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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, 2019

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

INVESTORS REAL ESTATE TRUST
(Exact name of Registrant as specified in its charter)

North Dakota

45-0311232

North Dakota45-0311232
(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

1400 31st31st Avenue SW

Suite 60

Post Office Box 1988

Minot

ND58702-1988

(Address of principal executive offices)

 (Zip code)

701-837-4738

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 valueIRETNew York Stock Exchange
Series C Cumulative Redeemable Preferred SharesIRET-PCNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None

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 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, 2019 was $985,547,135679,479,919 based on the last reported sale price on the New York Stock Exchange on October 31, 2015.June 30, 2019. 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 12, 2020, was 121,091,249.

12,098,979.

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

Documents Incorporated by Reference: Portions of IRET’s definitive Proxy Statement for its 20162020 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

INDEX

PAGE

PART I

PAGE

Item 1.

PART I

Business

4 

Item 1A.

Risk Factors

1. 

Item 1A. 

Item 1B.

21 

Item 2.

Properties

21 

Item 3.

32 

Item 4.

32 

Item 5.

33 

Item 6.

36 

Item 7.

37 

Item 7A.

69 

Item 8.

71 

Item 9.

71 

Item 9A.

71 

Item 9B.

73 

Item 10.

73 

Item 11.

73 

Item 12.

73 

Item 13.

73 

Item 14.

73 

Item 15.

73 

74 

76 


2016 Annual Report 2


Table of Contents

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,“may,” “will,” “designed,” “estimate,” “should,” “continue” and othervariations of those words and similar expressions. These forward-looking statements indicateinvolve known and unknown risks, uncertainties, and other factors 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,economic conditions in markets in which we own apartment communities or other markets in which we may invest in the future;

·

the economic health of our multifamily and commercial tenants;

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;

·

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

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, and inability to reinvest sales proceeds successfully;

·

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

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

·

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

inability to acquire or develop properties and expand our operations into new markets successfully;

·

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

inability to provide high-quality housing and consistent operation of our apartment communities;

·

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

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

·

changes in our operating expenses;

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

·

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

inability to sell certain properties on terms that are acceptable;

·

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

failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and tax protection payments;

·

the availability and cost of casualty insurance for losses.

inability to fund capital expenditures out of cash flow;

inability to pay, or need to reduce, dividends on our common shares;
financing risks, including our potential inability to obtain debt or equity financing on favorable terms, or at all;
level and volatility of interest or capitalization rates or capital market conditions;
changes in operating costs, including real estate taxes, utilities, and insurance costs;
inability to continue to satisfy complex tax rules in order to maintain our status as a REIT, inability of the Operating Partnership 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;
increasing social media activity regarding our properties that could adversely affect our business or reputation;
inability to address catastrophic weather, natural events, and climate change;
inability to comply with environmental laws and regulations; and
other risks identified in this Report, in 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



Table of Contents


PART I

Item 1. Business

Overview

Business

OVERVIEW
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. Over the past several years, we have extensively repositioned our formation in 1970,portfolio from a diversified, multi-segment collection of properties into a single segment concentrated on apartment communities. Our current emphasis is on making operational enhancements that will improve our business has consistedresidents' experience, redeveloping some of owningour existing apartment communities to meet current market demands, 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 primarilyacquiring new apartment communities in the upper Midwest statesMinneapolis/St. Paul and Denver metropolitan areas.
We focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of Minnesotalife that we believe, in combination, lead to higher demand for our apartment homes and North Dakota. For the fiscal year ended April 30, 2016, our real estate investments in these two states accounted for 73.2%retention of our total gross revenue. Our principal executive office is located in Minot, North Dakota. We also have corporate offices in Minneapolis and St. Cloud, Minnesota, and additional property management offices located in the states where we own properties.

In January 2015, we announced 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.

residents. As of April 30, 2016,December 31, 2019, we held for investment 99 multifamily propertiesowned interests in 69 apartment communities, containing 12,950 apartment units11,953 homes and having a total real estate investment amount, net of accumulated depreciation, of $1.0 billion, and 47 commercial properties, consisting$1.3 billion. Our corporate headquarters is located in Minot, North Dakota. We also have a corporate office in Minneapolis, Minnesota.

On September 20, 2018, our Board of healthcare, industrial, office and retail, containing approximately 2.9 million square feet of leasable space and havingTrustees approved a total real estate investment amount net of accumulated depreciation of $333.8 million. As ofchange in our fiscal year-end from April 30 2016,to December 31, effective as of January 1, 2019. As a result of this change, we heldfiled a transition report on Form 10-KT for sale 1 multifamily property, 36 commercial propertiesthe eight-month transition period ended December 31, 2018, in accordance with SEC rules and 3 parcels of land. regulations. The references in this Annual Report on Form 10-K to the terms listed below reflect the respective period noted (all other reporting periods defined separately):
TermFinancial Reporting Period
Year ended December 31, 2019January 1, 2019 through December 31, 2019
Year ended December 31, 2018January 1, 2018 through December 31, 2018
Transition period ended December 31, 2018May 1, 2018 through December 31, 2018
Fiscal year ended April 30, 2018May 1, 2017 through April 30, 2018
Fiscal year ended April 30, 2017May 1, 2016 through April 30, 2017
For comparative purposes, unaudited data is shown for the year ended December 31, 2018 and for the eight-month period ended December 31, 2017.
On June 6, 2016, we announced our plan to move towards becomingDecember 14, 2018, the Board approved 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 tenants under long-term lease arrangements. As of April 30, 2016, no individual tenant accounted for more than 10%reverse stock split of our total real estate rentals, although affiliated entitiesoutstanding common shares and Units, no par value per share, at a ratio of Edgewood Vista together accounted1-for-10. The reverse stock split was effective as of the close of trading on December 27, 2018, with trading commencing on a split-adjusted basis on December 28, 2018. The number of common shares and Operating Partnership limited partnership units ("Units" or "OP Units") was reduced from 119.4 million to 11.9 million and 13.7 million to 1.4 million, respectively. We have retroactively restated all shares and Units and per share and Unit data for approximately 28.4%all periods presented.

Website and Available Information
Our internet address is www.iretapartments.com. We make available, free of charge, through the “SEC filings” tab under the Investors section of our total commercial minimum rentswebsite, our Transition Report on Form 10-KT, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, and proxy statements for properties heldour Annual Meetings of 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. We also file press releases, investor presentations, and certain supplemental information on our website. Current copies of our Code of Conduct; Code of Ethics for investmentSenior Financial Officers; and Charters for sale.

Structure

the Audit, Compensation, and 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 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.


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”) since our formation. On February 1, 1997, we were restructured as an Umbrella Partnership Real Estate Investment Trust, or UPREIT, and have conductedwe conduct our daily business operations primarily through IRET Properties.

our operating partnership, IRET Properties, was organized under the laws ofa 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.Properties” or the “Operating Partnership”). The sole general partner of IRET Properties is 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, through IRET, Inc., in exchange for the sole general partnership interest in IRET Properties. IRET Properties holds substantially all of the assets of the Company. IRET Properties 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 OP Units, which is one of the reasons the Company is structured in this manner. As of April 30, 2016,December 31, 2019, IRET, Inc. owned an 88.1%a 92.0% interest in IRET Properties. The remaining ownership ofinterest in IRET Properties is held by individual limited partners.

BUSINESS STRATEGIES
Our business is focused on our mission - to provide a great home - for our residents, our employees and our investors. We fulfill this mission by providing renters well-located options that range from workforce to lifestyle housing. 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.
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 excellent customer service to enhance resident satisfaction and retention;
Employing new technologies that make our communities more efficient and more accessible to residents;
Optimizing revenues;
Controlling operating costs; and
Unlocking value within the portfolio through redevelopment and enhancement of existing assets.
Investment Strategy and Policies

Our business objective under our current strategic plan is to increase shareholder value by employingemploy an investment strategy that includes the following elements:
Investing in income-producing apartment communities that grow distributable cash flow and are located in key geographic markets with populations ranking in the top 50 U.S. metropolitan statistical areas, including expansion in the Minneapolis and Denver markets;
Selecting markets with favorable market characteristics, including strong growth prospects and employment forecasts, high occupancy rates, strong rent growth potential, and institutional liquidity;
Leveraging our portfolio to take advantage of our heightened market knowledge and regional experience;
Building a disciplinedstrong market presence in new markets; and
Deemphasizing our exposure to tertiary markets.
FINANCING AND DISTRIBUTIONS
To fund our investment strategy. This strategy is implemented by growing income-producing assets in desired geographical markets in real estate classesand capital activities, we believe will providerely on 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, OP Units, and borrowed funds in exchange for property. We regularly issue dividends to our shareholders. Each of these is described below.


At-the-Market Offering
In November 2019, we entered into an equity distribution agreement in connection with an at-the-market offering ("2019 ATM Program") through which we may offer and sell common shares having an aggregate gross sales price of beneficial interest (“common shares”) or for limited partnership unitsup to $150.0 million, in amounts and at times that we determine. 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 properties and commercial properties thatunder the 2019 ATM Program are leasedintended to single or multiple tenants, usuallybe used for five years or longer, and are located throughoutgeneral corporate purposes, which may include the upper Midwest. Our commercial properties consist primarilyfunding of healthcare. Since January 2015, we have concentrated on multifamily and healthcare propertyfuture acquisitions and are now exploring the potential salerepayment 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, 2019, we issued 308,444 common shares under the 2019 ATM Program at an average price of $72.29 per share, net of commissions. Total consideration, net of commissions and capital appreciation through an increase in value of our real estate portfolio, as well as increased revenue as a result of higher rents.

Any policy, as it relates to investments in real estate or interests in real estate may be changed by our Board 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.issuance costs, was approximately $22.0 million. As of April 30, 2016 and 2015,December 31, 2019, 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$127.7 million remaining available under the 2019 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


Table of Contents

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"Series C preferred shares”shares"), and on August 7, 2012, we issued 4,600,000. All of our outstanding shares of 7.95% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B preferred shares”).shares were redeemed on October 30, 2017. Depending on 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

Bank Financing and Other Debt
As of December 31, 2019, we owned 69 apartment communities, of which 24 properties served as collateral for mortgage loans. All of these mortgages payable were non-recourse to us other than for standard carve-out obligations. Our primary unsecured credit facility is a revolving, multi-bank line of credit, with borrowing capacity based on borrowed funds in pursuing our investment objectives and goals. It has generally been our policy to borrow up to 65.0% to 75.0% of the appraised value of all new real estate acquired or developed. Inproperties contained in the future,unencumbered asset pool. This credit facility matures on August 31, 2022, with one 12-month option to extend the maturity date at our election.
During the year ended December 31, 2019, we expect this policy will reflectentered into a more conservative approachprivate shelf agreement for the issuance of up to 50.0% to 65%$150.0 million of unsecured senior promissory notes ("unsecured senior notes"). Under this agreement, we issued $75.0 million of Series A notes due September 13, 2029 bearing interest at a rate of 3.84% annually, and $50.0 million of Series B notes due September 30, 2028 bearing interest at a rate of 3.69% annually. We have $25.0 million remaining available under the appraisedprivate shelf agreement.
As of December 31, 2019, we owned 45 apartment communities that were not encumbered by mortgages, with 45 of these properties providing credit support for our unsecured 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 of $250.0 million, with borrowing capacity based on the value of all new real estate acquired or developed. This policy concerning borrowed funds is vested solely withproperties contained in the unencumbered asset pool (“UAP”). The UAP provided for a borrowing capacity of $250.0 million at December 31, 2019, providing additional borrowing availability of $199.9 million beyond the $50.1 million drawn, including the balance on our Boardoperating line of Trustees and can be changed by our Boardcredit (discussed below), priced at an interest rate of Trustees at any time, or from time to time, without notice to, or a vote3.81%, including the impact of our shareholders. Such policyinterest rate swap. This credit facility matures on August 31, 2022, with one 12-month option to extend the maturity date at our election.
Under our primary unsecured credit facility, we also have a $70.0 million unsecured term loan, which matures on January 15, 2024, and a $75.0 million unsecured term loan, which matures on August 31, 2025.
We also have a $6.0 million operating line of credit, which is subject, however,designed to the limitation in our Fourth Restated Trustees’ Regulations (Bylaws) (“Bylaws”), which provides that unless approved by a majority of the independent members of our Board of Trusteesenhance treasury management activities 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”). “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.more effectively manage cash balances. As of April 30, 2016,December 31, 2019, our ratio of total indebtedness to total gross real estate investments was 63.6% while our ratio39.2%.
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 units (or "OP Units") of IRET Properties in exchange for real estate. The limited partnership unitsOP Units 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, OP 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 Properties in exchange for property. As a result, any decision to do so is vested solely in our Board of Trustees. This policy may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders. For the three most recentyear ended December 31, 2019, the transition period ended December 31, 2018 and the fiscal years ended April 30, 2018 and 2017, we have issued the following limited partnership unitsdid not issue any regular OP Units of IRET Properties in exchange for properties:

properties. However, on February 26, 2019, we issued 165,600 newly created Series D preferred units as partial consideration for the acquisition of

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

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 or repurchasing shares. Asall of the Series 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. The holders of the Series D preferred units do not have any voting rights.

Distributions to Shareholders
The Internal Revenue Code requires a REIT it is our intention to invest onlydistribute 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 corporate level tax in real estate assets. Our Declaration of Trust does not prohibit the acquisition or repurchaselieu thereof. We have distributed, and intend to continue to distribute, enough of our common or preferred shares or other securities so long as such activity does not prohibit us from operating as 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 Trustees and may be changed at any time, or from timetaxable income to time, without noticesatisfy these requirements. Our general practice has been to or a vote of, our shareholders.

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During fiscal year 2016, our Board of Trustees authorized a share repurchase program of uptarget cash distributions to $50.0 million worth of our common shares, under which we repurchased 4.6 millionshareholders and the holders 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, 2016approximately 65% to 90% of our funds from operations and 2015.

Investingto use the remaining funds for capital improvements or the reduction of debt. Distributions to our common shareholders and unitholders in the securities of other issuers for the purpose of exercisingcontrol. We have not engaged in,year ended December 31, 2019 and we are not currently engaging in, investment in the securitiestransition period ended December 31, 2018 totaled approximately 69% and 82%, respectively, on a per share and unit basis of other issuers for the purpose of exercising control. Our Declaration of Trust does not impose any limitationour funds from operations.

For 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 on Form 10-K.

Employees

-- Liquidity and Capital Resources."

EMPLOYEES
As of April 30, 2016,December 31, 2019, we had 483392 employees, of whom 432which 361 were full-time and 5431 were part-time. 58
INSURANCE
We purchase general liability and property insurance coverage for each of these employees were corporate staff located in our Minot, North Dakotaproperties. We also purchase limited terrorism, environmental, and Minneapolis, Minnesota offices,flood insurance as well as other types of insurance coverage related to a variety of risks and 428 were property management employees based either atexposures. There 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. In addition, we carry other types of insurance coverage related to a variety of risks and exposures. 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 local property management offices.

Environmental Matters and Government Regulation

Under various federal, state and local laws, ordinances and regulations relating to the protectionexcess of the environment, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third parties for property damage, personal injuries 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 thatcoverage limits, any of which could have a material adverse effect on our propertiesbusiness.

COMPETITION
There 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 tonumerous housing alternatives that compete with 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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Competition

Investing in and operating real estate is a very competitive business. We 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 engaged 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, pensionbusinesses, and investment funds, partnerships and investment companies,other entities to acquire properties. This competition affects our ability to acquire properties we want to add to our portfolio and the price we pay for acquisitions.  We do not believe we have a dominant position in any of

ENVIRONMENTAL MATTERS
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, which discussion under "We may be responsible for potential liabilities under environmental laws" is incorporated by reference into this Item 1.



Item 1A.  Risk Factors
Risks Related to Our Properties and Operations
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 IRET’s 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.
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 adverselythey are located;
changes in interest rates and availability 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 periodic need to repair, renovate, and redevelop our apartment communities; 
increases in operating costs, including real estate taxes, state and local taxes, insurance expenses, utilities, and security costs, many of which are not reduced significantly when circumstances cause a reduction in revenues from a property;
increases in compensation costs due to the tight labor market in many of the markets in which we operate; 
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 income generated by our properties:

·

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 oversupplyvalue of REITs generally 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 laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. Government, may adversely affect our business. We depend on the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) for financing for many of our multifamily properties. Fannie Mae and Freddie Mac are U.S. Government-sponsored entities, or GSEs, but their guarantees are not backed by the full faith and credit of the United States. In September 2008, Fannie Mae and Freddie Mac were placed 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.

in particular.

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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;

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

·

acquiredwe 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 anywith either no recourse or with only limited recourse against prior owners or other third parties with respect to these unknown liabilities. As a result, if liability were asserted against us based upon ownership of these properties, liabilities; and 
we might havemay be unable 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, 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.

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. During the year ended December 31, 2019, many of our markets were impacted by a series of adverse weather-related events. These events included extreme cold, record-setting snowfall, extensive hail storms in certain markets, and tornadoes, which caused excess ice and snow accumulation, water and hail damage, and other weather-related damage to some of our apartment communities. Although most of these losses were covered by insurance, these or other 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 downtown 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.

2016 Annual Report 13

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 region and portions of the West region 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.

TableOur business depends on our ability to continue to provide high quality housing and consistent operation of Contents

We have significant investments in healthcare properties and adverse trends inhealthcare provider operations may negativelyour apartment communities, the failure of which could adversely affect our lease revenues fromthese properties.We have acquired a significant numberbusiness and results of specialty healthcare propertiesoperations. Our business depends on providing our residents with quality housing and reliable services (including senior housing). As of April 30, 2016, our real estate portfolio held for investment included 31 healthcare properties,utilities), along with a total real estate investment amount, net of accumulated depreciation, of $254.4 million, or approximately 18.6% of the total real estate investment amount, net of accumulated depreciation,consistent operation 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,communities and methods of delivery of, healthcare services; changes in third-party reimbursement policies; significant unused capacity in certaintheir associated amenities, including covered parking, swimming pools, clubhouses with fitness facilities, playground 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 federalsimilar features. We may be required to undertake significant capital expenditures to renovate or reconfigure our communities in order to attract new residents and state authorities. Sourcesretain existing residents. The delayed delivery, material reduction, or prolonged interruption in any of revenue forthese services may cause 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 payorsresidents to reduce healthcare costs will likely continue, whichterminate their leases, may result in reductions the reduction of rents and/or slower growthmay result in reimbursement for certain services provided by somean 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 tenants. These factors may adversely affect the economic performance of some or all of our healthcare services tenants and,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.
Short-term leases could expose us to the effects of declining market rents. Our apartment leases are generally for a term of 18 months or less. Because these leases generally allow residents to leave at the expiration of the lease revenues. In addition,term without penalty, our rental revenues are impacted by declines in market rents more quickly than if we or our tenants terminate the leases were for these properties, orlonger terms.
Because real estate investments are relatively illiquid and various other factors limit our tenants lose their regulatory authorityability to operate such properties,dispose of 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 Internal Revenue Code (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 IRET Properties, 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 servicesWe 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 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.
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 prospectsresults of operations. Similarly, disclosure of any non-public sensitive information relating to our business or our residents or prospective residents could be harmed.damage our reputation, our business, or our results of operations. The locationcontinuing evolution of social media will present us with new and ongoing challenges and risks.
Litigation risks could affect our company headquarters in Minot, North Dakota,business. As a publicly traded owner, manager, and developer of apartment communities, we may make it more difficultincur liability based on various conditions at our properties and expensive to attract, relocatethe buildings thereon. In the past, we have been, and retain current and future officers and employees.

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The level of oil and gas drilling 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
Future cash flows may not be sufficient to ensure recoverability of the carrying value of our 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 requiredconsidered permanent in nature. Generally, a real estate asset held for investment is not considered impaired if the 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 make cash distributions to our shareholders, if ourestimate 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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Actual or threatened terrorist attacks may adversely affect our business. Actual or threatened terrorist attacks and other acts of war or violence could adversely affect our business. Attacks that directly impact one or more of our apartment communities could significantly affect our ability to operate these communities, thereby impairing our ability to achieve our expected results. Our insurance may not adequately cover all losses from a terrorist attack, and the ongoing effects of any terrorist attacks or threatened terrorist attacks could adversely affect the U.S. economy generally and our business in particular.

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, there are current government proposals relating to the future of agency mortgage finance in the U.S. that 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.

TableEmployee 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 Contents

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 faceincur 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,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 otherwise,repay our indebtedness when due; and
the terms of any renewal or refinancing will be less favorable than the terms of our current indebtedness.
These risks increase when credit markets are tight. 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 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 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.
The restrictive terms of indebtedness may cause acceleration of debt payments and constrain our ability to conduct certain transactions. At December 31, 2019, we and our Operating Partnership had outstanding borrowings of approximately $651.5 million. Some of this indebtedness contains financial covenants relating to fixed charge coverage ratios, maximum secured debt, maintenance of unencumbered asset value, and total debt to gross assets, among others. Some covenants present new constraints as we navigate investments and dispositions with respect to our ability to invest in certain markets, add incremental secured and recourse debt, and add overall leverage. If an event of default occurs, our lenders may increase rates or declare borrowings under the loan agreements to be due and payable immediately, which could pose a riskhave an adverse effect on our ability to make distributions to our systems, networksshareholders and servicespay amounts due on our debt.
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 face risks associated with security breaches or disruptions, whether through cyber-attacks or cyber intrusions overalso 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 Internet, malware, computer viruses, attachmentscost of issuing new debt, and reduce the cash available for distribution to emails, or persons insideshareholders.
Interest rate hedging arrangements may result in losses. From time to time, we use interest rate swaps and other hedging instruments to manage our organization. The risk ofinterest 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 security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increasedhedging arrangement is not indexed to the same rate as the number, intensityindebtedness that is hedged, we may be exposed to losses to the extent that the rate governing the indebtedness and sophisticationthe rate governing the hedging arrangement change independently of attempted attackseach other, and intrusions fromnonperformance 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.
Potential 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. Daily LIBOR interest rates have been published since January 1, 1986 and have become deeply entrenched into the global financial markets. Post-financial crisis, regulation has significantly reduced bank appetite to issue commercial paper and wholesale deposits, which means there is a very low volume of transactions upon which banks can base their LIBOR submissions. As a result, central banks around the world, including the Federal Reserve, have increased. Incommissioned working groups of market participants and official sector representatives with the normalgoal of finding suitable replacements for LIBOR based on observable market transactions. It is expected a transition away from the widespread use of LIBOR to alternative rates will occur over the course of business,the next few years. The U.K. Financial Conduct Authority (FCA), which regulates LIBOR, has announced it has commitments from panel banks to continue to contribute to LIBOR through the end of 2021, but it will not use its powers to compel contributions beyond such date. Accordingly, there is considerable uncertainty regarding the publication of such rates beyond 2021. The Federal Reserve Bank of New York and various other authorities have commenced the publication of reforms and actions relating to alternatives to U.S. dollar LIBOR. Although the full impact of such reforms and actions, together with any transition away from LIBOR, 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 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 be able to prevent unauthorized access to this personal information.are invested. There can be no assurance that our efforts to maintain the security and integritya 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
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 IRET Properties. 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 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 2017, 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 2019 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.
Risks Related to Tax Matters
We may incur tax liabilities as a consequence of failing 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, 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, ifIf IRET Properties or one or more of our 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 IRET Properties, 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 IRET Properties 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 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. The imposition of a corporate tax on IRET Properties would significantly reduce the amount of cash available for distribution.

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 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 people 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.”
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.
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. 
In 2017, Congress passed tax legislation (the “2017 Tax Cuts and Jobs Act”) that significantly changed the U.S. federal income taxation of U.S. businesses and their owners, including REITs and their shareholders. The Tax Cuts and Jobs Act of 2017 also contained provisions that may reduce the relative competitive advantage of operating as a REIT. For example, the Tax Cuts and Jobs Act of 2017 lowered income tax rates on individuals and corporations, easing the burden of double taxation on corporate dividends and potentially causing the single level of taxation on REIT distributions to be relatively less attractive. The Tax Cuts and Jobs Act of 2017 also contains provisions allowing the expensing of capital expenditures, which could result in the bunching of taxable income and required distributions for REITs, and provisions further limiting the deductibility of interest expense, which could disrupt the real estate market. Changes made by the 2017 Tax Cuts and Jobs Act that could affect our shareholders include the following:
reducing the individual U.S. federal income tax rates on ordinary income (with the highest rate being reduced from 39.6% to 37% for taxable years beginning after December 31, 2017 and before January 1, 2026;
permanently eliminating the progressive corporate tax rate structure, including dividends we may distribute to our shareholders that are not designated as capital gains dividends or qualified dividend income, which will allow individuals, trusts, and estate to deduct up to 20% of such amounts for taxable years beginning after December 31, 2017 and before January 1, 2026;
reducing the highest rate of withholding on distributions to non-U.S. shareholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;
limiting our deductions for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of REIT taxable income (determined without regard to the dividends paid deduction); and
eliminating the corporate alternative minimum tax.
We cannot predict whether, when, or to what extent the Tax Cuts and Jobs Act of 2017 and any new U.S. federal tax laws, regulations, interpretations, or rulings will impact the real estate investment industry or REITs. Prospective investors are urged to consult their tax advisers regarding the effect of the Tax Cuts and Jobs Act of 2017 and potential future changes to the federal tax laws of an investment in our shares or Units.
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 but, under the 2017 Tax Cuts and Jobs Act, U.S. shareholders that are individuals, trusts, and estates generally may deduct 20% of ordinary dividends from a REIT (for taxable years beginning after December 31, 2017 and before January 1, 2026). 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 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.
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. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS is subject to detailed tax regulations that affect how itdirectly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT's assets may be capitalizedconsist of stock or securities of one or more TRSs, and operated. We currently have onethe TRS rules limit the deductibility of interest paid or accrued by a 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 changesits parent REIT 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,assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its income from the operations of the assisted living facilities at the federal and state level. In addition, theparent REIT that are not conducted on an arm’s-length basis.

Our TRS is subject to detailed tax regulations that affect how it may be capitalizedapplicable federal, state, 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 federallocal income tax legislation,on its taxable income, and we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulingsits after-tax net income will be adopted. Any of such actions may prospectively or retroactively modifyavailable for distribution to us but is not required to be distributed to us. We believe that the tax treatmentaggregate value of the TRSstock and therefore, may adversely affectsecurities of 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 to 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 conditions are not satisfied, then the rents will not be qualifying rents, which could have a material adverse effect 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 relationship 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 enter 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 calculations to avoid double taxation at 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

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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 consequencesbe less than 20% 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


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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 sharestotal assets (including our TRS stock and any other securitiessecurities). We will continue to be issued inmonitor 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 pricevalue of our securities, and low trading volume oninvestments in our TRS for the New York Stock Exchange may prevent the timelyresalepurpose of ensuring compliance with TRS ownership limitations. We will scrutinize all of our securities. Onetransactions with our TRS to ensure that they are entered into on arm's-length terms to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 20% limitation discussed above or to avoid application 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.

100% excise tax discussed above.

Item 1B.  Unresolved Staff Comments

Comments


None.


Item 2. Properties

Communities

We are organized as a REIT under Section 856-858 of the Internal Revenue Code and are structured as an UPREIT, throughUmbrella Partnership Real Estate Investment Trust (“UPREIT”), which allows us to accept the contribution of real estate to our Operating Partnership in exchange for OP 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 inemployees. 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, 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 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, 2019

The following table presents information regarding our 146 multifamily, healthcare69 apartment communities and three other properties held for investment, as well as unimproved land as of December 31, 2019. We provide certain information on a same-store and non-same-store basis. Same-store communities are owned or in service for the entirety 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. "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.

 

 

 

 

 

 

 

 

 

    

 

    

(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


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%
   (in thousands)
 
   Investment
Physical
  Number of(initial cost plus
Occupancy 
  Apartmentimprovements less
as of 
Community Name and Location Homes
impairment)
December 31, 2019
SAME-STORE    
71 France - Edina, MN (1) (3) (5)
 241
$66,795
97.5%
Alps Park - Rapid City, SD (1)
 71
6,235
100.0%
Arcata - Golden Valley, MN  (2) (5)
 165
33,386
97.6%
Ashland - Grand Forks, ND (1)
 84
8,639
98.8%
Avalon Cove - Rochester, MN (2)
 187
36,188
90.9%
Boulder Court - Eagan, MN (2)
 115
9,841
97.4%
Canyon Lake - Rapid City, SD (1)
 109
6,667
98.2%
Cardinal Point - Grand Forks, ND (2) (5)
 251
35,200
96.4%
Cascade Shores - Rochester, MN (1)
 90
18,394
96.7%
Castlerock - Billings, MT (2)
 166
8,052
97.0%
Chateau - Minot, ND (2) (5)
 104
21,382
92.3%
Cimarron Hills - Omaha, NE (1)
 234
15,310
93.6%
Colonial Villa - Burnsville, MN (2)
 239
24,484
92.9%
Colony - Lincoln, NE (1)
 232
19,229
96.1%
Commons and Landing at Southgate - Minot, ND (2)
 341
55,258
94.4%
Cottonwood - Bismarck, ND (2)
 268
24,384
96.6%
Country Meadows - Billings, MT (2)
 133
10,088
95.5%
Crystal Bay - Rochester, MN (2)
 76
12,157
100.0%
Cypress Court - St. Cloud, MN (1) (3)
 196
20,905
94.4%
Deer Ridge - Jamestown, ND (2) (5)
 163
25,109
95.7%
Evergreen - Isanti, MN (2)
 72
7,184
93.1%
Forest Park - Grand Forks, ND (2)
 268
15,283
94.8%
French Creek - Rochester, MN (2)
 40
5,174
97.5%
Gardens - Grand Forks, ND (2)
 74
9,345
95.9%
Grand Gateway - St. Cloud, MN (2)
 116
9,869
92.2%
GrandeVille at Cascade Lake - Rochester, MN (1)
 276
57,209
96.0%
Greenfield - Omaha, NE (2)
 96
6,213
94.8%
Heritage Manor - Rochester, MN (2)
 182
10,858
90.7%
Homestead Garden - Rapid City, SD (2)
 152
15,578
94.7%
Lakeside Village - Lincoln, NE (1)
 208
18,527
94.2%
Landmark - Grand Forks, ND (2)
 90
2,960
95.6%
Legacy - Grand Forks, ND (1)
 360
33,827
96.1%
Legacy Heights - Bismarck, ND  (2) (5)
 119
15,287
99.2%
Meadows - Jamestown, ND (2)
 81
7,102
90.1%
Monticello Crossings - Monticello, MN (2) (5)
 202
31,980
98.0%
Monticello Village - Monticello, MN (2)
 60
5,457
98.3%
Northridge - Bismarck, ND (2)
 68
8,677
100.0%
Olympic Village - Billings, MT (1)
 274
15,636
93.8%
Olympik Village - Rochester, MN (2)
 140
9,948
98.6%
Park Meadows - Waite Park, MN (1)
 360
20,334
95.3%
Park Place - Plymouth, MN (2) (4) (5)
 500
98,670
85.8%
Plaza - Minot, ND (2)
 71
16,720
94.4%
Pointe West - Rapid City, SD (2)
 90
5,918
95.6%
Ponds at Heritage Place - Sartell, MN (2)
 58
5,451
94.8%
Quarry Ridge - Rochester, MN (1)
 313
34,411
95.8%
Red 20 - Minneapolis, MN (1)
 130
26,296
93.8%
Regency Park Estates - St. Cloud, MN (1)
 147
13,609
95.9%
Rimrock West - Billings, MT (2)
 78
5,915
97.4%
River Ridge - Bismarck, ND (2)
 146
26,324
98.6%
Rocky Meadows - Billings, MT (2)
 98
8,033
98.0%
Rum River - Isanti, MN (1)
 72
6,202
91.7%
Silver Springs - Rapid City, SD (1)
 52
4,196
100.0%

2016 Annual Report 25


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%

2016 Annual Report 26


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%

 

 

 

 

 

 

 

 

   (in thousands)
 
   Investment
Physical
  Number of(initial cost plus
Occupancy 
  Apartmentimprovements less
as of 
Community Name and Location Homes
impairment)
December 31, 2019
South Pointe - Minot, ND (2)
 196
$15,932
92.9%
Southpoint - Grand Forks, ND (2)
 96
10,696
95.8%
Southwind - Grand Forks, ND (2)
 164
9,965
87.8%
Sunset Trail - Rochester, MN (1)
 146
16,580
97.9%
Thomasbrook - Lincoln, NE (1)
 264
16,357
92.0%
Valley Park - Grand Forks, ND (2)
 168
8,674
94.6%
Village Green - Rochester, MN (2)
 36
3,586
100.0%
West Stonehill - Waite Park, MN (1)
 313
19,038
97.8%
Whispering Ridge - Omaha, NE (1)
 336
29,421
94.6%
Winchester - Rochester, MN (2)
 115
9,046
98.3%
Woodridge - Rochester, MN (1)
 110
10,559
96.4%
TOTAL SAME-STORE 10,402
$1,165,750
 
     
NON-SAME-STORE    
Dylan - Denver, CO (2) (4) (5)
 274
90,240
96.4%
FreightYard Townhomes & Flats - Minneapolis, MN (2)
 96
25,629
92.7%
Lugano at Cherry Creek - Denver, CO (2)
 328
95,548
91.8%
Oxbo - St Paul, MN  (2) (4) (5)
 191
57,564
97.4%
SouthFork Townhomes - Lakeville, MN (1)
 272
46,538
96.0%
Westend - Denver, CO (2) (4) (5)
 390
128,202
91.3%
TOTAL NON-SAME-STORE 1,551
$443,721
 
     
TOTAL MULTIFAMILY 11,953
$1,609,471
 

2016 Annual Report 27


   (in thousands)
 
   Investment
Physical
  Net Rentable
(initial cost plus
Occupancy 
  Square
improvements less
as of 
Property Name and Location Footage
impairment)
December 31, 2019
OTHER - MIXED USE COMMERCIAL    
71 France - Edina, MN (1)
 20,955
$6,764
93.6%
Lugano at Cherry Creek - Denver, CO 13,295
1,600
47.8%
Oxbo - St Paul, MN (2)
 11,477
3,526
100.0%
Plaza - Minot, ND (2)
 50,610
9,672
100.0%
Red 20 - Minneapolis, MN (1)
 10,508
2,944
89.6%
TOTAL OTHER - MIXED USE COMMERCIAL 106,845
$24,506


     
OTHER - COMMERCIAL    
3100 10th St SW - Minot, ND(6)
 9,690
$2,111

Dakota West Plaza - Minot, ND 16,921
622
52.3%
Minot IPS - Minot, ND 27,698
6,368
100.0%
TOTAL OTHER - COMMERCIAL 54,309
$9,101
 
     
UNIMPROVED LAND    
Rapid City - Rapid City, SD  $1,376
 
TOTAL UNIMPROVED LAND  $1,376
 
     
TOTAL SQUARE FOOTAGE - OTHER 161,154
 
 
TOTAL GROSS REAL ESTATE INVESTMENTS, EXCLUDING MORTGAGE NOTES RECEIVABLE  
$1,644,454
 

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

 

 

(1)

Encumbered by mortgage debt.

(in thousands)

(2)

Pledged as credit support on unencumbered asset pool for our line of credit.

Investment

(3)

Owned by a joint venture entity and consolidated in our financial statements. We have an approximately 52.6% ownership in 71 France, and 86.1% ownership in Cypress Court.

(initial cost plus

(4)

Non-same-store for the comparison of the eight months ended December 31, 2018 to the eight months ended December 31, 2017.

improvements less

Property Name(5)

Non-same-store for the comparison of fiscal years 2018 and Location

2017.

impairment)

(6)

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

This is our 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

corporate office building.

2016 Annual Report 28



 

    

 

    

(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


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


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


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 

 

 

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 

 

 

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, 2019, the total amount of property held for investment,owned, net of accumulated depreciation, by state:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

(in thousands)

    

    

 

State

 

Multifamily

    

Healthcare

    

Other

    

Total

 

% of Total

 

Minnesota

 

$

396,035

 

$

233,456

 

$

26,492

 

$

655,983

 

47.9

%

North Dakota

 

 

409,495

 

 

8,544

 

 

40,374

 

 

458,413

 

33.5

%

Nebraska

 

 

88,830

 

 

6,021

 

 

 —

 

 

94,851

 

6.9

%

South Dakota

 

 

53,207

 

 

 —

 

 

 —

 

 

53,207

 

3.9

%

Kansas

 

 

47,874

 

 

 —

 

 

 —

 

 

47,874

 

3.5

%

Montana

 

 

29,349

 

 

3,467

 

 

 —

 

 

32,816

 

2.4

%

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

%

  (in thousands)    
State Multifamily
Other
Total
% of Total
Minnesota $600,580
$11,505
$612,085
47.3%
Colorado 300,990
1,582
302,572
23.4%
North Dakota 245,942
10,672
256,614
19.8%
Nebraska 72,414

72,414
5.6%
South Dakota 27,073

27,073
2.1%
Montana 23,198

23,198
1.8%
Total $1,270,197
$23,759
$1,293,956
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

2016 Annual Report 32




PART II

PART I

I

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

Quarterly Share and Distribution Data

Our common shares of beneficial interest trade 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.

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

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 12, 2020, there were approximately 3,6442,689 common shareholders of record.

Unregistered Sales of Shares

Under the terms of IRET Properties’ Agreement of Limited Partnership, limited partners have the right to require the IRET Properties to redeem their limited partnership units for cash generally 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 Properties 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.

During the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 2016, 20152018 and 2014,2017, respectively, we issued an aggregate of 36,156, 471,80021,004, 19,899, 2,892, and 254,94830,471 unregistered common shares to limited partners of IRET Properties 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 Board 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 theEquity 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.

     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)
January 1 - 31, 2019 174,085
50.54
173,916
24,587,276
February 1 - 28, 2019 30
57.89

24,587,276
March 1 - 31, 2019 2,443
59.56

24,587,276
April 1, - 30, 2019 144,020
59.86
15,078
23,705,362
May 1 - 31, 2019 24,263
59.26
24,263
22,267,567
June 1 - 30, 2019 80,561
59.22
76,731
17,724,778
July 1 - 31, 2019 39,441
59.57
39,381
15,378,896
August 1 - 31, 2019 30
60.40

15,378,896
September 1 - 30, 2019 92
64.68

15,378,896
October 1 - 31, 2019 


15,378,896
November 1 - 30, 2019 


15,378,896
December 1 - 31, 2019 166
75.52

50,000,000
Total 465,131
$56.24
329,369
 
(1)Includes a total of 135,762 Units redeemed for cash pursuant to the exercise of exchange rights.
(2)Amount includes commissions paid.
(3)Amounts for January through November represent amounts outstanding under our $50,000,000 share repurchase program, which was authorized by our Board of Trustees on December 7, 2016 reauthorized on December 5, 2017 for a one year period, and reauthorized for another one year period on December 5, 2018. On December 5, 2019, the board terminated the existing repurchase program and authorized a new $50,000,000 repurchase program.
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, 2014 and ending April 30, 2016,December 31, 2019, the cumulative total returns for our common shares with the comparable cumulative total return of two indexes, the Standard & Poor’s 500 Index (“S&P 500”) and the FTSE NAREITNareit Equity REITs 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, 2014, $100 was invested in our common shares and in each of the indexes. The comparison assumes the reinvestment of all distributions. Cumulative total shareholder returns for our common shares, the

totalreturnperformancechart.jpg
 Period Ending
Index12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
Investors Real Estate Trust100.00
91.58
101.67
84.91
77.36
119.31
S&P 500 Index100.00
101.38
113.51
138.29
132.23
173.86
FTSE Nareit Equity REITs100.00
103.04
110.83
115.15
110.70
137.65
Source: S&P 500 and the FTSE NAREIT Equity REITs Index are based on our fiscal year ending April 30.

Global Market Intelligence

2016 Annual Report 34



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

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

 

Source:  SNL Financial LC

2016 Annual Report 35


Table of Contents

Item 6. Selected Financial Data

Data

Set forth below is selected financial data on a historical basis for the fiveyear ended December 31, 2019, the eight months ended December 31, 2018, and the four most recent fiscal years ended April 30.30, 2018. This information should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this 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

  (in thousands, except per share data)
  Year Ended
Eight Months Ended
Fiscal Years Ended April 30,
  December 31, 2019
December 31, 2018
2018
2017
2016
2015
Consolidated Statement of Operations Data                   
Revenue $185,755
$121,871
$169,745
$160,104
$145,500
$141,294
Impairment of real estate investments in continuing and discontinued operations 
1,221
18,065
57,028
5,983
6,105
Gain (loss) on sale of discontinued operations and real estate and other investments 97,624
10,277
183,687
74,847
33,422
6,093
Income (loss) from continuing operations 84,822
(5,890)(37,194)(46,228)9,182
10,237
Income (loss) from discontinued operations 
570
164,823
76,753
67,420
18,447
Net income (loss) 84,822
(5,320)127,629
30,525
76,602
28,684
Net income (loss) attributable to controlling interests 78,669
(4,398)116,788
43,347
72,006
24,087
        
Consolidated Balance Sheet Data       
Total real estate investments 1,311,472
1,289,476
1,380,245
1,121,385
1,204,654
1,057,356
Total assets 1,392,418
1,335,997
1,426,658
1,474,514
1,755,022
1,992,092
Revolving lines of credit 50,079
57,500
124,000
57,050
17,500
60,500
Notes payable 269,058
143,991
69,514



Mortgages payable 329,664
444,197
509,919
565,978
648,173
453,928
Total Investors Real Estate Trust shareholders’ equity 619,053
568,786
605,663
553,721
618,758
652,110
        
Consolidated Per Common Share Data (basic and diluted)
       
Earnings (loss) from continuing operations – basic $6.06
$(0.79)$(3.54)$(3.01)
$(0.32)
Earnings (loss) from discontinued operations – basic $
$0.04
$12.25
$5.59
$4.91
$1.37
Net income (loss) per common share - basic $6.06
$(0.75)$8.71
$2.58
$4.91
$1.05
        
Earnings (loss) from continuing operations – diluted $6.00
$(0.79)$(3.54)$(3.01)
$(0.32)
Earnings (loss) from discontinued operations – diluted $
$0.04
$12.25
$5.59
$4.91
$1.37
Net income (loss) per common share - diluted $6.00
$(0.75)$8.71
$2.58
$4.91
$1.05
        
Distributions $2.80
$2.10
$2.80
$4.60
$5.20
$5.20
        
Other Data       
Total apartment communities 69
87
90
87
99
100
Total homes 11,953
13,702
14,176
13,212
12,974
11,844
        
Funds from operations applicable to common shares and units $52,866
$30,559
$38,941
$55,207
$103,874
$86,575

CALENDAR YEAR  2019
2018
2017
2016
2015
2014
Tax status of distributions       
Capital gain 38.53%100.00%48.87%87.57%11.99%23.09%
Ordinary income 23.43%
14.59%12.43%36.28%25.74%
Return of capital 38.04%
36.54%
51.73%51.17%

Table of Contents


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

The following discussion and analysis should be read in conjunction with the consolidated financial statements includedand notes appearing elsewhere in this Annual Report on Form 10-K. report. Historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations.
We operate on a fiscal year ending on April 30. The following discussion and analysis isare presenting our result of operations for the years ended December 31, 2019 and 2018, the eight months ended December 31, 2018 and 2017, and the fiscal yearyears ended April 30, 2016.

Overview

2018 and 2017. For additional comparison of results of operations for the eight months ended December 31, 2018 and 2017, and the fiscal years ended April 30, 2018 and 2017, please refer to our Transition Report on from 10-KT filed with the SEC on February 27, 2019. Unaudited data is shown for the year ended December 31, 2018 and the eight months ended December 31, 2017.

We are a self-advised equity REIT engaged in owning and operating income-producing real properties. Our investments include multifamily, healthcareconsider this and other properties locatedsections of this Report to 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, 2019, we owned interests in 69 apartment communities consisting of 11,953 homes as detailed in Item 2 - Properties. Property owned, as presented in the upper Midwest states of Minnesotaconsolidated balance sheet, was $1.6 billion at December 31, 2019, compared to $1.6 billion and North Dakota.

In January 2015, we announced our intention to sell substantially all of our office$1.7 billion at December 31, 2018, 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 12,9502018, respectively.

Renting 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.

Ourhomes is 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 creating 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 continuously since our first distribution in 1971.

Significant Transactions and Events for the Year Ended December 31, 2019
Financial Highlights. For the year ended December 31, 2019, our financial highlights included the following:
Net income of $6.00 per diluted share for the year ended December 31, 2019, compared to a loss of $1.83 per diluted share for the year ended December 31, 2018.
Same-store year-over-year revenue growth of 3.7%, driven by 3.0% growth in rental revenue and 0.7% growth in occupancy.
Acquisitions and Dispositions. During the year ended December 31, 2019, we completed the following transactions in furtherance of our strategic plan:
Continued our focus on key growth markets, expanding in Minneapolis, Minnesota and Denver, Colorado, acquiring a total of three apartment communities in these markets, consisting of 696 homes, for an aggregate purchase price of $169.3 million.
Exited from secondary and tertiary markets in Topeka, Kansas, Sioux City, Iowa, and Sioux Falls, South Dakota and decreased our exposure in Bismarck, North Dakota. In total, we disposed of 21 apartment communities, two other properties, and three parcels of unimproved land for an aggregate sale price of $203.1 million.
Financing Transactions. During the year ended December 31, 2019, we completed the following financing transactions:
Entered into an equity distribution agreement for 2019 ATM Program, through which we may offer and sell common shares having an aggregate gross sales price of up to $150.0 million, in amounts and at times as we determine. During the year ended December 31, 2019, we issued 308,444 common shares under the 2019 ATM Program for total consideration, net of commissions and issuance costs, of approximately $22.0 million.

Entered into a private shelf agreement for the issuance of up to $150.0 million of unsecured senior promissory notes. Under this agreement, we issued $75.0 million of Series A notes due September 13, 2029, bearing interest at a rate of 3.84% annually, and $50.0 million of Series B notes due September 30, 2028, bearing interest at a rate of 3.69% annually. We have $25.0 million remaining available under the private shelf agreement.
Outlook
We intend to continue our focus on maximizing the financial performance of the properties 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 and to explore potential new markets and acquisition opportunities. Our continued management of a strong balance sheet should provide us with flexibility to pursue both internal and external growth.

RESULTS OF OPERATIONS
Reconciliation of Operating Income (Loss) to Net Operating Income
  (in thousands, except percentages)
  Twelve Months Ended December 31,
  20192018$ Change
% Change
      
Operating income (loss) $11,417
$(13,602)$25,019
(183.9)%
Adjustments:     
Property management expenses 6,186
5,537
649
11.7 %
Casualty loss 1,116
815
301
36.9 %
Depreciation and amortization 74,271
77,624
(3,353)(4.3)%
Impairment 
19,030
(19,030)(100.0)%
General and administrative expenses 14,450
14,883
(433)(2.9)%
Net operating income $107,440
$104,287
$3,153
3.0 %
Consolidated Results of Operations
The following consolidated results of operations cover the years ended December 31, 2019 and 2018, the eight months ended December 31, 2018 and 2017, and the fiscal years ended April 30, 2018 and 2017.
  (in thousands)
  Year Ended December 31,2019 vs. 2018
  2019
2018
$ Change
% Change
   (unaudited)
  
Revenue     
Same-store $135,939
$131,149
$4,790
3.7 %
Non-same-store 25,495
15,646
9,849
62.9 %
Other properties and dispositions 24,321
33,573
(9,252)(27.6)%
Total 185,755
180,368
5,387
3.0 %
Property operating expenses, including real estate taxes     
Same-store 58,155
56,047
2,108
3.8 %
Non-same-store 9,031
5,518
3,513
63.7 %
Other properties and dispositions 11,129
14,516
(3,387)(23.3)%
Total 78,315
76,081
2,234
2.9 %
Net operating income     
Same-store 77,784
75,102
2,682
3.6 %
Non-same-store 16,464
10,128
6,336
62.6 %
Other properties and dispositions 13,192
19,057
(5,865)(30.8)%
Total $107,440
$104,287
$3,153
3.0 %
Property management expense (6,186)(5,537)649
11.7 %
Casualty loss (1,116)(815)301
36.9 %
Depreciation and amortization (74,271)(77,624)(3,353)(4.3)%
Impairment of real estate investments 
(19,030)(19,030)(100.0)%
General and administrative expenses (14,450)(14,883)(433)(2.9)%
Operating income (loss) 11,417
(13,602)25,019
(183.9)%
Interest expense (30,537)(32,733)(2,196)(6.7)%
Loss on extinguishment of debt (2,360)(678)1,682
248.1 %
Interest and other income 2,092
2,027
65
3.2 %
Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations (19,388)(44,986)25,598
56.9 %
Gain (loss) on sale of real estate and other investments 97,624
12,011
85,613
712.8 %
Gain (loss) on litigation settlement 6,586

6,586
100.0 %
Income (loss) from continuing operations 84,822
(32,975)117,797
(357.2)%
Income (loss) from discontinued operations 
14,690
(14,690)(100.0)%
NET INCOME (LOSS) $84,822
$(18,285)$103,107
(563.9)%
Dividends to preferred unitholders (537)
(537)(100.0)%
Net (income) loss attributable to noncontrolling interests – Operating Partnership (6,752)2,553
(9,305)(364.5)%
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities 1,136
709
427
60.2 %
Net income (loss) attributable to controlling interests 78,669
(15,023)93,692
(623.7)%
Dividends to preferred shareholders (6,821)(6,821)

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $71,848
$(21,844)$93,692
(428.9)%

  Year Ended  Eight Months Ended  Year Ended
  December 31,  December 31,  April 30,
Weighted Average Occupancy (1)
 2019
2018
  2018
2017
  2018
2017
Same-store 94.3%93.6%  93.7%93.1%  93.7%91.5%
Non-same-store 94.1%88.7%  90.3%73.1%  87.9%77.0%
Total 94.3%93.0%  93.2%92.1%  92.5%89.3%
(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 is 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,  December 31,  April 30,
Number of Homes 2019
2018
  2018
2017
  2018
2017
Same-store 10,402
10,402
  12,347
12,344
  11,320
11,320
Non-same-store 1,551
1,355
  1,355
965
  2,856
1,892
Total 11,953
11,757
  13,702
13,309
  14,176
13,212
Net operating income. Net Operating Income (“NOI”) is a non-GAAP 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 Annual Report on Form 10-K, we have provided certain information on a same-store and non-same-store basis. Same-store apartment communities are owned or in service for the entirety 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 or from 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, 2019 and 2018, 63 apartment communities were classified as same-store and six 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 and communities designated as held for sale are in "Other." "Other" also includes non-multifamily properties and the non-multifamily components of mixed use properties.
Revenue. Total revenue increased by 3.0% to $185.8 million for the year ended December 31, 2019 compared to $180.4 million in the year ended December 31, 2018. Six non-same-store apartment communities contributed $9.8 million to the increase, offset by a $9.3 million decrease from dispositions and other properties. Revenue from same-store communities increased by 3.7% or $4.8 million in the year ended December 31, 2019, compared to the same period in the prior year. Approximately 3.0% of the increase was attributable to growth in average rental revenue. Approximately 0.7% of the increase was due to higher occupancy as weighted average occupancy increased from 93.6% to 94.3% for the years ended December 31, 2018 and 2019, respectively.
Property operating expenses, including real estate taxes. Total property operating expenses, including real estate taxes, increased by 2.9% to $78.3 million in the year ended December 31, 2019 compared to $76.1 million in the year ended December 31, 2018. A total of $3.5 million of the increase was attributable to non-same-store apartment communities but was

partially offset by a decrease of $3.4 million from other properties, primarily due to dispositions. Property operating expenses at same-store communities increased by 3.8% or $2.1 million in the year ended December 31, 2019, compared to the same period in the prior year. Insurance and real estate taxes comprised $1.1 million and $263,000 of the increase, respectively, and rose by a combined 8.1%. The increase in insurance expense was due to a $324,000 adjustment in the prior year from the favorable resolution of insurance claims and $478,000 of higher deductible costs, with the remainder from an increase in premiums. Controllable operating expenses, which exclude insurance and real estate taxes, increased by $697,000 or 1.8%, primarily driven by snow removal and other maintenance costs.
Net operating income. NOI increased by 3.0% to $107.4 million in the year ended December 31, 2019 compared to $104.3 million in the year ended December 31, 2018.
Property management expense. Property management expense, consisting of property management overhead and property management fees paid to third parties, was $6.2 million in the year ended December 31, 2019 and $5.5 million in the year ended December 31, 2018. The increase was primarily driven by technology initiatives and compensation costs, including severance.
Casualty gain (loss). Casualty loss increased by 36.9% to $1.1 million in the year ended December 31, 2019, compared to $815,000 in the year ended December 31, 2018. During the year ended December 31, 2019, many of our markets were impacted by a series of adverse weather-related events. These events included extreme cold and record-setting snowfall, which caused excess ice and snow accumulation, resulting in water damage to some of our apartment communities. Substantially all of the damage from these weather-related events will be covered by insurance. We recorded casualty losses of $641,000 during the year, representing the aggregate annual stop loss under our insurance coverage. The remaining increase is a result of uninsured water intrusion damage at one apartment community and uninsured water damage due to mechanical failure at another apartment community. In the same period of the prior year, we recorded $50,000 in aggregate stop loss under our insurance coverage as a result of favorable claims experience.
Depreciation and amortization. Depreciation and amortization decreased by 4.3% to $74.3 million in the year ended December 31, 2019, compared to $77.6 million in the year ended December 31, 2018. This decrease was primarily due to sold properties, certain intangible assets becoming fully amortized, and an adjustment in the prior year due to shortening the estimated useful life of a non-multifamily property, which elevated depreciation expense in the prior year.
Impairment of real estate investments.  During the year ended December 31, 2019, we had no impairment losses, reflecting the overall improvement in the quality of our current portfolio, compared to $19.0 million in the same period of the prior year. See Note 2 to our consolidated financial statements contained in this Annual Report on Form 10-K for additional information on impairments. 
General and administrative expenses.  General and administrative expenses decreased by 2.9% to $14.5 million in the year ended December 31, 2019, compared to $14.9 million in the year ended December 31, 2018, primarily attributable to decreases of $737,000 in legal fees related to our pursuit of a recovery on a construction defect claim, $608,000 in severance-related costs, and $296,000 in real estate tax on sold parcels of land. These decreases were partially offset by an increase of $871,000 in compensation costs as result of a decrease in open positions and higher incentive compensation related to expanding the participant pool in the long-term incentive plan.
Operating income (loss). Operating income increased by 183.9% to $11.4 million in the year ended December 31, 2019, compared to a loss of $13.6 million in the year ended December 31, 2018.
Interest expense.  Interest expense decreased 6.7% to $30.5 million in the year ended December 31, 2019, compared to $32.7 million in the year ended December 31, 2018, primarily due to the replacement of maturing debt with lower rate debt.
Loss on extinguishment of debt. We recorded loss on extinguishment of debt in the years ended December 31, 2019 and 2018 of $2.4 million and $678,000, respectively, primarily due to prepayment penalties associated with the disposal of assets and the write-off of unamortized loan costs.
Interest and other income.  We recorded interest and other income in the years ended December 31, 2019 and 2018 of $2.1 million and $2.0 million, respectively.
Gain (loss) on sale of real estate and other investments.  In the years ended December 31, 2019 and 2018, we recorded gains on sale of real estate and other investments in continuing operations of $97.6 million and $12.0 million, respectively, primarily related to increased dispositions in 2019.

Gain (loss) on litigation settlement. In the year ended December 31, 2019, we recorded a gain on litigation settlement of $6.6 million from the settlement of a construction defect claim.
Income (loss) from discontinued operations.  We had no income from discontinued operations in the year ended December 31, 2019 compared to $14.7 million in the year ended December 31, 2018.
Acquisitions and Dispositions
We added $171.4 million of new real estate to our portfolio during the year ended December 31, 2019. We continued our portfolio transformation by disposing of our portfolios in Topeka, Kansas, Sioux Falls, South Dakota, Sioux City, Iowa, and certain communities in Bismarck, North Dakota. We sold 21 apartment communities, two commercial properties, and three parcels of land for an aggregate sale price of $203.1 million during the year ended December 31, 2019. See Note 9 of the notes to consolidated financial statements in this Annual Report for a table detailing our acquisitions and dispositions for the year ended December 31, 2019, for the transition period ended December 31, 2018, and for the fiscal year ended April 30, 2018.
Funds From Operations
We use the definition of Funds from Operations ("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;
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.
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.
We believe that FFO, which is a standard supplemental measure for equity REITs, is helpful to investors in understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets, thereby providing an additional perspective on our operating results. We believe that GAAP historical cost depreciation of real estate assets is not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. 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.
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, and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions.
Net income available to common shareholders for the year ended December 31, 2019 increased to $71.8 million compared to a loss of $21.8 million for the year ended December 31, 2018. FFO applicable to common shares and Units for the year ended December 31, 2019, increased to $52.9 million compared to $43.9 million for the year ended December 31, 2018, a change of 20.4%, primarily due to a $6.6 million gain on litigation settlement, as well as higher NOI at same-store and non-same-store communities and reductions in interest expense and general and administrative expenses. The increase in FFO was partially offset by decreases in NOI from sold properties and increases in loss on extinguishment of debt, property management expenses, and weather-related casualty loss. For a comparison of FFO applicable to common shares and Units for the eight months ended December 31, 2018 and 2017, and the fiscal years ended April 30, 2018 and 2017, please refer to our Transition Report on from 10-KT filed with the SEC on February 27, 2019.


Reconciliation of Net Income Available to Common Shareholders to Funds FromOperations
 (in thousands, except per share and unit amounts)
 Years Ended December 31,  Eight Months Ended December 31,  Fiscal Years Ended April 30,
 20192018  20182017  2018 2017
Net income (loss) available to common shareholders$71,848
 $(21,844)  $(8,945) $117,461
  $104,562
 $31,366
Adjustments:      
  
     
Noncontrolling interests – Operating Partnership6,752
 (2,553)  (1,032) 14,222
  12,702
 4,059
Depreciation and amortization74,271
 77,624
  50,456
 63,345
  90,515
 55,025
Less depreciation – non real estate(322) (305)  (203) (234)  (339) (210)
Less depreciation – partially owned entities(2,059) (2,795)  (1,828) (1,911)  (2,877) (2,251)
Impairment of real estate
 19,030
  1,221
 256
  18,065
 57,028
Less impairment - partially owned entities
 
  
 
  
 (14,963)
(Gain) loss on sale of real estate(97,624) (25,245)  (9,110) (167,553)  (183,687) (74,847)
Funds from operations applicable to common shares and Units$52,866
 $43,912
  $30,559
 $25,586
  $38,941
 $55,207
              
Funds from operations applicable to common shares and Units$52,866
 $43,912
  $30,559
 $25,586
  $38,941
 $55,207
Dividends to preferred unitholders537
 
  
 
  
 
Funds from operations applicable to common shares and Units - diluted$53,403
 $43,912
  $30,559
 $25,586
  $38,941
 $55,207
              
Per Share Data             
Earnings (loss) per common share - diluted$6.00
 $(1.83)  $(0.75) $9.78
  $8.71
 $2.59
FFO per share and Unit - diluted$4.05
 $3.29
  $2.29
 $1.90
  $2.89
 $4.02
              
Weighted average shares and Units - diluted13,182
 13,344
  13,324
 13,498
  13,459
 13,730
Liquidity and Capital Resources
Overview
We desire to create and maintain a strong balance sheet that offers financial flexibility and enables us to pursue and acquire apartment communities that enhance our portfolio composition, operating metrics, and cash flow growth prospects. We intend to strengthen our capital and liquidity positions by continuing to focus on improving our core fundamentals, which include generating positive cash flows from operations, 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 2019 ATM Program, and unsecured debt or long-term 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, and Units, value-add redevelopment, and acquisition of additional communities.
We intend to maintain a strong balance sheet and preserve our financial flexibility, which we believe should enhance our ability to capitalize on appropriate investment opportunities as they may arise. We intend to maintain our capital structure by taking certain actions, including:
extending and sequencing our debt maturity dates;
managing interest rate exposure through the appropriate use of a mix of fixed and floating debt and utilizing our lines of credit and term loans as appropriate;
maintaining adequate coverage ratios on our debt obligations; and

where appropriate, accessing the equity markets through our 2019 ATM Program and other offerings under our shelf registration statement.
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 consider our ability to generate cash from property operating activities and draws on our lines 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, 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, 2019, we declared cash distributions of $36.4 million to common shareholders and unitholders of IRET Properties, as compared to net cash provided by operating activities of $69.6 million and FFO of $52.9 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 re-development opportunities with respect to our existing portfolio of operating assets. 
As of December 31, 2019, we had total liquidity of approximately $226.5 million, which included $199.9 million available on our line of credit based on the value of properties contained in our unencumbered asset pool ("UAP") and $26.6 million of cash and cash equivalents. As of December 31, 2018, we had total liquidity of approximately $188.8 million, which included $175.0 million available on our line of credit based on the UAP and $13.8 million of cash and cash equivalents. As of April 30, 2018, we had total liquidity of approximately $187.9 million, which included $176.0 million available under our line of credit based on the UAP and $11.9 million of cash and cash equivalents.
Debt
We have an unsecured credit facility for $395.0 million, with the commitment allocated to a revolving line of credit for $250.0 million and the remaining $145.0 million allocated between two term loans: a $70.0 million unsecured term loan that matures on January 15, 2024 and a $75.0 million term loan that matures on August 31, 2025.
As of December 31, 2019, our line of credit had total commitments of $250.0 million, with borrowing capacity based on the value of properties contained in the UAP. The UAP provided for a borrowing capacity of approximately $250.0 million at year-end, offering additional borrowing availability of $199.9 million beyond the $50.1 million drawn, including the balance on our operating line of credit, as of December 31, 2019. At December 31, 2018, the line of credit borrowing capacity was $232.5 million based on the UAP, of which $57.5 million was drawn on the line. The multi-bank line of credit bears interest either at the lender's base rate plus a margin ranging from 35 to 85 basis points, or the LIBOR, plus a margin ranging from 135 to 190 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 on August 31, 2022, with one twelve-month option to extend the maturity date at our election.
During the year ended December 31, 2019, we entered into a $50.0 million interest rate swap to fix the interest rate on a portion of our primary line of credit.

During the year ended December 31, 2019, we entered into a private shelf agreement for the issuance of up to $150.0 million of unsecured senior promissory notes. We issued $75.0 million of Series A notes due September 13, 2029, bearing interest at a rate of 3.84% annually, and $50.0 million of Series B notes due September 30, 2028, bearing interest at a rate of 3.69% annually, under this facility. An additional $25.0 million remains available under this agreement.
We also have a $6.0 million 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 has a one-year term, with pricing based on a market spread plus the one-month LIBOR index rate.
Mortgage loan indebtedness was $331.4 million on December 31, 2019, $446.0 million on December 31, 2018, and $512.1 million on April 30, 2018. All of our mortgage 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. As of December 31, 2019, the weighted average rate of interest on our mortgage debt was 4.02%, compared to 4.58% on December 31, 2018, and 4.69% on April 30, 2018. Refer to Note 6 of our consolidated financial statements contained in this Annual Report on Form 10-K for the principal payments due on our mortgage indebtedness and other tabular information.
Equity
In November 2019, we entered into an equity distribution agreement in connection with the 2019 ATM Program through which we may offer and sell common shares having an aggregate gross sales price of up to $150.0 million, in amounts and at times that we determine. The proceeds from the sale of common shares under the 2019 ATM Program are intended to be used for general corporate purposes, which may include the funding of future acquisitions and the repayment of indebtedness. During the year ended December 31, 2019, we issued 308,444 common shares under the 2019 ATM Program at an average price of $72.29 per share, net of commissions. Total consideration, net of commissions and issuance costs, was approximately $22.0 million. As of December 31, 2019, common shares having an aggregate offering price of up to $127.7 million remained available under the 2019 ATM Program.
On December 7, 2016, our Board of Trustees authorized a share repurchase program to repurchase up to $50 million of our common shares and/or Series B preferred shares over a one-year period, and subsequently reauthorized the program for two additional one-year periods.
On December 5, 2019, our Board of Trustees terminated this share repurchase program and authorized a new share purchase program to repurchase up to $50 million of our common shares or preferred shares over a one-year period. Under this new repurchase program, we may repurchase common shares 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. The extent to which we repurchase our shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by our executive management team. The program may be suspended or discontinued at any time. As of December 31, 2019, $50.0 million remained available under our new repurchase program. During the year ended December 31, 2019, we repurchased and retired approximately 329,000 common shares for an aggregate cost of $18.0 million, including commissions, at an average price per share of $54.69, under the previous repurchase program. During the transition period ended December 31, 2018, we repurchased and retired approximately 42,000 common shares for an aggregate cost of $2.2 million, including commissions, at an average price per share of $51.36. During the fiscal year ended April 30, 2018, we repurchased and retired approximately 178,000 common shares for an aggregate cost of $9.9 million, including commissions, at an average price per share of $55.82.
As of December 31, 2019, December 31, 2018, and April 30, 2018, we had 4.1 million Series C preferred shares outstanding. On October 30, 2017, we completed the redemption of all the outstanding 7.95% Series B Cumulative Redeemable Preferred Shares ("Preferred B Shares") for an aggregate redemption price of $115.0 million, and such shares are no longer outstanding as of such date.
Changes in Cash, Cash Equivalents, and Restricted Cash
As of December 31, 2019, we had restricted cash consisting of $2.3 million of escrows held by lenders for real estate taxes, insurance, and capital additions and $17.2 million in net tax-deferred exchange proceeds remaining from a portion of our dispositions. We had restricted cash consisting of $5.5 million and $4.2 million of escrows held by lenders for real estate taxes, insurance, and capital additions as of December 31, 2018 and April 30, 2018, respectively.

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.
Operating Activities. For the year ended December 31, 2019, our net cash provided by operating activities was $69.6 million and impacted by:
The receipt of $5.2 million from the settlement of our pursuit of recovery on a construction defect claim.
Investing Activities. Net cash provided by investing activities was $7.0 million for the year ended December 31, 2019, due primarily to:
The disposition of 21 apartment communities, two commercial properties, and three land parcels for a total sales price of $203.1 million;
Acquiring SouthFork Townhomes, a 272-home apartment community located in Lakeville, Minnesota, FreightYard Townhomes and Flats, a 96-home apartment community located in Minneapolis, Minnesota, and Lugano at Cherry Creek, a 328-home apartment community located in Denver, Colorado, for an aggregate purchase price of $169.3 million;
Acquiring an office building for $2.1 million, which will become our Minot, North Dakota corporate office building after renovations have been completed; and
Funding capital expenditures for apartment communities of approximately $21.0 million.
Financing Activities. During the year ended December 31, 2019, net cash used by financing activities was $49.8 million which was primarily due to:
Repaying approximately $177.7 million of mortgage principal;
Repurchasing 465,000 common shares and Units for an aggregate cost of approximately $26.2 million;
Paying distributions on common shares and Units of $36.4 million;
The receipt of $59.9 million from a mortgage secured by four apartment communities and $125.0 million from a private shelf agreement; and
The receipt of $22.0 million from the issuance of 308,444 common shares under our 2019 ATM Program.
Contractual Obligations and Other Commitments
Our primary contractual obligations relate to borrowings under our lines of credit, term loans, unsecured senior notes, and mortgages payable. The primary line of credit matures in August 2022 and had a $50.1 million balance outstanding at December 31, 2019. We also had two term loans with an aggregate balance of $145.0 million at December 31, 2019: a $70.0 million term loan that matures in January 2024 and a $75.0 million term loan that matures in August 2025.
In addition, we had unsecured senior notes with an aggregate balance of $125.0 million at December 31, 2019. The $75.0 million of Series A senior notes mature on September 13, 2029 and the $50.0 million of Series B senior notes mature on September 30, 2028.
  (in thousands)
    Less than
     More than
  Total
 1 Year
 1-3 Years
 3-5 Years
 5 Years
Mortgages payable (principal and interest) $412,626
 $28,124
 $102,009
 $69,220
 $213,273
Lines of credit (principal and interest)(1)
 $54,849
 $1,818
 $53,031
 
 
Notes payable (principal and interest) $346,289
 $10,976
 $21,892
 $89,625
 $223,796
Total $813,764
 $40,918
 $176,932
 $158,845
 $437,069
(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, 2019.

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, thereby minimizing the risk of inflation. 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.
Off-Balance-Sheet Arrangements
As of December 31, 2019, we had no significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Critical Accounting Policies

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

Real Estate. Real estate is carried at cost, net of accumulated depreciation, less an adjustment for impairment, if any. Depreciation requires an estimate by management of the useful life of each 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.

In the first quarter of fiscal year 2018, we determined it was appropriate to review and adjust our estimated useful lives to be specific to our remaining asset portfolio. Effective May 1, 2017, we changed the estimated useful lives of our real estate assets to better reflect the estimated periods during which they will be of economic benefit. Refer to Note 2 of our consolidated financial statements contained in this Annual Report on Form 10-K for further discussion on this change and its impact.
Property sales or dispositions are recorded when control of the assets are transferred to the buyer and we have no significant continuing involvement with the property sold. The gain or loss on disposal is recognized net of certain closing and other costs associated with the disposition.
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.

Capitalization of Costs. 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,re-development, 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.

occupancy.


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 to be 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. 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

We report in discontinued operations the results of operations and the related gains or losses on the sales of properties that hadhave either been disposed of or classified as held for sale and otherwise metmeet the classification of a discontinued operation. Effective February 1, 2014, we adopted Accounting Standards Update (“ASU”) 2014-08, operation as described in ASC 205 - Presentation of Financial Statements (Topic 205) and ASC 360 - Property, Plant, and Equipment (Topic 360):Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this standard,these standards, 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 group, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the long-lived asset group against the carrying amount of that asset group. 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. 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.

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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

 

2017¹

 

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


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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 currently use interest rate swaps to offset the impact of interest rate fluctuations on our $70.0 million and secondarily$75.0 million variable-rate term loans and a portion of our line of credit. The swap on our $70.0 million term loan has a notional amount of $70.0 million and an average pay rate of 2.16%. The swap on our $75.0 million term loan has a notional amount of $75.0 million and an average pay rate of 2.81%. The swap on our line of credit has a notional amount of $50.0 million and an average pay rate of 2.02%. The aggregate fair value of our interest rate swaps is a liability of $7.6 million, as of December 31, 2019. 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.
During the year ended December 31, 2019, we entered into a private shelf agreement for the issuance of up to $150.0 million of unsecured senior promissory notes ("unsecured senior notes"). Under this agreement, we issued $75.0 million of Series A notes due September 13, 2029, bearing interest at a rate of 3.84% annually, and $50.0 million of Series B notes due September 30, 2028, bearing interest at a rate of 3.69% annually. The proceeds from this facility were used to repay outstanding amounts under our unsecured credit facility, retire mortgage debt, and partially fund our acquisition of Lugano at Cherry Creek. As a result of entering into this facility, we have been able to lengthen our average debt maturity duration and lower our weighted average interest rate of debt.
As of December 31, 2019, we had no variable-rate mortgage debt outstanding and $195.1 million of variable-rate borrowings under our line of credit and term loans, of which $195.0 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 an impact on our net income due to our depositsinterest rate swaps on our existing variable rate debt.
Mortgage loan indebtedness decreased by $114.6 million as of December 31, 2019, compared to December 31, 2018, primarily due to loan payoffs related to property dispositions. As of December 31, 2019 and December 31, 2018, 100.0% of our $331.4 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, 2019, the weighted


average rate of interest rates. Approximately 77.8%, 92.8% and 97.9% ofon our mortgage debt including mortgageswas 4.02%, compared to 4.58% 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, 2018. 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


Table of Contents

We primarily use long-term (more than nine years)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 medium term (five to seven years) debt as a source 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 by 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 variablerelated weighted average interest rates could increase or decrease our interest expenses. For example, an increase of one percent per annumby expected maturity dates. Average variable rates are based 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 is limited by a cap onrates in effect at the interest rate. 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%. 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.

2016 Annual Report 70


reporting date.

  
Future Principal Payments (in thousands, except percentages)
         Fair
Debt 2020
2021
2022
2023
2024
Thereafter
Total
Value
Fixed Rate $14,897
$40,523
$37,352
$48,111
$3,777
$311,716
$456,376
$457,471
Average Interest Rate(1)
 4.31%4.39%4.25%4.00%3.83%3.76%3.95% 
Variable Rate(2)
 $79

$50,000
$
$70,000
$75,000
$195,079
$195,079
Average Interest Rate(1)
 4.21%
3.81%
3.61%4.58%4.05% 

(1)Interest rate is annualized and includes the effect of our interest rate swaps.
(2)Includes $50.1 million under our line of credit and $145.0 million on our term loans.
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.

Item 9A. Controls and Procedures

Procedures

Disclosure Controls and Procedures: As of April 30, 2016,December 31, 2019, 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 Rule 13a-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 Rule 13a-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 Annual Report 71


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, 2019. 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, 2019, 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, 2019, 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, 2019 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, 2019.

2016 Annual Report 72


Table of Contents

Item 9B.  Other InformatioInformation

None.
n

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,” and “Board Committees” in our definitive proxy statement for our 20162020 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

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 2020 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Annual Report on Form 10-K.
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 2020 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Annual Report on Form 10-K.
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 2020 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Annual Report on Form 10-K.
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 2020 Annual Meetingof Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Annual Report on Form 10-K.
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.

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.

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: Schedule III Real Estate and Accumulated Depreciation

3. Exhibits

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

(b)

The Exhibit Index below lists the exhibits to this Annual Report on Form 10-K. 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 Annual Report on Form 10-K or are incorporated by reference as indicated below.

Item 16. 10-K Summary
None.

EXHIBIT INDEX

2016 Annual Report 73


EXHIBIT INDEX

EXHIBIT NO.

DESCRIPTION

3.1.

3.2

Fourth

3.3
4.1

3.3

4.2

4.3

4.4
4.5
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**


EXHIBIT NO.DESCRIPTION
10.8**
10.9**
10.10**

10.12**

10.11

Short-Term Incentive Program

10.13**

10.12

Long-Term Incentive Program dated May 1, 2012

10.13
10.14

2016 Annual Report 74


EXHIBIT NO.

10.15

DESCRIPTION

10.14

Third Amendment to the Amended and Restated Loan Agreement dated November 20, 2013 by and between of Limited Partnership of IRET Properties, as borrower, and First International Bank & Trust, as lender (IncorporatedA North Dakota Limited Partnership (incorporated herein by reference to Exhibit 10.13.2 to the Company’sRegistrant's Current Report on Form 8-K filed with the Commission on November 25, 2013)October 2, 2017).

10.15

10.16

First

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

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

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, 2019 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



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 19, 2020

Investors Real Estate Trust

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

TitleDate
/s/ Jeffrey L. Miller

P. Caira

Jeffrey L. Miller

P. Caira

Trustee & Chairman

June 29, 2016

February 19, 2020

/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 19, 2020

/s/ Ted E. Holmes

John A. Kirchmann

Ted E. Holmes

John A. Kirchmann

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

June 29, 2016

February 19, 2020

/s/ Nancy B. Andersen

Nancy B. Andersen

Vice President & Principal Accounting Officer (Principal Accounting Officer)

June 29, 2016

/s/ Jeffrey P. Caira

Jeffrey P. Caira

Trustee

June 29, 2016

/s/ Michael T. Dance

Michael T. Dance

Trustee

June 29, 2016

February 19, 2020

/s/ Emily Nagle Green

Emily Nagle GreenTrusteeFebruary 19, 2020
/s/ Linda J. Hall

Linda J. Hall

Trustee

June 29, 2016

February 19, 2020

/s/ Terrance P. Maxwell

Terrance P. Maxwell

Trustee

June 29, 2016

February 19, 2020

/s/ John A. Schissel

John A. Schissel

Trustee

June 29, 2016

February 19, 2020

/s/ Stephen L. Stenehjem

Mary J. Twinem

Stephen L. Stenehjem

Mary J. Twinem

Trustee

June 29, 2016

February 19, 2020

/s/ Jeffrey K. Woodbury

Jeffrey K. Woodbury

Trustee

June 29, 2016


2016 Annual Report 76


INVESTORS REAL ESTATE TRUST

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


INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

TABLE OF CONTENTS

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




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FIRM


Board of Trustees and Shareholders

Investors Real Estate Trust


Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Investors Real Estate Trust (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and April 30, 2016 and 2015, and2018, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the threeyear ended December 31, 2019, eight month period ended December 31, 2018, and the years in the period ended April 30, 2016. Our audits of2018 and 2017, and the basic consolidated financial statements included therelated notes and financial statement schedule listedin Item 15 (collectively referred to as the “financial statements”). In our opinion, thefinancial statements present fairly, in all material respects, the financial position of the Companyas of December 31, 2019 and 2018, and April 30, 2018, and the results of itsoperations and itscash flows for the year ended December 31, 2019, eight month period ended December 31, 2018 and the years ended April 30, 2018 and 2017, in conformity with accounting principles generally accepted in the index appearing under Item 15. United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 19, 2020 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 supporting 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 matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were 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 especially challenging, subjective, or complex judgments. The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Mortgage Loans Receivable and Notes Receivable
As described in all material respects,Note 2 to the information set forth therein.

consolidated financial statements, in December 2019, the company originated a $29.9 million construction loan and a $15.3 million mezzanine loan to an unconsolidated variable interest entity ("unconsolidated VIE"), for the development of a multifamily development located in Minneapolis, Minnesota. The loans are secured by mortgages and mature on December 31, 2023, and the agreement provides the Company with an option to purchase the development. The Company concluded it is not the primary beneficiary of the unconsolidated VIE as the Company does not have the power to direct the activities which most significantly impact its economic performance nor do they have significant influence over the unconsolidated VIE. We also have audited,identified the Company's VIE determination for the unconsolidated VIE transaction as a critical audit matter.

The principal consideration for our determination that the VIE determination for the unconsolidated VIE transaction is a critical audit matter is that it involves a high degree of judgment in accordanceassessing management's conclusions that the Company does not exert

control over the activities that are most significant in impacting the economics of the unconsolidated VIE and therefore is not the primary beneficiary and does not consolidate the VIE.
Our audit procedures related to the VIE determination for the unconsolidated VIE transaction included the following, among others.
We tested the design and operating effectiveness of management's internal controls over their VIE determination, including controls over the evaluation and application of the appropriate accounting principles.
We inspected the construction and mezzanine loan agreements to identify and understand the provisions relevant to management's conclusion.
We evaluated those relevant provisions to determine whether management's conclusions were consistent with the standardsrelevant accounting guidance, specifically whether the protective rights granted to the Company through the loan agreements gave the Company the power to direct the activities most significant to the unconsolidated VIE.
We consulted our national office regarding the appropriateness of management’s conclusions that the Company was not the primary beneficiary of the PublicVIE as the Company Accounting Oversight Board (United States), the Company’s internaldoes not exert control over financial reporting as of April 30, 2016, based on criteria establishedthe activities that are most significant in impacting the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizationseconomics of the Treadway Commission (COSO), and our report dated June 29, 2016 expressed an unqualified opinion thereon.

VIE.


/s/ GRANT THORNTON LLP


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

Minneapolis, Minnesota

June 29, 2016

2016 Annual Report F-2

February 19, 2020


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Trustees and Shareholders

Investors Real Estate Trust

Opinion on internal control over financial reporting
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,December 31, 2019 based on criteria established in the 2013 Internal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)(“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, 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) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2019, and our report dated February 19, 2020 expressed an unqualified opinion on those financial statements.
Basis for opinion
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’sManagements 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

2016 Annual Report F-3

February 19, 2020


INVESTORS REAL ESTATE TRUST 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)
  December 31, 2019
December 31, 2018
April 30, 2018
ASSETS    
Real estate investments    
Property owned $1,643,078
$1,627,636
$1,669,764
Less accumulated depreciation (349,122)(353,871)(311,324)
  1,293,956
1,273,765
1,358,440
Unimproved land 1,376
5,301
11,476
Mortgage loans receivable 16,140
10,410
10,329
Total real estate investments 1,311,472
1,289,476
1,380,245
Cash and cash equivalents 26,579
13,792
11,891
Restricted cash 19,538
5,464
4,225
Other assets 34,829
27,265
30,297
TOTAL ASSETS $1,392,418
$1,335,997
$1,426,658
LIABILITIES, MEZZANINE EQUITY, AND EQUITY    
LIABILITIES    
Accounts payable and accrued expenses $47,155
$40,892
$29,018
Revolving lines of credit 50,079
57,500
124,000
Notes payable, net of unamortized loan costs of $942, $1,009 and $486, respectively
 269,058
143,991
69,514
Mortgages payable, net of unamortized loan costs of $1,712, $1,777 and $2,221, respectively
 329,664
444,197
509,919
TOTAL LIABILITIES $695,956
$686,580
$732,451
COMMITMENTS AND CONTINGENCIES (NOTE 14) 



REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES $
$5,968
$6,644
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 165,600 units issued and outstanding at December 31, 2019 and no units issued and outstanding at December 31, 2018 and April 30, 2018, aggregate liquidation preference of $16,560,000) 16,560


EQUITY    
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 4,118,460 shares issued and outstanding at December 31, 2019, December 31, 2018, and April 30, 2018, aggregate liquidation preference of $102,971,475) 99,456
99,456
99,456
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 12,098,379 shares issued and outstanding at December 31, 2019, 11,942,372 shares issued and outstanding at December 31, 2018, and 11,952,598 shares issued and outstanding at April 30, 2018) 917,400
899,234
900,097
Accumulated distributions in excess of net income (390,196)(429,048)(395,669)
Accumulated other comprehensive income (loss) (7,607)(856)1,779
Total shareholders’ equity $619,053
$568,786
$605,663
Noncontrolling interests – Operating Partnership (1,058,142 units at December 31, 2019, 1,367,502 units at December 31, 2018, and 1,409,943 units at April 30, 2018) 55,284
67,916
73,012
Noncontrolling interests – consolidated real estate entities 5,565
6,747
8,888
Total equity $679,902
$643,449
$687,563
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY $1,392,418
$1,335,997
$1,426,658
See Notes to Consolidated Financial Statements.

2016 Annual Report F-4



INVESTORS REAL ESTATE TRUST 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, Eight Months Ended December 31, Fiscal Years Ended April 30,
  2019 2018 20182017
REVENUE $185,755
 $121,871
 $169,745
$160,104
EXPENSES       
Property operating expenses, excluding real estate taxes 57,249
 37,198
 54,292
47,587
Real estate taxes 21,066
 13,521
 18,742
16,739
Property management expense 6,186
 3,663
 5,526
5,046
Casualty loss 1,116
 915
 500
414
Depreciation and amortization 74,271
 50,456
 82,070
44,253
Impairment of real estate investments 
 1,221
 18,065
57,028
General and administrative expenses 14,450
 9,812
 14,203
15,871
Acquisition and investment related costs 
 
 51
3,276
TOTAL EXPENSES 174,338
 116,786
 193,449
190,214
Operating income (loss) 11,417
 5,085
 (23,704)(30,110)
Interest expense (30,537) (21,359) (34,178)(34,314)
Loss on extinguishment of debt (2,360) (556) (940)(1,651)
Interest and other income 2,092
 1,233
 1,508
1,146
Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations (19,388) (15,597) (57,314)(64,929)
Gain (loss) on sale of real estate and other investments 97,624
 9,707
 20,120
18,701
Gain (loss) on litigation settlement 6,586
 
 

Income (loss) from continuing operations 84,822
 (5,890) (37,194)(46,228)
Income (loss) from discontinued operations 
 570
 164,823
76,753
NET INCOME (LOSS) 84,822
 (5,320) 127,629
30,525
Dividends to preferred unitholders (537) 
 

Net (income) loss attributable to noncontrolling interests – Operating Partnership (6,752) 1,032
 (12,702)(4,059)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities 1,136
 (110) 1,861
16,881
Net income (loss) attributable to controlling interests 78,669
 (4,398) 116,788
43,347
Dividends to preferred shareholders (6,821) (4,547) (8,569)(10,546)
Redemption of preferred shares 
 
 (3,657)(1,435)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $71,848
 $(8,945) $104,562
$31,366
        
BASIC       
Earnings (loss) per common share from continuing operations – basic $6.06
 $(0.79) $(3.54)$(3.01)
Earnings (loss) per common share from discontinued operations – basic 
 0.04
 12.25
5.59
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC $6.06
 $(0.75) $8.71
$2.58
        
DILUTED       
Earnings (loss) per common share from continuing operations – diluted $6.00
 $(0.79) $(3.54)$(3.01)
Earnings (loss) per common share from discontinued operations – diluted $
 $0.04
 $12.25
$5.59
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED $6.00
 $(0.75) $8.71
$2.58
See Notes to Consolidated Financial Statements.

2016 Annual Report F-5




INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY  

COMPREHENSIVE INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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,
 Eight Months Ended December 31, Fiscal Years Ended April 30,
  2019 2018 2018 2017
Net income (loss) $84,822
 $(5,320) $127,629
 $30,525
Other comprehensive income:        
Unrealized gain (loss) from derivative instrument (7,040) (2,794) 1,627
 
(Gain) loss on derivative instrument reclassified into earnings 289
 159
 152
 
Total comprehensive income (loss) $78,071
 $(7,955) $129,408
 $30,525
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership (6,058) 1,032
 (12,888) (4,059)
Net comprehensive (income) loss attributable to noncontrolling interests – consolidated real estate entities 1,136
 (110) 1,861
 16,881
Comprehensive income (loss) attributable to controlling interests $73,149
 $(7,033) $118,381
 $43,347

See Notes to Consolidated Financial Statements.

2016 Annual Report F-6



INVESTORS REAL ESTATE TRUST 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)
   NUMBER ACCUMULATEDACCUMULATED  
   OF DISTRIBUTIONSOTHERNONREDEEMABLE 
  PREFERREDCOMMONCOMMONIN EXCESS OFCOMPREHENSIVENONCONTROLLINGTOTAL
  SHARESSHARESSHARESNET INCOMEINCOMEINTERESTSEQUITY
Balance at April 30, 2016 $138,674
12,110
$922,084
$(442,000)
$99,504
$718,262
Net income (loss) attributable to controlling interest and noncontrolling interests  
 
 
43,347
 (12,400)30,947
Distributions – common shares and Units ($4.60 per share and Unit)  
 
 
(55,907) (7,453)(63,360)
Distributions – Series A preferred shares (1.0312 per Series A share)  
 
 
(1,403)  
(1,403)
Distributions – Series B preferred shares ($1.9875 per Series B share)  
 
 
(9,143)  
(9,143)
Shares issued and share-based compensation  
39
358
 
  
358
Redemption of Units for common shares  
50
875
 
 (875)
Redemption of Units for cash      (966)(966)
Shares repurchased (27,317)(79)(4,501)(1,435)  (33,253)
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities  
 
 
 
 7,188
7,188
Conversion of equity of notes receivable from noncontrolling interests - consolidated real estate entities  
 
 
 
 (7,366)(7,366)
Acquisition of nonredeemable noncontrolling interests - consolidated real estate entities   (9,893)  5,019
(4,874)
Other   (18) 
 (214)(232)
Balance at April 30, 2017 $111,357
12,120
$908,905
$(466,541)
$82,437
$636,158
Net income (loss) attributable to controlling interests and noncontrolling interests    116,788
 11,582
128,370
Change in fair value of derivatives     1,779
 1,779
Distributions – common shares and Units ($2.80 per share and Unit)    (33,689) (4,096)(37,785)
Distributions – Series B preferred shares ($0.9938 per Series B share)    (4,571)  (4,571)
Distributions – Series C preferred shares ($1.65625 per Series C share)    (3,999)  (3,999)
Shares issued and share-based compensation  10
1,663
   1,663
Issuance of Series C preferred shares 99,456
 
 
   99,456
Redemption of Units for common shares  3
34
  (34)
Redemption of Units for cash      (8,775)(8,775)
Shares repurchased (111,357)(178)(9,935)(3,657)  
(124,949)
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities      619
619
Other  (2)(570)  167
(403)
Balance at April 30, 2018 $99,456
11,953
$900,097
$(395,669)1,779
$81,900
$687,563
See Notes to Consolidated Financial Statements.

2016 Annual Report F-7



INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

EQUITY (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

  (in thousands)
   NUMBER ACCUMULATEDACCUMULATED  
   OF DISTRIBUTIONSOTHERNONREDEEMABLE 
  PREFERREDCOMMONCOMMONIN EXCESS OFCOMPREHENSIVENONCONTROLLINGTOTAL
  SHARESSHARESSHARESNET INCOMEINCOMEINTERESTSEQUITY
Balance at April 30, 2018 $99,456
11,953
$900,097
$(395,669)$1,779
$81,900
$687,563
Cumulative adjustment upon adoption of ASC 606 and ASC 610-20    627
  627
Balance on May 1, 2018 99,456
11,953
900,097
(395,042)1,779
81,900
688,190
Net income (loss) attributable to controlling interests and noncontrolling interests    (4,398) (480)(4,878)
Change in fair value of derivatives     (2,635) (2,635)
Distributions – common shares and Units ($2.10 per share and Unit)    (25,060) (2,917)(27,977)
Distributions – Series C preferred shares ($1.2422 per Series C share)    (4,548)  (4,548)
Share-based compensation, net of forfeitures  3
1,042
   1,042
Redemption of Units for common shares  33
649
  (649)
Redemption of Units for cash   
 
  (498)(498)
Shares repurchased 

(42)(2,172)


  (2,172)
Distributions to nonredeemable noncontrolling interests - consolidated real estate entities      (2,432)(2,432)
Conversion to equity of notes receivable from nonredeemable noncontrolling interests – consolidated real estate entities    
  (392)(392)
Acquisition of nonredeemable noncontrolling interests – consolidated real estate entities   (175)  131
(44)
Other  (5)(207)  


(207)
Balance at December 31, 2018 $99,456
11,942
$899,234
$(429,048)$(856)$74,663
$643,449
Net income (loss) attributable to controlling interests 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 common 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, net  308
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 repurchased  (329)(18,023)   (18,023)
Acquisition of redeemable noncontrolling interests   4,529
   4,529
Distributions to nonredeemable noncontrolling interests – consolidated real estate entities      (220)(220)
Other  (7)(87)   (87)
Balance at December 31, 2019 $99,456
12,098
$917,400
$(390,196)$(7,607)$60,849
$679,902
See Notes to Consolidated Financial Statements.

2016 Annual Report F-8




INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

  (in thousands)
  Year Ended December 31, Eight Months Ended December 31, Fiscal Year Ended April 30,
  2019
 2018
 2018
2017
CASH FLOWS FROM OPERATING ACTIVITIES      
 
Net income (loss) $84,822
 $(5,320) $127,629
$30,525
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
 
Depreciation and amortization 75,408
 51,394
 83,276
46,135
Depreciation and amortization from discontinued operations 
 
 8,526
10,477
(Gain) loss on sale of real estate, land, other investments and discontinued operations (97,624) (10,277) (183,687)(74,847)
(Gain) loss on extinguishment of debt and discontinued operations 2,360
 482
 6,839
3,848
(Gain) loss on litigation settlement (1,349) 
 

Share-based compensation expense 1,905
 845
 1,587
6
Impairment of real estate investments 
 1,221
 18,065
57,028
Other, net 1,096
 629
 1,457
3,660
Changes in other assets and liabilities:      
 
Other assets 1,076
 (1,145) (646)(214)
Accounts payable and accrued expenses 1,930
 2,205
 (7,851)2,434
Net cash provided (used) by operating activities $69,624
 $40,034
 $55,195
$79,052
CASH FLOWS FROM INVESTING ACTIVITIES      
 
Issuance of loans receivable (6,279) (918) (15,480)
Purchase of marketable securities (6,942) 
 

Proceeds from sale of discontinued operations 
 
 426,131
237,135
Proceeds from sale of real estate and other investments 199,282
 62,695
 64,639
47,354
Payments for acquisitions of real estate assets (158,466) (977) (374,081)
Payments for development of real estate assets 
 
 (2,655)(18,274)
Payments for improvements of real estate assets (20,954) (11,518) (17,980)(41,083)
Other investing activities 366
 1,889
 (462)(972)
Net cash provided (used) by investing activities $7,007
 $51,171
 $80,112
$224,160
CASH FLOWS FROM FINANCING ACTIVITIES      
 
Proceeds from mortgages payable 59,900
 
 
84,150
Principal payments on mortgages payable (177,743) (67,016) (205,159)(298,984)
Proceeds from revolving lines of credit 245,397
 53,017
 370,350
246,000
Principal payments on revolving lines of credit (252,818) (119,517) (303,400)(206,450)
Proceeds from notes payable and other debt 124,878
 74,352
 72,714
19,341
Principal payments on notes payable and other debt 
 
 (21,689)(49,080)
Payoff of financing liability 
 
 (7,900)
Proceeds from sale of common shares, net of issuance costs 22,019
 
 

Additions to notes receivable from noncontrolling partner –  consolidated real estate entities 
 
 
(9,211)
Proceeds from noncontrolling partner – consolidated real estate entities 
 
 
9,749
Payments for acquisition of noncontrolling interests – consolidated real estate entities (1,260) 
 
(4,938)
Proceeds from sale of preferred shares 
 
 99,467

Repurchase of common shares (18,023) (2,172) (9,935)(4,501)
Repurchase of preferred shares 
 
 (115,017)(28,752)
Repurchase of partnership units (8,147) (498) (8,775)(966)
Distributions paid to common shareholders (32,891) (16,724) (33,689)(55,907)
Distributions paid to preferred shareholders (6,821) (5,116) (8,763)(10,744)
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership (3,630) (1,959) (4,096)(7,453)
Distributions paid to noncontrolling interests – consolidated real estate entities (220) (2,432) (99)(174)
Distributions paid to preferred unitholders (377) 
 

Other financing activities (34) 
 

Net cash provided (used) by financing activities $(49,770) $(88,065) $(175,991)$(317,920)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 26,861
 3,140
 (40,684)(14,708)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF YEAR 19,256
 16,116
 56,800
71,508
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF YEAR $46,117
 $19,256
 $16,116
$56,800



INVESTORS REAL ESTATE TRUST 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

 



  Twelve Months Ended December 31, Eight Months Ended December 31, Fiscal Year Ended April 30,
  2019
 2018
 2018
2017
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES      
 
Accrued capital expenditures $1,273
 $(329) $(3,415)$(1,851)
Distributions declared but not paid 9,210
 
 

Property acquired through issuance of Series D preferred units 16,560
 
 

Conversion to equity of notes receivable from noncontrolling interests - consolidated real estate entities 
 670
 
9,846
Construction debt reclassified to mortgages payable 
 
 23,300
10,549
Increase in mortgage notes receivable 
 
 10,329

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      
 
Cash paid for interest, net of amounts capitalized of $0, $0, $0 and $431, respectively 28,679
 24,135
 35,758
34,432
See Notes to Consolidated Financial Statements.

2016 Annual Report F-9







INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS

December 31, 2019, December 31, 2018, April 30, 2016, 2015,2018 and 2014

2017


NOTE 1 • ORGANIZATION

Investors Real Estate Trust (“IRET”,IRET,” “we” 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, 2019, we held for investment 99 multifamily properties69 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.11,953 homes. We conduct a majority of our business activities through our consolidated operating partnership, IRET Properties, a North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other subsidiary entities.

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

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include 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
On September 20, 2018, our Board of Trustees approved a change in our fiscal year endsyear-end from April 30th.

30 to December 31, effective as of January 1, 2019. As a result of this change, we filed a transition report on Form 10-KT for the eight-month transition period ended December 31, 2018, in accordance with SEC rules and regulations. The references in these notes to the consolidated financial statements to the terms listed below reflect the respective periods presented in the consolidated financial statements:

TermFinancial Reporting Period
Year ended December 31, 2019January 1, 2019 through December 31, 2019
Transition period ended December 31, 2018May 1, 2018 through December 31, 2018
Fiscal year ended April 30, 2018May 1, 2017 through April 30, 2018
Fiscal year ended April 30, 2017May 1, 2016 through April 30, 2017
Our interest in the Operating Partnership was 88.1%92.0%, 89.7%, and 89.9%89.4%, respectively, of the limited partnership units of the Operating Partnership (“Units”) as of December 31, 2019, December 31, 2018, and April 30, 2016 and 2015,2018, which includes 100% of the general partnership interest.

Under

On December 14, 2018, the termsBoard approved a reverse stock split of our outstanding common shares and Units, no par value per share, at a ratio of 1-for-10. The reverse stock split was effective as of the Operating Partnership’s Agreementclose of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their Units for cash any time following the first anniversarytrading on December 27, 2018, with trading commencing on a split-adjusted basis on December 28, 2018. The number 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 subjectand Units was reduced from 119.4 million to certain conditions11.9 million and limitations, including the limited partner may not exercise the Exchange Right more than two times during a calendar year13.7 million to 1.4 million, respectively. We have retroactively restated all shares and the limited partner may not exerciseUnits and per share and Unit data 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.

periods presented.

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


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


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 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments; ASU 2018-19, Codification Improvements to Topic 326; ASU 2019-05, Financial Instruments - Credit Losses - Targeted Transition Relief; ASU 2019-11, Codification improvements to Topic 326, Financial Instruments - Credit Losses
These ASUs require entities to estimate a lifetime expected credit loss for most financial assets, such as loans and other financial instruments, and to present the net amount expected to be collected. In 2018, another ASU was issued to amend ASU 2016-13 which clarifies that it does not apply to operating lease receivables. In 2019, an additional ASU was issued to provide transition relief in which an entity is allowed to elect the fair value option on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326.These ASUs are effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted.
We will elect the fair value option, as allowed by ASU 2019-05, for our mortgages receivable and notes receivable at January 1, 2020. The fair value option election is not expected to have a material impact on our consolidated financial statements but will require additional disclosures.

ASU 2018-13, Fair Value Measurements (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurements
This ASU eliminates certain disclosure requirements affecting all levels of measurement, and modifies and adds new disclosure requirements for Level 3 measurements.This ASU is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted.The new standard will not have a material impact on our condensed consolidated financial statements.
ASU 2019-01, Leases (Topic 842) - Codification Improvements
This ASU provides clarification on various lease related issues and provides for reduced transition disclosure requirements.
This ASU has two effective dates. The various lease issues are effective for annual reporting periods beginning after December 15, 2019. The transition disclosures are effective with ASU 2016-02, Leases. We adopted this standard using the modified retrospective approach effective January 1, 2019.
The adoption of the standard did not have a material impact on our condensed consolidated financial statements. Refer to the "Leases" section below for transition disclosures.
ASU 2019-07, Codification Updates to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates
This ASU clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC's regulations, thereby eliminating redundancies and making the codification easier to apply.This ASU was effective upon issuance.The adoption of this ASU did not have a material impact on our condensed consolidated financial statements and the related disclosures.

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 Statementsconsolidated statement of Operations, we combined utilities, maintenance, insurance, property management expensesoperations, total assets, liabilities or equity as reported in the consolidated balance sheets 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.

total shareholder’s equity. We report in discontinued operations the results of operations 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.

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 $1.3 billion, $1.3 billion, and $1.4 billion as of December 31, 2019, December 31, 2018, and April 30, 2018, 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 the acquired

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.

2016 Annual Report F-12


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.

Interest of approximately $4,000 and $431,000 was capitalized in continuing and discontinued operations for the years ended April 30, 2018 and 2017, respectively. We did not capitalize interest during the year ended December 31, 2019 or the transition period ended December 31, 2018.

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 group, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the long-lived asset group against the carrying amount of that asset. 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. 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 requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

During fiscalthe year 2016,ended December 31, 2019, we did not incur a loss for impairment on real estate.
During the transition period ended December 31, 2018, we incurred a non-cash loss of $6.0$1.2 million due to 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 aBismarck, North Dakota. The parcel of land in River Falls, Wisconsin. These properties werewas 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

2016 Annual Report F-13


property was based on receipt of a market offer to purchase and our intent to dispose of the property.

During the fiscal year ended April 30, 2018, we incurred a loss of $18.1 million due to impairment of 1 apartment community, 3 other commercial properties, and 4 parcels of land. We recognized impairments of $12.2 million on 1

apartment community in Grand Forks, North Dakota; $1.4 million on an industrial property (we signedin Bloomington, Minnesota; $922,000 on an industrial property in Woodbury, Minnesota; and $630,000 on a purchase agreementretail property in Minot, North Dakota. These properties were written-down to estimated fair value based on independent appraisals and market data or, in the fourth quartercase of fiscal year 2014). Thisthe retail 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 signedproperty. We recognized impairments of $428,000 on a purchase agreementparcel of land in Williston, North Dakota; $1.5 million on a parcel of land in Grand Forks, North Dakota; and $256,000 and $709,000 on 2 parcels of land in Bismarck, North Dakota. These parcels were written down to estimated fair value based on independent appraisals and market data.
During the fiscal year ended April 30, 2017, we incurred a loss of $57.0 million due to impairment of 16 apartment communities and 2 parcels of unimproved land. We recognized impairments of $40.9 million, $5.8 million, $4.7 million, and $2.8 million, respectively, on 3 apartment communities and 1 parcel of unimproved land in Williston, North Dakota, due to deterioration of this energy-impacted market, which resulted in poor leasing activity and declining rental rates, which should generally be a strong leasing period. These properties were written down to estimated fair value based on an independent appraisal in the first quartercase of one property and management cash flow estimates and market data in the case of the remaining assets. The properties impaired for $40.9 million, $4.7 million, and $2.8 million were owned by joint venture entities in which, at the time of impairment, we had an approximately 70%, 60%, and 70% interest, respectively, but which were consolidated in our consolidated financial statements. We recognized impairments of $2.9 million on 13 properties and 1 parcel of land in Minot, North Dakota. These properties were written down to estimated fair value based on management cash flow estimates and market data and, in the case of the 13 properties, our intent to dispose of the properties.
CHANGE IN DEPRECIABLE LIVES OF REAL ESTATE ASSETS
Effective May 1, 2017, we changed the estimated useful lives of our real estate assets to better reflect the estimated periods during which they would be of economic benefit. Generally, the estimated lives of buildings and improvements that previously were 20-40 years were decreased to 10-37 years, while those that were previously nine years were changed to 5-10 years. The effect of this change in estimate for the fiscal year 2015).

ended April 30, 2018, was to increase depreciation expense by approximately $29.3 million, decrease net income by $29.3 million, and decrease earnings per share by $0.22.

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 0 properties one multifamily property, one industrial property and three parcels of unimproved land were classified as held for sale at December 31, 2019, December 31, 2018, and April 30, 2016. One office property 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,2018.

We report in discontinued operations the results of operations and the related gains or losses on the sales of properties that hadhave either been disposed of or classified as held for sale and otherwise metmeet the classification of a discontinued operation. Effective February 1, 2014, we adopted ASU 2014-08, operation as described in ASC 205 - Presentation of Financial Statements (Topic 205) and ASC 360 - Property, Plant, and Equipment (Topic 360):Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this standard,these standards, 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 ASSETS

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.

2016 Annual Report F-14


RESTRICTED CASH

Table of Contents

 (in thousands)
Balance sheet descriptionDecember 31, 2019 December 31, 2018 April 30, 2018
Cash and cash equivalents$26,579
 $13,792
 $11,891
Restricted cash19,538
 5,464
 4,225
Total cash, cash equivalents and restricted cash$46,117
 $19,256
 $16,116

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, 2019 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$17.2 million of the deposit at Dacotah Bank is held as a certificate of deposit and comprises the $50,000 in other investments on the Consolidated Balance Sheets. The certificate 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 $4.3our dispositions and $2.3 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 construction and tenant improvement projects, while the increase of $1.1 million represents additional amounts retainedescrows held by lenders for new projects.

2016 Annual Report F-15


ALLOWANCE FOR DOUBTFUL ACCOUNTS

Management evaluates the appropriate amount of the allowance for doubtful accounts by assessing the recoverability of individual real estate mortgage loanstaxes, insurance, and rent receivables, through a comparisoncapital additions. As of their carrying amount with their estimated realizable value. Management considers tenant financial condition, credit historyDecember 31, 2018, 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, 20152018, restricted cash consisted primarily of escrows held by lenders for real estate taxes, insurance, 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

capital additions. Tax, insurance, and other escrow includesescrows 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 of certain projects. The funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender.

REAL ESTATE DEPOSITS

Real estate deposits

LEASES
Effective January 1, 2019, we adopted ASUs 2016-02, 2018-10, 2018-11, 2018-20, and 2019-01 related to leases using the modified retrospective approach. We elected to adopt the package of practical expedients permitted under the transition guidance, which permits us to not reassess prior conclusions about lease identification, classification, and initial direct costs under the new standard, and the practical expedient related to land easements, which allows us to not evaluate existing or expired land easements that were not previously accounted for under ASC 840. We made an accounting policy election to exclude leases in which we are a lessee with a term of 12 months or less from the balance sheet.
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 98.1% of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 1.9% 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 funds held by escrow agentsoptions to extend the lease for additional terms.
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, 2019, was as follows:
  (in thousands)
2020 $2,993
2021 3,020
2022 3,024
2023 2,847
2024 2,308
Thereafter 4,793
Total scheduled lease income - operating leases $18,985

REVENUE
We adopted ASU 2014-09, Revenue from Contracts with Customers, as of May 1, 2018, using the modified retrospective approach. We elected to apply the new standard to contracts that were not complete as of May 1, 2018. We also elected to omit disclosing the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Under the new standard, 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 ASU 2014-09 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: Subsequent to the adoption of the new standard, 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

Costs and commissions incurred in obtaining tenant leases are amortized on the straight-line method overdisposition.

We concluded that the termsadoption of the related leases. Costs incurrednew standard required a cumulative adjustment of $627,000 to the opening balance of retained earnings as of May 1, 2018, due to the sale of a group of properties in obtaining long-term financing are amortized to interest expense over the lifeprior fiscal year. The sale of properties was previously accounted for using the installment method. Under the installment method, we recorded a mortgage receivable net of the loan usingdeferred gain on sale, which was to be recognized as payments were received. The gain on sale under the straight-line method, which approximatesnew revenue standard is recognized when control of the effective interest method.

assets is transferred to the buyer. As a result of our adoption of the new standard, we recorded a cumulative adjustment to retained earnings and increased the mortgage receivable by $627,000 to recognize the previously deferred gain on sale.

The following table presents the disaggregation of revenue streams of our rental income for the year ended December 31, 2019 and the transition period ended December 31, 2018:
   (in thousands)
   Year endedTransition period ended
Revenue StreamApplicable Standard December 31, 2019December 31, 2018
Fixed lease income - operating leasesLeases $176,706
$114,047
Variable lease income - operating leasesLeases 5,586
3,528
Non-lease componentsRevenue from contracts with customers 

Other property revenueRevenue from contracts with customers 3,463
4,296
Total revenue  $185,755
$121,871
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. 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 year ended December 31, 2019, the transition period ended December 31, 2018 and the fiscal years ended April 30, 2016, 20152018, and 2014,2017, 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 one 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 fiscalthe year 2016,ended December 31, 2019, 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 year ended December 31, 2019, the transition period ended December 31, 2018 and the fiscal years ended April 30, 2016, 20152018, and 2014. Our TRS is the tenant in our Legends at Heritage Place senior housing facility.

2017.

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.

2016 Annual Report F-16


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


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, 2019, December 31, 2018, and December 31, 2017,
CALENDAR YEAR  2019
2018
2017
Tax status of distributions    
Capital gain 38.53%100.00%48.87%
Ordinary income 23.43%
14.59%
Return of capital 38.04%
36.54%

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, 2019, December 31, 2018, and April 30, 2018, other assets consisted of the following amounts:
 in thousands
 December 31, 2019
December 31, 2018
April 30, 2018
Receivable arising from straight line rents$785
$1,145
$1,458
Accounts receivable, net of allowance
154
71
81
Fair value of interest rate swaps
818
1,779
Loans receivable16,557
16,399
15,480
Marketable securities7,055


Prepaid and other assets4,866
3,802
5,334
Intangible assets, net of accumulated amortization
1,212
498
1,469
Property and equipment, net of accumulated depreciation
1,277
686
820
Goodwill1,086
1,546
1,553
Deferred charges and leasing costs1,837
2,300
2,323
Total Other Assets$34,829
$27,265
$30,297

PROPERTY AND EQUIPMENT
Property and equipment consists primarily of office equipment located at our headquarters in Minot, North Dakota and corporate office 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, 2019, December 31, 2018, and April 30, 2018, property and equipment cost was $2.9 million, $2.2 million, and $2.1 million, respectively. Accumulated depreciation was $1.7 million, $1.4 million, and $1.3 million as of December 31, 2019, December 31, 2018, and April 30, 2018, respectively, and are included within other assets in the consolidated balance sheets.
MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE
In August 2017, we sold 13 apartment communities in exchange for cash and an $11.0 million note secured by a mortgage on the assets. As of December 31, 2019, December 31, 2018, and April 30, 2018 the remaining balance on the mortgage was $10.0 million, $10.4 million, and $11.0 million, respectively. As of December 31, 2019, 12 communities remained in the pool of assets used to secure the mortgage. The note bears an interest rate of 5.5% and matures in August 2020. Monthly payments are interest-only, with the principal balance payable at maturity. We received and recognized approximately $570,000, $448,000, and $372,000 of interest income during the year ended December 31, 2014 were characterized,2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018, respectively.

In July 2017, we originated a $16.2 million loan in a multifamily development located in New Hope, MN, a Minneapolis suburb. We funded an additional $341,000 upon satisfaction of certain conditions set forth in the loan agreement. The note bears an interest rate of 6%, matures in July 2023, and provides us an option to purchase the development prior to the loan maturity date. Interest payments are due when the note matures. As of December 31, 2019, the balance of the note, including accrued interest, was $16.6 million, which appears in other assets on our consolidated balance sheets.
In December 2019, we originated a $29.9 million construction loan and a $15.3 million mezzanine loan for federalthe development of a multifamily development located in Minneapolis, Minnesota. The construction and mezzanine loans bear interest at 4.5% and 11.5%, respectively. As of December 31, 2019, we had funded $6.2 million of the construction loan, which appears within mortgages receivable in our consolidated balance sheets. 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
As of December 31, 2019, 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 tax purposes, as 25.74% ordinary income, 23.09% capital gain and 51.17% return of capital.

REVENUE RECOGNITION

Multifamily rental properties are leased 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 overconsolidated statements of operations.

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 $1.4 million of liabilities waived under 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") under our 2015 Incentive Plan and Series D Convertible Preferred Units ("Series D preferred units"), which could have a dilutive financial interests. The potentialeffect on our earnings per share upon exercise of the RSUs or upon conversion of the Series D preferred units (refer to Note 4 for further discussion of the preferred units). Other than the issuance of RSUs and Series D 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 year ended December 31, 2019, performance-based restricted stock awards of 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.
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 year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 2018 and 2017:

  (in thousands, except per share data)
  For Year Ended For Period Ended For Year Ended
  December 31, 2019
 December 31, 2018
 April 30, 2018
April 30, 2017
NUMERATOR    
  
 
Income (loss) from continuing operations – controlling interests $78,669
 $(4,908) $(30,266)$(24,473)
Income (loss) from discontinued operations – controlling interests 
 510
 147,054
67,820
Net income (loss) attributable to controlling interests 78,669
 (4,398) 116,788
43,347
Dividends to preferred shareholders (6,821) (4,547) (8,569)(10,546)
Redemption of preferred shares 
 
 (3,657)(1,435)
Numerator for basic earnings per share – net income available to common shareholders 71,848
 (8,945) 104,562
31,366
Noncontrolling interests – Operating Partnership 6,752
 (1,032) 12,702
4,059
Dividends to preferred unitholders 537
 
 

Numerator for diluted earnings (loss) per share $79,137
 $(9,977) $117,264
$35,425
DENOMINATOR    
  
 
Denominator for basic earnings per share weighted average shares 11,744
 11,937
 11,998
12,117
Effect of redeemable operating partnership units 1,237
 1,387
 1,462
1,613
Effect of Series D preferred units 193
 
 

Effect of diluted restricted stock awards and restricted stock units 8
 
 

Denominator for diluted earnings per share 13,182
 13,324
 13,460
13,730
        
Earnings (loss) per common share from continuing operations – basic $6.06
 $(0.79) $(3.54)$(3.01)
Earnings (loss) per common share from discontinued operations – basic 
 0.04
 12.25
5.59
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC $6.06
 $(0.75) $8.71
$2.58
        
Earnings (loss) per common share from continuing operations – diluted $6.00
 $(0.79) $(3.54)$(3.01)
Earnings (loss) per common share from discontinued operations – diluted 
 0.04
 12.25
5.59
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED $6.00
 $(0.75) $8.71
$2.58

NOTE 4 • EQUITY AND MEZZANINE EQUITY
Operating Partnership Units. Outstanding Units in the Operating Partnership were 1.1 million Units at December 31, 2019, 1.4 million Units at December 31, 2018, and 1.4 million Units at April 30, 2018.
Exchange Rights. Pursuant to the exercise of Exchange Rights, we redeemed Units during the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018 as detailed in the table below.
  (in thousands, except per Unit amounts)
  Number ofAggregateAverage Price
  UnitsCostPer Unit
Year Ended December 31, 2019 136
$8,142
$60.02
Transition Period Ended December 31, 2018 9
499
53.12
Fiscal Year Ended April 30, 2018 149
8,775
58.90

We also redeemed Units in exchange for common shares pursuant toduring the Exchange Right will have no effect on net income per share because Unitholdersyear ended December 31, 2019, the transition period ended December 31, 2018, and common shareholders effectively share equallythe fiscal year ended April 30, 2018 as detailed in the net income of the Operating Partnership.

PROCEEDS FROM FINANCING LIABILITY

table below.

  (in thousands)
  Number ofTotal Book
  UnitsValue
Year Ended December 31, 2019 174
$7,823
Transition Period Ended December 31, 2018 33
649
Fiscal Year Ended April 30, 2018 3
34

Common Shares and Equity Awards. Common shares outstanding on December 31, 2019, December 31, 2018, and April 30, 2018, totaled 12.1 million, 11.9 million, and 12.0 million, respectively. During the first quarter ofyear ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal year 2014, we sold a non-core assisted living property in exchange for $7.9 million in cash and a $29.0 million contract for deed which matures August 1, 2018. The buyer leased the property back to us, and also granted us an option to repurchase 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 ofended April 30, 2016 is $7.9 million.

VARIABLE INTEREST ENTITY

On2018, we issued approximately 18,000, 5,600, and 9,300 common shares, respectively, with a total grant-date value of $1.1 million, $347,000, and $536,000, respectively, under our 2015 Incentive Plan, for officer and trustee share-based compensation for future performance. During the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018, approximately 3,300, 200, and 3,200 common shares were forfeited under the 2015 Incentive Plan, respectively.

Equity Distribution Agreement. In November 27, 2012,2019, we entered into an equity distribution agreement in connection with an at-the-market offering ("2019 ATM Program") through which we may offer and sell common shares having an aggregate sales price of up to $150.0 million, in amounts and at times as we determine. The proceeds from the sale of common shares under the 2019 ATM Program are intended to be used for general corporate purposes, which may include the funding of future acquisitions, community renovations, and the repayment of indebtedness. During the year ended December 31, 2019, we issued 308,444 common shares under the 2019 ATM Program at an average price of $72.29 per share, net of commissions. Total consideration, net of commissions and issuance costs, was approximately $22.0 million. As of December 31, 2019, we had common shares having an aggregate offering price of up to $127.7 million remaining available under the 2019 ATM Program.
Share Repurchase Program. On December 7, 2016, our Board of Trustees authorized a share repurchase program to repurchase up to $50 million of our common shares over a one year period. On December 5, 2017, our Board of Trustees reauthorized this share repurchase program for an additional one year period. On December 5, 2018, our Board of Trustees reauthorized this share repurchase program for a third one-year period. On December 5, 2019, our Board of Trustees terminated this 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 new repurchase program, we may 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. The extent to which we repurchase our shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by our executive management team. The program may be suspended or discontinued at any time. As of December 31, 2019, $50.0 million remained available under our repurchase program. Common shares repurchased during the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018 are detailed in the table below.
 (in thousands, except per share amounts)
 Number of Shares
Aggregate Cost(1)
Average Price Per Share(1)
Year ended December 31, 2019(2)
329
$18,023
$54.69
Transition period ended December 31, 201842
2,200
51.56
Fiscal year ended April 30, 2018178
9,900
55.82
(1)Amount includes commissions.
(2)Repurchases during the year were under the prior repurchase program.
Issuance of Preferred Shares and Redemption of Series B Preferred Shares. In the year ended April 30, 2018, we issued 4,118,460 shares of our 6.625% Series C Cumulative Redeemable Preferred Shares ("Series C preferred shares") and redeemed all 4,600,000 shares of our 7.95% Series B Cumulative Redeemable Preferred Shares. The Series 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 cumulative 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 ($103.0 million liquidation preference in the aggregate).

Series D Preferred Units (Mezzanine Equity). On February 26, 2019, we issued 165,600 newly created 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 redeem any or all of the Series 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 charged to common shares on our consolidated balance sheets from period to period. 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 net income (loss) attributable to controlling interests and noncontrolling interests.
Redeemable Noncontrolling Interests (Mezzanine Equity). Redeemable noncontrolling interests on our consolidated balance sheets represent the noncontrolling interest in a joint venture operating agreementin 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 a real estate development company to construct an apartment project in Minot, North Dakota as IRET – Minot Apartments, LLC, with approximately 69%the terms of the project financed with third-party debt and approximately 7% financed with debt from us toagreement, or at a negotiated price. Redeemable noncontrolling interests are presented at the joint venture entity. The two-phase project was substantially completedgreater of their carrying amount or redemption value at the end of each reporting period. Changes in the third quarter of fiscalvalue from period to period are charged to common shares on our consolidated balance sheets. During the year 2015. As of April 30, 2016,ended December 31, 2019, we areacquired the approximately 51.0% owner of the joint venture and have management and leasing responsibilities andremaining 34.5% noncontrolling interests in the real estate development companypartnership that owns approximately 49.0%Commons and Landing at Southgate for $1.3 million. Below is a table reflecting the activity of the joint venture and was responsible for the development and 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.

redeemable noncontrolling interests.
  (in thousands)
  Year ended December 31, Transition period ended December 31, Years ended April 30,
  2019
 2018
 2018
2017
Balance at beginning of fiscal year $5,968
 $6,644
 $7,117
$7,522
Contributions 
 
 268
17
Net (loss) income (174) (676) (741)(422)
Acquisition of redeemable noncontrolling interests (5,794)     
Balance at close of fiscal year $
 $5,968
 $6,644
$7,117

2016 Annual Report F-17


On June 12, 2014, we entered into a joint venture operating agreement with a real estate development company 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% 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. As of April 30, 2016, we are 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 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.

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 million and $9.7 million, respectively.

2016 Annual Report F-18


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 for the years ended April 30, 2016, 2015 and 2014, respectively.

The future minimum lease receipts to be received under non-cancellable leases for commercial properties held for investment as of April 30, 2016, assuming that no options to renew or buy out the lease are exercised, 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 Investments within Note 2 for information about impairment losses recorded during fiscal years 2016 and 2015.

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


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. During fiscal year 2016, Mendota Properties LLC disposed of the five properties held by the entity.operations. Our noncontrolling interests – consolidated real estate entities at December 31, 2019, December 31, 2018, and April 30, 2016 and 20152018 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

 

  (in thousands)
  December 31, 2019
December 31, 2018
April 30, 2018
IRET - 71 France, LLC $4,817
$5,918
$6,606
IRET - Cypress Court Apartments, LLC 748
829
890
IRET - Williston Garden Apartments, LLC 

1,635
IRET - WRH 1, LLC 

(467)
WRH Holding, LLC 

224
Noncontrolling interests – consolidated real estate entities $5,565
$6,747
$8,888


NOTE 76 • LINE OF CREDIT

DEBT

As of April 30, 2016,December 31, 2019, we through our Operating Partnership as Borrower, had one secured 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.  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. Interest-only payments are due monthly based on the total amount of advances outstanding. As of April 30, 2016, we had advanced $17.5 million under the line of credit.

2016 Annual Report F-20


The line of credit may be prepaid at par at any time. The facility 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,owned 69 apartment communities, 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, we believe we are in compliance with the line of credit’s covenants. This credit facility is summarized in 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

Most of our properties owned individually serve24 served as collateral for separatemortgage loans. All of these mortgage loans on single properties or groups of properties. The majority of these mortgages payable arewere 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%5.73%, and the mortgagesmortgage loans have varying maturity dates from JulyNovember 1, 20162020, through JulySeptember 1, 2036.2031. As of April 30, 2016, management believesDecember 31, 2019, we believe there are no0 material defaults or instances of material compliance issuesnoncompliance in regards to any of these mortgage loans.

During the year ended December 31, 2019, we closed on a $59.9 million mortgage loan. This mortgage is secured by four apartment communities, is interest only, and is priced at a fixed rate of 3.88% for the full twelve-year term of the loan. Proceeds from this loan were used to pay down balances under our line of credit.
During the year ended December 31, 2019, we entered into a private shelf agreement for the issuance of up to $150.0 million of unsecured senior promissory notes ("unsecured senior notes"). Under this agreement, we issued $75.0 million of Series A notes due September 13, 2029, bearing interest at a rate of 3.84% annually, and $50.0 million of Series B notes due September 30, 2028, bearing interest at a rate of 3.69% annually. We have $25.0 million remaining available under the private shelf agreement.
As of December 31, 2019, we owned 45 apartment communities that were not encumbered by mortgages, payable.

Ofwith all of these apartment communities providing credit support for our unsecured borrowings. Our primary unsecured credit facility ("unsecured credit facility") is a revolving, multi-bank line of credit, with the mortgages payable,Bank of Montreal serving as administrative agent. Our line of credit has total commitments of $250.0 million, with borrowing capacity based on the value of properties contained in the unencumbered asset pool (“UAP”). The UAP provided for a borrowing capacity of $250.0 million at December 31, 2019, providing additional borrowing availability of $199.9 million beyond the $50.1 million drawn, including mortgages on properties held for sale, the balance on our operating line of fixedcredit (discussed below), priced at an interest rate mortgages totaled $689.3of 3.81%, including the impact of our interest rate swap. This credit facility matures on August 31, 2022, with 1 12-month option to extend the maturity date at our election. At December 31, 2018, the line of credit borrowing capacity was $232.5 million based on the UAP, of which $57.5 million was drawn on the line. At April 30, 2018, the line of credit borrowing capacity was $300.0 million based on the UAP, of which $124.0 million was drawn on the line.

Under our unsecured credit facility, we also have unsecured term loans of $70.0 million and $904.9$75.0 million, included within notes payable on the consolidated balance sheets, which mature on January 15, 2024 and August 31, 2025, respectively.
The interest rates on the line of credit and term loans are based, at April 30, 2016our option, on the lender's base rate plus a margin, ranging from 35-85 basis points, or the London Interbank Offered Rate (“LIBOR”), plus a margin that ranges from 135-190 basis points based on our consolidated leverage. Our unsecured credit facility and 2015, respectively,unsecured senior notes are subject to customary financial covenants and the balances of variable rate mortgages totaled $196.8 millionlimitations. We believe that we are in compliance with all such financial covenants and $70.0 millionlimitations as of April 30, 2016,December 31, 2019.
We also have a $6.0 million operating line of credit. This operating line of credit is designed to enhance treasury management activities and 2015, respectively. We do not utilize derivative financial instruments to mitigatemore effectively manage cash balances. This operating line has a one-year term, with pricing based on a market spread plus the one-month LIBOR index rate.

The following table summarizes our exposure to changes 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. indebtedness:
  (in thousands) 
  December 31, 2019
December 31, 2018
April 30, 2018
Weighted Average Maturity in Years
Lines of credit $50,079
$57,500
$124,000
2.67
Term loans(1)
 145,000
145,000
70,000
4.88
Unsecured senior notes(1)
 125,000


9.33
Unsecured debt 320,079
202,500
194,000
6.27
Mortgages payable - fixed 331,376
445,974
489,401
5.79
Mortgages payable - variable 

22,739

Total debt $651,455
$648,474
$706,140
6.02
      
Annual Weighted Average Interest Rates     
Lines of credit (rate with swap) 3.81%3.72%3.35% 
Term loans (rate with swaps) 4.11%4.01%3.86% 
Unsecured senior notes 3.78%

 
Mortgages payable 4.02%4.58%4.69% 

(1)Included within notes payable on our consolidated balance sheets.
The aggregate amount of required future principal payments on mortgages payable and notes payable as of December 31, 2019 is as follows:
  (in thousands)
2020 $14,897
2021 40,523
2022 37,352
2023 48,111
2024 73,777
Thereafter 386,716
Total payments $601,376

NOTE 7 • DERIVATIVE INSTRUMENTS
Our objective in using an interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate fluctuations. To accomplish this objective, we primarily use interest rate swap contracts to fix the variable rate interest on our term loans and a portion of our primary line of credit. The interest rate swap contracts qualify as cash flow hedges.
The ineffective portion of 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 interest rate swap will be reclassified to interest expense as interest payments are made on our term loan and line of credit. During the next 12 months, we estimate an additional $1.5 million will be reclassified as an increase to interest expense.
At December 31, 2019, we had three interest rate swap contracts in effect with a notional amount of $195.0 million and 1 additional interest rate swap that becomes effective on January 31, 2023 with a notional amount of $70.0 million.
The table below presents the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets as of December 31, 2019, December 31, 2018, and April 30, 2016, is2018.
   (in thousands)   (in thousands)
   December 31, 2019 December 31, 2018 April 30, 2018   December 31, 2019 December 31, 2018 April 30, 2018
 Balance Sheet Location Fair Value
 Fair Value Fair Value Balance Sheet Location Fair Value
 Fair Value Fair Value
Total derivative instruments designated at hedging instruments - interest rate swapsOther Assets $
 $818
 1,779
 Accounts Payable and Accrued Expenses $7,607
 $1,675
 


The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations as follows

of December 31, 2019, December 31, 2018, and April 30, 2018.

 

 

 

 

 

 

 

 

 

 

(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)
 Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from Accumulated OCI into Income Gain (Loss) Reclassified from Accumulated OCI into Income
 Year Ended December 31, Transition Period Ended December 31, Year Ended April 30,   Year Ended December 31, Transition Period Ended December 31, Year Ended April 30,
 2019 2018 2018   2019 2018 2018
Total derivatives in cash flow hedging relationships - interest rate swaps$(7,040) $(2,794) 1,627
 Interest expense $289
 $(159) (152)

In addition

NOTE 8 • FAIR VALUE MEASUREMENTS
Cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are carried at amounts that reasonably approximate their fair value due to mortgage loans comprising our $886.1 million of mortgage indebtedness, our revolving, multi-bank securedtheir short-term nature. For variable rate line of credit discusseddebt that re-prices frequently, fair values are based on carrying values.
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.
Fair Value Measurements on a Recurring Basis
The fair value of our 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 Note 7the fair value measurement.
Fair Value Measurements on a Nonrecurring Basis
Non-financial assets measured at fair value on a nonrecurring basis at December 31, 2018 and April 30, 2018, consisted of real estate investments that were written-down to estimated fair value during the transition period ended December 31, 2018 and the fiscal year ended April 30, 2018, respectively. We had no non-financial assets measured at fair value on a nonrecurring basis at December 31, 2019. 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
December 31, 2018  
 
 
 
Real estate investments valued at fair value $3,049


$3,049
      
April 30, 2018  
 
 
 
Real estate investments valued at fair value $52,145


$52,145


As of December 31, 2018 and April 30, 2018, we estimated the fair value of our real estate investments using appraisals, a market offer to purchase, market comparisons, and other market data.
Financial Assets and Liabilities Not Measured at Fair Value
For mortgages payable, the fair value of fixed rate loans is securedestimated 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, 2019, December 31, 2018, and April 30, 2016, by mortgages on 17 properties. This line of credit is not included in our mortgage indebtedness total. We currently have 29 unencumbered properties.

Our construction debt totaled $82.0 million and $136.2 million on April 30, 2016 and 2015, respectively. The weighted average rate of interest on the construction debt2018 are 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 construction loans was $26.2 million at April 30, 2016.

follows:


2016 Annual Report F-21


  (in thousands)
  12/31/201912/31/20184/30/2018
  Amount
Fair Value
Amount
Fair Value
Amount
Fair Value
FINANCIAL ASSETS  
 
 
 
 
 
Cash and cash equivalents $26,579
$26,579
$13,792
$13,792
$11,891
$11,891
Restricted cash 19,538
19,538
5,464
5,464
4,225
4,225
Mortgage and note receivables 32,810
32,810
26,809
26,809
25,809
25,809
FINANCIAL LIABILITIES      
 
Revolving lines of credit(1)
 50,079
50,079
57,500
57,500
124,000
124,000
Notes payable(1)
 270,000
270,000
145,000
145,000
70,000
70,000
Mortgages payable 331,376
332,471
445,974
444,241
509,919
510,803
(1)Excluding the effect of the interest rate swap agreement.

NOTE 9 • TRANSACTIONS WITH RELATED PARTIES

BANKING SERVICES – FIRST INTERNATIONAL BANKACQUISITIONS AND TRUST

DISPOSITIONS

ACQUISITIONS
We have an ongoing banking relationship with First International Bank. Stephen L. Stenehjem, a memberacquired $171.4 million of our Board of Trustees, isnew real estate during the Chief Executive Officeryear ended December 31, 2019, NaN in the transition period ended December 31, 2018, and Chairman of First International Bank and$373.1 million during 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 offiscal year ended 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 balance of this credit line, and paid fees of $77,000. In connection with this multi-bank line of credit, we maintain compensating balances with First International Bank totaling $6.0 million, of which $1.5 million is held in a non-interest bearing account, and $4.5 million is held in an account that pays us 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 service and other fees charged on these checking accounts.

In fiscal years 2015 and 2014, we paid interest and fees on outstanding mortgage and construction loans 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 $125,000 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 and 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.

2018.

Year Ended December 31, 2019

2016 Annual Report F-22


   (in thousands)
   Total
Form of ConsiderationInvestment Allocation
  DateAcquisition
    
    
 
 
Intangible
Acquisitions AcquiredCost
Cash
Units(1)

Land
Building
Assets
Multifamily        
272 homes - SouthFork Townhomes - Lakeville, MN February 26, 2019$44,000
$27,440
$16,560
$3,502
$39,950
$548
96 homes - FreightYard Townhomes and Flats - Minneapolis, MN September 6, 201926,000
26,000

1,889
23,615
496
328 homes - Lugano at Cherry Creek - Denver, CO(3)
 September 26, 201999,250
99,250

7,679
89,365
1,781
   $169,250
$152,690
$16,560
$13,070
$152,930
$2,825
         
Other        
Minot 3100 10th St SW - Minot, ND(2)
 May 23, 2019$2,112
$2,112

$246
$1,866

         
Total Acquisitions  $171.362
$154,802
$16,560
$13,316
$154,796
$2,825
(1)Value of Series D preferred units at the acquisition date.
(2)Acquired for use as our Minot corporate office building after renovations have been completed.
(3)Investment allocation excludes a $425,000 acquisition credit related to retail space lease-up.

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 2018(May 1, 20152017 to April 30, 20162018)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

   (in thousands)
   Total
Form of ConsiderationInvestment Allocation
  DateAcquisition
    
 
 
Intangible
Acquisitions AcquiredCost
Cash
Land
Building
Assets
191 homes - Oxbo - St. Paul, MN (1)
 May 26, 2017$61,500
$61,500
$5,809
$54,910
$781
500 homes - Park Place - Plymouth, MN September 13, 201792,250
92,250
10,609
80,711
930
274 homes - Dylan - Denver, CO November 28, 201790,600
90,600
12,155
77,249
1,196
390 homes - Westend - Denver, CO March 28, 2018128,700
128,700
25,525
102,101
1,074
Total Acquisitions  $373,050
$373,050
$54,098
$314,971
$3,981

(1)

ValueProperty includes 11,477 square feet 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.

retail space.

(2)

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

DISPOSITIONS

2016 Annual Report F-23


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 toDuring the year ended December 31, 2019, we continued 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 included in the Consolidated Statements of Operations as of their acquisition date. The revenue and net incometransformation by disposing of our fiscal year 2016portfolios and 2015 acquisitions are detailed below.

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Year Ended April 30,

    

2016

    

2015

 

Total revenue

 

$

4,094

 

$

2,565

 

Net loss

 

$

(366)

 

$

(1)

 

2016 Annual Report F-24


DEVELOPMENT PROJECTS PLACED IN SERVICE

Our Operating Partnership placed approximately $211.8 million of development projectscertain communities in service during fiscal year 2016, compared to $124.5 milliontertiary and secondary markets. We sold our portfolios in fiscal year 2015. The fiscal year 2016Topeka, Kansas, Sioux Falls, South Dakota, and 2015 development projects placedSioux City, Iowa. We also sold certain apartment communities 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 project, 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 F-25


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 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.

(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 F-26


PROPERTY DISPOSITIONS

During fiscal year 2016, weBismarck, North Dakota. We sold 8 multifamily, 40 office properties,21 apartment communities, 2 healthcare properties, 18 retailcommercial properties and 3 parcels of unimproved land for a total sales price of $414.1$203.1 million. Dispositions totaled $63.4 million and transferred ownership of 9 office properties pursuant to a deed in lieu transaction. Dispositions totaled $76.0$515.1 million in the transition period ended December 31, 2018 and the fiscal year 2015.ended April 30, 2018, respectively. The dispositions for the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal year 2016 and 2015 dispositionsended April 30, 2018 are detailed below.

Fiscal 2016

Year Ended December 31, 2019
   (in thousands)
  Date Book Value 
Dispositions DisposedSales Priceand Sale CostGain/(Loss)
Multifamily     
21 homes - Pinehurst - Billings, MT July 26, 2019$1,675
$961
$714
160 homes - Brookfield Village - Topeka, KS September 24, 201910,350
5,853
4,497
220 homes - Crown Colony - Topeka, KS September 24, 201917,200
7,876
9,324
54 homes - Mariposa - Topeka, KS September 24, 20196,100
4,290
1,810
300 homes - Sherwood - Topeka, KS September 24, 201926,150
11,536
14,614
308 homes - Villa West - Topeka, KS September 24, 201922,950
15,165
7,785
152 homes - Crestview - Bismarck, ND October 29, 20198,250
2,681
5,569
73 homes - North Pointe - Bismarck, ND October 29, 20195,225
3,179
2,046
108 homes - Kirkwood - Bismarck, ND October 29, 20195,400
2,518
2,882
65 homes - Westwood Park - Bismarck, ND October 29, 20194,250
1,931
2,319
16 homes - Pebble Springs - Bismarck, ND October 29, 2019875
573
302
192 homes - Arbors - Sioux City, IA December 11, 201916,200
6,110
10,090
120 homes - Indian Hills - Sioux City, IA December 11, 20198,100
5,302
2,798
132 homes - Ridge Oaks - Sioux City, IA December 11, 20197,700
4,006
3,694
50 homes - Cottage West - Sioux Falls, SD December 12, 20196,991
4,391
2,600
24 homes - Gables - Sioux Falls, SD December 12, 20192,515
2,052
463
79 homes - Oakmont - Sioux Falls, SD December 12, 20197,010
3,917
3,093
160 homes - Oakwood - Sioux Falls, SD December 12, 201912,090
3,056
9,034
120 homes - Oxbow Park - Sioux Falls, SD December 12, 201910,452
2,713
7,739
48 homes - Prairie Winds - Sioux Falls, SD December 12, 20193,763
1,112
2,651
44 homes - Sierra Vista - Sioux Falls, SD December 12, 20193,178
2,292
886
   $186,424
$91,514
$94,910
Other     
Minot 1400 31st Ave SW - Minot, ND(1)
 May 23, 2019$6,530
$6,048
$482
Woodbury 1865 Woodland - Woodbury, MN November 1, 20195,765
4,079
1,686
   $12,295
$10,127
$2,168
      
Unimproved Land     
Creekside Crossing - Bismarck, ND March 1, 2019$3,049
$3,205
$(156)
Minot 1525 24th Ave SW - Minot, ND April 3, 2019725
593
132
Weston - Weston, WI July 31, 2019600
427
173
   $4,374
$4,225
$149
      
Total Dispositions  $203,093
$105,866
$97,227
(1)This property currently houses our Minot corporate office. During the second quarter of 2019, we purchased an office building which will become our Minot corporate office after renovations are completed. We will lease space in the Minot 1400 31st Ave SW building until the new office is placed in service.


Transition Period Ended December 31, 2018 (May 1, 20152018 to December 31, 2018)
   (in thousands)
  Date Book Value 
Dispositions DisposedSales Priceand Sale CostGain/(Loss)
Multifamily     
44 unit - Dakota Commons - Williston, ND July 26, 2018$4,420
$3,878
$542
145 unit - Williston Garden - Williston, ND(1)
 July 26, 201812,310
11,313
997
288 unit - Renaissance Heights - Williston, ND(2)
 July 26, 201824,770
17,856
6,914
   $41,500
$33,047
$8,453
      
Other     
7,849 sq ft Minot Southgate Retail - Minot, ND July 12, 2018$1,925
$2,056
$(131)
9,052 sq ft Fresenius - Duluth, MN July 27, 20181,900
1,078
822
15,000 sq ft Minot 2505 16th St SW - Minot, ND October 12, 20181,710
1,814
(104)
81,594 sq ft Minot Arrowhead - Minot, ND November 30, 20186,622
5,907
715
100,850 sq ft Bloomington 2000 W 94th Street - Bloomington, MN December 19, 20184,550
4,550

   $16,707
$15,405
$1,302
      
Unimproved Land     
Grand Forks - Grand Forks, ND July 16, 2018$3,000
$2,986
$14
Renaissance Heights - Williston, ND(3)
 July 26, 2018750
684
66
Badger Hills Unimproved - Rochester, MN August 29, 20181,400
1,528
(128)
   $5,150
$5,198
$(48)
      
Total Property Dispositions  $63,357
$53,650
$9,707
(1)This apartment community was owned by a joint venture entity in which we had an interest of approximately 74.11%.
(2)This apartment community was owned by a joint venture entity in which we had an interest of approximately 87.14%.
(3)
This parcel of land was owned by a joint venture entity in which we had an interest of approximately 70.00%

Fiscal 2018 (May 1, 2017 to April 30, 20162018)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

   (in thousands)
  Date 
Book Value
 
Dispositions DisposedSales Price
and Sales Cost
Gain/(Loss)
Multifamily     
327 homes - 13 apartment communities - Minot, ND (1)(2)
 August 22, 2017$12,263
$11,562
$701
48 homes - Crown - Rochester, MN December 1, 20175,700
3,318
2,382
16 homes - Northern Valley - Rochester, MN December 1, 2017950
690
260
   $18,913
$15,570
$3,343
Other 






4,998 sq ft Minot Southgate Wells Fargo Bank - Minot, ND May 15, 2017$3,440
$3,332
$108
90,260 sq ft Lexington Commerce Center - Eagan, MN August 22, 20179,000
3,963
5,037
17,640 sq ft Duckwood Medical - Eagan, MN August 24, 20172,100
1,886
214
279,834 sq ft Edgewood Vista Hermantown I & II - Hermantown, MN October 19, 201736,884
24,697
12,187
518,161 sq ft Urbandale - Urbandale, IA November 22, 201716,700
12,857
3,843
36,053 sq ft 3075 Long Lake Road - Roseville, MN November 28, 201718,650
12,766
5,884
1,205,432 sq ft 25 Healthcare properties December 29, 2017370,268
232,778
137,490
43,404 sq ft Garden View - St. Paul, MN January 19, 201814,000
6,191
7,809
52,116 sq ft Ritchie Medical - St. Paul, MN January 19, 201816,500
10,419
6,081
22,187 sq ft Bismarck 715 East Broadway and Unimproved Land - Bismarck, ND March 7, 20185,500
3,215
2,285
   $493,042
$312,104
$180,938
Unimproved Land   
 
 
Bismarck 4916 Unimproved Land - Bismarck, ND August 8, 2017$3,175
$3,188
$(13)
      
Total Dispositions  $515,130
$330,862
$184,268

(1)

These communities include: 4th Street 4 Plex, 11th Street 3 Plex, Apartments on Main, Brooklyn Heights, Colton Heights, Fairmont, First Avenue (Apartments and Office), Pines, Southview, Summit Park, Temple (includes 17 South Main Retail), Terrace Heights, and Westridge.

(2)The properties included in this portfolio disposition are: 610 Business Center, 7800 West Brown Deerincluded: 2800 Medical, 2828 Chicago Avenue, Airport Medical, Billings 2300 Grand 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,Burnsville 303 Nicollet Medical, Burnsville 305 Nicollet Medical, 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 SquareClinic, Edina 6363 France Medical, Edina 6405 France Medical, Edina 6517 Drew Avenue, Edina 6225 France SMC II, Edina 6545 France SMC I, Gateway Clinic, High Pointe Health Campus, Lakeside Medical Plaza, Mariner Clinic, Minneapolis 701 25th Avenue Medical, Missoula 3050 Great Northern, Park Dental, Pavilion I, Pavilion II, PrairieCare Medical, St. Michael Clinic, Trinity at Plaza 16 and St. Cloud Westgate.

Wells Clinic.

(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 F-27


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, 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

We report our results in two reportable segments, which are aggregations of similar properties: multifamily and healthcare, excluding our senior housing properties, which were classified as held for sale and discontinued operations at April 30, 2016.

Segment information in this report is presented based on net operating income (“NOI”), 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 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 income for the fiscal years ended April 30, 2016, 2015 and 2014 from our two reportable segments, 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 Assets as reported in the consolidated financial statements.

2016 Annual Report F-28


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

2016 Annual Report F-29


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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


NOTE 1210 • DISCONTINUED OPERATIONS

Prior to February 1, 2014, we reported,

We report in discontinued operations the results of operations and the related gains or losses on the sales of properties that hadhave either been disposed of or classified as held for sale and otherwise metmeet the classification of a discontinued operation. Asoperation as described in ASC 205 - Presentation of Financial Statements and ASC 360 - Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this standard, a result of the adoption of ASU 2014-08, results of operations and gains or losses on sale for properties that are disposed or classifieddisposal (or classification as held for salesale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the ordinary course of businessdisposal represents a strategic shift that has (or will have) a major effect on or subsequentan entity’s operations and financial results.
We determined that our strategic decision to February 1, 2014 would generally be included in continuing operations onexit our consolidated statements of operations, to the extent such disposals did not meethealthcare segment met the criteria for classificationdiscontinued operations, and we consequently classified 27 property dispositions as a discontinued operation described in Note 2.

Duringoperations during the fiscal year 2016,ended April 30, 2018. We classified 0 dispositions as discontinued operations during the year ended December 31, 2019, the transition period ended December 31, 2018 and the fiscal year ended April 30, 2017. During the fiscal year ended April 30, 2017, 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 the 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 atended 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.2017. 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 yearsyear ended April 30, 2016, 2015December 31, 2019, the transition period ended December 31, 2018, 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


 

 

 

 

 

 

 

 

 

 

 

 

 

(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, 20152018 and 2014:

2017.


2016 Annual Report F-32


  (in thousands)
  Year EndedEight Months EndedYear Ended
  December 31, 2019
December 31, 2018
April 30, 2018
April 30, 2017
REVENUE     
Real estate rentals $
$
$19,744
$43,984
Tenant reimbursement 

11,650
16,110
TRS senior housing revenue 


3,218
TOTAL REVENUE 

31,394
63,312
EXPENSES   
 
 
Property operating expenses, excluding real estate taxes 

6,350
9,051
Real estate taxes 

5,191
6,848
Property management expense 

206
574
Depreciation and amortization 

8,445
10,772
TRS senior housing expenses 


3,113
TOTAL EXPENSES 

20,192
30,358
Operating income (loss) 

11,202
32,954
Interest expense(1)
 

(4,172)(11,628)
Gain (loss) on extinguishment of debt(1)
 

(6,508)(3,238)
Interest income 

661
2,179
Other income 

73
340
Income (loss) from discontinued operations before gain on sale 

1,256
20,607
Gain (loss) on sale of discontinued operations 
570
163,567
56,146
INCOME (LOSS) FROM DISCONTINUED OPERATIONS $
$570
$164,823
$76,753
Segment Data   
 
 
All other $
$570
$164,823
$76,753
Total $
$570
$164,823
$76,753

NOTE 11 • 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 make decisions about resources to be allocated and to assess performance. We do not group our operations 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 segment. "All other" is composed of non-multifamily properties, non-multifamily components of mixed use properties, and properties disposed or designated as held for sale.
Prior to the third quarter of fiscal year 2018, we reported our results in two reportable segments: multifamily and healthcare. We sold substantially all of our healthcare portfolio during the third quarter of fiscal year 2018 and classified it as discontinued operations, at which point healthcare no longer met the quantitative thresholds for reporting as a separate reportable segment.
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 less property operating expenses, including real estate taxes. 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, 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 present NOI for the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 2018 and 2017 from our reportable segment and reconcile net operating income to net income as reported in the consolidated financial statements. Segment assets are also reconciled to total assets as reported in the consolidated financial statements.

  (in thousands)
Year ended December 31, 2019 Multifamily
All Other
Total
Revenue $161,434
$24,321
$185,755
Property operating expenses, including real estate taxes 67,186
11,129
78,315
Net operating income $94,248
$13,192
$107,440
Property management expenses   (6,186)
Casualty loss   (1,116)
Depreciation and amortization   (74,271)
General and administrative expenses   (14,450)
Interest expense   (30,537)
Loss on debt extinguishment   (2,360)
Interest and other income   2,092
Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations   (19,388)
Gain (loss) on sale of real estate and other investments   97,624
Gain (loss) on litigation settlement   6,586
Gain (loss) from continuing operations   84,822
Income (loss) from discontinued operations   
Net income (loss)   $84,822

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 


  (in thousands)
Transition period ended December 31, 2018 Multifamily
All Other
Total
Revenue $100,136
$21,735
$121,871
Property operating expenses, including real estate taxes 41,391
9,328
50,719
Net operating income $58,745
$12,407
$71,152
Property management expenses   (3,663)
Casualty loss   (915)
Depreciation and amortization  
 
(50,456)
Impairment of real estate investments  
 
(1,221)
General and administrative expenses  
 
(9,812)
Interest expense  
 
(21,359)
Loss on debt extinguishment  
 
(556)
Interest and other income  
 
1,233
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations  
 
(15,597)
Gain (loss) on sale of real estate and other investments  
 
9,707
Gain (loss) from continuing operations  
 
(5,890)
Income (loss) from discontinued operations  
 
570
Net income (loss)  
 
$(5,320)

  (in thousands)
Year ended April 30, 2018 
Multifamily (1)

All Other (1)

Total
Revenue $159,983
$9,762
$169,745
Property operating expenses, including real estate taxes 70,460
2,574
73,034
Net operating income $89,523
$7,188
$96,711
Property management expenses   (5,526)
Casualty loss   (500)
Depreciation and amortization  
 
(82,070)
Impairment of real estate investments  
 
(18,065)
General and administrative expenses  
 
(14,203)
Acquisition and investment related costs  
 
(51)
Interest expense  
 
(34,178)
Loss on debt extinguishment  
 
(940)
Interest and other income  
 
1,508
Income (loss) before gain on sale of real estate and other investments  
 
(57,314)
Gain (loss) on sale of real estate and other investments  
 
20,120
Income (loss) from continuing operations  
 
(37,194)
Income (loss) from discontinued operations  
 
164,823
Net income (loss)  
 
$127,629
(1)Revenue, property operating expenses, including real estate taxes, and net operating income for the year ended April 30, 2018 have not been updated for properties sold during the year ended 2019.
  (in thousands)
Year ended April 30, 2017 
Multifamily (1)

All Other (1)

Total
Revenue $142,214
$17,890
$160,104
Property operating expenses, including real estate taxes 60,895
3,431
64,326
Net operating income $81,319
$14,459
$95,778
Property management expenses   (5,046)
Casualty loss   (414)
Depreciation and amortization  
 
(44,253)
Impairment of real estate investments  
 
(57,028)
General and administrative expenses  
 
(15,871)
Acquisition and investment related costs  
 
(3,276)
Interest expense  
 
(34,314)
Loss on debt extinguishment   (1,651)
Interest and other income  
 
1,146
Income (loss) before loss on sale of real estate and other investments and income (loss) from discontinued operations  
 
(64,929)
Gain (loss) on sale of real estate and other investments  
 
18,701
Income (loss) from continuing operations  
 
(46,228)
Income (loss) from discontinued operations  
 
76,753
Net income (loss)  
 
$30,525

(1)Revenue, property operating expenses, including real estate taxes, and net operating income for the year ended April 30, 2017 have not been updated for properties sold during the year ended 2019.

Segment Assets and Accumulated Depreciation
  (in thousands)
As at December 31, 2019 Multifamily
All Other
Total
Segment assets  
 
 
Property owned $1,609,471
$33,607
$1,643,078
Less accumulated depreciation (339,272)(9,850)(349,122)
Total property owned $1,270,199
$23,757
$1,293,956
Cash and cash equivalents   26,579
Restricted cash   19,538
Other assets   34,829
Unimproved land   1,376
Mortgage loans receivable   16,140
Total Assets   $1,392,418

  (in thousands)
As at December 31, 2018 Multifamily
All Other
Total
Segment assets  
 
 
Property owned $1,428,226
$199,410
$1,627,636
Less accumulated depreciation (277,709)(76,162)(353,871)
Total property owned $1,150,517
$123,248
$1,273,765
Cash and cash equivalents  
 
13,792
Restricted cash   5,464
Other assets  
 
27,265
Unimproved land   5,301
Mortgage loans receivable  
 
10,410
Total Assets  
 
$1,335,997
  (in thousands)
As at April 30, 2018 Multifamily
All Other
Total
Segment assets (1)
  
 
 
Property owned $1,606,421
$63,343
$1,669,764
Less accumulated depreciation (294,477)(16,847)(311,324)
Total property owned $1,311,944
$46,496
$1,358,440
Cash and cash equivalents  
 
11,891
Restricted cash  
 
4,225
Other assets   30,297
Unimproved land  
 
11,476
Mortgage loans receivable   10,329
Total Assets  
 
$1,426,658

(1)Segment assets as of April 30, 2018 have not been updated for properties sold during the year ended 2019.
NOTE 1412 • 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) matching contributions are fully vested when made. Our contributionsWe recognized expense of approximately $738,000, $476,000, $838,000, and $565,000 in the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 2018 and 2017, respectively.

NOTE 13 • TRANSACTIONS WITH RELATED PARTIES
Transactions with BMO Capital Markets
We have an historical and ongoing relationship with BMO Capital Markets (“BMO”). On July 17, 2017, we engaged BMO to these plans on behalfprovide financial advisory services in connection with the proposed disposition of employees totaled approximately $836,000, $1.0 millionour healthcare property portfolio. A family member of Mark O. Decker, Jr., our President and $1.1Chief Executive Officer, is an employee of BMO and could have an indirect material interest in any such engagement and related transaction(s). The Board pre-approved the engagement of BMO. During the fiscal year ended April 30, 2018, we completed the disposition of 27 of our 28 healthcare properties and paid BMO a transaction fee of $1.8 million in fiscal years 2016, 2015 and 2014, respectively. The decrease in cost from fiscal year 2015 to fiscal year 2016 was due to a decrease in discretionary employer contribution expense.

connection with this engagement.

2016 Annual Report F-33


NOTE 1514 • 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 on the age of the property) asbestos or lead, or have underground fuel storage tanks.lead. 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


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,4,443 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 December 31, 2019, December 31, 2018, and April 30, 2016 and 2015,2018, 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$76.6 million, $68.4 million, and $102.4$74.7 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


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


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


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 1815 • 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

 

  (in thousands, except per share data)
QUARTER ENDED March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
Revenues $45,608
$46,934
$47,436
$45,777
Net income (loss) attributable to controlling interests $(4,698)$3,113
$31,596
$48,658
Net income (loss) available to common shareholders $(6,403)$1,407
$29,891
$46,953
Net income (loss) per common share - basic $(0.54)$0.11
$2.57
$3.95
Net income (loss) per common share - diluted $(0.54)$0.11
$2.54
$3.89

  (in thousands, except per share data)
TRANSITION PERIOD First Quarter
Second Quarter
Two Months Ended December 31, 2018
 
Revenues $45,946
$45,638
$30,287
 
Net income (loss) attributable to controlling interest $2,916
$(4,558)$(2,756) 
Net income (loss) available to common shareholders $1,211
$(6,264)$(3,892) 
Net income (loss) per common share - basic & diluted $0.10
$(0.52)$(0.33) 
  (in thousands, except per share data)
QUARTER ENDED July 31, 2017
October 31, 2017
January 31, 2018
April 30, 2018
Revenues $40,978
$41,866
$42,716
$44,185
Net income (loss) attributable to controlling interests $(11,264)$12,821
$136,105
$(20,874)
Net income (loss) available to common shareholders $(13,550)$6,360
$134,331
$(22,579)
Net income (loss) per common share - basic & diluted $(1.12)$0.53
$11.22
$(1.89)

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 2016 • 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, which allows for awards in the form of cash, and unrestricted, and restricted common shares, and restricted stock units ("RSUs") up to an aggregate of 4,250,000425,000 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


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, 2019, awards under the 2015 Incentive Plan performance periodsconsisted of restricted and unrestricted common shares and RSUs. We account for suchforfeitures of restricted and unrestricted common shares and RSUs when they occur instead of estimating the forfeitures.

Year Ended December 31, 2019 LTIP Awards
Awards granted to trustees on May 17, 2019 consisted of 812 RSUs, which vested immediately, awards granted to trustees on September 16, 2015 (“2016 LTIP Awards”) included one-year, two-yearJune 13, 2019 consisted of 7,521 time-based RSU awards, which vest on June 13, 2020, and three-year periods beginningan award granted to a trustees on May 1, 2015. Going forward, it is anticipated that LTIPNovember 25, 2019 consisted of 49 RSUs, which vested immediately. All of these awards will be issued with a three-year performance period. The 2016 LTIP Awards utilized the performance metrics of relative TSR for 67% of the award and absolute TSR for 33% of the award. The 2016 LTIP Awards for performance periods of one, two and three years were 380,498; 353,535 and 353,535 shares, respectively.

In connection with the LTIP awards, weare classified as equity awards. We recognize compensation expense associated with the time-based awards ratably (over 31.5 monthsover the requisite service period. The fair value of share awards at grant date for non-management trustees was approximately $505,000, $348,000, $389,000, and $365,000 for the 50% unrestrictedyear ended December 31, 2019, the transition period ended December 31, 2018, and each of the fiscal years ended April 30, 2018 and 2017, respectively.

Awards granted to management on March 8, 2019, consist of time-based RSUs for 6,391 shares and performance RSUs based on total shareholder return ("TSR") for 12,781 shares. The time-based RSUs vest as to one-third of the shares on each of March 8, 2020, March 8, 2021, and March 8, 2022. Awards granted to management on June 15, 2019, consist of 169 time-based RSUs that vest on June 15, 2020. Awards granted on August 10, 2019, consist of 100 time-based RSUs that vest on August 10, 2020. Awards granted on August 29, 2019, consist of 98 time-based awards that vest as to one-third on each of March 8, 2020, March 8, 2021, and March 8, 2022; 197 performance RSUs based on TSR; and 444 time-based RSUs that vest as to one-third on each of August 29, 2020, August 29, 2021, and August 29, 2022. All of these awards are classified as equity awards.

The TSR performance RSU awards are earned based on our TSR as compared to the MSCI US REIT Index over 43.5 monthsa forward looking three-year period. The maximum number of RSUs eligible to be earned is 25,562 RSUs, which is 200% of the RSUs granted. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the 50% restricted shares)awards to vest. We recognize compensation expense 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). 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.not achieved. We based the expected volatility on the historical volatility of our daily closing share price. The share price, at the grant date, September 16, 2015, was $7.13. We based 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 RSU awards were an expected volatility of 25.5%, a risk-free interest rate of 2.43%, and an expected life of 2.82 years. The share price at the grant date, fair value as a percentage 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 Awards with a one-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 46% to 96% 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 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 AwardsMarch 8, 2019, 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.

$58.06 per share. 

2016 Annual Report F-39


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 trustee was $39,139, $39,139 and $28,976 for each of the fiscal years ended April 2016, 2015, and 2014, respectively.

TotalShare-Based Compensation Expense

Total share-based compensation expense recognized in the consolidated financial statements for the threeyear ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 20162018 and 2017, 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,Transition Period EndedFiscal Year Ended April 30, 
  2019December 31, 201820182017
Share based compensation expense $1,905
$845
$1,587
$6


Restricted Share Awards with Performance
The total fair value of time-based share grants vested during the year ended December 31, 2019, the transition period ended December 31, 2018, and Service Conditions

the fiscal years ended April 30, 2018 and 2017 was $310,000, $147,000, $1.1 million, and $127,000, respectively.

The activity for the threeyear ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 20162018 and 2017, 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-
  Shares
Date Fair Value
Unvested at April 30, 2016 
 
Granted 25,326
$61.59
Vested (2,132)$59.50
Forfeited (3,683)$62.40
Unvested at April 30, 2017 19,511


Granted 9,136
$57.55
Vested (18,545)$59.89
Forfeited (202)$62.40
Unvested at April 30, 2018 9,900


Granted 

Vested (2,709)$63.21
Forfeited 

Unvested at December 31, 2018 7,191


Granted 


Vested (4,999)$61.06
Forfeited 

Unvested at December 31, 2019 2,192
$59.20


Restricted Stock Units
During the year ended December 31, 2019, we issued 7,702 time-based RSUs to employees and 8,382 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, 2019 was approximately $647,000, $568,000 and $0. As of April 30, 2016, there was no$961,000. 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 awardsrecognized is $547,000, which we expect to recognize over a weighted average period of 1.3 years.

RSUs with market conditions were granted during fiscal year 2016 under the LTIP during the year ended December 31, 2019 with a fair market values,value, as determined using a Monte Carlo simulation, as follows:

 

 

 

 

 

 

 

(in thousands)

 

 

Grant Date Fair Value

 

 

Restricted

 

Unrestricted

Relative TSR

$

1,750

$

1,750

Absolute TSR

 

199

 

199

of $1.0 million. The unamortized value of the awards and RSUs with market conditions as of December 31, 2019, December 31, 2018, and April 30 20162018, was approximately $1.3 million, $1.1 million, and $448,000, respectively.

The activity for the year ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30 2018 and 2017, 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


Table of Contents

  RSUs with Service Conditions RSUs with Market Conditions
   Wtd Avg Grant-
  Wtd Avg Grant-
  Shares
Date Fair Value
 Shares
Date Fair Value
Unvested at April 30, 2017 
  
 
Granted 6,994
$60.54
 11,538
$70.90
Vested (207)$50.30
 
 
Forfeited 
  
 
Unvested at April 30, 2018 6,787
$60.85
 11,538
$70.90
Granted 14,878
$53.60
 15,461
$57.70
Vested (2,943)$60.83
 

Forfeited (462)$53.60
 (1,680)$70.90
Unvested at December 31, 2018 18,260

 25,319
$62.84
Granted 16,084
$59.76
 12,978
$79.49
Vested (11,633)$55.35
 

Forfeited (365)$51.73
 (475)$57.70
Unvested at December 31,��2019 22,346
$58.41
 37,822
$68.62

NOTE 21 • SUBSEQUENT EVENTS

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, 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, 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.


2016 Annual Report F-41


Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

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 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

 

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

 

     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)

Land
ImprovementsacquisitionLand
ImprovementsTotal
Depreciationor Acquisitioncomputed
Same-Store 
 
 
 
 
 
 
 
   
71 France - Edina, MN$54,459
$4,721
$61,762
$312
$4,801
$61,994
$66,795
$(11,070)201630-37years
Alps Park - Rapid City, SD3,426
287
5,551
397
333
5,902
6,235
(1,350)201330-37years
Arcata - Golden Valley, MN
2,088
31,036
262
2,130
31,256
33,386
(6,946)201530-37years
Ashland - Grand Forks, ND4,993
741
7,569
329
824
7,815
8,639
(2,016)201230-37years
Avalon Cove - Rochester, MN
1,616
34,074
498
1,731
34,457
36,188
(4,573)201630-37years
Boulder Court - Eagan, MN
1,067
5,498
3,276
1,576
8,265
9,841
(4,014)200330-37years
Canyon Lake - Rapid City, SD2,573
305
3,958
2,404
420
6,247
6,667
(3,006)200130-37years
Cardinal Point - Grand Forks, ND
1,600
33,400
200
1,702
33,498
35,200
(1,829)201330-37years
Cascade Shores - Rochester, MN11,400
1,585
16,710
99
1,587
16,807
18,394
(2,299)201630-37years
Castlerock - Billings, MT
736
4,864
2,452
1,045
7,007
8,052
(4,185)199830-37years
Chateau - Minot, ND
301
20,058
1,023
326
21,056
21,382
(5,095)201330-37years
Cimarron Hills - Omaha, NE8,700
706
9,588
5,016
1,590
13,720
15,310
(7,214)200130-37years
Colonial Villa - Burnsville, MN
2,401
11,515
10,568
2,987
21,497
24,484
(11,044)200330-37years
Colony - Lincoln, NE11,936
1,515
15,730
1,984
1,845
17,384
19,229
(4,686)201230-37years
Commons and Landing at Southgate - Minot, ND
5,945
47,512
1,801
6,419
48,839
55,258
(11,401)201530-37years
Cottonwood - Bismarck, ND
1,056
17,372
5,956
2,001
22,383
24,384
(11,253)199730-37years
Country Meadows - Billings, MT
491
7,809
1,788
599
9,489
10,088
(5,457)199530-37years
Crystal Bay - Rochester, MN
433
11,425
299
438
11,719
12,157
(1,528)201630-37years
Cypress Court - St. Cloud, MN11,934
1,583
18,879
443
1,619
19,286
20,905
(4,474)201230-37years
Deer Ridge - Jamestown, ND
711
24,129
269
778
24,331
25,109
(4,877)201330-37years
Evergreen - Isanti, MN
1,129
5,524
531
1,145
6,039
7,184
(1,782)200830-37years
Forest Park - Grand Forks, ND
810
5,579
8,894
1,532
13,751
15,283
(8,519)199330-37years
French Creek - Rochester, MN
201
4,735
238
207
4,967
5,174
(619)201630-37years
Gardens - Grand Forks, ND
518
8,702
125
535
8,810
9,345
(1,387)201530-37years
Grand Gateway - St. Cloud, MN
814
7,086
1,969
961
8,908
9,869
(2,962)201230-37years
GrandeVille at Cascade Lake - Rochester, MN36,000
5,003
50,363
1,843
5,095
52,114
57,209
(8,040)201530-37years
Greenfield - Omaha, NE
578
4,122
1,513
872
5,341
6,213
(2,064)200730-37years
Heritage Manor - Rochester, MN
403
6,968
3,487
731
10,127
10,858
(5,712)199830-37years
Homestead Garden - Rapid City, SD
655
14,139
784
723
14,855
15,578
(2,845)201530-37years
Lakeside Village - Lincoln, NE11,806
1,215
15,837
1,475
1,401
17,126
18,527
(4,458)201230-37years
Landmark - Grand Forks, ND
184
1,514
1,262
425
2,535
2,960
(1,588)199730-37years
Legacy - Grand Forks, ND13,565
1,362
21,727
10,738
2,431
31,396
33,827
(16,893)1995-200530-37years
Legacy Heights - Bismarck, ND
1,207
13,742
338
1,226
14,061
15,287
(2,091)201530-37years
Meadows - Jamestown, ND
590
4,519
1,993
733
6,369
7,102
(3,438)199830-37years
Monticello Crossings - Monticello, MN
1,734
30,136
110
1,761
30,219
31,980
(4,013)201730-37years
Monticello Village - Monticello, MN
490
3,756
1,211
638
4,819
5,457
(2,161)200430-37years

2016 Annual Report F-43



Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

December 31, 2019
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

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     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)

Land
ImprovementsacquisitionLand
ImprovementsTotal
Depreciationor Acquisitioncomputed
Northridge - Bismarck, ND$
$884
$7,515
$278
$1,057
$7,620
$8,677
$(1,342)201530-37years
Olympic Village - Billings, MT9,533
1,164
10,441
4,031
1,836
13,800
15,636
(7,584)200030-37years
Olympik Village - Rochester, MN
1,034
6,109
2,805
1,450
8,498
9,948
(3,790)200530-37years
Park Meadows - Waite Park, MN7,768
1,143
9,099
10,092
2,140
18,194
20,334
(11,216)199730-37years
Park Place - Plymouth, MN
10,609
80,781
7,280
10,782
87,888
98,670
(7,255)199730-37years
Plaza - Minot, ND
867
12,784
3,069
1,002
15,718
16,720
(5,063)200930-37years
Pointe West - Rapid City, SD
240
3,538
2,140
463
5,455
5,918
(3,548)199430-37years
Ponds at Heritage Place - Sartell, MN
395
4,564
492
419
5,032
5,451
(1,327)201230-37years
Quarry Ridge - Rochester, MN24,680
2,254
30,024
2,133
2,412
31,999
34,411
(9,705)200630-37years
Red 20 - Minneapolis, MN21,755
1,900
24,116
280
1,908
24,388
26,296
(5,532)201530-37years
Regency Park Estates - St. Cloud, MN7,623
702
10,198
2,709
1,148
12,461
13,609
(3,777)201130-37years
Rimrock West - Billings, MT
330
3,489
2,096
543
5,372
5,915
(2,930)199930-37years
River Ridge - Bismarck, ND
576
24,670
1,078
936
25,388
26,324
(7,027)200830-37years
Rocky Meadows - Billings, MT
656
5,726
1,651
840
7,193
8,033
(4,370)199530-37years
Rum River - Isanti, MN3,141
843
4,823
536
870
5,332
6,202
(1,927)200730-37years
Silver Springs - Rapid City, SD2,043
215
3,007
974
267
3,929
4,196
(772)201530-37years
South Pointe - Minot, ND
550
9,548
5,834
1,445
14,487
15,932
(9,239)199530-37years
Southpoint - Grand Forks, ND
576
9,893
227
666
10,030
10,696
(1,919)201330-37years
Southwind - Grand Forks, ND
400
4,938
4,627
929
9,036
9,965
(5,347)199530-37years
Sunset Trail - Rochester, MN7,310
336
12,814
3,430
785
15,795
16,580
(8,294)199930-37years
Thomasbrook - Lincoln, NE13,100
600
10,306
5,451
1,708
14,649
16,357
(7,648)199930-37years
Valley Park - Grand Forks, ND
294
4,137
4,243
1,323
7,351
8,674
(4,498)199930-37years
Village Green - Rochester, MN
234
2,296
1,056
361
3,225
3,586
(1,528)200330-37years
West Stonehill - Waite Park, MN16,425
939
10,167
7,932
1,903
17,135
19,038
(10,848)199530-37years
Whispering Ridge - Omaha, NE20,120
2,139
25,424
1,858
2,459
26,962
29,421
(6,573)201230-37years
Winchester - Rochester, MN
748
5,622
2,676
1,104
7,942
9,046
(3,942)200330-37years
Woodridge - Rochester, MN5,411
370
6,028
4,161
752
9,807
10,559
(5,566)199730-37years
Total Same-Store$309,701
$77,779
$928,945
$159,026
$96,675
$1,069,075
$1,165,750
$(319,456)   
            
Non-Same-Store           
Dylan - Denver, CO$
$12,155
$77,215
$870
$12,217
$78,023
$90,240
$(5,536)201330-37years
FreightYard Townhomes & Flats - Minneapolis, MN
1,889
23,616
124
1,895
23,734
25,629
(289)201930years
Lugano at Cherry Creek - Denver, CO
7,679
87,766
103
7,679
87,869
95,548
(1,075)201930years
Oxbo - St Paul, MN
5,809
51,586
176
5,809
51,755
57,564
(5,096)201530-37years
SouthFork Townhomes - Lakeville, MN21,675
3,502
40,153
2,883
3,502
43,036
46,538
(1,433)201930years
Westend - Denver, CO
25,525
102,180
497
25,525
102,677
128,202
(6,389)199530-37years
Total Non-Same-Store$21,675
$56,559
$382,516
$4,653
$56,627
$387,094
$443,721
$(19,818)   
            
Total Multifamily$331,376
$134,338
$1,311,461
$163,679
$153,302
$1,456,169
$1,609,471
$(339,274)   

2016 Annual Report F-44



Table of Contents

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

December 31, 2019
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

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)

 

 

 

 

 

2016 Annual Report F-45


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

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

      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)

Land
ImprovementsacquisitionLand
ImprovementsTotal
Depreciationor Acquisitioncomputed
Other - Mixed Use  
 
 
 
 
 
 
 
   
71 France - Edina, MN 
$
$5,879
$885
$
$6,764
$6,764
$(873)201630-37years
Lugano at Cherry Creek - Denver, CO 

1,600


1,600
1,600
(18)201930years
Oxbo - St Paul, MN 

3,472
54

3,526
3,526
(315)201530-37years
Plaza - Minot, ND 
389
5,444
3,839
601
9,071
9,672
(3,899)200930-37years
Red 20 - Minneapolis, MN 

2,525
419

2,944
2,944
(541)201530-37years
Total Other - Mixed Use 
$389
$18,920
$5,197
$601
$23,905
$24,506
$(5,646)   
             
Other - Commercial            
3100 10th St SW - Minot, ND 
$246
$1,866
$(1)$246
$1,865
$2,111
$(41)201930years
Dakota West Plaza - Minot , ND 
92
493
37
106
516
622
(202)200630-37years
Minot IPS - Minot, ND 
416
5,952

416
5,952
6,368
(3,959)201230-37years
Total Other - Commercial 
$754
$8,311
$36
$768
$8,333
$9,101
$(4,202)   
             
Subtotal $331,376
$135,481
$1,338,692
$168,912
$154,671
$1,488,407
$1,643,078
$(349,122)   
             
Unimproved Land            
Rapid City - Rapid City, SD 
$1,376


$1,376

$1,376

2014  
Total Unimproved Land 
$1,376

$
$1,376

$1,376

   
             
Total $331,376
$136,857
$1,338,692
$168,912
$156,047
$1,488,407
$1,644,454
$(349,122)   

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 balancesbalance as of April 30, 2016.December 31, 2019. These amounts do not include amounts owing under the Company’sCompany's multi-bank line of credit or under the Company’s constructionterm 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

December 31, 2019
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)


Reconciliations of the carrying value of total property owned for the threeyear ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 2016, 2015,2018 and 20142017 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 EndedTransition Period EndedYear Ended April 30,
  December 31, 2019December 31, 201820182017
Balance at beginning of year $1,627,636
$1,669,764
$1,358,529
$1,369,893
Additions during year     
Multifamily and Other 168,504

369,332
61,565
Improvements and Other 21,868
11,620
15,065
34,761
  1,818,008
1,681,384
1,742,926
1,466,219
Deductions during year   
 
 
Cost of real estate sold (171,112)(53,653)(46,001)(21,601)
Impairment charge 

(15,192)(51,401)
Write down of asset and accumulated depreciation on impaired assets 

(8,597)(7,144)
Properties classified as held for sale during the year 


(24,156)
Other (1)
 (3,819)(95)(3,372)(3,388)
Balance at close of year $1,643,077
$1,627,636
$1,669,764
$1,358,529
Reconciliations of accumulated depreciation/amortization for the threeyear ended December 31, 2019, the transition period ended December 31, 2018, and the fiscal years ended April 30, 2016, 2015,2018 and 2014,2017, 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 EndedTransition Period EndedYear Ended April 30,
  December 31, 2019December 31, 201820182017
Balance at beginning of year $353,871
$311,324
$255,599
$237,859
Additions during year   
 
 
Provisions for depreciation 71,787
49,208
78,785
42,960
Deductions during year   
 
 
Accumulated depreciation on real estate sold or classified as held for sale (72,758)(6,609)(11,033)(14,687)
Write down of asset and accumulated depreciation on impaired assets 

(8,597)(7,144)
Other (1)
 (3,778)(52)(3,430)(3,389)
Balance at close of year $349,122
$353,871
$311,324
$255,599






INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

April 30, 2016

December 31, 2019
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)


Reconciliations of development in progress for the threeyear ended December 31, 2019, the transition period ended December 31, 2018 and the fiscal years ended April 30, 2016, 2015,2018 and 2014,2017, 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

 

  (in thousands)
  Year EndedTransition Period EndedYear Ended April 30,
  December 31, 2019December 31, 201820182017
Balance at beginning of year 


$51,681
Additions during year     
Unimproved land moved to development in progress 



Improvements and other 


7,762
Deductions during year     
Development placed in service (2)
 


(59,443)
Balance at close of year 




INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
December 31, 2019
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

Reconciliations of unimproved land for the threeyear ended December 31, 2019, the transition period ended December 31, 2018 and the fiscal years ended April 30, 2016, 2015,2018 and 2014,2017 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

 

   (in thousands)
  Year EndedTransition Period EndedYear Ended April 30,
  December 31, 2019December 31, 201820182017
Balance at beginning of year $5,301
$11,476
$18,455
$20,939
Additions during year   
 
 
Improvements and other 


1,024
Deductions during year   
 
 
Cost of real estate sold (3,925)(4,954)(1,000)
Impairment charge 
(1,221)(2,617)(3,508)
Properties classified as held for sale during the year 

(3,288)
Unimproved land moved to development in progress 



Other (1)
 

(74)
Balance at close of year 1,376
5,301
11,476
18,455
      
Total real estate investments, excluding mortgage notes receivable (3)
 $1,295,331
$1,279,066
$1,369,916
$1,121,385

(1)

Consists of miscellaneous disposed assets.

(2)

Includes development projects that are placed in service in phases.

(3)

Consists of miscellaneous re-classed assets.

(4)

The net basis, of the Company’s real estate investments, including held for sale properites,properties, for Federal Income Tax purposes was $1.6$1.3 billion $1.7, $1.2 billion, $1.5 billion and $1.5$1.4 billion at December 31, 2019, December 31, 2018, April 30, 2016, 20152018, and 2014,April 30, 2017, respectively.



2016 Annual Report F-51

F-43