changes in fair value of approximately $1.7 million and $1.0 million respectively. In fiscal years 2015 and 2014, respectively, we paid First International Bank $245,000 and $125,000derivatives not designated in interest on First International Bank’s portion of the multi-bank line of credit and paid fees of $40,000 in both years. Also in both fiscal years 2015 and 2014, we paid under $500 in total in various bank service andhedging relationships are recorded directly into earnings within other fees charged on checking accounts maintained with First International Bank. Total payments of interest and fees from us to First International Bank were approximately $2.5 million, $2.0 million and $1.2 million in fiscal years 2016, 2015 and 2014, respectively.

LEASE AND SALE TRANSACTIONS

In fiscal year 2013, we entered into an agreement with First International Bank to construct an approximately 3,700 square-foot building on an outlot of our Arrowhead Shopping Center in Minot, North Dakota, to be leased by First International Bank under a 20-year lease for use as a branch bank location. The project was completed in fiscal year 2013 at a cost of $1.3 million. Net rental payments received in fiscal years 2016, 2015 and 2014 totaled $108,000, $109,000 and $109,000, respectively.  We sold the property to First International Bank during fiscal year 2016 for a sales price of $1.7 million.

SALES AGREEMENT

We have an investment banking relationship with Robert W. Baird & Co. Incorporated (“Baird”). Terrance P. Maxwell, a member of our Board of Trustees, was appointed the Chief Financial Officer of Baird in March 2015 and has served as a Managing Director and member of the Executive Committee since May 2014. On August 30, 2013, we and our Operating Partnership entered into an at-the-market, or ATM, sales agreement with Baird as sales agent. Under the terms of this agreement, we may from time to time issue and sell through Baird our common shares having an aggregate offering price of up to $75.0 million. Baird will be entitled to compensation of up to 2.0% of the gross sales price per share for common shares sold under the agreement. The agreement remains in force until terminated pursuant to its terms, including automatic termination upon the sale of all such shares through Baird. We have not issued any common shares under this program during fiscal years 2016, 2015 and 2014.

2016 Annual Report F-22

Table of Contents

NOTE 10 • ACQUISITIONS, DEVELOPMENT PROJECTS PLACED IN SERVICE AND DISPOSITIONS

PROPERTY ACQUISITIONS

We added $143.5 million of real estate properties to our portfolio through property acquisitions during fiscal year 2016, compared to $56.3 million in fiscal year 2015. We expensed approximately $253,000 and $216,000 of transaction costs related to the acquisitions in fiscal years 2016 and 2015, respectively. The fiscal year 2016 and 2015 acquisitions are detailed below.

Fiscal 2016 (May 1, 2015 to April 30, 2016)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

Total

 

 

Form of Consideration

 

Investment Allocation

 

 

    

Date

    

Acquisition

  

  

 

 

    

 

 

  

  

 

 

    

 

 

    

Intangible

 

Acquisitions

 

Acquired

 

Cost

 

 

Cash

 

Units(1)

 

 

Land

 

Building

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74 unit - Gardens - Grand Forks, ND

 

2015-09-10

 

$

9,250

 

 

$

8,850

 

$

400

 

 

$

518

 

$

8,672

 

$

60

 

276 unit - GrandeVille at Cascade Lake - Rochester, MN

 

2015-10-29

 

 

56,000

 

 

 

56,000

 

 

 —

 

 

 

5,003

 

 

50,363

 

 

634

 

187 unit - Avalon Cove - Rochester, MN(2)

 

2016-03-22

 

 

36,250

 

 

 

15,000

 

 

17,826

 

 

 

1,616

 

 

34,145

 

 

489

 

90 unit - Cascade Shores - Rochester, MN

 

2016-03-22

 

 

18,500

 

 

 

18,500

 

 

 —

 

 

 

1,585

 

 

16,710

 

 

205

 

76 unit - Crystal Bay - Rochester, MN

 

2016-03-22

 

 

12,000

 

 

 

12,000

 

 

 —

 

 

 

433

 

 

11,425

 

 

142

 

40-unit - French Creek - Rochester, MN

 

2016-03-22

 

 

5,000

 

 

 

5,000

 

 

 —

 

 

 

201

 

 

4,735

 

 

64

 

 

 

 

 

��

137,000

 

 

 

115,350

 

 

18,226

 

 

 

9,356

 

 

126,050

 

 

1,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,819 sq ft Lakeside Medical Plaza - Omaha, NE

 

2015-08-20

 

 

6,500

 

 

 

6,500

 

 

 —

 

 

 

903

 

 

5,109

 

 

488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Acquisitions

 

 

 

$

143,500

 

 

$

121,850

 

$

18,226

 

 

$

10,259

 

$

131,159

 

$

2,082

 

(1)

Value of Units of the Operating Partnership based on the closing market price of our common stock on the acquisition date. The number of Units issued were approximately 44,000 and 2.5 million, respectively, for the Gardens and Avalon Cove acquisitions.

(2)

Acquisition resulted in a gain on bargain purchase of approximately $3.4 million. See Note 2 for additional information.

2016 Annual Report F-23

Table of Contents

Fiscal 2015 (May 1, 2014 to April 30, 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

Total

 

 

Form of Consideration

 

 

Investment Allocation

 

 

    

 

    

Acquisition

 

 

 

    

    

 

 

 

 

 

 

 

 

 

    

 

 

    

Intangible

 

Acquisitions

    

Date Acquired

    

Cost

  

  

Cash

    

Units(1)

    

Other(2)

  

  

Land

    

Building

    

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

152 unit - Homestead Garden - Rapid City, SD(3)

 

2014-06-02

 

$

15,000

 

 

$

5,092

 

$

 —

 

$

9,908

 

 

$

655

 

$

14,139

 

$

206

 

52 unit - Silver Springs - Rapid City, SD

 

2014-06-02

 

 

3,280

 

 

 

1,019

 

 

 —

 

 

2,261

 

 

 

215

 

 

3,006

 

 

59

 

68 unit - Northridge - Bismarck, ND

 

2014-09-12

 

 

8,500

 

 

 

8,400

 

 

100

 

 

 —

 

 

 

884

 

 

7,516

 

 

100

 

119 unit - Legacy Heights - Bismarck, ND(4)

 

2015-03-19

 

 

15,000

 

 

 

14,300

 

 

700

 

 

 —

 

 

 

1,207

 

 

13,742

 

 

51

 

 

 

 

 

 

41,780

 

 

 

28,811

 

 

800

 

 

12,169

 

 

 

2,961

 

 

38,403

 

 

416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Creekside Crossing - Bismarck, ND

 

2014-05-22

 

 

4,269

 

 

 

4,269

 

 

 —

 

 

 —

 

 

 

4,269

 

 

 —

 

 

 —

 

PrairieCare Medical - Brooklyn Park, MN

 

2014-06-05

 

 

2,616

 

 

 

2,616

 

 

 —

 

 

 —

 

 

 

2,616

 

 

 —

 

 

 —

 

71 France Phase I - Edina. MN(5)

 

2014-06-12

 

 

1,413

 

 

 

 —

 

 

 —

 

 

1,413

 

 

 

1,413

 

 

 —

 

 

 —

 

Monticello 7th Addition - Monticello, MN

 

2014-10-09

 

 

1,660

 

 

 

1,660

 

 

 —

 

 

 —

 

 

 

1,660

 

 

 —

 

 

 —

 

71 France Phase II & III - Edina. MN(5)

 

2014-11-04

 

 

3,309

 

 

 

 —

 

 

 —

 

 

3,309

 

 

 

3,309

 

 

 —

 

 

 —

 

Minot 1525 24th Ave SW - Minot, ND

 

2014-12-23

 

 

1,250

 

 

 

1,250

 

 

 —

 

 

 —

 

 

 

1,250

 

 

 —

 

 

 —

 

 

 

 

 

 

14,517

 

 

 

9,795

 

 

 —

 

 

4,722

 

 

 

14,517

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Acquisitions

 

 

 

$

56,297

 

 

$

38,606

 

$

800

 

$

16,891

 

 

$

17,478

 

$

38,403

 

$

416

 

(1)

Value of limited partnership units of the Operating Partnership based on the closing market price of our common stock on the acquisition date. The number of Units issued were approximately 11,000 and 77,000, respectively, for the Northridge and Legacy Heights acquisitions.

(2)

Consists of assumed debt (Homestead Garden I: $9.9 million, Silver Springs: $2.3 million) and value of land contributed by the joint venture partner (71 France: $4.7 million).

(3)

At acquisition, we adjusted the assumed debt to fair value and recognized approximately $852,000 of goodwill.

(4)

At acquisition, the purchase price included assets in development (land: $804,000, building: $7.8 million, escrow $1.3 million).

(5)

Land was contributed to a joint venture in which we have an approximately 52.6% interest. The joint venture is consolidated in our financial statements.

Acquisitions in fiscal years 2016 and 2015 are immaterial to our real estate portfolio both individually and in the aggregate, and consequently no proforma information is presented. The results of operations from acquired properties are includedincome loss in the Consolidated Statements of OperationsOperations. For the year ended December 31, 2021, we recorded a gain of $419,000 related to the interest rate swap not designated in a hedging relationship. As of December 31, 2020, we did not have any outstanding interest rate hedges that were not designated as hedges in a qualifying hedging relationship.

The fair value of our derivative financial instruments as well as their classification on our Consolidated Balance Sheets as of their acquisition date. December 31, 2021 and 2020 is detailed below.
(in thousands)
December 31, 2021December 31, 2020
Balance Sheet LocationFair ValueFair Value
Total derivative instruments designated as hedging instruments - interest rate swapsAccounts Payable and Accrued Expenses$4,610 $15,905 
Total derivative instruments not designated as hedging instruments - interest rate swapsAccounts Payable and Accrued Expenses$1,097 $— 
The revenueeffect of the Company's derivative financial instruments on the consolidated statements of operations as of December 31, 2021, 2020, and net income2019 is detailed below.
(in thousands)
Gain (Loss) Recognized in OCILocation of Gain (Loss) Reclassified from Accumulated OCI into IncomeGain (Loss) Reclassified from Accumulated OCI into Income
Year Ended December 31,Year Ended December 31,
202120202019202120202019
Total derivatives in cash flow hedging relationships - interest rate swaps$2,383 $(11,068)$(7,040)Interest expense$(9,087)$(2,770)$(289)
We have agreements with each of our fiscal year 2016derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations.
NOTE 8 • FAIR VALUE MEASUREMENTS
Cash and 2015 acquisitionscash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are detailed below.

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Year Ended April 30,

    

2016

    

2015

 

Total revenue

 

$

4,094

 

$

2,565

 

Net loss

 

$

(366)

 

$

(1)

 

carried at amounts that reasonably approximate their fair value due to their short-term nature. For variable rate line of credit debt that re-prices frequently, fair values are based on carrying values.

2016 Annual Report F-24

In determining the fair value of other financial instruments, we apply Financial Accounting Standard Board ASC 820, Fair Value Measurement and Disclosures. Fair value hierarchy under ASC 820 distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entity’s own assumptions about market participant assumptions (Level 3). Fair value estimates may differ from the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities.

F-21
Table of Contents

DEVELOPMENT PROJECTS PLACED IN SERVICE

Our Operating Partnership placed approximately $211.8 millionFair Value Measurements on a Recurring Basis

(in thousands)
TotalLevel 1Level 2Level 3
December 31, 2021
Assets
Mortgages and notes receivable$49,484 $— $— $49,484 
Liabilities
Derivative instruments - interest rate swaps$5,707 $— $— $5,707 
December 31, 2020
Assets
Mortgages and notes receivable$30,994 $— $— $30,994 
Liabilities
Derivative instruments - interest rate swaps$15,905 $— $— $15,905 
The fair value of development projectsour interest rate swaps is determined using the market standard methodology of netting discounted expected variable cash payments and receipts. The variable cash payments and receipts are based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves. We consider both our own nonperformance risk and the counterparty’s nonperformance risk in service during fiscal year 2016, comparedthe fair value measurement.
We utilize an income approach with level 3 inputs based on expected future cash flows to $124.5 millionvalue these instruments. The inputs include market transactions for similar instruments, management estimates of comparable interest rates (range of 3.75% to 10.75%), and instrument specific credit risk (range of 0.5% to 1.0%). Changes in fiscal year 2015.fair value of these receivables from period to period are reported in interest and other income on our Consolidated Statements of Operations.
(in thousands)
Fair Value MeasurementOther Gains (Losses)Interest IncomeTotal Changes in Fair Value Included in Current Period Earnings
Year ended December 31, 2021$49,484 $14 $2,403 $2,417 
Year ended December 31, 2020$30,994 $12 $1,442 $1,454 
As of December 31, 2021, we had an investment of $903,000 in a real estate technology venture consisting of privately held entities that develop technology related to the real estate industry. The fiscal year 2016investment is measured at net asset value (“NAV”) as a practical expedient under ASC 820. As of December 31, 2021, we had unfunded commitments of $1.2 million.
Fair Value Measurements on a Nonrecurring Basis
There were no non-financial assets measured at fair value on a nonrecurring basis at December 31, 2021 and 2015 development projects placed in service2020.
Financial Assets and Liabilities Not Measured at Fair Value
The fair value of mortgages payable and unsecured senior notes is estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates (Level 3).
The estimated fair values of our financial instruments as of December 31, 2021 and 2020 are detailed below.

Fiscal 2016 (May 1, 2015 to April 30, 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

Date Placed

    

 

 

    

 

 

    

Development

 

Development Projects Placed in Service (1)

 

in Service

 

Land

 

Building

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

72 unit - Chateau II - Minot, ND (2)

 

2015-06-01

 

$

240

 

$

14,408

 

$

14,648

 

288 unit - Renaissance Heights - Williston, ND(3)

 

2015-07-27

 

 

3,080

 

 

59,434

 

 

62,514

 

163 unit - Deer Ridge - Jamestown, ND(4)

 

2016-02-22

 

 

700

 

 

24,137

 

 

24,837

 

251 unit - Cardinal Point - Grand Forks, ND(5)

 

2016-03-18

 

 

1,600

 

 

48,132

 

 

49,732

 

 

 

 

 

 

5,620

 

 

146,111

 

 

151,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

57,624 sq ft Edina 6565 France SMC III - Edina, MN(6)

 

2015-06-01

 

 

 —

 

 

33,041

 

 

33,041

 

70,756 sq ft PrairieCare Medical - Brooklyn Park, MN(7)

 

2015-09-08

 

 

2,610

 

 

21,830

 

 

24,440

 

 

 

 

 

 

2,610

 

 

54,871

 

 

57,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

7,963 sq ft Minot Southgate Retail - Minot, ND(8)

 

2015-10-01

 

 

889

 

 

1,734

 

 

2,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Development Projects Placed in Service

 

 

 

$

9,119

 

$

202,716

 

$

211,835

 

(1)

Development projects that are placed in service in phases are excluded from this table until the entire project has been placed in service. See Note 15 for additional information on the 71 France project, which was partially placed in service during the fiscal year ended April 30, 2016.

as follows:

(2)

Costs paid in prior fiscal years totaled $12.3 million. Additional costs incurred in fiscal year 2016 totaled $2.3 million, for a total project cost at April 30, 2016 of $14.6 million.

 (in thousands)
 December 31, 2021December 31, 2020
 AmountFair ValueAmountFair Value
FINANCIAL ASSETS    
Cash and cash equivalents$31,267 $31,267 $392 $392 
Restricted cash7,358 7,358 6,918 6,918 
FINANCIAL LIABILITIES
Revolving lines of credit(1)
76,000 76,000 152,871 152,871 
Term loans(1)
— — 145,000 145,000 
Unsecured senior notes300,000 308,302 125,000 133,181 
Mortgages payable - Fannie Mae credit facility198,850 198,850 — — 
Mortgages payable - other284,934 284,546 298,445 308,855 

(3)

Costs paid in prior fiscal years totaled $57.7 million. Additional costs incurred in fiscal year 2016 totaled $4.8 million, for a total project cost at April 30, 2016 of $62.5 million. The project is owned by a joint venture entity in which we currently have an approximately 70.0% interest. The joint venture is consolidated in our financial statements.

(1)Excluding the effect of the interest rate swap agreement.

(4)

Costs paid in prior fiscal years totaled $14.3 million. Additional costs incurred in fiscal year 2016 totaled $10.5 million, for a total project cost at April 30, 2016 of $24.8 million.

F-22

(5)

Costs paid in prior fiscal years totaled $23.0 million. Additional costs incurred in fiscal year 2016 totaled $26.7 million, for a total project cost at April 30, 2016 of $49.7 million.

(6)

Costs paid in prior fiscal years totaled $20.8 million. Additional costs incurred in fiscal year 2016 totaled $12.2 million, for a total project cost at April 30, 2016 of $33.0 million.

(7)

Costs paid in prior fiscal years totaled $17.3 million. Additional costs incurred in fiscal year 2016 totaled $7.1 million, for a total project cost at April 30, 2016 of $24.4 million.

(8)

Costs paid in prior fiscal years totaled $2.1 million. Additional costs incurred in fiscal year 2016 totaled approximately $500,000, for a total project cost at April 30, 2016 of $2.6 million.

2016 Annual Report F-25

Table of Contents

Fiscal 2015 (MayNOTE 9 • ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS
We acquired $499.8 million and $191.0 million of new real estate during the years ended December 31, 2021 and 2020, respectively. Our acquisitions during the years ended December 31, 2021 and 2020 are detailed below.
Year Ended December 31, 2021
(in thousands)
TotalForm of ConsiderationInvestment Allocation
DateAcquisitionIntangible
AcquisitionsAcquired
Cost(1)
Cash
Units(2)
Other(3)
LandBuildingAssets
Other(4)
256 homes -Union Pointe Apartment Homes - Longmont, COJanuary 6, 2021$76,900 $76,900 $— $— $5,727 $69,966 $1,207 $— 
120 homes - Bayberry Place - Minneapolis, MNSeptember 1, 202116,673 898 9,855 5,920 1,807 14,113 753 — 
251 homes - Burgandy & Hillsboro Court - Minneapolis, MNSeptember 1, 202135,569 2,092 22,542 10,935 2,834 31,148 1,587 — 
97 homes - Venue on Knox - Minneapolis, MNSeptember 1, 202118,896 500 11,375 7,021 3,438 14,743 715 — 
120 homes - Gatewood - St. Cloud, MNSeptember 1, 20217,781 378 3,388 4,015 327 6,858 596 — 
84 homes - Grove Ridge - Minneapolis, MNSeptember 1, 202112,060 121 8,579 3,360 1,250 10,271 539 — 
119 homes - The Legacy - St. Cloud, MNSeptember 1, 202110,560 229 5,714 4,617 412 9,556 592 — 
151 homes - New Hope Garden & Village - Minneapolis, MNSeptember 1, 202115,006 1,435 10,812 2,759 1,603 12,578 825 — 
330 homes - Palisades - Minneapolis, MNSeptember 1, 202153,354 2,884 30,470 20,000 6,919 46,577 2,211 (2,353)
96 homes - Plymouth Pointe - Minneapolis, MNSeptember 1, 202114,450 370 9,061 5,019 1,042 12,809 599 — 
93 homes - Pointe West - St. Cloud, MNSeptember 1, 20217,558 91 3,605 3,862 246 6,849 463 — 
301 homes - River Pointe - Minneapolis MNSeptember 1, 202138,348 2,249 21,653 14,446 3,346 33,117 1,885 — 
70 homes - Southdale Parc - Minneapolis, MNSeptember 1, 20219,670 165 7,907 1,598 1,569 7,740 361 — 
62 homes - Portage - Minneapolis, MNSeptember 1, 20219,171 323 5,588 3,260 2,133 6,685 353 — 
200 homes - Windsor Gates - Minneapolis, MNSeptember 1, 202122,231 1,122 12,080 9,029 2,140 18,943 1,148 — 
136 homes - Wingate - Minneapolis, MNSeptember 1, 202115,784 723 10,246 4,815 1,480 13,530 774 — 
178 homes - Woodhaven - Minneapolis, MNSeptember 1, 202125,009 1,682 15,200 8,127 3,940 20,080 989 — 
288 homes - Woodland Pointe - Minneapolis, MNSeptember 1, 202147,796 437 29,438 17,921 5,367 40,422 2,007 — 
176 homes - Civic Lofts - Denver, CODecember 21, 202163,000 63,000 — — 6,166 55,204 1,630 — 
Total Acquisitions$499,816 $155,599 $217,513 $126,704 $51,746 $431,189 $19,234 $(2,353)
(1)Includes $36.1 million for additional fair value of Series E preferred units with a liquidation preference of $181.4 million for the September 1, 2014 to April 30, 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

Date Placed

    

 

 

    

 

 

    

Development

 

Development Projects Placed in Service (1)

 

in Service

 

Land

 

Building

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

44 unit - Dakota Commons - Williston, ND(2)

 

2014-07-15

 

$

823

 

$

9,596

 

$

10,419

 

130 unit - Red 20 - Minneapolis, MN(3)

 

2014-11-21

 

 

1,900

 

 

26,412

 

 

28,312

 

233 unit - Commons at Southgate - Minot, ND(4)

 

2014-12-09

 

 

3,691

 

 

31,351

 

 

35,042

 

64 unit - Cypress Court II - St. Cloud, MN(5)

 

2015-01-01

 

 

447

 

 

6,320

 

 

6,767

 

165 unit - Arcata - Golden Valley, MN(6)

 

2015-01-01

 

 

2,088

 

 

29,640

 

 

31,728

 

 

 

 

 

 

8,949

 

 

103,319

 

 

112,268

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

4,998 sq ft Minot Southgate Wells Fargo Bank - Minot, ND(7)

 

2014-11-10

 

 

992

 

 

2,193

 

 

3,185

 

202,807 sq ft Roseville 3075 Long Lake Road - Roseville, MN

 

2015-02-02

 

 

 —

 

 

9,036

 

 

9,036

 

 

 

 

 

 

992

 

 

11,229

 

 

12,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Development Projects Placed in Service

 

 

 

$

9,941

 

$

114,548

 

$

124,489

 

(1)

Development projects that are placed in service in phases are excluded from this table until the entire project has been placed in service. See Note 6 for additional information on the Renaissance Heights project, which was partially placed in service during the fiscal year 2014 and the twelve months ended April 30, 2015.

2021 portfolio acquisition.

(2)

Costs paid in prior fiscal years totaled $8.1 million. Additional costs paid in fiscal year 2015 totaled $2.3 million, for a total project cost at April 30, 2015 of $10.4 million.

(2)Fair value of Series E preferred units at the acquisition date.

(3)

Costs paid in prior fiscal years totaled $12.2 million. Additional costs paid in fiscal year 2015 totaled $16.1 million, for a total project cost at April 30, 2015 of $28.3 million. The project is owned by a joint venture entity in which we have an approximately 58.6% interest. The joint venture is consolidated in our financial statements.

(3)Payoff of debt or assumption of seller's debt upon closing.

(4)

Costs paid in prior fiscal years totaled $26.5 million, respectively. Additional costs paid in fiscal year 2015 totaled $8.1 million, for a total project cost at April 30, 2015 of $35.0 million. The project is owned by a joint venture entity in which we had an approximately 52.9% interest at April 30, 2015. The joint venture is consolidated in our financial statements.

(5)

Costs paid in prior fiscal years totaled $1.2 million. Additional costs paid in fiscal year 2015 totaled $5.5 million, for a total project cost at April 30, 2015 of $6.8 million. The project is owned by a joint venture entity in which we have an approximately 86.1% interest. The joint venture is consolidated in our financial statements.

(6)

Costs paid in prior fiscal years totaled $11.3 million, respectively. Additional costs paid in fiscal year 2015 totaled $19.1 million, for a total project cost at April 30, 2015 of $31.7 million.

(7)

Costs paid in fiscal year 2015 totaled $3.2 million, including land acquired in fiscal year 2013.

2016 Annual Report F-26

(4)Debt discount on assumed mortgage.

F-23
Table of Contents

PROPERTY Year Ended December 31, 2020

 (in thousands)
 TotalForm of ConsiderationInvestment Allocation
DateAcquisition          Intangible
AcquisitionsAcquiredCostCash
Other(1)
LandBuildingAssets
Other(2)
Multifamily
182 homes - Ironwood Apartments - New Hope, MNMarch 5, 2020$46,263 $28,600 $17,663 $2,165 $36,869 $824 $6,405 
465 homes - Parkhouse Apartments - Thornton, COSeptember 22, 2020144,750 144,750 — 10,474 132,105 2,171 — 
Total Acquisitions$191.013 $173,350 $17,663 $12,639 $168,974 $2,995 $6,405 
(1)Payoff of note receivable and accrued interest by seller at closing.
(2)Consists of TIF note acquired. Refer to Note 2 for further discussion.
DISPOSITIONS

During fiscalthe year 2016,ended December 31, 2021, we sold 8 multifamily, 40 office properties, 2 healthcare properties, 18 retail propertiescontinued our portfolio transformation by disposing of 5 apartment communities and 3 parcels of unimproved land1 commercial property for a total sales price of $414.1 million$62.3 million. The dispositions for the years ended December 31, 2021 and transferred ownership of 9 office properties pursuant to a deed in lieu transaction. Dispositions totaled $76.0 million in fiscal year 2015. The fiscal year 2016 and 2015 dispositions2020 are detailed below.

Fiscal 2016 (May 1, 2015 to April 30, 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

Date

    

 

 

    

Book Value

    

 

 

 

Dispositions

 

Disposed

 

Sales Price

 

and Sales Cost

 

Gain/(Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

391 unit - St. Cloud Student Housing Portfolio - St. Cloud, MN

 

2016-03-24

 

$

5,615

 

 

5,647

 

 

(32)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

61,758 sq ft Nebraska Orthopaedic Hospital - Omaha, NE

 

2016-04-01

 

 

24,494

 

 

16,512

 

 

7,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

117,144 sq ft Thresher Square – Minneapolis, MN

 

2015-05-18

 

 

7,000

 

 

7,175

 

 

(175)

 

2,549,222 sq ft Office Sale Portfolio(1)

 

2015-08-03

 

 

250,000

 

 

231,908

 

 

18,092

 

420,216 sq ft Mendota Office Center Portfolio – Mendota Heights, MN(2)

 

2015-08-12

 

 

40,000

 

 

41,574

 

 

(1,574)

 

1,027,208 sq ft Retail Sale Portfolio(3)

 

2015-09-30

 

 

78,960

 

 

72,000

 

 

6,960

 

48,700 sq ft Eden Prairie 6101 Blue Circle Drive – Eden Prairie, MN

 

2015-10-19

 

 

2,900

 

 

2,928

 

 

(28)

 

8,526 sq ft Burnsville I Strip Center – Burnsville, MN

 

2015-12-23

 

 

1,300

 

 

913

 

 

387

 

4,800 sq ft Pine City C-Store – Pine City, MN

 

2016-01-08

 

 

300

 

 

355

 

 

(55)

 

11,003 sq ft Minot Plaza – Minot, ND

 

2016-01-19

 

 

1,854

 

 

393

 

 

1,461

 

937,518 sq ft 9-Building Office Portfolio(4)(5)

 

2016-01-29

 

 

122,610

(5)  

 

86,154

(5)  

 

36,456

(5)

3,702 sq ft Arrowhead First International Bank - Minot, ND

 

2016-04-06

 

 

1,675

 

 

1,255

 

 

420

 

 

 

 

 

 

506,599

 

 

444,655

 

 

61,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

River Falls Unimproved Land - River Falls, WI

 

2016-04-06

 

 

20

 

 

21

 

 

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Dispositions

 

 

 

$

536,728

 

$

466,835

 

$

69,893

 

(1)

The properties included in this portfolio disposition are: 610 Business Center, 7800 West Brown Deer Road, Ameritrade, Barry Pointe Office Park, Benton Business Park, Brenwood, Brook Valley I, Crosstown Centre, Golden Hills Office Center, Granite Corporate Center, Great Plains, Highlands Ranch I, Highlands Ranch II, Interlachen Corporate Center, Intertech Building, Minnesota National Bank, Northpark Corporate Center, Omaha 10802 Farnam Dr, Plaza VII, Plymouth 5095 Nathan Lane, Prairie Oak Business Center, Rapid City 900 Concourse Drive, Spring Valley IV, Spring Valley V, Spring Valley X, Spring Valley XI, Superior Office Building, TCA Building & vacant land, Three Paramount Plaza, UHC Office, US Bank Financial Center, Wells Fargo Center, West River Business Park and Westgate.

(2)

The properties included in this portfolio disposition are: Mendota Office Center I, Mendota Office Center II, Mendota Office Center III, Mendota Office Center IV and American Corporate Center.

Year Ended December 31, 2021

(3)

The properties included in this portfolio disposition are: Champlin South Pond, Chan West Village, Duluth 4615 Grand, Duluth Denfeld Retail, Forest Lake Auto, Forest Lake Westlake Center, Grand Forks Medpark Mall, Jamestown Buffalo Mall, Jamestown Business Center, Lakeville Strip Center, Monticello C Store & vacant land, Omaha Barnes & Noble, Pine City Evergreen Square, Rochester Maplewood Square and St. Cloud Westgate.

(in thousands)
DateBook Value
DispositionsDisposedSales Priceand Sale CostGain/(Loss)
Multifamily
76 homes-Crystal Bay-Rochester, MNMay 25, 2021$13,650 $10,255 $3,395 
40 homes-French Creek-Rochester, MNMay 25, 20216,700 4,474 2,226 
182 homes-Heritage Manor-Rochester, MNMay 25, 202114,125 4,892 9,233 
140 homes-Olympik Village-Rochester, MNMay 25, 202110,725 6,529 4,196 
151-homes-Winchester/Village Green-Rochester, MNMay 25, 202114,800 7,010 7,790 
$60,000 $33,160 $26,840 
Other
Minot IPSOctober 18, 2021$2,250 $1,573 $677 
Total Dispositions$62,250 $34,733 $27,517 

(4)

The properties included in this portfolio disposition are: Corporate Center West, Farnam Executive Center, Flagship Corporate Center, Gateway Corporate Center, Miracle Hills One, Pacific Hills, Riverport, Timberlands, and Woodlands Plaza IV.

Year Ended December 31, 2020

(5)

On January 29, 2016, we transferred ownership of nine properties to the mortgage lender on a $122.6 million non-recourse loan and removed the debt obligation and accrued interest from our balance sheet. The properties had an estimated fair value of $89.3 million on the transfer date. Upon completion of this transfer, we recognized a gain on extinguishment of debt of $36.5 million, representing the difference between the loan and accrued interest payable extinguished over the carrying value of the properties, cash, accounts payable and accounts receivable transferred as of the transfer date and related closing costs.

(in thousands)
DateBook Value
DispositionsDisposedSales Priceand Sale CostGain/(Loss)
Multifamily
268 homes - Forest Park - Grand Forks, NDAugust 18, 2020$19,625 $6,884 $12,741 
90 homes - Landmark - Grand Forks, NDAugust 18, 20203,725 1,348 2,377 
164 homes - Southwind - Grand Forks, NDAugust 18, 202010,850 4,573 6,277 
168 homes - Valley Park - Grand Forks, NDAugust 18, 20208,300 4,059 4,241 
$42,500 $16,864 $25,636 
Other
Dakota WestAugust 7, 2020$500 $474 $26 
Unimproved Land
Rapid City Land - Rapid City, SDJune 29, 2020$1,300 $1,490 $(190)
Total Dispositions$44,300 $18,828 $25,472 

2016 Annual Report F-27

F-24

Table of Contents

Fiscal 2015 (May 1, 2014NOTE 10 • SEGMENTS

We operate in a single reportable segment which includes the ownership, management, development, redevelopment, and acquisition of apartment communities. Each of our operating properties is considered a separate operating segment because each property earns revenues, incurs expenses, and has discrete financial information. Our chief operating decision-makers evaluate each property’s operating results to April 30, 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

Date

    

 

    

Book Value

    

 

 

 

Dispositions

 

Disposed

 

Sales Price

 

and Sales Cost

 

Gain/(Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

83 unit - Lancaster - St. Cloud, MN

 

2014-09-22

 

$

4,451

 

$

3,033

 

$

1,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

45,222 sq ft Jamestown Medical Office Building - Jamestown, ND

 

2015-02-05

 

 

12,819

 

 

8,710

 

 

4,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

73,338 sq ft Dewey Hill - Edina, MN

 

2014-05-19

 

 

3,100

 

 

3,124

 

 

(24)

 

198,600 sq ft Eagan 2785 & 2795 - Eagan, MN

 

2014-07-15

 

 

3,600

 

 

5,393

 

 

(1,793)

 

25,644 sq ft Weston Retail - Weston, WI

 

2014-07-28

 

 

 —

 

 

1,176

 

 

(1,176)

 

74,568 sq ft Wirth Corporate Center - Golden Valley, MN

 

2014-08-29

 

 

4,525

 

 

4,695

 

 

(170)

 

52,000 sq ft Kalispell Retail - Kalispell, MT

 

2014-10-15

 

 

1,230

 

 

1,229

 

 

1

 

34,226 sq ft Fargo Express Center & SC Pad - Fargo, ND

 

2014-11-18

 

 

2,843

 

 

2,211

 

 

632

 

79,297 sq ft Northgate I – Maple Grove, MN

 

2014-12-01

 

 

7,200

 

 

6,881

 

 

319

 

45,222 sq ft Jamestown Medical Office Building - Jamestown, MN

 

2015-02-05

 

 

12,819

 

 

8,710

 

 

4,109

 

14,820 sq ft Weston Walgreens – Weston, WI

 

2015-02-27

 

 

5,177

 

 

2,152

 

 

3,025

 

26,000 sq ft Northgate II - Maple Grove, MN

 

2015-03-02

 

 

2,725

 

 

1,727

 

 

998

 

45,019 sq ft Burnsville Bluffs II -  Burnsville, MN

 

2015-03-25

 

 

1,245

 

 

2,245

 

 

(1,000)

 

26,186 sq ft Plymouth I - Plymouth, MN

 

2015-03-25

 

 

1,985

 

 

1,492

 

 

493

 

26,186 sq ft Plymouth II - Plymouth, MN

 

2015-03-25

 

 

1,625

 

 

1,356

 

 

269

 

26,186 sq ft Plymouth III - Plymouth, MN

 

2015-03-25

 

 

2,500

 

 

1,977

 

 

523

 

126,936 sq ft Plymouth IV & V - Plymouth, MN

 

2015-03-25

 

 

12,910

 

 

11,706

 

 

1,204

 

58,300 sq ft Southeast Tech Center - Eagan, MN

 

2015-03-25

 

 

3,300

 

 

4,196

 

 

(896)

 

61,138 sq ft Whitewater Plaza - Minnetonka, MN

 

2015-03-25

 

 

3,035

 

 

4,625

 

 

(1,590)

 

13,374 sq ft 2030 Cliff Road - Eagan, MN

 

2015-04-21

 

 

950

 

 

834

 

 

116

 

 

 

 

 

 

70,769

 

 

65,729

 

 

5,040

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

Kalispell Unimproved - Kalispell, MT

 

2014-10-15

 

 

670

 

 

670

 

 

 —

 

Weston – Weston, WI

 

2015-02-17

 

 

158

 

 

158

 

 

 —

 

 

 

 

 

 

828

 

 

828

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Property Dispositions

 

 

 

$

88,867

 

$

78,300

 

$

10,567

 

NOTE 11 • OPERATING SEGMENTS

make decisions about resources to be allocated and to assess performance. We reportdo not group our results in twooperations based on geography, size, or type. Our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents. No apartment community comprises more than 10% of consolidated revenues, profits, or assets. Accordingly, our apartment communities are aggregated into a single reportable segments, which are aggregationssegment. “All other” is composed of similar properties: multifamilynon-multifamily properties, non-multifamily components of mixed use properties, and healthcare, excluding our senior housing properties which were classifieddisposed or designated as held for sale and discontinued operations at April 30, 2016.

Segment information in this report is presentedsale.

Our executive management team comprises our chief operating decision-makers. This team measures the performance of our reportable segment based on net operating income (“NOI”), which we define as total real estate revenues and gain on involuntary conversion less property operating expenses, including real estate expenses (which consist of utilities, maintenance, real estate taxes, insurance, property management expenses and other property expenses).taxes. 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, property management overhead, and general and administrative expense. NOI does not represent cash generated by operating activities in accordance with U.S. GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
The following tables present real estate revenues and net operating incomeNOI for the fiscal years ended April 30, 2016, 2015December 31, 2021, 2020, and 20142019 from our two reportable segments,segment and reconcile net operating income of reportable segments to net income as reported in the consolidated financial statements. Segment assets are also reconciled to Total Assetstotal assets as reported in the consolidated financial statements.

2016 Annual Report F-28

 (in thousands)
Year ended December 31, 2021MultifamilyAll OtherTotal
Revenue$195,624 $6,081 $201,705 
Property operating expenses, including real estate taxes79,096 2,761 81,857 
Net operating income$116,528 $3,320 $119,848 
Property management expenses(8,752)
Casualty loss(344)
Depreciation and amortization(92,165)
General and administrative expenses(16,213)
Gain (loss) on sale of real estate and other investments27,518 
Interest expense(29,078)
Loss on debt extinguishment(535)
Interest and other income (loss)(2,380)
Net income (loss)$(2,101)

 (in thousands)
Year ended December 31, 2020MultifamilyAll OtherTotal
Revenue$164,126 $13,868 $177,994 
Property operating expenses, including real estate taxes66,356 6,802 73,158 
Net operating income$97,770 $7,066 $104,836 
Property management expenses(5,801)
Casualty loss(1,662)
Depreciation and amortization  (75,593)
General and administrative expenses  (13,440)
Gain (loss) on sale of real estate and other investments25,503 
Interest expense  (27,525)
Loss on debt extinguishment  (23)
Interest and other income  (1,552)
Net income (loss)  $4,743 

F-25
Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Year Ended April 30, 2016

    

Multifamily

    

Healthcare

All Other

    

Total

 

Real estate revenue

 

$

131,149

 

$

45,621

$

11,550

 

$

188,320

 

Real estate expenses

 

 

60,477

 

 

16,021

 

2,602

 

 

79,100

 

Net operating income

 

$

70,672

 

$

29,600

$

8,948

 

 

109,220

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(49,832)

 

Impairment of real estate investments

 

 

 

 

 

 

 

 

 

 

(5,543)

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

(11,267)

 

Acquisition and investment related costs

 

 

 

 

 

 

 

 

 

 

(830)

 

Other expenses

 

 

 

 

 

 

 

 

 

 

(2,231)

 

Interest expense

 

 

 

 

 

 

 

 

 

 

(35,768)

 

Loss on debt extinguishment

 

 

 

 

 

 

 

 

 

 

(106)

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

2,573

 

Income before gain on sale of real estate and other investments, gain on bargain purchase and income from discontinued operations

 

 

 

 

 

 

 

 

 

 

6,216

 

Gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

9,640

 

Gain on bargain purchase

 

 

 

 

 

 

 

 

 

 

3,424

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

 

19,280

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

57,322

 

Net income

 

 

 

 

 

 

 

 

 

$

76,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Year Ended April 30, 2015

    

Multifamily

    

Healthcare

All Other

    

 

Total

 

Real estate revenue

 

$

118,526

 

$

44,153

$

16,642

 

$

179,321

 

Real estate expenses

 

 

51,172

 

 

16,240

 

5,725

 

 

73,137

 

Net operating income

 

$

67,354

 

$

27,913

$

10,917

 

 

106,184

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(42,784)

 

Impairment of real estate investments

 

 

 

 

 

 

 

 

 

 

(4,663)

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

(11,824)

 

Acquisition and investment related costs

 

 

 

 

 

 

 

 

 

 

(362)

 

Other expenses

 

 

 

 

 

 

 

 

 

 

(1,647)

 

Interest expense

 

 

 

 

 

 

 

 

 

 

(34,447)

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

2,956

 

Income before gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

13,413

 

Gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

6,093

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

 

19,506

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

9,178

 

Net income

 

 

 

 

 

 

 

 

 

$

28,684

 

 (in thousands)
Year ended December 31, 2019MultifamilyAll OtherTotal
Revenue$148,644 $37,111 $185,755 
Property operating expenses, including real estate taxes60,760 17,555 78,315 
Net operating income$87,884 $19,556 $107,440 
Property management expenses(6,186)
Casualty loss(1,116)
Depreciation and amortization  (74,271)
General and administrative expenses  (14,450)
Gain (loss) on sale of real estate and other investments97,624 
Interest expense  (30,537)
Loss on debt extinguishment  (2,360)
Interest and other income  2,092 
Income (loss) before gain on litigation settlement  78,236 
Gain (loss) on litigation settlement6,586 
Net income (loss)  $84,822 

2016 Annual Report F-29

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Year Ended April 30, 2014

    

Multifamily

    

Healthcare

All Other

    

Total

 

Real estate revenue

 

$

102,059

 

$

44,098

$

18,433

 

$

164,590

 

Real estate expenses

 

 

46,138

 

 

16,351

 

6,767

 

 

69,256

 

Gain on involuntary conversion

 

 

2,480

 

 

0

 

0

 

 

2,480

 

Net operating income

 

$

58,401

 

$

27,747

$

11,666

 

 

97,814

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(39,712)

 

Impairment of real estate investments

 

 

 

 

 

 

 

 

 

 

(7,700)

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

(10,743)

 

Acquisition and investment related costs

 

 

 

 

 

 

 

 

 

 

(279)

 

Other expenses

 

 

 

 

 

 

 

 

 

 

(1,850)

 

Interest expense

 

 

 

 

 

 

 

 

 

 

(33,729)

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

2,148

 

Income before loss on sale of real estate and other investments and loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

5,949

 

Loss on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

(51)

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

 

5,898

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

(22,838)

 

Net loss

 

 

 

 

 

 

 

 

 

$

(16,940)

 

Segment Assets and Accumulated Depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

As of April 30, 2016

    

Multifamily

    

Healthcare

    

All Other

    

Total

 

Segment assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Property owned

 

$

1,243,909

 

$

337,920

 

$

99,642

 

$

1,681,471

 

Less accumulated depreciation

 

 

(209,156)

 

 

(83,558)

 

 

(20,175)

 

 

(312,889)

 

Total property owned

 

$

1,034,753

 

$

254,362

 

$

79,467

 

$

1,368,582

 

Assets held for sale and assets from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

220,761

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

66,698

 

Other investments

 

 

 

 

 

 

 

 

 

 

 

50

 

Receivables and other assets

 

 

 

 

 

 

 

 

 

 

 

31,466

 

Development in progress

 

 

 

 

 

 

 

 

 

 

 

51,681

 

Unimproved land

 

 

 

 

 

 

 

 

 

 

 

20,939

 

Total Assets

 

 

 

 

 

 

 

 

 

 

$

1,760,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

As of April 30, 2015

    

Multifamily

    

Healthcare

    

All Other

    

Total

 

Segment assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Property owned

 

$

946,520

 

$

284,342

 

$

104,825

 

$

1,335,687

 

Less accumulated depreciation

 

 

(180,414)

 

 

(78,625)

 

 

(20,378)

 

 

(279,417)

 

Total property owned

 

$

766,106

 

$

205,717

 

$

84,447

 

$

1,056,270

 

Assets held for sale and assets from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

675,764

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

48,970

 

Other investments

 

 

 

 

 

 

 

 

 

 

 

329

 

Receivables and other assets

 

 

 

 

 

 

 

 

 

 

 

36,683

 

Development in progress

 

 

 

 

 

 

 

 

 

 

 

153,994

 

Unimproved land

 

 

 

 

 

 

 

 

 

 

 

25,827

 

Total Assets

 

 

 

 

 

 

 

 

 

 

$

1,997,837

 

2016 Annual Report F-30

 (in thousands)
As of December 31, 2021MultifamilyAll OtherTotal
Segment assets   
Property owned$2,244,250 $26,920 $2,271,170 
Less accumulated depreciation(436,004)(7,588)(443,592)
Total property owned$1,808,246 $19,332 $1,827,578 
Cash and cash equivalents31,267 
Restricted cash7,358 
Other assets30,582 
Mortgage loans receivable43,276 
Total Assets$1,940,061 


Table of Contents

 (in thousands)
As of December 31, 2020MultifamilyAll OtherTotal
Segment assets   
Property owned$1,727,287 $85,270 $1,812,557 
Less accumulated depreciation(368,717)(30,532)(399,249)
Total property owned$1,358,570 $54,738 $1,413,308 
Cash and cash equivalents  392 
Restricted cash6,918 
Other assets  18,904 
Mortgage loans receivable  24,661 
Total Assets  $1,464,183 

NOTE 12 • DISCONTINUED OPERATIONS

Prior to February 1, 2014, we reported, in discontinued operations, the results of operations and the related gains or losses of properties that had either been disposed of or classified as held for sale and otherwise met the classification of a discontinued operation. As a result of the adoption of ASU 2014-08, results of operations and gains or losses on sale for properties that are disposed or classified as held for sale in the ordinary course of business on or subsequent to February 1, 2014 would generally be included in continuing operations on our consolidated statements of operations, to the extent such disposals did not meet the criteria for classification as a discontinued operation described in Note 2.

During fiscal year 2016, we determined that our strategic plan to exit the office and retail segments met the criteria for discontinued operations. Accordingly, 48 office properties, 17 retail properties and 1 healthcare property were classified as discontinued operations and subsequently sold during fiscal year 2016. Additionally, we determined that our strategic decision to exit senior housing, which is a subset of our healthcare segment, met the criteria for discontinued operations and we consequently classified 34 senior housing properties as held for sale and discontinued operations at April 30, 2016. We classified no dispositions as discontinued operations during fiscal year 2015. During fiscal year 2014, we disposed of two multifamily properties, three office properties, twelve industrial properties and three retail properties that were classified as discontinued operations. The following information shows the effect on net income and the gains or losses from the sale of properties classified as discontinued operations for the fiscal years ended April 30, 2016, 2015 and 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

2016

    

2015

    

2014

 

REVENUE

 

 

 

 

 

 

 

 

 

 

Real estate rentals

 

$

43,544

 

$

75,883

 

$

78,066

 

Tenant reimbursement

 

 

8,684

 

 

24,466

 

 

27,301

 

TRS senior housing revenue

 

 

3,955

 

 

3,520

 

 

1,627

 

TOTAL REVENUE

 

 

56,183

 

 

103,869

 

 

106,994

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

Property operating expenses, excluding real estate taxes

 

 

10,252

 

 

23,517

 

 

25,735

 

Real estate taxes

 

 

5,777

 

 

14,343

 

 

15,229

 

Depreciation and amortization

 

 

14,166

 

 

27,823

 

 

32,216

 

Impairment of real estate investments

 

 

440

 

 

1,442

 

 

36,726

 

TRS senior housing expenses

 

 

3,366

 

 

2,997

 

 

1,331

 

Other expenses

 

 

 —

 

 

1

 

 

3

 

TOTAL EXPENSES

 

 

34,001

 

 

70,123

 

 

111,240

 

Operating income (loss)

 

 

22,182

 

 

33,746

 

 

(4,246)

 

Interest expense(1)

 

 

(18,406)

 

 

(24,573)

 

 

(25,834)

 

Gain on extinguishment of debt(1)

 

 

29,336

 

 

 —

 

 

 —

 

Interest income

 

 

1

 

 

 —

 

 

2

 

Other income

 

 

427

 

 

5

 

 

241

 

Income (loss) from discontinued operations before gain on sale

 

 

33,540

 

 

9,178

 

 

(29,837)

 

Gain on sale of discontinued operations

 

 

23,782

 

 

 —

 

 

6,999

 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS

 

$

57,322

 

$

9,178

 

$

(22,838)

 

Segment Data

 

 

 

 

 

 

 

 

 

 

Multifamily

 

$

 —

 

$

 —

 

$

(99)

 

Healthcare

 

 

5,926

 

 

6,832

 

 

4,223

 

All other

 

 

51,396

 

 

2,346

 

 

(26,962)

 

Total

 

$

57,322

 

$

9,178

 

$

(22,838)

 

(1)

Interest expense includes $4.7 million and approximately $528,000 for fiscal years ended April 30, 2016 and 2015, respectively, of default interest related to a$122.6 million non-recourse loan. Gain on extinguishment of debt in the fiscal year ended April 30, 2016 includes $36.5 million of gain on extinguishment of debt recognized in connection with our transfer of ownership to the mortgage lender of the nine properties serving as collateral for the $122.6 million non-recourse loan and the removal of the debt obligation and accrued interest from our balance sheet.

2016 Annual Report F-31

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

2014

 

Property Sale Data

 

 

 

 

 

 

 

 

 

 

Sales price

 

 

373,460

 

$

 —

 

$

80,883

 

Net book value and sales costs

 

 

(349,678)

 

 

 —

 

 

(73,884)

 

Gain on sale of discontinued operations

 

 

23,782

 

$

 —

 

$

6,999

 

The following information reconciles the carrying amounts of major classes of assets and liabilities of the discontinued operations to assets and liabilities held for sale that are presented separately on the Condensed Consolidated Balance Sheets:

 

 

 

 

 

 

(in thousands)

 

 

April 30, 2016

 

April 30, 2015

Carrying amounts of major classes of assets included as part of discontinued operations

 

 

 

 

Property owned and intangible assets, net of accumulated depreciation and amortization

$

189,900

$

592,780

Receivable arising from straight-lining of rents

 

9,805

 

19,191

Accounts receivable

 

1,707

 

1,041

Prepaid and other assets

 

43

 

739

Intangible assets

 

0

 

25,879

Tax, insurance and other escrow

 

670

 

1,750

Property and equipment

 

479

 

515

Goodwill

 

18

 

193

Deferred charges and leasing costs

 

222

 

9,936

Total major classes of assets of the discontinued operations

 

202,844

 

652,024

Other assets included in the disposal group classified as held for sale

 

17,917

 

23,740

Total assets of the disposal group classified as held for sale on the balance sheet

$

220,761

$

675,764

 

 

 

 

 

Carrying amounts of major classes of liabilities included as part of discontinued operations

 

 

 

 

Accounts payable and accrued expenses

$

810

$

14,811

Mortgages payable

 

68,162

 

366,824

Other

 

7,900

 

7,904

Total major classes of liabilities of the discontinued operations

 

76,872

 

389,539

Other liabilities included in the disposal group classified as held for sale

 

840

 

11,760

Total liabilities of the disposal group classified as held for sale on the balance sheet

$

77,712

$

401,299

NOTE 13 • 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. We have no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings. Pursuant to the exercise of Exchange Rights, Units may be exchanged for common shares on a one-for-one basis after a minimum holding period of one year. 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 fiscal years ended April 30, 2016, 2015 and 2014:

2016 Annual Report F-32

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

For Year Ended April 30, 

 

 

 

(in thousands, except per share data)

 

 

 

2016

    

2015

    

2014

 

NUMERATOR

 

 

 

 

 

 

 

 

 

 

Income from continuing operations – Investors Real Estate Trust

 

$

20,600

 

$

15,996

 

$

6,065

 

Income (loss) from discontinued operations – Investors Real Estate Trust

 

 

51,406

 

 

8,091

 

 

(19,239)

 

Net income (loss) attributable to Investors Real Estate Trust

 

 

72,006

 

 

24,087

 

 

(13,174)

 

Dividends to preferred shareholders

 

 

(11,514)

 

 

(11,514)

 

 

(11,514)

 

Numerator for basic earnings per share – net income (loss) available to common shareholders

 

 

60,492

 

 

12,573

 

 

(24,688)

 

Noncontrolling interests – Operating Partnership

 

 

7,032

 

 

1,526

 

 

(4,676)

 

Numerator for diluted earnings (loss) per share

 

$

67,524

 

$

14,099

 

$

(29,364)

 

DENOMINATOR

 

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share weighted average shares

 

 

123,094

 

 

118,004

 

 

105,331

 

Effect of convertible operating partnership units

 

 

14,278

 

 

16,594

 

 

21,697

 

Denominator for diluted earnings per share

 

 

137,372

 

 

134,598

 

 

127,028

 

Earnings (loss) per common share from continuing operations – Investors Real Estate Trust – basic and diluted

 

$

0.08

 

$

0.04

 

$

(0.05)

 

Earnings (loss) per common share from discontinued operations – Investors Real Estate Trust – basic and diluted

 

 

0.41

 

 

0.07

 

 

(0.18)

 

NET INCOME (LOSS) PER COMMON SHARE – BASIC & DILUTED

 

$

0.49

 

$

0.11

 

$

(0.23)

 

NOTE 1411 • RETIREMENT PLANS

We sponsor a defined contribution 401(k) plan to provide retirement plan. There are three types of contributions to the plan: 401(k) Safe Harbor employer matching contributions, discretionary non-elective employer contributions and employee deferrals or contributions. Participation in our defined contribution 401(k) plan is available tobenefits for employees over the age of 21, except that collectively bargained employees, non-resident alien employees and part-time/temporary/seasonal employees scheduled to work less than 1,000 hours of service within the plan year are excluded from participation. Employees can contribute immediately upon hire; however, they are not eligible for the employer match until they have completed six months of service and worked at least 1,000 hours per calendar year. Employees participating in the 401(k) plan may contribute up to maximum levels established by the IRS. Employer contributions to the plan are at the discretion of our management. Employees are eligible to receive discretionary employer contributions if they are over the age of 21, have completed 1,000 hours of service within the plan year and are employed on the last day of the plan year.meet minimum employment criteria. We currently expect discretionary employer contributions to be not more than 3.5% of the eligible wages of each participating employee, and currently match, dollar for dollar, employee contributions to the 401(k) plan in an amount equal to up to 4.0% of the eligible wages of each participating employee, for a total expected contribution of not more than 7.5%5.0% of the eligible wages of each participating employee. Discretionary employer contributions are subject to a vesting schedule; 401(k) matchingMatching contributions are fully vested when made. Our contributions to these plans on behalfWe recognized expense of employees totaled approximately $836,000, $1.0 million, $875,000, and $1.1 million$738,000 in fiscalthe years 2016, 2015ended December 31, 2021, 2020, and 2014,2019, respectively. The decrease in cost from fiscal year 2015 to fiscal year 2016 was due to a decrease in discretionary employer contribution expense.

2016 Annual Report F-33

Table of Contents

NOTE 1512 • COMMITMENTS AND CONTINGENCIES

Ground Leases. As of April 30, 2016, we are a tenant under operating ground or air rights leases on nine of our properties. We pay a total of approximately $329,000 per year in rent under these ground leases, which have remaining terms ranging from 15 to 85 years, and expiration dates ranging from February 2031 to October 2100. We have renewal options for four of the nine ground leases, and rights of first offer or first refusal for the remainder.

The expected timing of ground and air rights lease payments as of April 30, 2016 is as follows:

 

 

 

 

 

 

    

(in thousands)

 

Fiscal Year Ended April 30, 

 

Lease Payments

 

2017

 

$

330

 

2018

 

 

331

 

2019

 

 

332

 

2020

 

 

333

 

2021

 

 

335

 

Thereafter

 

 

8,503

 

Total

 

$

10,164

 

Legal Proceedings. We are involved in various lawsuits arising in the normal course of business. Management believesWe believe that such matters will not have a material adverse effect on our consolidated financial statements.

Environmental Matters. It is generally our policy to obtain a Phase I environmental assessment of each property that we seek to acquire. Such assessments have not revealed, nor are we aware of, any environmental liabilities that we believe would have a material adverse effect on our financial position or results of operations. We own properties that contain or potentially contain (based
F-26
Table of Contents
(based on the age of the property) asbestos, or lead, or have underground fuel storage tanks. For certain of these properties, we estimated the fair value of the conditional asset retirement obligation and chose not to book a liability because the amounts involved were immaterial. With respect to certain other properties, we have not recorded any related asset retirement obligation as the fair value of the liability cannot be reasonably estimated due to insufficient information. We believe we do not have sufficient information to estimate the fair value of the asset retirement obligations for these properties because a settlement date or range of potential settlement dates has not been specified by others and, additionally, there are currently no plans or expectation of plans to demolish these properties or to undertake major renovations that would require removal of the asbestos, lead and/or underground storage tanks. These properties are expected to be maintained by repairs and maintenance activities that would not involve the removal of the asbestos, lead and/or underground storage tanks. Also, a need for renovations caused by tenantresident changes, technology changes or other factors has not been identified.  

Tenant Improvements.  In entering into leases with tenants, we may commit ourself to fund improvements or build-outs of the rented space to suit tenant requirements. These tenant improvements are typically funded at the beginning of the lease term, and we are accordingly exposed to some risk of loss if a tenant defaults prior to the expiration of the lease term, and the rental income that was expected to cover the cost of the tenant improvements is not received. As of April 30, 2016, we are committed to fund $6.1 million in tenant improvements, within approximately the next 12 months. Of this total, approximately $101,000 is related to properties classified as held for sale.

Purchase Options.  Under certain lease agreements, we have granted options to the tenants of properties to purchase such properties. In general, these options grant the tenant the right to purchase the property at the greater of such property’s appraised value or an annual compounded increase of a specified percentage of the initial cost to us. As of April 30, 2016, 14 of our properties were subject to purchase options, and the total investment cost, plus improvements, of all such properties was $97.2 million with total gross rental revenues in fiscal year 2016 of $7.6 million. Subsequent to fiscal year end, the tenant in our Spring Creek senior housing portfolio exercised its option to purchase the properties for a sale price of $43.5 million. The Spring Creek properties were classified as held for sale and discontinued operations with the rest of our senior housing portfolio at April 30, 2016.

identified.  

Insurance. We carry insurance coverage on our properties in amounts and types that we believe are customarily obtained by owners of similar properties and are sufficient to achieve our risk management objectives.

2016 Annual Report F-34

Table of Contents

Restrictions on Taxable Dispositions.Approximately 76 NaN of our properties,apartment communities, consisting of approximately 2.6 million square feet of our combined commercial properties and 5,396 apartment units,6,511 homes, are subject to restrictions on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties. The real estate investment amount of these properties (net of accumulated depreciation) was approximately $692.4 million at April 30, 2016. The restrictions on taxable dispositionsand are effective for varying periods. The terms of these agreements generally prevent us from selling the properties in taxable transactions. We do not believe that the agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties during the restriction period because we generally hold these and our other properties for investment purposes rather than for sale. Historically, however, whereWhere we have deemeddeem it to be in our shareholders’ best interests to dispose of restrictedsuch properties, we have done so through transactions structuredgenerally seek to structure sales of such properties as tax-deferredtax deferred transactions under Section 1031 of the Internal Revenue Code.

Otherwise, we may be required to provide tax indemnification payments to the parties to these agreements.

Redemption Value of Units. Pursuant to a UnitholdersUnitholder’s exercise of its Exchange Rights, after a minimum one-year holding period, we have the right, in our sole discretion, to acquire such Units by either making a cash payment or exchangingacquiring the Units for our common shares, on a one-for-one1-for-one basis. All Units receive the same per Unit cash distributions as thosethe per share dividends paid on common shares. Units are redeemable for an amount of cash per Unit equal to the average of the daily market price of our common shareshares for the ten consecutive trading days immediately preceding the date of valuation of the Unit. As of April 30, 2016December 31, 2021 and 2015,2020, the aggregate redemption value of the then-outstanding Units owned by limited partners, as determined by the ten-day average market price for our common shares, was approximately $109.3$90.9 million and $102.4$69.0 million, respectively.

Joint Venture Buy/Sell Options.  Several of our joint venture agreements contain buy/sell options in which each party under certain circumstances has the option to acquire the interest of the other party, but do not generally require that we buy our partners’ interests. However, from time to time, we have entered into joint venture agreements which contain options compelling us to acquire the interest of the other parties. We currently have one such joint venture, the Southgate apartment project in Minot, North Dakota, in which our joint venture partner can, for the four-year period from February 6, 2016 through February 5, 2020, compel us to acquire the partner’s interest for a price to be determined in accordance with the provisions of the joint venture agreement. The joint venture partner’s interest is reflected as a redeemable noncontrolling interest on the Consolidated Balance Sheets.

Development, Expansion and Renovation Projects.  We have various contracts outstanding with third parties in connection with development, expansion and renovation projects that are underway or placed in service during the quarter, the costs for which have been capitalized. As of April 30, 2016, contractual commitments for these projects are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

(in fiscal years)

 

 

    

 

    

Rentable

    

 

 

    

 

 

    

Anticipated

 

 

 

 

 

Square Feet

 

Anticipated

 

Costs as of

 

Construction

 

Project Name and Location

 

Planned Segment

 

or Number of Units

 

Total Cost(1)

 

April 30, 2016(1)

 

Completion

 

Deer Ridge - Jamestown, ND

 

Multifamily

 

163 units

 

 

24,837

 

 

24,837

 

In Service

 

Cardinal Point - Grand Forks, ND(2)

 

Multifamily

 

251 units

 

 

52,344

 

 

49,732

 

In Service

 

71 France - Edina, MN(3)

 

Multifamily

 

241 units

 

 

73,290

 

 

71,727

 

1Q 2017

 

Monticello Crossings - Monticello, MN

 

Multifamily

 

202 units

 

 

31,784

 

 

17,507

 

2Q 2017

 

Other

 

n/a

 

n/a

 

 

n/a

 

 

3,729

 

n/a

 

 

 

 

 

 

 

$

182,255

 

$

167,532

 

 

 

(1)

Includes costs related to development projects that are placed in service in phases (71 France - $41.3 million).

(2)

Anticipated total cost as of April 30, 2016 includes incremental cost increase due to the replacement of the project’s original general contractor.

(3)

The project is being constructed in three phases by a joint venture entity in which we currently have an approximately 52.6% interest. The anticipated total cost amount given in the table above is the total cost to the joint venture entity. The anticipated total cost includes approximately 20,956 square feet of rentable retail space.

These development projects are subject to various contingencies, and no assurances can be given that they will be completed within the time frames or on the terms currently expected.

2016 Annual Report F-35

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NOTE 16 • FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurement and Disclosures defines and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels, as follows: 

Level 1:  Quoted prices in active markets for identical assets

Level 2:  Significant other observable inputs

Level 3:  Significant unobservable inputs

There were no transfers in and out of Level 1, Level 2 and Level 3 fair value measurements during fiscal years 2016 and 2015. Fair value estimates may be different than the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities.

Fair Value Measurements on a Recurring Basis

We had no assets or liabilities recorded at fair value on a recurring basis at April 30, 2016 and 2015.

Fair Value Measurements on a Nonrecurring Basis

Non-financial assets measured at fair value on a nonrecurring basis at April 30, 2016 and 2015 consisted of real estate held for sale that was written-down to estimated fair value during fiscal year 2016 and 2015, respectively. The aggregate fair value of these assets by their levels in the fair value hierarchy are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

Total

    

Level 1

    

Level 2

    

Level 3

 

April 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate held for sale

 

$

6,650

 

$

 —

 

$

 —

 

$

6,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate held for sale

 

$

7,100

 

$

 —

 

$

 —

 

$

7,100

 

Financial Assets and Liabilities Not Measured at Fair Value

The following methods and assumptions were used to estimate the fair value of each class of financial assets and liabilities. The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt.

Cash and Cash Equivalents. The carrying amount approximates fair value because of the short maturity.

Other Investments. The carrying amount, or cost plus accrued interest, of the certificates of deposit approximates fair value.

Other Debt. For variable rate loans that re-price frequently, fair values are based on carrying values. The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using relevant treasury interest rates plus credit spreads (Level 2).

Lines of Credit. The carrying amount approximates fair value because the variable rate debt re-prices frequently.

Mortgages Payable. For variable rate loans that re-price frequently, fair values are based on carrying values. The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using relevant treasury interest rates plus credit spreads (Level 2).

2016 Annual Report F-36

Table of Contents

The estimated fair values of our financial instruments as of April 30, 2016 and 2015 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

2016

 

2015

 

 

 

Amount

 

Fair Value

 

Amount

 

Fair Value

 

FINANCIAL ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,698

 

$

66,698

 

$

48,970

 

$

48,970

 

Other investments

 

 

50

 

 

50

 

 

329

 

 

329

 

FINANCIAL LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

Other debt

 

 

82,026

 

 

82,026

 

 

136,190

 

 

136,190

 

Lines of credit

 

 

17,500

 

 

17,500

 

 

60,500

 

 

60,500

 

Mortgages payable

 

 

817,324

 

 

866,649

 

 

596,965

 

 

673,043

 

Mortgages payable related to assets held for sale

 

 

68,824

 

 

78,690

 

 

366,824

 

 

451,379

 

NOTE 17 • COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST AND EQUITY

Distribution Reinvestment and Share Purchase Plan.  During fiscal years 2016 and 2015, we issued approximately 821,000 and 8.1 million common shares, respectively, pursuant to our Distribution Reinvestment and Share Purchase Plan (“DRIP”), at a total value at issuance of $5.6 million and $64.9 million, respectively. The shares issued under the DRIP during fiscal year 2016 consisted of approximately 610,000 shares valued at issuance at $4.1 million that were purchased with reinvested distributions and approximately 211,000 shares valued at $1.5 million at issuance that were purchased with voluntary cash contributions. The shares issued under the DRIP during fiscal year 2015 consisted of 2.1 million shares valued at issuance at $16.2 million that were purchased with reinvested distributions and approximately 6.0 million shares valued at $48.7 million at issuance that were purchased with voluntary cash contributions. Participation in the DRIP is available to existing common shareholders and Unitholders as well as new investors. Under the DRIP, participants may purchase additional common shares by reinvesting their cash distributions and making voluntary cash contributions.

Exchange of Units for Common Shares.  During fiscal years 2016 and 2015, respectively, approximately 273,000 and 7.2 million Units were exchanged for common shares in connection with Unitholders exercising their Exchange Rights, with a total value of $1.5 million and $41.3 million included in equity.

Issuance of Preferred Shares.  On August 7, 2012, we completed the public offering of 4.6 million 7.95% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series B preferred shares”) at a price of $25.00 per share for net proceeds of approximately $111.2 million after underwriting discounts and estimated offering expenses.  These shares are nonvoting and redeemable for cash at $25.00 per share at our option on or after August 7, 2017. Holders of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of Trustees). Distributions accrue at an annual rate of $1.9875 per share, which is equal to 7.95% of the $25.00 per share liquidation preference ($115 million liquidation preference in the aggregate). We contributed the net proceeds from the sale to the Operating Partnership for general business purposes, including the acquisition and development of income-producing real estate properties and debt repayment, in exchange for 4.6 million Series B preferred units, which carry terms that are substantially the same as the Series B preferred shares. The Series B preferred shares were registered under a shelf registration statement declared effective on July 12, 2012. This shelf registration statement was terminated in June 2013 upon the filing of the Company’s shelf registration statement on Form S-3ASR, which shelf registration statement expired June 27, 2016.

We also have outstanding approximately 1.2 million shares of 8.25% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series A preferred shares”), issued during fiscal year 2004 for total proceeds of $27.3 million, net of selling costs. Holders of Series A preferred shares are entitled to receive dividends at an annual rate of 8.25% of the liquidation preference of $25 per share, or $2.0625 per share per annum. These dividends are cumulative and payable quarterly in arrears. The shares are not convertible into or exchangeable for any other property or any other of our securities. However, we, at our option, may redeem the shares at a redemption price of $25.00 per share, plus any accrued and unpaid dividends through the date of redemption. The shares have no maturity date and will remain outstanding indefinitely unless redeemed by us.

2016 Annual Report F-37

Table of Contents

During the second quarter of fiscal year 2014, we and our Operating Partnership entered into an ATM sales agreement with Baird as sales agent, pursuant to which we may from time to time sell common shares having an aggregate offering price of up to $75 million. The shares would be issued pursuant to our shelf registration statement on Form S-3ASR. The Company issued no common shares under this agreement during fiscal years 2016 and 2015.

NOTE 18 • QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

QUARTER ENDED

 

July 31, 2015

 

October 31, 2015

 

January 31, 2016

 

April 30, 2016

 

Revenues

    

$

45,045

    

$

46,346

    

$

48,406

    

$

48,523

 

Net income attributable to Investors Real Estate Trust

 

$

4,540

 

$

16,666

 

$

39,797

 

$

11,003

 

Net income available to common shareholders

 

$

1,661

 

$

13,788

 

$

36,918

 

$

8,125

 

Net income per common share - basic & diluted

 

$

0.01

 

$

0.11

 

$

0.30

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

QUARTER ENDED

    

July 31, 2014

    

October 31, 2014

    

January 31, 2015

    

April 30, 2015

 

Revenues

 

$

43,314

 

$

45,236

 

$

45,630

 

$

45,141

 

Net (loss) income attributable to Investors Real Estate Trust

 

$

(151)

 

$

5,114

 

$

8,371

 

$

10,753

 

Net (loss) income available to common shareholders

 

$

(3,030)

 

$

2,236

 

$

5,492

 

$

7,875

 

Net (loss) income per common share - basic & diluted

 

$

(0.03)

 

$

0.02

 

$

0.05

 

$

0.07

 

The above financial information is unaudited. In the opinion of management, alladjustments (which are of a normal recurring nature) have been included for afair presentation.

NOTE 19 • REDEEMABLE NONCONTROLLING INTERESTS

Redeemable noncontrolling interests on our Consolidated Balance Sheets represent the noncontrolling interest in a joint venture in which our unaffiliated partner, at its election, could require us to buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price. Redeemable noncontrolling interests are presented at the greater of their carrying amount or redemption value at the end of each reporting period. Changes in the value from period to period are charged to common shares on our Consolidated Balance Sheets. We currently have one joint venture, the Southgate apartment project in Minot, North Dakota, in which our joint venture partner can, for the four-year period from February 6, 2016 through February 5, 2020, compel us to acquire its interest for a price to be determined in accordance with the provisions of the joint venture agreement.

As of April 30, 2016 and 2015, the estimated redemption value of the redeemable noncontrolling interests was $7.5 million and $6.4 million, respectively. Below is a table reflecting the activity of the redeemable noncontrolling interests.

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

2014

 

Balance at beginning of fiscal year

 

$

6,368

 

$

6,203

 

$

5,937

 

Contributions

 

 

1,120

 

 

 —

 

 

 —

 

Net income

 

 

34

 

 

165

 

 

266

 

Balance at close of fiscal year

 

$

7,522

 

$

6,368

 

$

6,203

 

NOTE 2013 • SHARE BASED COMPENSATION

Share based

Share-based awards are provided to officers, non-officer employees, and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, as amended and restated on May 18, 2021 which allows for awards in the form of cash, and unrestricted, and restricted common shares, stock options, stock appreciation rights, and restricted stock units (“RSUs”) up to an aggregate of 4,250,000775,000 shares over the ten yearten-year period in which the plan will be in effect. Through April 30, 2016, awards under the 2015 Incentive Plan consisted of restricted and unrestricted common shares.

2016 Annual Report F-38

Table of Contents

Prior to the approval ofUnder our 2015 Incentive Plan, share based awards were provided to officers, non-officer employees and trustees under the our 2008 Incentive Award Plan, which was approved by shareholders on September 16, 2008, which allowed for awards in the form of cash and unrestricted and restricted common shares up to an aggregate of 2,000,000 shares over the period in which the plan is in effect. Through April 30, 2016, awards under the 2008 Incentive Award Plan consisted of cash and restricted and unrestricted Common Shares.

Long-Term Incentive Plan

Under the 2008 Incentive Award Plan, our officers and non-officer employees could earn share awards under the Long-Term Incentive Plan (“LTIP”) adopted pursuant to the plan, which was a backward-looking program that measured performance over a one-year performance period beginning on the first day of each fiscal year. Such awards were payable to the extent deemed earned in shares, 50% of which vested on the last day of the performance period and 50% of which vested on the first anniversary of the end of the performance period. Such awards utilized the sole performance metric of the three-year average of the annual absolute total shareholder return (“TSR”).

Under the 2015 Incentive Plan, our officers and non-officer employees may earn share awards under a revised long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. SuchThese awards are payable to the extent deemed earned in shares, 50% of which will vest at the conclusionshares. The terms of the performance period and 50% of which will vest onlong-term incentive awards granted under the first anniversary of the end of the performance period. To accommodate the transitionprogram may vary from the 2008 Incentive Award Planyear to year. Through December 31, 2021, awards under the 2015 Incentive Plan consisted of restricted and unrestricted common shares, RSUs, and stock options. We account for forfeitures of restricted and unrestricted common shares, RSUs, and stock options when they occur instead of estimating the forfeitures.

Year Ended December 31, 2021 LTIP Awards
Awards granted to employees on January 1, 2021, consist of an aggregate of 6,410 time-based RSU awards, 19,224 performance periods for such awards grantedbased RSUs based on September 16, 2015total shareholder return (“2016 LTIP Awards”TSR”) included one-year, two-year, and three-year periods beginning43,629 stock options. The time-based RSUs vest as to one-third of the shares on Mayeach of January 1, 2015. Going2022, January 1, 2023, and January 1, 2024. The stock options vest as to 25% on each of January 1, 2022, January 1, 2023, January 1, 2024, and January 1, 2025 and expire 10 years after grant date. The fair value of stock options was $7.383 per share and was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
Exercise price$70.64 
Risk-free rate0.650 %
Expected term6.25 years
Expected volatility21.08 %
Dividend Yield3.963 %
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Table of Contents
The TSR performance RSUs are earned based on the Company’s TSR as compared to the FTSE Nareit Apartment Index over a forward it is anticipated that LTIP awards will be issued with alooking three-year performance period. The 2016 LTIP Awards utilized the performance metricsmaximum number of relative TSR for 67%RSUs eligible to be earned is 38,448 RSUs, which is 200% of the award and absolute TSR for 33%RSUs granted. Earned awards (if any) will fully vest as of the award. The 2016 LTIP Awards for performance periodslast day of one, two and three years were 380,498; 353,535 and 353,535 shares, respectively.

In connection with the LTIPmeasurement period. These awards we recognize compensation expense ratably (over 31.5 monthshave market conditions in addition to service conditions that must be met for the 50% unrestricted shares and over 43.5 months for the 50% restricted shares)awards to vest. Compensation expense is recognized ratably based on the grant date fair value, as determined using a binomial model employing the Monte Carlo simulation, andvaluation model, regardless of whether the market conditions are achieved and the LTIP awards ultimately vest. TheTherefore, previously recorded compensation expense is not adjusted in the event that the market conditions utilized for the 2016 LTIP Awards are absolute TSR (1/3 weighting) and relative TSR measured against the MSCI US REIT Index (2/3 weighting).not achieved. The model evaluates the LTIP awards for changing TSR over the vesting periods, and uses random simulations that are based on past share characteristics as well as distribution growth and other factors. The assumptions used to value the LTIP awards were an expected volatility of 16.6%, a risk-free interest rate of 1.13% and an expected life of 3 years. WeCompany based the expected volatility on a weighted average of the historical volatility of ourthe Company’s daily closing share price. The share price at the grant date, September 16, 2015, was $7.13. We basedand a select peer average volatility, the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the LTIP award. We basedaward, and the expected term on the performance period of the LTIP award.

The calculatedassumptions used to value the TSR performance RSUs were an expected volatility of 20.63%, a risk-free interest rate of 0.17%, and an expected life of 3 years. The share price at the grant date, fair value as a percentageJanuary 1, 2021, was $70.64 per share.

Awards granted to trustees in May 2021 consisted of the officers’ base salary for the 2016 LTIP Awards with a three-year performance period beginning on May 1, 2015 ranged from approximately 42% to 85% for the portion of the awards based on relative TSR and from 5% to 10% for the portion of the awards based on absolute TSR. For the transition 2016 LTIP Awards6,061 RSUs with a one-year performance period beginning on May 1, 2015,vesting period. All of these awards are classified as equity awards. We recognize compensation expense associated with the calculated grant datetime-based awards ratably over the requisite service period. The fair value as a percentage of the officers’ base salary ranged from approximately 46% to 96% for the portion of theshare awards based on relative TSR and from 5% to 10% for the portion of the awards based on absolute TSR. For the transition 2016 LTIP Awards with a two-year performance period beginning on May 1, 2015, the calculated grant date fair value as a percentage of the officers’ base salary ranged from approximately 43% to 86% for the portion of the awards based on relative TSR and from 5% to 10% for the portion of the awards based on absolute TSR.

Share-based compensation expense for the 2016 LTIP Awards was $1.6 million for the fiscal year ended April 30, 2016. Share-based compensation expense for the 2015 performance period was approximately $277,000 and $1.3 million for the fiscal years ended April 30, 2016 and 2015. Share-based compensation expense for the 2014 performance period was approximately $690,000 and $914,000 for the fiscal years ended April 30, 2015 and 2014.

2016 Annual Report F-39

Table of Contents

Trustee Awards

We award share-based compensation to our non-management trustees on an annual basis in the form of unrestricted shares which vest immediately. The value of share-based compensation at grant date for each non-management trusteenon-employee trustees was $39,139, $39,139approximately $425,000, $533,000, and $28,976$505,000 for each of the fiscal years ended April 2016, 2015,December 31, 2021, 2020, and 2014,2019, respectively.

Total

Share-Based Compensation Expense

Total share-based compensation expense recognized in the consolidated financial statements for the three years ended April 30, 2016December 31, 2021, 2020, and 2019, for all share-based awards was as follows (in thousands):

follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended April 30, 

 

 

    

2016

    

2015

    

2014

 

Share based compensation expense

 

$

2,256

 

$

2,215

 

$

1,162

 

(in thousands)
 Year Ended December 31,
 202120202019
Share based compensation expense$2,687 $2,106 $1,905 

Restricted Share Awards with Performance
The total fair value of time-based share grants vested during the years ended December 31, 2020 and Service Conditions

2019 was $136,000 and $310,000, respectively.

The activity for the three years ended April 30, 2016December 31, 2020 and 2019, related to our restricted share awards excluding those subject to market conditions, was as follows.

follows:

 

 

 

 

 

 

 

 

 

 

 

Wtd Avg Grant-

 

 

    

Shares

    

Date Fair Value

 

Unvested at April 30, 2013

 

 —

 

$

 —

 

 Granted

 

104,855

 

 

8.72

 

Unvested at April 30, 2014

 

104,855

 

 

8.72

 

 Granted

 

107,536

 

 

7.17

 

 Vested during year

 

(79,181)

 

 

8.72

 

 Forfeited

 

(25,674)

 

 

8.72

 

Unvested at April 30, 2015

 

107,536

 

 

7.17

 

 Vested during year

 

(107,536)

 

 

7.17

 

Unvested at April 30, 2016

 

 —

 

 

 —

 

Awards with Service Conditions
  Wtd Avg Grant-
 SharesDate Fair Value
Unvested at December 31, 20187,191 0
Granted— 0
Vested(4,999)$61.06 
Forfeited— 
Unvested at December 31, 20192,192 59.20 
Granted— 0
Vested(2,192)$59.20 
Forfeited— 
Unvested at December 31, 2020— 

Restricted Stock Units
During the year ended December 31, 2021, we issued 7,416 time-based RSUs to employees and 6,277 to trustees. The totalRSUs to employees generally vest over a three-year period and the RSUs to trustees generally vest over a one-year period. The fair value of share grants vestedthe time-based RSUs granted during the fiscal yearsyear ended April 30, 2016, 2015 and 2014December 31, 2021 was approximately $647,000, $568,000 and $0. As of April 30, 2016, there was no$980,000. The total compensation cost related to non-vested share awardstime-based RSUs not yet recognized.

Restricted and Unrestricted Share Awards with Market Conditions

Share based awards with market conditions were granted during fiscal year 2016 under the LTIP with fair market values, as determined usingrecognized is $491,000, which we expect to recognize over a Monte Carlo simulation, as follows:

weighted average period of 1.2 years.

 

 

 

 

 

 

 

(in thousands)

 

 

Grant Date Fair Value

 

 

Restricted

 

Unrestricted

Relative TSR

$

1,750

$

1,750

Absolute TSR

 

199

 

199

The unamortized value of the awardsRSUs with market conditions as of April 30, 2016December 31, 2021, 2020, and 2019, was approximately $1.1 million, $487,000, and $1.3 million, respectively.

The activity for the years ended December 31, 2021, 2020, and 2019, related to our RSUs was as follows:

 

 

 

 

 

 

 

(in thousands)

 

 

Restricted

 

Unrestricted

Relative TSR

$

1,275

$

763

Absolute TSR

 

145

 

87

2016 Annual Report F-40

F-28
Table of Contents

RSUs with Service ConditionsRSUs with Market Conditions
  Wtd Avg Grant- Wtd Avg Grant-
 SharesDate Fair ValueSharesDate Fair Value
Unvested at December 31, 201818,260 $55.13 25,319 $62.84 
Granted16,084 $59.76 12,978 $79.49 
Vested(11,633)$55.35 — — 
Forfeited(365)$51.73 (475)$57.70 
Unvested at December 31, 201922,346 $58.41 37,822 $68.62 
Granted17,981 $68.25 — $— 
Vested(14,991)$59.10 (13,357)74.68 
Change in awards(1)
— $— 4,436 $— 
Forfeited(508)$62.99 (1,907)$63.92 
Unvested at December 31, 202024,828 $65.03 26,994 $67.87 
Granted13,693 $71.54 19,224 $87.04 
Vested(17,065)$63.42 (35,920)$65.34 
Change in awards(1)
— — 8,926 — 
Forfeited(482)$70.44 — $— 
Unvested at December 31, 202120,974 $69.97 19,224 $87.04 

(1)Represents the change in the number of restricted stock units earned at the end of the measurement period.
Stock Options
During the year ended December 31, 2021, we issued 43,629 stock options to employees. The stock options vest over a four-year period. The fair value of the stock options granted during the year ended December 31, 2021 was $7.383 per share. The total compensation costs related to non-vested stock options not yet recognized is $387,000, which we expect to recognize over a weighted average period of 2.4 years.
The stock option activity for the years ended December 31, 2021 and 2020 was as follows:
Number of SharesWeighted Average Exercise Price
Outstanding at December 31, 2019— — 
Granted141,000 $66.36 
Exercised— — 
Forfeited(1,952)$66.36 
Outstanding at December 31, 2020139,048 $66.36 
Exercisable at December 31, 2020— — 
Granted43,629 70.64 
Exercised— — 
Forfeited— — 
Outstanding at December 31, 2021182,677 67.38 
Exercisable at December 31, 202134,758 66.36 
The intrinsic value of a stock option represents the amount by which the current price of the underlying stock exceeds the exercise price of the option. As of December 31, 2021, stock options outstanding had an aggregate intrinsic value of $8.0 million with a weighted average remaining contractual term of 8.54 years.
NOTE 2114 • SUBSEQUENT EVENTS

Common and Preferred Share Distributions.

On June 2, 2016, our BoardJanuary 4, 2022, we acquired a portfolio of Trustees declared3 apartment communities located in the following distributions:

Quarterly Amount

Class of shares/units

per Share or Unit

Record Date

Payment Date

Common shares and limited partnership units

$

0.1300

June 15, 2016

July 1, 2012

Preferred shares:

Series A

$

0.5156

June 15, 2016

June 30, 2016

Series B

$

0.4968

June 15, 2016

June 30, 2016

Strategic Plan Update. On June 6, 2016, we announced our plan to move towards becoming a pure play multifamily REIT and our intention to sell our remaining commercial properties.

Termination of the ATM Sales Agreement. On June 1, 2016, we and our Operating Partnership terminated the ATM sales agreement with Baird according to its terms.

Completed Disposition.  On May 6, 2016, we sold a parcel of unimproved land in Grand Chute, WI,Minneapolis, Minnesota region for a salean aggregate purchase price of $250,000.

Pending Dispositions.  $68.1 million. The acquisition was financed through the assumption of $41.6 million in mortgage debt, the issuance of 209,156 Units, and cash.

On May 2, 2016, the tenantJanuary 26, 2022, we acquired Noko Apartments in our eight Spring Creek senior housing properties exercised its option toMinneapolis, Minnesota for an aggregate purchase the properties for a sale price of $43.5$46.4 million. On May 3, 2016, we signed an agreement to sell an industrial property in Fargo, ND, forWe financed the development of Noko Apartments with a sale price of $13.4 million. These pending dispositions are subject to various closing conditionsconstruction loan and contingencies, and no assurances can be given that the transaction will be completed on the terms currently expected, or at all.

2016 Annual Report F-41

a mezzanine loan which had

F-29
Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (principal balances of $29.9 million and $13.4 million, respectively, as of December 31, 2021. The loans were exchanged to fund, in thousands)

part, the acquisition.
On February 23, 2022, we paid $3.3 million to terminate our $75.0 million interest rate swap and our $70.0 million forward swap.
F-30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Gross amount at which carried at

    

 

 

    

 

    

Life on which

 

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

depreciation in

 

 

 

 

 

 

 

 

 

 

 

 

Costs capitalized

 

 

 

 

 

 

 

 

 

 

 

 

 

Date of

 

latest income

 

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

statement is

 

Description

 

Encumbrances(1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

computed

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

71 France - Edina, MN

 

$

 —

 

$

3,220

 

$

38,092

 

$

27

 

$

3,220

 

$

38,119

 

$

41,339

 

$

(611)

 

2015

 

40

years

 

11th Street 3 Plex - Minot, ND

 

 

81

 

 

11

 

 

53

 

 

20

 

 

20

 

 

64

 

 

84

 

 

(15)

 

2008

 

40

years

 

4th Street 4 Plex - Minot, ND

 

 

94

 

 

15

 

 

74

 

 

37

 

 

26

 

 

100

 

 

126

 

 

(23)

 

2008

 

40

years

 

Alps Park - Rapid City, SD

 

 

3,833

 

 

287

 

 

5,551

 

 

243

 

 

308

 

 

5,773

 

 

6,081

 

 

(466)

 

2013

 

40

years

 

Apartments on Main - Minot, ND

 

 

618

 

 

158

 

 

1,123

 

 

59

 

 

195

 

 

1,145

 

 

1,340

 

 

(275)

 

1987

 

24 - 40

years

 

Arbors - S Sioux City, NE

 

 

3,753

 

 

350

 

 

6,625

 

 

2,119

 

 

985

 

 

8,109

 

 

9,094

 

 

(2,432)

 

2006

 

40

years

 

Arcata - Golden Valley, MN

 

 

23,321

 

 

2,088

 

 

30,613

 

 

58

 

 

2,089

 

 

30,670

 

 

32,759

 

 

(1,438)

 

2015

 

40

years

 

Ashland - Grand Forks, ND

 

 

5,414

 

 

741

 

 

7,569

 

 

202

 

 

783

 

 

7,729

 

 

8,512

 

 

(902)

 

2012

 

40

years

 

Avalon Cove - Rochester, MN

 

 

25,900

 

 

1,616

 

 

34,074

 

 

9

 

 

1,616

 

 

34,083

 

 

35,699

 

 

(109)

 

2016

 

40

years

 

Boulder Court - Eagan, MN

 

 

2,468

 

 

1,067

 

 

5,498

 

 

3,008

 

 

1,391

 

 

8,182

 

 

9,573

 

 

(2,713)

 

2003

 

40

years

 

Brookfield Village - Topeka, KS

 

 

5,124

 

 

509

 

 

6,698

 

 

1,618

 

 

773

 

 

8,052

 

 

8,825

 

 

(2,531)

 

2003

 

40

years

 

Brooklyn Heights - Minot, ND

 

 

636

 

 

145

 

 

1,450

 

 

979

 

 

235

 

 

2,339

 

 

2,574

 

 

(1,012)

 

1997

 

12 - 40

years

 

Canyon Lake - Rapid City, SD

 

 

2,791

 

 

305

 

 

3,958

 

 

1,748

 

 

397

 

 

5,614

 

 

6,011

 

 

(1,943)

 

2001

 

40

years

 

Cardinal Point - Grand Forks, ND

 

 

 —

 

 

1,600

 

 

47,334

 

 

838

 

 

1,600

 

 

48,172

 

 

49,772

 

 

(587)

 

2013

 

40

years

 

Cascade Shores - Rochester, MN

 

 

11,400

 

 

1,585

 

 

16,710

 

 

 —

 

 

1,585

 

 

16,710

 

 

18,295

 

 

(149)

 

2016

 

40

years

 

Castlerock - Billings, MT

 

 

6,465

 

 

736

 

 

4,864

 

 

2,281

 

 

1,011

 

 

6,870

 

 

7,881

 

 

(2,963)

 

1998

 

40

years

 

Chateau I & II - Minot, ND(2)

 

 

 —

 

 

301

 

 

20,065

 

 

760

 

 

317

 

 

20,809

 

 

21,126

 

 

(1,364)

 

2013

 

40

years

 

Cimarron Hills - Omaha, NE

 

 

4,648

 

 

706

 

 

9,588

 

 

4,466

 

 

1,376

 

 

13,384

 

 

14,760

 

 

(5,139)

 

2001

 

40

years

 

Colonial Villa - Burnsville, MN

 

 

4,937

 

 

2,401

 

 

11,515

 

 

8,191

 

 

2,878

 

 

19,229

 

 

22,107

 

 

(5,958)

 

2003

 

40

years

 

Colony - Lincoln, NE

 

 

13,032

 

 

1,515

 

 

15,730

 

 

941

 

 

1,609

 

 

16,577

 

 

18,186

 

 

(1,826)

 

2012

 

40

years

 

Colton Heights - Minot, ND

 

 

358

 

 

80

 

 

672

 

 

441

 

 

123

 

 

1,070

 

 

1,193

 

 

(808)

 

1984

 

40

years

 

Commons at Southgate - Minot, ND

 

 

21,760

 

 

3,691

 

 

32,572

 

 

360

 

 

3,796

 

 

32,827

 

 

36,623

 

 

(1,914)

 

2015

 

40

years

 

Cottage West Twin Homes - Sioux Falls, SD

 

 

3,523

 

 

968

 

 

3,762

 

 

495

 

 

1,041

 

 

4,184

 

 

5,225

 

 

(496)

 

2011

 

40

years

 

Cottonwood - Bismarck, ND

 

 

15,358

 

 

1,056

 

 

17,372

 

 

3,851

 

 

1,460

 

 

20,819

 

 

22,279

 

 

(7,469)

 

1997

 

40

years

 

Country Meadows - Billings, MT

 

 

6,436

 

 

491

 

 

7,809

 

 

1,653

 

 

543

 

 

9,410

 

 

9,953

 

 

(4,086)

 

1995

 

33 - 40

years

 

Crestview - Bismarck, ND

 

 

3,757

 

 

235

 

 

4,290

 

 

1,853

 

 

536

 

 

5,842

 

 

6,378

 

 

(3,081)

 

1994

 

24 - 40

years

 

Crown - Rochester, MN

 

 

2,509

 

 

261

 

 

3,289

 

 

275

 

 

269

 

 

3,556

 

 

3,825

 

 

(575)

 

2010

 

40

years

 

Crown Colony - Topeka, KS

 

 

7,936

 

 

620

 

 

9,956

 

 

2,630

 

 

954

 

 

12,252

 

 

13,206

 

 

(4,868)

 

1999

 

40

years

 

Crystal Bay - Rochester, MN

 

 

8,000

 

 

433

 

 

11,425

 

 

 —

 

 

433

 

 

11,425

 

 

11,858

 

 

(54)

 

2016

 

40

years

 

Cypress Court - St. Cloud, MN

 

 

12,922

 

 

1,583

 

 

18,879

 

 

162

 

 

1,591

 

 

19,033

 

 

20,624

 

 

(1,280)

 

2012

 

40

years

 

Dakota Commons - Williston, ND(2)

 

 

 —

 

 

823

 

 

9,597

 

 

97

 

 

871

 

 

9,646

 

 

10,517

 

 

(571)

 

2015

 

40

years

 

Deer Ridge - Jamestown, ND

 

 

11,673

 

 

711

 

 

24,117

 

 

69

 

 

711

 

 

24,186

 

 

24,897

 

 

(440)

 

2013

 

40

years

 

2016 Annual Report

Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

April 30, 2016

December 31, 2021
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

     Gross amount at which carried at  Life on which
  Initial Cost to Company close of period  depreciation in
    Costs capitalized    Date oflatest income
   Buildings &subsequent to Buildings & AccumulatedConstructionstatement is
Description
Encumbrances(1)
LandImprovementsacquisitionLandImprovementsTotalDepreciationor Acquisitioncomputed
Same-Store           
71 France - Edina, MN$52,149 $4,721 $61,762 $625 $4,801 $62,307 $67,108 $(17,093)201630-37years
Alps Park - Rapid City, SD— 287 5,551 691 336 6,193 6,529 (1,817)201330-37years
Arcata - Golden Valley, MN— 2,088 31,036 413 2,128 31,409 33,537 (9,627)201530-37years
Ashland - Grand Forks, ND— 741 7,569 364 823 7,851 8,674 (2,688)201230-37years
Avalon Cove - Rochester, MN— 1,616 34,074 825 1,808 34,707 36,515 (7,327)201630-37years
Boulder Court - Eagan, MN— 1,067 5,498 3,124 1,576 8,113 9,689 (4,590)200330-37years
Canyon Lake - Rapid City, SD— 305 3,958 2,285 420 6,128 6,548 (3,287)200130-37years
Cardinal Point - Grand Forks, ND— 1,600 33,400 400 1,727 33,673 35,400 (4,132)201330-37years
Castlerock - Billings, MT— 736 4,864 2,257 1,045 6,812 7,857 (4,582)199830-37years
Chateau - Minot, ND— 301 20,058 1,185 326 21,218 21,544 (6,880)201330-37years
Cimarron Hills - Omaha, NE8,700 706 9,588 4,684 1,639 13,339 14,978 (7,998)200130-37years
Commons and Landing at Southgate - Minot, ND— 5,945 47,512 2,448 6,424 49,481 55,905 (15,690)201530-37years
Connelly on Eleven - Burnsville, MN— 2,401 11,515 16,010 3,206 26,720 29,926 (14,315)200330-37years
Cottonwood - Bismarck, ND— 1,056 17,372 5,799 1,962 22,265 24,227 (13,046)199730-37years
Country Meadows - Billings, MT— 491 7,809 1,623 599 9,324 9,923 (5,872)199530-37years
Cypress Court - St. Cloud, MN11,338 1,583 18,879 545 1,625 19,382 21,007 (5,995)201230-37years
Deer Ridge - Jamestown, ND— 711 24,129 348 785 24,403 25,188 (7,292)201330-37years
Donovan - Lincoln, NE11,270 1,515 15,730 4,952 1,817 20,380 22,197 (6,531)201230-37years
Dylan - Denver, CO— 12,155 77,215 1,138 12,241 78,267 90,508 (10,892)201830years
Evergreen - Isanti, MN— 1,129 5,524 628 1,159 6,122 7,281 (2,290)200830-37years
Freightyard - Minneapolis, MN— 1,889 23,616 1,296 1,895 24,906 26,801 (2,091)201930years
Gardens - Grand Forks, ND— 518 8,702 141 535 8,826 9,361 (2,100)201530-37years
Grand Gateway - St. Cloud, MN— 814 7,086 2,152 970 9,082 10,052 (3,972)201230-37years
GrandeVille Shores - Rochester, MN46,320 6,588 67,072 5,741 6,776 72,625 79,401 (16,311)201530-37years
Greenfield - Omaha, NE— 578 4,122 3,007 876 6,831 7,707 (2,769)200730-37years
Homestead Garden - Rapid City, SD— 655 14,139 1,219 792 15,221 16,013 (3,944)201530-37years
Lakeside Village - Lincoln, NE11,158 1,215 15,837 3,369 1,476 18,945 20,421 (6,098)201230-37years
Legacy - Grand Forks, ND— 1,362 21,727 10,958 2,474 31,573 34,047 (19,735)1995-200530-37years
Legacy Heights - Bismarck, ND— 1,207 13,742 290 1,142 14,097 15,239 (3,102)201530-37years
Lugano at Cherry Creek - Denver, CO— 7,679 87,766 1,317 7,679 89,083 96,762 (7,670)201930years
Meadows - Jamestown, ND— 590 4,519 2,075 730 6,454 7,184 (4,101)199830-37years
Monticello Crossings - Monticello, MN— 1,734 30,136 649 1,951 30,568 32,519 (6,660)201730-37years
Monticello Village - Monticello, MN— 490 3,756 1,211 655 4,802 5,457 (2,655)200430-37years
Northridge - Bismarck, ND— 884 7,515 296 1,048 7,647 8,695 (1,912)201530-37years
Olympic Village - Billings, MT— 1,164 10,441 4,047 1,885 13,767 15,652 (8,539)200030-37years
Oxbo - St Paul, MN— 5,809 51,586 263 5,822 51,836 57,658 (8,896)201830years
Park Meadows - Waite Park, MN— 1,143 9,099 9,976 2,140 18,078 20,218 (13,170)199730-37years
Park Place - Plymouth, MN— 10,609 80,781 13,587 10,819 94,158 104,977 (15,767)201830years
F-31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Gross amount at which carried at

    

 

 

    

 

    

Life on which

 

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

depreciation in

 

 

 

 

 

 

 

 

 

 

 

 

Costs capitalized

 

 

 

 

 

 

 

 

 

 

 

 

 

Date of

 

latest income

 

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

statement is

 

Description

 

Encumbrances (1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

computed

 

Evergreen - Isanti, MN

 

 

1,951

 

 

380

 

 

2,740

 

 

142

 

 

385

 

 

2,877

 

 

3,262

 

 

(552)

 

2008

 

40

years

 

Evergreen II - Isanti, MN

 

 

2,020

 

 

691

 

 

2,784

 

 

92

 

 

698

 

 

2,869

 

 

3,567

 

 

(361)

 

2011

 

40

years

 

Fairmont - Minot, ND

 

 

319

 

 

28

 

 

337

 

 

116

 

 

56

 

 

425

 

 

481

 

 

(93)

 

2008

 

40

years

 

First Avenue - Minot, ND

 

 

 —

 

 

 —

 

 

3,046

 

 

21

 

 

 —

 

 

3,067

 

 

3,067

 

 

(234)

 

2013

 

40

years

 

Forest Park - Grand Forks, ND

 

 

7,422

 

 

810

 

 

5,579

 

 

7,746

 

 

1,439

 

 

12,696

 

 

14,135

 

 

(5,776)

 

1993

 

24 - 40

years

 

French Creek - Rochester, MN

 

 

3,100

 

 

201

 

 

4,735

 

 

 —

 

 

201

 

 

4,735

 

 

4,936

 

 

(28)

 

2016

 

40

years

 

Gables Townhomes - Sioux Falls, SD

 

 

1,426

 

 

349

 

 

1,921

 

 

193

 

 

377

 

 

2,086

 

 

2,463

 

 

(246)

 

2011

 

40

years

 

Gardens - Grand Forks, ND(2)

 

 

 —

 

 

518

 

 

8,702

 

 

71

 

 

519

 

 

8,772

 

 

9,291

 

 

(155)

 

2015

 

40

years

 

Grand Gateway - St. Cloud, MN

 

 

 —

 

 

814

 

 

7,086

 

 

1,119

 

 

935

 

 

8,084

 

 

9,019

 

 

(1,027)

 

2012

 

40

years

 

GrandeVille at Cascade Lake - Rochester, MN

 

 

36,000

 

 

5,003

 

 

50,363

 

 

220

 

 

5,027

 

 

50,559

 

 

55,586

 

 

(673)

 

2015

 

40

years

 

Greenfield - Omaha, NE

 

 

3,503

 

 

578

 

 

4,122

 

 

935

 

 

824

 

 

4,811

 

 

5,635

 

 

(1,092)

 

2007

 

40

years

 

Heritage Manor - Rochester, MN

 

 

3,731

 

 

403

 

 

6,968

 

 

2,915

 

 

582

 

 

9,704

 

 

10,286

 

 

(4,039)

 

1998

 

40

years

 

Homestead Garden - Rapid City, SD

 

 

9,585

 

 

655

 

 

14,139

 

 

282

 

 

694

 

 

14,382

 

 

15,076

 

 

(737)

 

2015

 

40

years

 

Indian Hills - Sioux City, IA(2)

 

 

 —

 

 

294

 

 

2,921

 

 

3,933

 

 

410

 

 

6,738

 

 

7,148

 

 

(1,574)

 

2007

 

40

years

 

Kirkwood Manor - Bismarck, ND

 

 

3,204

 

 

449

 

 

2,725

 

 

1,767

 

 

577

 

 

4,364

 

 

4,941

 

 

(1,907)

 

1997

 

12 - 40

years

 

Lakeside Village - Lincoln, NE

 

 

12,867

 

 

1,215

 

 

15,837

 

 

620

 

 

1,280

 

 

16,392

 

 

17,672

 

 

(1,785)

 

2012

 

40

years

 

Landing at Southgate - Minot, ND

 

 

10,240

 

 

2,254

 

 

14,958

 

 

187

 

 

2,319

 

 

15,080

 

 

17,399

 

 

(916)

 

2013

 

40

years

 

Landmark - Grand Forks, ND

 

 

 —

 

 

184

 

 

1,514

 

 

1,154

 

 

353

 

 

2,499

 

 

2,852

 

 

(1,150)

 

1997

 

40

years

 

Legacy - Grand Forks, ND

 

 

15,151

 

 

1,362

 

 

21,727

 

 

7,505

 

 

2,227

 

 

28,367

 

 

30,594

 

 

(11,020)

 

1995-2005

 

24 - 40

years

 

Legacy Heights - Bismarck, ND(2)

 

 

 —

 

 

1,207

 

 

13,742

 

 

225

 

 

1,229

 

 

13,945

 

 

15,174

 

 

(412)

 

2015

 

40

years

 

Mariposa - Topeka, KS

 

 

2,872

 

 

399

 

 

5,110

 

 

565

 

 

428

 

 

5,646

 

 

6,074

 

 

(1,627)

 

2004

 

40

years

 

Meadows - Jamestown, ND

 

 

 —

 

 

590

 

 

4,519

 

 

1,520

 

 

678

 

 

5,951

 

 

6,629

 

 

(2,297)

 

1998

 

40

years

 

Monticello Village - Monticello, MN

 

 

2,901

 

 

490

 

 

3,756

 

 

603

 

 

625

 

 

4,224

 

 

4,849

 

 

(1,371)

 

2004

 

40

years

 

Northern Valley - Rochester, MN

 

 

 —

 

 

110

 

 

610

 

 

140

 

 

122

 

 

738

 

 

860

 

 

(126)

 

2010

 

40

years

 

North Pointe - Bismarck, ND

 

 

3,330

 

 

303

 

 

3,957

 

 

808

 

 

357

 

 

4,711

 

 

5,068

 

 

(1,579)

 

1995-2011

 

24 - 40

years

 

Northridge - Bismarck, ND

 

 

6,146

 

 

884

 

 

7,516

 

 

96

 

 

946

 

 

7,550

 

 

8,496

 

 

(334)

 

2015

 

40

years

 

Oakmont Estates - Sioux Falls, SD

 

 

2,361

 

 

422

 

 

4,838

 

 

721

 

 

639

 

 

5,342

 

 

5,981

 

 

(1,910)

 

2002

 

40

years

 

Oakwood Estates - Sioux Falls, SD

 

 

3,847

 

 

543

 

 

2,784

 

 

4,470

 

 

837

 

 

6,960

 

 

7,797

 

 

(3,422)

 

1993

 

40

years

 

Olympic Village - Billings, MT

 

 

10,372

 

 

1,164

 

 

10,441

 

 

3,312

 

 

1,799

 

 

13,118

 

 

14,917

 

 

(5,266)

 

2000

 

40

years

 

Olympik Village - Rochester, MN

 

 

4,259

 

 

1,034

 

 

6,109

 

 

2,315

 

 

1,187

 

 

8,271

 

 

9,458

 

 

(2,346)

 

2005

 

40

years

 

Oxbow Park - Sioux Falls, SD

 

 

3,757

 

 

404

 

 

3,152

 

 

3,178

 

 

957

 

 

5,777

 

 

6,734

 

 

(2,987)

 

1994

 

24 - 40

years

 

Park Meadows - Waite Park, MN

 

 

8,342

 

 

1,143

 

 

9,099

 

 

7,594

 

 

1,766

 

 

16,070

 

 

17,836

 

 

(6,454)

 

1997

 

40

years

 

Pebble Springs - Bismarck, ND

 

 

738

 

 

7

 

 

748

 

 

182

 

 

55

 

 

882

 

 

937

 

 

(373)

 

1999

 

40

years

 

Pinehurst - Billings, MT

 

 

164

 

 

72

 

 

687

 

 

360

 

 

112

 

 

1,007

 

 

1,119

 

 

(332)

 

2002

 

40

years

 

Pines - Minot, ND

 

 

102

 

 

35

 

 

215

 

 

187

 

 

49

 

 

388

 

 

437

 

 

(148)

 

1997

 

40

years

 

Plaza - Minot, ND

 

 

5,212

 

 

867

 

 

12,784

 

 

2,617

 

 

998

 

 

15,270

 

 

16,268

 

 

(2,851)

 

2009

 

40

years

 

Pointe West - Rapid City, SD

 

 

2,566

 

 

240

 

 

3,538

 

 

1,674

 

 

388

 

 

5,064

 

 

5,452

 

 

(2,522)

 

1994

 

24 - 40

years

 

Ponds at Heritage Place - Sartell, MN

 

 

3,749

 

 

395

 

 

4,564

 

 

400

 

 

410

 

 

4,949

 

 

5,359

 

 

(517)

 

2012

 

40

years

 

Prairie Winds - Sioux Falls, SD

 

 

1,381

 

 

144

 

 

1,816

 

 

575

 

 

297

 

 

2,238

 

 

2,535

 

 

(1,296)

 

1993

 

24 - 40

years

 

Quarry Ridge - Rochester, MN

 

 

26,755

 

 

2,254

 

 

30,024

 

 

1,690

 

 

2,363

 

 

31,605

 

 

33,968

 

 

(5,450)

 

2006

 

40

years

 

2016 Annual Report F-43

Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

April 30, 2016

December 31, 2021
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

     Gross amount at which carried at  Life on which
  Initial Cost to Company close of period  depreciation in
    Costs capitalized    Date oflatest income
   Buildings &subsequent to Buildings & AccumulatedConstructionstatement is
Description
Encumbrances(1)
LandImprovementsacquisitionLandImprovementsTotalDepreciationor Acquisitioncomputed
Plaza - Minot, ND— 867 12,784 3,118 1,011 15,758 16,769 (6,270)200930-37years
Pointe West - Rapid City, SD— 240 3,538 2,209 463 5,524 5,987 (4,044)199430-37years
Ponds at Heritage Place - Sartell, MN— 395 4,564 540 419 5,080 5,499 (1,773)201230-37years
Quarry Ridge - Rochester, MN23,409 2,254 30,024 5,223 2,412 35,089 37,501 (12,114)200630-37years
Red 20 - Minneapolis, MN20,775 1,900 24,116 521 1,908 24,629 26,537 (7,560)201530-37years
Regency Park Estates - St. Cloud, MN7,167 702 10,198 6,155 1,179 15,876 17,055 (5,205)201130-37years
Rimrock West - Billings, MT— 330 3,489 2,044 568 5,295 5,863 (3,403)199930-37years
River Ridge - Bismarck, ND— 576 24,670 1,154 922 25,478 26,400 (9,018)200830-37years
Rocky Meadows - Billings, MT— 656 5,726 1,632 840 7,174 8,014 (4,817)199530-37years
Rum River - Isanti, MN— 843 4,823 515 870 5,311 6,181 (2,358)200730-37years
Silver Springs - Rapid City, SD— 215 3,007 1,077 273 4,026 4,299 (1,142)201530-37years
South Pointe - Minot, ND— 550 9,548 5,814 1,489 14,423 15,912 (10,819)199530-37years
Southpoint - Grand Forks, ND— 576 9,893 284 663 10,090 10,753 (2,696)201330-37years
Southfork - Lakeville, MN21,675 3,502 40,153 8,626 3,583 48,698 52,281 (6,292)201930years
Sunset Trail - Rochester, MN— 336 12,814 3,429 826 15,753 16,579 (9,579)199930-37years
Thomasbrook - Lincoln, NE13,100 600 10,306 5,474 1,710 14,670 16,380 (9,080)199930-37years
West Stonehill - Waite Park, MN16,425 939 10,167 10,933 1,912 20,127 22,039 (12,812)199530-37years
Westend - Denver, CO— 25,525 102,180 935 25,532 103,108 128,640 (13,525)201830years
Whispering Ridge - Omaha, NE19,187 2,139 25,424 3,715 2,551 28,727 31,278 (9,162)201230-37years
Woodridge - Rochester, MN— 370 6,028 5,380 761 11,017 11,778 (6,625)199730-37years
Total Same-Store$262,673 $129,597 $1,258,137 $180,716 $146,004 $1,422,446 $1,568,450 $(419,730)   
Non-Same-Store
Bayberry Place - Minneapolis, MN11,048 1,807 14,113 538 1,865 14,593 16,458 (177)202130years
Burgundy and Hillsboro Court - Minneapolis, MN23,570 2,834 31,149 1,177 2,913 32,247 35,160 (398)202130years
Civic Lofts - Denver, CO— 6,166 55,182 51 6,171 55,228 61,399 (148)202130years
Gatewood - St Cloud, MN5,156 327 6,858 348 342 7,191 7,533 (95)202130years
Grove Ridge - Minneapolis, MN7,992 1,250 10,271 405 1,293 10,633 11,926 (133)202130years
Ironwood - Minneapolis, MN— 2,165 36,874 238 2,167 37,110 39,277 (2,564)202030years
Legacy Waite Park - St Cloud, MN6,923 412 9,556 428 426 9,970 10,396 (135)202130years
New Hope Garden and Village - Minneapolis, MN9,943 1,603 12,578 480 1,651 13,010 14,661 (170)202130years
Palisades - Minneapolis, MN22,260 6,919 46,577 386 6,959 46,923 53,882 (574)202130years
Parkhouse - Thornton, CO— 10,474 132,105 987 10,484 133,082 143,566 (6,922)202030years
Plymouth Pointe - Minneapolis, MN9,575 1,042 12,810 526 1,073 13,305 14,378 (174)202130years
Pointe West St Cloud - St Cloud, MN5,008 246 6,850 437 260 7,273 7,533 (98)202130years
Portage - Minneapolis, MN5,991 2,133 6,685 415 2,226 7,007 9,233 (83)202130years
River Pointe - Minneapolis, MN25,412 3,346 33,118 951 3,426 33,989 37,415 (422)202130years
Southdale Parc - Minneapolis, MN5,301 1,569 7,740 302 1,618 7,993 9,611 (96)202130years
Union Pointe - Denver, CO— 5,727 69,966 336 5,736 70,293 76,029 (2,723)202130years
Venue on Knox - Minneapolis, MN11,660 3,438 14,743 548 3,530 15,199 18,729 (177)202130years
Windsor - Minneapolis, MN14,731 2,140 18,943 738 2,204 19,617 21,821 (243)202130years
Wingate - Minneapolis, MN$10,459 $1,480 $13,530 $503 $1,526 $13,987 $15,513 $(180)202130years
Woodhaven - Minneapolis, MN14,408 3,940 20,080 627 4,040 20,607 24,647 (245)202130years
Woodland Pointe - Minneapolis, MN31,673 5,367 40,422 843 5,449 41,183 46,632 (516)202130years
Total Non-Same-Store$221,110 $64,385 $600,150 $11,264 $65,359 $610,440 $675,799 $(16,273)
Total Multifamily$483,783 $193,982 $1,858,287 $191,980 $211,363 $2,032,886 $2,244,249 $(436,003)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Gross amount at which carried at

    

 

 

    

 

    

Life on which

 

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

depreciation in

 

 

 

 

 

 

 

 

 

 

 

 

Costs capitalized

 

 

 

 

 

 

 

 

 

 

 

 

 

Date of

 

latest income

 

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

statement is

 

Description

 

Encumbrances (1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

computed

 

Red 20 - Minneapolis, MN

 

 

23,200

 

 

1,900

 

 

26,641

 

 

65

 

 

1,900

 

 

26,706

 

 

28,606

 

 

(1,349)

 

2015

 

40

years

 

Regency Park Estates - St. Cloud, MN

 

 

8,368

 

 

702

 

 

10,198

 

 

1,760

 

 

873

 

 

11,787

 

 

12,660

 

 

(1,539)

 

2011

 

40

years

 

Renaissance Heights - Williston, ND

 

 

42,221

 

 

3,080

 

 

59,434

 

 

286

 

 

3,089

 

 

59,711

 

 

62,800

 

 

(2,956)

 

2013

 

40

years

 

Ridge Oaks - Sioux City, IA

 

 

3,301

 

 

178

 

 

4,073

 

 

2,532

 

 

307

 

 

6,476

 

 

6,783

 

 

(2,394)

 

2001

 

40

years

 

Rimrock West - Billings, MT

 

 

3,223

 

 

330

 

 

3,489

 

 

1,706

 

 

447

 

 

5,078

 

 

5,525

 

 

(1,902)

 

1999

 

40

years

 

River Ridge - Bismarck, ND

 

 

13,000

 

 

576

 

 

24,695

 

 

435

 

 

662

 

 

25,044

 

 

25,706

 

 

(2,167)

 

2008

 

40

years

 

Rocky Meadows - Billings, MT

 

 

4,997

 

 

656

 

 

5,726

 

 

1,437

 

 

775

 

 

7,044

 

 

7,819

 

 

(3,316)

 

1995

 

40

years

 

Rum River - Isanti, MN

 

 

3,461

 

 

843

 

 

4,823

 

 

269

 

 

864

 

 

5,071

 

 

5,935

 

 

(1,164)

 

2007

 

40

years

 

Sherwood - Topeka, KS

 

 

11,918

 

 

1,142

 

 

14,684

 

 

3,405

 

 

1,745

 

 

17,486

 

 

19,231

 

 

(7,099)

 

1999

 

40

years

 

Sierra Vista - Sioux Falls, SD

 

 

1,358

 

 

241

 

 

2,097

 

 

477

 

 

276

 

 

2,539

 

 

2,815

 

 

(350)

 

2011

 

40

years

 

Silver Springs - Rapid City, SD

 

 

2,194

 

 

215

 

 

3,006

 

 

351

 

 

237

 

 

3,335

 

 

3,572

 

 

(161)

 

2015

 

40

years

 

South Pointe - Minot, ND

 

 

8,428

 

 

550

 

 

9,548

 

 

3,836

 

 

1,362

 

 

12,572

 

 

13,934

 

 

(5,881)

 

1995

 

24 - 40

years

 

Southpoint - Grand Forks, ND(2)

 

 

 —

 

 

576

 

 

9,893

 

 

95

 

 

605

 

 

9,959

 

 

10,564

 

 

(672)

 

2013

 

40

years

 

Southview - Minot, ND

 

 

1,009

 

 

185

 

 

469

 

 

435

 

 

251

 

 

838

 

 

1,089

 

 

(401)

 

1994

 

40

years

 

Southwind - Grand Forks, ND

 

 

5,385

 

 

400

 

 

5,034

 

 

3,290

 

 

796

 

 

7,928

 

 

8,724

 

 

(3,754)

 

1995

 

24 - 40

years

 

Summit Park - Minot, ND

 

 

882

 

 

161

 

 

1,898

 

 

1,847

 

 

795

 

 

3,111

 

 

3,906

 

 

(1,347)

 

1997

 

24 - 40

years

 

Sunset Trail - Rochester, MN

 

 

7,875

 

 

336

 

 

12,814

 

 

2,926

 

 

662

 

 

15,414

 

 

16,076

 

 

(5,937)

 

1999

 

40

years

 

Temple - Minot, ND

 

 

72

 

 

 —

 

 

 —

 

 

234

 

 

 —

 

 

234

 

 

234

 

 

(64)

 

2006

 

40

years

 

Terrace Heights - Minot, ND

 

 

147

 

 

29

 

 

312

 

 

148

 

 

40

 

 

449

 

 

489

 

 

(184)

 

2006

 

40

years

 

Thomasbrook - Lincoln, NE

 

 

5,793

 

 

600

 

 

10,306

 

 

3,578

 

 

1,421

 

 

13,063

 

 

14,484

 

 

(4,967)

 

1999

 

40

years

 

Valley Park - Grand Forks, ND

 

 

3,755

 

 

294

 

 

4,137

 

 

3,667

 

 

1,177

 

 

6,921

 

 

8,098

 

 

(2,827)

 

1999

 

40

years

 

Villa West - Topeka, KS

 

 

11,923

 

 

1,590

 

 

15,760

 

 

1,152

 

 

1,942

 

 

16,560

 

 

18,502

 

 

(1,839)

 

2012

 

40

years

 

Village Green - Rochester, MN

 

 

945

 

 

234

 

 

2,296

 

 

1,009

 

 

359

 

 

3,180

 

 

3,539

 

 

(1,011)

 

2003

 

40

years

 

West Stonehill - Waite Park, MN

 

 

8,267

 

 

939

 

 

10,167

 

 

6,436

 

 

1,673

 

 

15,869

 

 

17,542

 

 

(7,323)

 

1995

 

40

years

 

Westridge - Minot, ND

 

 

1,543

 

 

68

 

 

1,887

 

 

309

 

 

79

 

 

2,185

 

 

2,264

 

 

(454)

 

2008

 

40

years

 

Westwood Park - Bismarck, ND

 

 

1,916

 

 

116

 

 

1,909

 

 

1,975

 

 

284

 

 

3,716

 

 

4,000

 

 

(1,546)

 

1998

 

40

years

 

Whispering Ridge - Omaha, NE

 

 

21,653

 

 

2,139

 

 

25,424

 

 

1,025

 

 

2,316

 

 

26,272

 

 

28,588

 

 

(2,349)

 

2012

 

40

years

 

Williston Garden - Williston, ND

 

 

10,070

 

 

1,400

 

 

17,696

 

 

215

 

 

1,431

 

 

17,880

 

 

19,311

 

 

(2,853)

 

2012

 

40

years

 

Winchester - Rochester, MN

 

 

2,313

 

 

748

 

 

5,622

 

 

1,877

 

 

1,016

 

 

7,231

 

 

8,247

 

 

(2,457)

 

2003

 

40

years

 

Woodridge - Rochester, MN

 

 

6,092

 

 

370

 

 

6,028

 

 

2,388

 

 

741

 

 

8,045

 

 

8,786

 

 

(3,810)

 

1997

 

40

years

 

Total Multifamily

 

$

623,429

 

$

79,801

 

$

1,013,203

 

$

150,905

 

$

98,012

 

$

1,145,897

 

$

1,243,909

 

$

(209,156)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-32

2016 Annual Report F-44

Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

April 30, 2016

December 31, 2021
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

     Gross amount at which carried at  Life on which
  Initial Cost to Company close of period  depreciation in
    Costs capitalized    Date oflatest income
   Buildings &subsequent to Buildings & AccumulatedConstructionstatement is
Description
Encumbrances(1)
LandImprovementsacquisitionLandImprovementsTotalDepreciationor Acquisitioncomputed
Other - Mixed Use           
71 France - Edina, MN— $— $5,879 $867 $— $6,746 $6,746 $(1,399)201630-37years
Lugano at Cherry Creek - Denver, CO— — 1,600 657 — 2,257 2,257 (148)201930years
Oxbo - St Paul, MN— — 3,472 54 — 3,526 3,526 (541)201530years
Plaza - Minot, ND— 389 5,444 3,447 607 8,673 9,280 (4,303)200930-37years
Red 20 - Minneapolis, MN— — 2,525 475 — 3,000 3,000 (810)201530-37years
Total Other - Mixed Use— $389 $18,920 $5,500 $607 $24,202 $24,809 $(7,201)
Other - Commercial
3100 10th St SW - Minot, ND— $246 $1,866 $— $246 $1,866 $2,112 $(388)201930years
Total Other - Commercial— $246 $1,866 $— $246 $1,866 $2,112 $(388)   
Total$483,783 $194,617 $1,879,073 $197,480 $212,216 $2,058,954 $2,271,170 $(443,592)
(1)Amounts in this column are the mortgages payable balance as of December 31, 2021. These amounts do not include amounts owing under the Company's multi-bank line of credit, term loans, or unsecured senior notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Gross amount at which carried at

    

 

 

    

 

    

Life on which

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

depreciation in

 

 

 

 

 

 

 

 

 

 

 

Costs capitalized

 

 

 

 

 

 

 

 

 

 

 

 

 

Date of

 

latest income

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

statement is

Description

 

Encumbrances(1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

computed

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2800 Medical Building - Minneapolis, MN

 

$

7,552

 

$

204

 

$

7,135

 

$

2,547

 

$

229

 

$

9,657

 

$

9,886

 

$

(3,386)

 

2005

 

40

years

2828 Chicago Avenue - Minneapolis, MN

 

 

11,813

 

 

726

 

 

11,319

 

 

5,280

 

 

729

 

 

16,596

 

 

17,325

 

 

(4,614)

 

2007

 

40

years

Airport Medical - Bloomington, MN

 

 

 —

 

 

 —

 

 

4,678

 

 

51

 

 

11

 

 

4,718

 

 

4,729

 

 

(1,848)

 

2002

 

40

years

Billings 2300 Grant Road - Billings, MT

 

 

980

 

 

649

 

 

1,216

 

 

 —

 

 

649

 

 

1,216

 

 

1,865

 

 

(176)

 

2010

 

40

years

Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN

 

 

7,903

 

 

1,071

 

 

6,842

 

 

2,137

 

 

1,160

 

 

8,890

 

 

10,050

 

 

(1,904)

 

2008

 

40

years

Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN

 

 

4,947

 

 

189

 

 

5,127

 

 

1,221

 

 

248

 

 

6,289

 

 

6,537

 

 

(1,261)

 

2008

 

40

years

Denfeld Clinic - Duluth, MN

 

 

1,308

 

 

501

 

 

2,597

 

 

1

 

 

501

 

 

2,598

 

 

3,099

 

 

(783)

 

2004

 

40

years

Eagan 1440 Duckwood Medical - Eagan, MN

 

 

 —

 

 

521

 

 

1,547

 

 

556

 

 

521

 

 

2,103

 

 

2,624

 

 

(730)

 

2008

 

40

years

Edina 6363 France Medical - Edina, MN

 

 

11,228

 

 

 —

 

 

12,675

 

 

3,319

 

 

 —

 

 

15,994

 

 

15,994

 

 

(4,455)

 

2008

 

40

years

Edina 6405 France Medical  - Edina, MN

 

 

8,568

 

 

 —

 

 

12,201

 

 

257

 

 

 —

 

 

12,458

 

 

12,458

 

 

(3,407)

 

2008

 

40

years

Edina 6517 Drew Avenue - Edina, MN

 

 

 —

 

 

353

 

 

660

 

 

27

 

 

372

 

 

668

 

 

1,040

 

 

(239)

 

2002

 

40

years

Edina 6525 Drew Avenue - Edina, MN

 

 

 —

 

 

388

 

 

117

 

 

 —

 

 

388

 

 

117

 

 

505

 

 

(13)

 

2011

 

40

years

Edina 6525 France SMC II - Edina, MN

 

 

9,604

 

 

755

 

 

8,054

 

 

6,156

 

 

1,040

 

 

13,925

 

 

14,965

 

 

(6,345)

 

2003

 

40

years

Edina 6545 France SMC I - Edina MN

 

 

28,993

 

 

3,480

 

 

30,192

 

 

14,383

 

 

3,480

 

 

44,575

 

 

48,055

 

 

(18,379)

 

2001

 

40

years

Edina 6565 France SMC III - Edina, MN

 

 

 —

 

 

 —

 

 

33,032

 

 

1,201

 

 

 —

 

 

34,233

 

 

34,233

 

 

(701)

 

2015

 

40

years

Fresenius - Duluth, MN

 

 

500

 

 

50

 

 

1,520

 

 

2

 

 

50

 

 

1,522

 

 

1,572

 

 

(458)

 

2004

 

40

years

Garden View - St. Paul, MN

 

 

6,890

 

 

 —

 

 

7,408

 

 

1,072

 

 

26

 

 

8,454

 

 

8,480

 

 

(3,001)

 

2002

 

40

years

Gateway Clinic - Sandstone, MN

 

 

757

 

 

77

 

 

1,699

 

 

 —

 

 

77

 

 

1,699

 

 

1,776

 

 

(512)

 

2004

 

40

years

Healtheast St John & Woodwinds - Maplewood & Woodbury, MN

 

 

5,654

 

 

3,239

 

 

18,362

 

 

 —

 

 

3,239

 

 

18,362

 

 

21,601

 

 

(7,326)

 

2000

 

40

years

High Pointe Health Campus - Lake Elmo, MN

 

 

7,500

 

 

1,305

 

 

10,528

 

 

2,174

 

 

1,398

 

 

12,609

 

 

14,007

 

 

(4,226)

 

2004

 

40

years

Lakeside Medical Plaza - Omaha, NE

 

 

4,294

 

 

903

 

 

5,210

 

 

 —

 

 

903

 

 

5,210

 

 

6,113

 

 

(92)

 

2015

 

40

years

Mariner Clinic - Superior, WI

 

 

1,657

 

 

 —

 

 

3,781

 

 

275

 

 

20

 

 

4,036

 

 

4,056

 

 

(1,182)

 

2004

 

40

years

Minneapolis 701 25th Avenue Medical - Minneapolis, MN*

 

 

7,016

 

 

 —

 

 

7,873

 

 

1,566

 

 

 —

 

 

9,439

 

 

9,439

 

 

(2,205)

 

2008

 

40

years

Missoula 3050 Great Northern - Missoula, MT

 

 

997

 

 

640

 

 

1,331

 

 

 —

 

 

640

 

 

1,331

 

 

1,971

 

 

(193)

 

2010

 

40

years

Park Dental - Brooklyn Center, MN

 

 

 —

 

 

185

 

 

2,767

 

 

15

 

 

200

 

 

2,767

 

 

2,967

 

 

(943)

 

2002

 

40

years

Pavilion I - Duluth, MN

 

 

4,366

 

 

1,245

 

 

8,898

 

 

31

 

 

1,245

 

 

8,929

 

 

10,174

 

 

(2,670)

 

2004

 

40

years

Pavilion II - Duluth, MN

 

 

8,034

 

 

2,715

 

 

14,673

 

 

1,937

 

 

2,715

 

 

16,610

 

 

19,325

 

 

(6,306)

 

2004

 

40

years

PrairieCare Medical - Brooklyn Park, MN

 

 

14,982

 

 

2,610

 

 

21,798

 

 

32

 

 

2,610

 

 

21,830

 

 

24,440

 

 

(407)

 

2015

 

40

years

Ritchie Medical Plaza - St Paul, MN

 

 

8,320

 

 

1,615

 

 

7,851

 

 

4,063

 

 

1,647

 

 

11,882

 

 

13,529

 

 

(3,422)

 

2005

 

40

years

St Michael Clinic - St Michael, MN

 

 

1,736

 

 

328

 

 

2,259

 

 

264

 

 

328

 

 

2,523

 

 

2,851

 

 

(573)

 

2007

 

40

years

Trinity at Plaza 16 - Minot, ND

 

 

4,577

 

 

568

 

 

9,009

 

 

16

 

 

674

 

 

8,919

 

 

9,593

 

 

(1,049)

 

2011

 

40

years

Wells Clinic - Hibbing, MN

 

 

1,156

 

 

162

 

 

2,497

 

 

2

 

 

162

 

 

2,499

 

 

2,661

 

 

(752)

 

2004

 

40

years

Total Healthcare

 

$

171,332

 

$

24,479

 

$

264,856

 

$

48,585

 

$

25,262

 

$

312,658

 

$

337,920

 

$

(83,558)

 

 

 

 

 

F-33

2016 Annual Report F-45

Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

April 30, 2016

December 31, 2021 and 2020
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

    

 

 

    

 

 

    

 

 

    

Gross amount at which carried at

    

 

 

    

 

    

Life on which

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

depreciation in

 

 

 

 

 

 

 

 

 

 

 

Costs capitalized

 

 

 

 

 

 

 

 

 

 

 

 

 

Date of

 

latest income

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

statement is

Description

 

Encumbrances(1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

computed

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1st Avenue Building - Minot, ND

 

$

 —

 

$

30

 

$

337

 

$

 —

 

$

30

 

$

337

 

$

367

 

$

(49)

 

1981

 

33 - 40

years

17 South Main - Minot, ND

 

 

72

 

 

15

 

 

75

 

 

197

 

 

17

 

 

270

 

 

287

 

 

(205)

 

2000

 

40

years

Bismarck 715 East Broadway - Bismarck, ND

 

 

2,041

 

 

389

 

 

1,283

 

 

1,126

 

 

443

 

 

2,355

 

 

2,798

 

 

(544)

 

2008

 

40

years

Bloomington 2000 W 94th Street - Bloomington, MN(2)

 

 

0

 

 

2,133

 

 

4,097

 

 

1,243

 

 

2,230

 

 

5,243

 

 

7,473

 

 

(1,649)

 

2006

 

40

years

Dakota West Plaza - Minot , ND

 

 

338

 

 

92

 

 

493

 

 

30

 

 

106

 

 

509

 

 

615

 

 

(135)

 

2006

 

40

years

Grand Forks Carmike - Grand Forks, ND

 

 

1,176

 

 

184

 

 

2,360

 

 

2

 

 

184

 

 

2,362

 

 

2,546

 

 

(1,270)

 

1994

 

40

years

Lexington Commerce Center - Eagan, MN

 

 

1,504

 

 

453

 

 

4,352

 

 

2,077

 

 

492

 

 

6,390

 

 

6,882

 

 

(3,013)

 

1999

 

40

years

Minot 1400 31st Ave - Minot, ND(2)

 

 

 —

 

 

1,026

 

 

6,143

 

 

4,404

 

 

1,038

 

 

10,535

 

 

11,573

 

 

(2,904)

 

2010

 

40

years

Minot 2505 16th Street SW - Minot, ND(2)

 

 

 —

 

 

298

 

 

1,724

 

 

296

 

 

298

 

 

2,020

 

 

2,318

 

 

(351)

 

2009

 

40

years

Minot Arrowhead - Minot, ND(2)

 

 

 —

 

 

100

 

 

3,216

 

 

5,554

 

 

176

 

 

8,694

 

 

8,870

 

 

(2,402)

 

1973

 

40

years

Minot IPS - Minot, ND(2)

 

 

 —

 

 

416

 

 

5,952

 

 

 —

 

 

416

 

 

5,952

 

 

6,368

 

 

(537)

 

2012

 

40

years

Minot Southgate Wells Fargo Bank - Minot, ND

 

 

 —

 

 

992

 

 

2,237

 

 

 —

 

 

992

 

 

2,237

 

 

3,229

 

 

(81)

 

2014

 

40

years

Minot Southgate Retail - Minot, ND

 

 

 —

 

 

889

 

 

1,734

 

 

 —

 

 

889

 

 

1,734

 

 

2,623

 

 

(24)

 

2015

 

40

years

Plaza 16 - Minot, ND

 

 

6,916

 

 

389

 

 

5,444

 

 

3,860

 

 

598

 

 

9,095

 

 

9,693

 

 

(2,410)

 

2009

 

40

years

Roseville 3075 Long Lake Road - Roseville, MN

 

 

 —

 

 

810

 

 

10,244

 

 

1,771

 

 

810

 

 

12,015

 

 

12,825

 

 

(507)

 

2001

 

40

years

Urbandale 3900 106th Street - Urbandale, IA

 

 

10,266

 

 

3,680

 

 

9,893

 

 

1,982

 

 

3,863

 

 

11,692

 

 

15,555

 

 

(2,955)

 

2007

 

40

years

Woodbury 1865 Woodlane - Woodbury, MN

 

 

 —

 

 

1,108

 

 

2,628

 

 

1,884

 

 

1,123

 

 

4,497

 

 

5,620

 

 

(1,139)

 

2007

 

40

years

Total Other

 

$

22,313

 

$

13,004

 

$

62,212

 

$

24,426

 

$

13,705

 

$

85,937

 

$

99,642

 

$

(20,175)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

$

817,074

 

$

117,284

 

$

1,340,271

 

$

223,916

 

$

136,979

 

$

1,544,492

 

$

1,681,471

 

$

(312,889)

 

 

 

 

 


2016 Annual Report F-46

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount at which carried at

 

 

 

 

 

 

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

Costs capitalized

    

 

 

    

 

 

    

 

 

    

 

 

    

Date of

 

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

Description

 

Encumbrances(1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

Unimproved Land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Badger Hills - Rochester, MN

 

$

 —

 

$

1,050

 

$

 —

 

$

 —

 

$

1,050

 

$

 —

 

$

1,050

 

$

 —

 

2012

 

Bismarck 4916 - Bismarck, ND

 

 

 —

 

 

3,250

 

 

 —

 

 

17

 

 

3,267

 

 

 —

 

 

3,267

 

 

 —

 

2013

 

Bismarck 700 E Main - Bismarck, ND

 

 

 —

 

 

314

 

 

 —

 

 

568

 

 

882

 

 

 —

 

 

882

 

 

 —

 

2008

 

Creekside Crossing - Bismarck, ND

 

 

 —

 

 

4,286

 

 

 —

 

 

66

 

 

4,352

 

 

 —

 

 

4,352

 

 

 —

 

2015

 

Grand Forks - Grand Forks, ND

 

 

 —

 

 

4,278

 

 

 —

 

 

 —

 

 

4,278

 

 

 —

 

 

4,278

 

 

 —

 

2012

 

Isanti Unimproved - Isanti, MN

 

 

 —

 

 

58

 

 

 —

 

 

 —

 

 

58

 

 

 —

 

 

58

 

 

 —

 

2014

 

Minot 1525 24th Ave SW - Minot, ND

 

 

 —

 

 

1,262

 

 

 —

 

 

 —

 

 

1,262

 

 

 —

 

 

1,262

 

 

 —

 

2015

 

Rapid City Unimproved- Rapid City, SD

 

 

 —

 

 

1,376

 

 

 —

 

 

 —

 

 

1,376

 

 

 —

 

 

1,376

 

 

 —

 

2014

 

Renaissance Heights - Williston, ND

 

 

 —

 

 

2,229

 

 

 —

 

 

1,701

 

 

3,930

 

 

 —

 

 

3,930

 

 

 —

 

2012

 

Urbandale - Urbandale, IA

 

 

 —

 

 

5

 

 

 —

 

 

109

 

 

114

 

 

 —

 

 

114

 

 

 —

 

2009

 

Weston - Weston, WI

 

 

 —

 

 

370

 

 

 —

 

 

 —

 

 

370

 

 

 —

 

 

370

 

 

 —

 

2006

 

Total Unimproved Land

 

 

 —

 

$

18,478

 

$

 —

 

$

2,461

 

$

20,939

 

 

 —

 

$

20,939

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development in Progress

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

71 France - Edina, MN

 

$

 —

 

$

1,501

 

$

28,100

 

$

814

 

$

1,501

 

$

28,914

 

$

30,415

 

$

 —

 

2015

 

Monticello 7th Addition - Monticello, MN

 

 

 —

 

 

1,734

 

 

13,787

 

 

1,986

 

 

1,734

 

 

15,773

 

 

17,507

 

 

 —

 

2015

 

Other

 

 

 —

 

 

 —

 

 

 —

 

 

3,759

 

 

 —

 

 

3,759

 

 

3,759

 

 

 —

 

n/a

 

Total Development in Progress

   

$

 —

 

$

3,235

 

$

41,887

 

$

6,559

 

$

3,235

 

$

48,446

 

$

51,681

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

817,074

 

$

138,997

 

$

1,382,158

 

$

232,936

 

$

161,153

 

$

1,592,938

 

$

1,754,091

 

$

(312,889)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016 Annual Report F-47

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount at which carried at

 

 

 

 

 

 

Life on which

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

depreciation in

 

    

 

 

    

 

 

    

 

 

    

Costs capitalized

    

 

 

    

 

 

    

 

 

    

 

 

    

Date of

    

latest income

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

statement is

Description

 

Encumbrances(1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

computed

Held for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casper 1930 E 12th Street (Park Place) - Casper, WY(2)

 

$

 —

 

$

439

 

$

5,780

 

$

1,296

 

$

439

 

$

7,076

 

$

7,515

 

$

(1,374)

 

2009

 

40

years

Casper 3955 E 12th Street (Meadow Wind) - Casper, WY(2)

 

 

 —

 

 

388

 

 

10,494

 

 

1,700

 

 

459

 

 

12,123

 

 

12,582

 

 

(2,263)

 

2009

 

40

years

Cheyenne 4010 N College Drive (Aspen Wind) - Cheyenne, WY(2)

 

 

 —

 

 

628

 

 

10,272

 

 

2,243

 

 

629

 

 

12,514

 

 

13,143

 

 

(2,360)

 

2009

 

40

years

Cheyenne 4606 N College Drive (Sierra Hills) - Cheyenne, WY(2)

 

 

 —

 

 

695

 

 

7,455

 

 

1,468

 

 

695

 

 

8,923

 

 

9,618

 

 

(1,661)

 

2009

 

40

years

Edgewood Vista - Belgrade, MT

 

 

 —

 

 

35

 

 

779

 

 

1,129

 

 

35

 

 

1,908

 

 

1,943

 

 

(663)

 

2008

 

40

years

Edgewood Vista - Billings, MT

 

 

1,723

 

 

115

 

 

1,767

 

 

2,033

 

 

115

 

 

3,800

 

 

3,915

 

 

(1,276)

 

2008

 

40

years

Edgewood Vista - Bismarck, ND

 

 

 —

 

 

511

 

 

9,193

 

 

1,018

 

 

511

 

 

10,211

 

 

10,722

 

 

(2,829)

 

2005

 

40

years

Edgewood Vista - Brainerd, MN

 

 

 —

 

 

587

 

 

8,999

 

 

916

 

 

587

 

 

9,915

 

 

10,502

 

 

(2,760)

 

2005

 

40

years

Edgewood Vista - Columbus, NE

 

 

 —

 

 

43

 

 

824

 

 

531

 

 

44

 

 

1,354

 

 

1,398

 

 

(404)

 

2008

 

40

years

Edgewood Vista - East Grand Forks, MN

 

 

2,625

 

 

290

 

 

1,352

 

 

2,864

 

 

290

 

 

4,216

 

 

4,506

 

 

(1,557)

 

2000

 

40

years

Edgewood Vista - Fargo, ND

 

 

11,297

 

 

775

 

 

20,870

 

 

4,032

 

 

775

 

 

24,902

 

 

25,677

 

 

(5,964)

 

2008

 

40

years

Edgewood Vista - Fremont, NE

 

 

528

 

 

56

 

 

490

 

 

59

 

 

56

 

 

549

 

 

605

 

 

(193)

 

2008

 

40

years

Edgewood Vista - Grand Island, NE

 

 

 —

 

 

33

 

 

773

 

 

540

 

 

39

 

 

1,307

 

 

1,346

 

 

(400)

 

2008

 

40

years

Edgewood Vista - Hastings, NE

 

 

544

 

 

49

 

 

517

 

 

62

 

 

50

 

 

578

 

 

628

 

 

(213)

 

2008

 

40

years

Edgewood Vista - Hermantown I, MN

 

 

14,576

 

 

288

 

 

9,871

 

 

10,094

 

 

288

 

 

19,965

 

 

20,253

 

 

(7,931)

 

2000

 

40

years

Edgewood Vista - Hermantown II, MN

 

 

 —

 

 

719

 

 

10,517

 

 

942

 

 

719

 

 

11,459

 

 

12,178

 

 

(3,168)

 

2005

 

40

years

Edgewood Vista - Kalispell, MT

 

 

545

 

 

70

 

 

502

 

 

625

 

 

70

 

 

1,127

 

 

1,197

 

 

(442)

 

2001

 

40

years

Edgewood Vista - Minot, ND

 

 

8,768

 

 

1,045

 

 

11,590

 

 

2,805

 

 

1,047

 

 

14,393

 

 

15,440

 

 

(3,000)

 

2010

 

40

years

Edgewood Vista - Missoula, MT

 

 

774

 

 

109

 

 

854

 

 

72

 

 

116

 

 

919

 

 

1,035

 

 

(439)

 

1996

 

40

years

Edgewood Vista - Norfolk, NE

 

 

 —

 

 

42

 

 

722

 

 

494

 

 

42

 

 

1,216

 

 

1,258

 

 

(366)

 

2008

 

40

years

Edgewood Vista - Omaha, NE

 

 

345

 

 

89

 

 

547

 

 

55

 

 

89

 

 

602

 

 

691

 

 

(218)

 

2001

 

40

years

Edgewood Vista - Sioux Falls, SD

 

 

987

 

 

314

 

 

974

 

 

1,754

 

 

314

 

 

2,728

 

 

3,042

 

 

(993)

 

2008

 

40

years

Edgewood Vista - Spearfish, SD

 

 

 —

 

 

315

 

 

8,584

 

 

664

 

 

330

 

 

9,233

 

 

9,563

 

 

(2,144)

 

2005

 

40

years

Edgewood Vista - Virginia, MN

 

 

12,399

 

 

246

 

 

11,823

 

 

4,581

 

 

246

 

 

16,404

 

 

16,650

 

 

(5,886)

 

2002

 

40

years

Georgetown Square - Grand Chute, WI

 

 

 —

 

 

250

 

 

 —

 

 

 —

 

 

250

 

 

 —

 

 

250

 

 

 —

 

2006

 

n/a

 

Laramie 1072 N 22nd Street (Spring Wind) - Laramie, WY(2)

 

 

 —

 

 

406

 

 

10,151

 

 

1,296

 

 

406

 

 

11,447

 

 

11,853

 

 

(1,964)

 

2009

 

40

years

Legends at Heritage Place - Sartell, MN

 

 

 —

 

 

970

 

 

9,920

 

 

 —

 

 

970

 

 

9,920

 

 

10,890

 

 

(630)

 

2013

 

40

years

Legends at Heritage Place Unimproved - Sartell, MN

 

 

 —

 

 

537

 

 

 —

 

 

 —

 

 

537

 

 

 —

 

 

537

 

 

 —

 

2013

 

n/a

 

Pinecone Villas - Sartell, MN

 

 

 —

 

 

584

 

 

2,191

 

 

47

 

 

587

 

 

2,235

 

 

2,822

 

 

(159)

 

2013

 

40

years

2016 Annual Report F-48

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount at which carried at

 

 

 

 

 

 

Life on which

 

 

 

 

 

Initial Cost to Company

 

 

 

 

close of period

 

 

 

 

 

 

depreciation in

 

    

 

 

    

 

 

    

 

 

    

Costs capitalized

    

 

 

    

 

 

    

 

 

    

 

 

    

Date of

    

latest income

 

 

 

 

 

 

 

 

Buildings &

 

subsequent to

 

 

 

 

Buildings &

 

 

 

 

Accumulated

 

Construction

 

statement is

Description

 

Encumbrances (1)

 

Land

 

Improvements

 

acquisition

 

Land

 

Improvements

 

Total

 

Depreciation

 

or Acquisition

 

computed

Sartell 2000 23rd Street South - Sartell, MN*

 

 

662

 

 

 —

 

 

6,400

 

 

 —

 

 

 —

 

 

6,400

 

 

6,400

 

 

 —

 

2002

 

40

years

Spring Creek-American Falls - American Falls, ID

 

 

1,955

 

 

145

 

 

3,870

 

 

55

 

 

145

 

 

3,925

 

 

4,070

 

 

(542)

 

2011

 

40

years

Spring Creek-Boise - Boise, ID

 

 

2,640

 

 

708

 

 

4,296

 

 

71

 

 

708

 

 

4,367

 

 

5,075

 

 

(649)

 

2011

 

40

years

Spring Creek-Eagle - Eagle, ID

 

 

1,799

 

 

263

 

 

3,775

 

 

62

 

 

263

 

 

3,837

 

 

4,100

 

 

(534)

 

2011

 

40

years

Spring Creek-Fruitland - Fruitland, ID

 

 

 —

 

 

550

 

 

6,565

 

 

 —

 

 

550

 

 

6,565

 

 

7,115

 

 

(462)

 

2014

 

40

years

Spring Creek Fruitland Unimproved - Fruitland, ID

 

 

 —

 

 

339

 

 

 —

 

 

 —

 

 

339

 

 

 —

 

 

339

 

 

 —

 

2014

 

n/a

 

Spring Creek-Meridian - Meridian, ID

 

 

2,972

 

 

424

 

 

6,724

 

 

102

 

 

424

 

 

6,826

 

 

7,250

 

 

(938)

 

2011

 

40

years

Spring Creek-Overland - Overland, ID

 

 

2,981

 

 

687

 

 

5,942

 

 

96

 

 

687

 

 

6,038

 

 

6,725

 

 

(867)

 

2011

 

40

years

Spring Creek-Soda Springs - Soda Springs, ID

 

 

704

 

 

66

 

 

2,124

 

 

63

 

 

66

 

 

2,187

 

 

2,253

 

 

(304)

 

2011

 

40

years

Spring Creek-Ustick - Meridian, ID

 

 

 —

 

 

467

 

 

3,833

 

 

 —

 

 

467

 

 

3,833

 

 

4,300

 

 

(473)

 

2011

 

40

years

Stone Container - Fargo, ND

 

 

 —

 

 

440

 

 

6,597

 

 

104

 

 

440

 

 

6,701

 

 

7,141

 

 

(3,111)

 

2001

 

40

years

Total Held for Sale

   

$

68,824

 

$

14,717

 

$

207,937

 

$

43,873

 

$

14,824

 

$

251,703

 

$

266,527

 

$

(59,137)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts in this column are the mortgages payable balances as of April 30, 2016. These amounts do not include amounts owing under the Company’s multi-bank line of credit or under the Company’s construction loans.

(2)

As of April 30, 2016, this property was included in the collateral pool securing the Company’s $100.0 million multi-bank line of credit. The Company may add and remove eligible properties from the collateral pool if certain minimum collateral requirements are satisfied. Advances under the facility may not exceed 60% of the value of properties provided as security.

2016 Annual Report F-49

Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

Reconciliations of the carrying value of total property owned for the three years ended April 30, 2016, 2015,December 31, 2021 and 20142020 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

2014

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

 

$

1,335,687

 

$

1,241,195

 

$

1,244,860

 

Additions during year

 

 

 

 

 

 

 

 

 

 

Multifamily

 

 

282,457

 

 

183,114

 

 

84,117

 

Healthcare

 

 

63,605

 

 

 —

 

 

 —

 

Other

 

 

2,623

 

 

12,223

 

 

 —

 

Improvements and Other

 

 

34,619

 

 

21,006

 

 

24,317

 

 

 

 

1,718,991

 

 

1,457,538

 

 

1,353,294

 

Deductions during year

 

 

 

 

 

 

 

 

 

 

Cost of real estate sold

 

 

(1,305)

 

 

(17,904)

 

 

(85,029)

 

Impairment charge

 

 

 —

 

 

(1,566)

 

 

(8,323)

 

Write down of asset and accumulated depreciation on impaired assets

 

 

 —

 

 

(881)

 

 

(6,291)

 

Properties classified as held for sale during the year

 

 

(32,438)

 

 

(97,824)

 

 

(10,307)

 

Other(1)

 

 

(3,777)

 

 

(3,676)

 

 

(2,149)

 

Balance at close of year

 

$

1,681,471

 

$

1,335,687

 

$

1,241,195

 

 (in thousands)
Year Ended December 31,
 20212020
Balance at beginning of year$1,812,557 $1,643,078 
Additions during year 
Multifamily and Other491,648 181,771 
Improvements and Other34,427 27,460 
 2,338,632 1,852,309 
Deductions during year 
Cost of real estate sold(57,698)(38,111)
Other (1)
(9,764)(1,641)
Balance at close of year$2,271,170 $1,812,557 

Reconciliations of accumulated depreciation/amortization for the three years ended April 30, 2016, 2015,December 31, 2021 and 2014,2020 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

2014

 

Balance at beginning of year

 

$

279,417

 

$

273,934

 

$

266,212

 

Additions during year

 

 

 

 

 

 

 

 

 

 

Provisions for depreciation

 

 

47,064

 

 

40,078

 

 

35,391

 

Deductions during year

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation on real estate sold or classified as held for sale

 

 

(9,957)

 

 

(29,463)

 

 

(19,413)

 

Write down of asset and accumulated depreciation on impaired assets

 

 

 —

 

 

(881)

 

 

(6,291)

 

Other(1)

 

 

(3,635)

 

 

(4,251)

 

 

(1,965)

 

Balance at close of year

 

$

312,889

 

$

279,417

 

$

273,934

 

2016 Annual Report F-50

 (in thousands)
Year Ended December 31,
 20212020
Balance at beginning of year$399,249 $349,122 
Additions during year 
Provisions for depreciation78,268 72,051 
Deductions during year 
Accumulated depreciation on real estate sold or classified as held for sale(24,161)(21,440)
Other (1)
(9,764)(484)
Balance at close of year$443,592 $399,249 







F-34
Table of Contents

INVESTORS REAL ESTATE TRUST

CENTERSPACE AND SUBSIDIARIES

April 30, 2016

December 31, 2021 and 2020
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

Reconciliations of development in progress for the three years ended April 30, 2016, 2015, and 2014, are as follows:


 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

 

$

153,994

 

$

104,609

 

$

46,782

 

Additions during year

 

 

 

 

 

 

 

 

 

 

Unimproved land acquisitions

 

 

 —

 

 

12,647

 

 

2,079

 

Unimproved land moved to development in progress

 

 

1,734

 

 

7,015

 

 

2,870

 

Improvements and other

 

 

96,753

 

 

189,306

 

 

123,240

 

Deductions during year

 

 

 

 

 

 

 

 

 

 

Involuntary conversion

 

 

 —

 

 

 —

 

 

(7,052)

 

Development placed in service(2)

 

 

(200,800)

 

 

(159,578)

 

 

(63,210)

 

Other(3)

 

 

 —

 

 

(5)

 

 

(100)

 

Balance at close of year

 

$

51,681

 

$

153,994

 

$

104,609

 

Reconciliations of unimproved land for the three years ended April 30, 2016, 2015,December 31, 2021 and 2014,2020 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

    

2016

    

2015

    

2014

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

 

$

25,827

 

$

22,864

 

$

21,503

 

Additions during year

 

 

 

 

 

 

 

 

 

 

Unimproved land acquisitions

 

 

 —

 

 

10,487

 

 

3,022

 

Improvements and other

 

 

205

 

 

1,533

 

 

1,209

 

Deductions during year

 

 

 

 

 

 

 

 

 

 

Cost of real estate sold

 

 

(442)

 

 

(670)

 

 

 —

 

Impairment charge

 

 

(1,285)

 

 

(1,293)

 

 

 —

 

Properties classified as held for sale during the year

 

 

(1,632)

 

 

(79)

 

 

 —

 

Unimproved land moved to development in progress

 

 

(1,734)

 

 

(7,015)

 

 

(2,870)

 

Balance at close of year

 

$

20,939

 

$

25,827

 

$

22,864

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate investments(4)

 

$

1,441,202

 

$

1,236,091

 

$

1,094,734

 

(1)

Consists of miscellaneous disposed assets.

(2)

Includes development projects that are placed in service in phases.

 (in thousands)
Year Ended December 31,
 20212020
Balance at beginning of year$— $1,376 
Deductions during year 
Cost of real estate sold— (1,376)
Balance at close of year— — 
Total real estate investments, excluding mortgage notes receivable (2)
$1,827,578 $1,413,308 

(3)

Consists of miscellaneous re-classed assets.

(4)

The net basis of the Company’s real estate investments, including held for sale properites, for Federal Income Tax purposes was $1.6 billion, $1.7 billion and $1.5 billion at April 30, 2016, 2015 and 2014, respectively.

(1)Consists of the write off of fully depreciated assets and accumulated amortization and miscellaneous disposed assets.

(2)The net basis, including held for sale properties, for Federal Income Tax purposes was $1.8 billion and $1.4 billion at December 31, 2021 and December 31, 2020, respectively.

2016 Annual Report F-51


F-35