CENTERSPACE - Annual Report: 2009 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
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R
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ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended April 30,
2009
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or
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£
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ____________ to
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Commission
File Number 000-14851
Investors
Real Estate Trust
(Exact
name of Registrant as specified in its charter)
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North
Dakota
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45-0311232
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification No.)
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3015
16th Street SW, Suite 100
Minot,
North Dakota 58701
(Address
of principal executive offices)
701-837-4738
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Common
Shares of Beneficial Interest (no par value) - NASDAQ
Global Select Market
Series A
Cumulative Redeemable Preferred Shares of Beneficial Interest (no par value) -
NASDAQ
Global Select Market
Securities
registered pursuant to Section 12(g) of the Act:
None
________________________________
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
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o
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Yes
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þ
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No
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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.
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o
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Yes
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þ
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No
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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.
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þ
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Yes
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o
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No
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2009 Annual Report
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).
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o
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Yes
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o
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No
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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. o
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” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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o Large accelerated
filer
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þ Accelerated
filer
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o Non-accelerated
filer
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o Smaller reporting
Company
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Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
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o
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Yes
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No
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The
aggregate market value of the Registrant’s outstanding common shares of
beneficial interest held by non-affiliates (i.e., by persons other than officers
and trustees of the Registrant as reflected in the table in Item 12 of this Form
10-K, incorporated by reference from the Registrant’s definitive Proxy Statement
for its 2009 Annual Meeting of Shareholders) was $561,436,684 based on the last
reported sale price on the NASDAQ Global Select Market on October 31,
2008.
The
number of common shares of beneficial interest outstanding as of June 30, 2009,
was 63,460,743.
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
2009 Annual Meeting of Shareholders to be held on September 15, 2009 are
incorporated by reference into Part III (Items 10, 11, 12, 13 and 14)
hereof.
2009
Annual Report
INVESTORS
REAL ESTATE TRUST
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PAGE
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PART
I
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5
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10
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20
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21
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31
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31
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PART
II
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31
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33
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34
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55
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56
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56
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56
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58
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PART
III
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58
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58
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58
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58
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59
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PART
IV
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59
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59
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61
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F-1
to F-41
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Special
Note Regarding Forward Looking Statements
Certain
statements included in this Annual Report on Form 10-K and the documents
incorporated into this document by reference are “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Such forward-looking statements include statements
about our 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 term growth; and other
statements preceded by, followed by or otherwise including words such as
“believe,” “expect,” “intend,” “project,” “plan,” “anticipate,” “potential,”
“may,” “will,” “designed,” “estimate,” “should,” “continue” and other similar
expressions. These statements indicate that we have used assumptions that are
subject to a number of risks and uncertainties that could cause our actual
results or performance to differ materially from those projected.
Although
we believe that the expectations reflected in such forward-looking statements
are based on reasonable assumptions, we can give no assurance that these
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the expectations reflected in the
forward-looking statements include:
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the
economic health of the markets in which we own and operate multi-family
and commercial properties, in particular the states of Minnesota and North
Dakota, or other markets in which we may invest in the
future;
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the
economic health of our commercial
tenants;
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market
rental conditions, including occupancy levels and rental rates, for
multi-family residential and commercial
properties;
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our
ability to identify and secure additional multi-family residential and
commercial properties that meet our criteria for
investment;
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the
level and volatility of prevailing market interest rates and the pricing
of our common shares of beneficial
interest;
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financing
risks, such as our inability to obtain debt or equity financing on
favorable terms, or at all;
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compliance
with applicable laws, including those concerning the environment and
access by persons with disabilities;
and
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the
availability and cost of casualty insurance for
losses.
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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.
PART
I
Overview
Investors
Real Estate Trust (“IRET” or the “Company”) is a self-advised equity Real Estate
Investment Trust (“REIT”) organized under the laws of North Dakota. Since our
formation in 1970, our business has consisted of owning and operating
income-producing real estate properties. We are structured as an Umbrella
Partnership Real Estate Investment Trust or UPREIT and we conduct our day-to-day
business operations through our operating partnership, IRET Properties, a North
Dakota Limited Partnership (“IRET Properties” or the “Operating Partnership”).
Our investments consist of multi-family residential properties and commercial
office, medical, industrial and retail properties. These properties are located
primarily in the upper Midwest states of Minnesota and North Dakota. For the
twelve months ended April 30, 2009, our real estate investments in these two
states accounted for 68.5% of our total gross revenue. Our principal executive
offices are located in Minot, North Dakota. We also have an office in
Minneapolis, Minnesota, and property management offices in Omaha, Nebraska;
Kansas City, Kansas; St. Louis, Missouri and Jamestown, North
Dakota.
We seek
to diversify our investments among multi-family residential and office, medical,
industrial and retail properties. As of April 30, 2009, our real estate
portfolio consisted of:
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77
multi-family residential properties, containing 9,645 apartment units and
having a total real estate investment amount net of accumulated
depreciation of $426.8 million;
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67
office properties containing approximately 5.0 million square feet of
leasable space and having a total real estate investment amount net of
accumulated depreciation of $498.6
million;
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49
medical properties (including senior housing) containing approximately 2.3
million square feet of leasable space and having a total real estate
investment amount net of accumulated depreciation of $345.9
million;
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18
industrial properties containing approximately 2.9 million square feet of
leasable space and having a total real estate investment amount net of
accumulated depreciation of $95.2 million;
and
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33
retail properties containing approximately 1.5 million square feet of
leasable space and having a total real estate investment amount net of
accumulated depreciation of $100.2
million.
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Our
residential 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, 2009, no single tenant accounted for more than 10% of our total rental
revenues.
Structure
We were
organized as a REIT under the laws of North Dakota on July 31,
1970.
Since our
formation, we have operated as a REIT under Sections 856-858 of the Internal
Revenue Code of 1986, as amended (the “Code”), and since February 1, 1997, we
have been structured as an UPREIT. Since restructuring as an UPREIT, we have
conducted all of our daily business operations through IRET Properties. IRET
Properties is organized under the laws of North Dakota pursuant to an Agreement
of Limited Partnership dated January 31, 1997. IRET Properties is principally
engaged in acquiring, owning, operating and leasing multi-family residential and
commercial real estate. The sole general partner of IRET Properties is IRET,
Inc., a North Dakota corporation and our wholly-owned subsidiary. All of our
assets (except for qualified REIT subsidiaries) and liabilities were contributed
to IRET Properties, through IRET, Inc., in exchange for the sole general
partnership interest in IRET Properties. As of April 30, 2009, IRET, Inc. owned
a 74.3% interest in IRET Properties. The remaining ownership of IRET Properties
is held by individual limited partners.
Investment
Strategy and Policies
Our
business objective is to increase shareholder value by employing a disciplined
investment strategy. This strategy is focused on growing assets in desired
geographical markets, achieving diversification by property type and location,
and adhering to targeted returns in acquiring properties.
We
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 properties in exchange for our common shares of beneficial interest
(“common shares”) or for limited partnership units of IRET Properties (“limited
partnership units” or “UPREIT 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 is to invest in multi-family residential properties, and in
office, medical, industrial and retail commercial properties that are leased to
single or multiple tenants, usually for five years or longer, and are located
throughout the upper Midwest. We operate mainly within the states of North
Dakota and Minnesota, although we also have real estate investments in South
Dakota, Montana, Nebraska, Colorado, Idaho, Iowa, Kansas, Michigan, Missouri,
Texas and Wisconsin.
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 engaged in 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 multi-family residential
properties and/or commercial properties in 13 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 Minnesota, North Dakota,
Nebraska, Iowa, Colorado, Montana, South Dakota, and Kansas. Similarly, we may
invest in any type of real estate or interest in real estate including, but not
limited to, office buildings, apartment buildings, shopping centers, industrial
and commercial properties, special purpose buildings and undeveloped acreage.
Under our Third Restated Trustees’ Regulations (Bylaws), however, we may not
invest more than 10.0% of our total assets in unimproved real estate, excluding
property being developed or property where development will be commenced within
one year.
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. During the holding period, it is our
policy to seek current income 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; provided, however, that except for
loans insured or guaranteed by a government or a governmental agency, we may not
invest in or make a mortgage loan unless an appraisal is obtained concerning the
value of the underlying property. 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. As of April 30, 2008 and 2009, we had
no junior mortgages outstanding. We had two contracts for deed
outstanding as of April 30, 2008, with a combined balance of
approximately
$541,000, net of reserves, due to us. We had one contract for deed outstanding
as of April 30, 2009, with a balance of approximately $160,000, net of reserves,
due to us.
Our
policies relating to mortgage loans, including second mortgages, may be changed
by our Board of Trustees at any time, or from time to time, without notice to,
or a vote of, our shareholders.
Policies
With Respect to Certain of Our Activities
Our
current policies as they pertain to certain of our activities are described as
follows:
Cash distributions to shareholders
and holders of limited partnership units. One of the requirements of the
Internal Revenue Code of 1986, as amended, 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. We intend to continue our policy of
making 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. We have increased
our cash distributions every year since our inception 39 years ago and every
quarter since 1988.
Issuing senior securities. On
April 26, 2004, we issued 1,150,000 shares of 8.25% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest (the “Series A preferred
shares”). Depending on future interest rate 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 on
borrowed funds in pursuing our investment objectives and goals. It is generally
our policy to seek to borrow up to 65.0% to 75.0% of the appraised value of all
new real estate acquired or developed. This policy concerning borrowed funds is
vested solely with our Board of Trustees and can be changed by our Board of
Trustees at any time, or from time to time, without notice to, or a vote of, our
shareholders. Such policy is subject, however, to the limitation in our Bylaws,
which provides that unless approved by a majority of the independent members of
our Board of Trustees and disclosed to our shareholders in our next quarterly
report along with justification for such excess, we may not borrow in excess of
300.0% of our total Net Assets (as such term is used in our Bylaws, which usage
is not in accordance with 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. As of April 30, 2009, our
ratio of total real estate mortgages to total real estate assets was 72.7% while
our ratio of total indebtedness as compared to our Net Assets (computed in
accordance with our Bylaws) was 141.8%.
Offering securities in exchange for
property. Our organizational structure allows us to issue shares and to
offer limited partnership units of IRET Properties in exchange for real estate.
The limited partnership units are convertible into cash, or, at our option,
common shares on a one-for-one basis after a minimum one-year holding period.
All limited partnership units receive the same cash distributions as those paid
on common shares. Limited partners are not entitled to vote on any matters
affecting us until they convert their limited partnership units to common
shares.
Our
Articles of Amendment and Third Restated 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 recent fiscal years ended April 30, we have issued the following
limited partnership units of IRET Properties in exchange for
properties:
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(in
thousands)
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2009
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2008
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2007
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Limited
partnership units issued
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362 | 2,309 | 6,705 | |||||||||
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Value
at issuance
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$ | 3,730 | $ | 22,931 | $ | 62,427 | ||||||
Acquiring or repurchasing shares.
As a REIT, it is our intention to invest only in real estate assets. Our
Articles of Amendment and Third Restated Declaration of Trust does not prohibit
the acquisition or repurchase 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 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 time to time, without notice
to, or a vote of, our shareholders.
During
fiscal year 2009, we did not repurchase any of our outstanding common shares,
preferred shares or limited partnership units, except for the redemption of a
nominal amount of fractional common shares held by shareholders, upon request,
and except for the redemption for cash of 15,758 limited partnership units from
a limited partner of the Operating Partnership.
To make 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. Our mortgage loans receivables (including contracts for deed), net
of reserves, totaled approximately $160,000 as of April 30, 2009, and $541,000
as of April 30, 2008.
To invest in the securities of other
issuers for the purpose of exercising control. We have not, for the
past three years, engaged in, and we are not currently engaging in, investment
in the securities of other issuers for the purpose of exercising control. Our
Articles of Amendment and Third Restated Declaration of Trust does not impose
any limitation on our ability to invest in the securities of other issuers for
the purpose of exercising control. Any decision to do so is vested solely in our
Board of Trustees and may be changed at any time, or from time to time, without
notice to, or a vote of, our shareholders.
Information
about Segments
We
currently operate in five reportable real estate segments: multi-family
residential, office, medical (including senior housing), industrial and retail.
For further information on these segments and other related information, see
Note 11 of our consolidated financial statements, and Management’s Discussion
and Analysis of Financial Condition and Results of Operations in Item 7 of this
Annual Report on Form 10-K.
Our
Executive Officers
Set forth
below are the names, ages, titles and biographies of each of our executive
officers as of July 1, 2009.
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Name
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Age
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Title
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Thomas
A. Wentz, Sr.
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73
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President
and Chief Executive Officer
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Timothy
P. Mihalick
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50
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Senior
Vice President and Chief Operating Officer
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Thomas
A. Wentz, Jr.
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43
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Senior
Vice President
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Diane
K. Bryantt
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45
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Senior
Vice President and Chief Financial Officer
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Michael
A. Bosh
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38
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Secretary
and General Counsel
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Thomas A. Wentz, Sr. is a
graduate of Harvard College and Harvard Law School, and has been associated with
us since our formation on July 31, 1970. Mr. Wentz was a member of our Board of
Trustees from 1970 to 1998, Secretary from 1970 to 1987, Vice President from
1987 to July 2000, and has been President and Chief Executive Officer since July
2000. Previously, from 1985 to 1991, Mr. Wentz was a Vice President of our
former advisor, Odell-Wentz & Associates, L.L.C., and, until August 1, 1998,
was a partner in the law firm of Pringle & Herigstad, P.C.
Timothy P. Mihalick joined us
as a financial officer in May 1981, after graduating from Minot State
University. He has served in various capacities with us over the years and was
named Vice President in 1992. Mr. Mihalick has served as the Chief Operating
Officer since 1997, as a Senior Vice President since 2002, and as a member of
our Board of Trustees since 1999.
Thomas A. Wentz, Jr. is a
graduate of Harvard College and the University of North Dakota School of Law,
and joined us as General Counsel and Vice President in January 2000. He has
served as a Senior Vice President of Asset Management and Finance since 2002 and
as a member of our Board of Trustees since 1996. Prior to 2000, Mr. Wentz was a
shareholder in the law firm of Pringle & Herigstad, P.C. from 1992 to 1999.
Mr. Wentz is a member of the American Bar Association and the North Dakota Bar
Association, and he is a Director of SRT Communications, Inc. Mr. Wentz is the
son of Thomas A. Wentz, Sr.
Diane K. Bryantt is a
graduate of Minot State University, joined us in June 1996, and served as our
Controller and Corporate Secretary before being appointed to the positions of
Senior Vice President and Chief Financial Officer in 2002. Prior to joining us,
Ms. Bryantt was employed by First American Bank, Minot, North
Dakota.
Michael A. Bosh joined us as
Associate General Counsel and Secretary in September 2002, and was named General
Counsel in September 2003. Prior to 2002, Mr. Bosh was a shareholder in the law
firm of Pringle & Herigstad, P.C. Mr. Bosh graduated from Jamestown College
in 1992 and from Washington & Lee University School of Law in 1995. Mr. Bosh
is a member of the American Bar Association and the North Dakota Bar
Association.
Employees
As of
April 30, 2009, we had 81 employees.
Environmental
Matters and Government Regulation
Under
various federal, state and local laws, ordinances and regulations relating to
the protection 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 or personal
injuries and for investigation and clean-up costs incurred in connection with
any contamination. In addition, some environmental laws create a lien on a
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. These laws often impose liability without
regard to whether the current owner was responsible for, or even knew of, the
presence of such substances. It is generally our policy to obtain from
independent environmental consultants a “Phase I” environmental audit (which
involves visual inspection but not soil or groundwater analysis) on all
properties that we seek to acquire. We do not believe that any of our properties
are subject to any material environmental contamination. However, no assurances
can be given that:
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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
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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.
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In
addition to laws and regulations relating to the protection of the environment,
many other laws and governmental regulations are applicable to our properties,
and changes in the laws and regulations, or in their interpretation by agencies
and the courts, occur frequently. Under the Americans with Disabilities Act of
1990 (the “ADA”), all places of public accommodation are required to meet
certain federal requirements related to access and use by disabled persons. In
addition, the Fair Housing Amendments Act of 1988 (the “FHAA”) requires
apartment communities first occupied after March 13, 1990, to be accessible to
the handicapped. Non-compliance with the ADA or the FHAA could result in the
imposition of fines or an award of damages to private litigants. We believe that
those of our properties to which the ADA and/or FHAA apply are substantially in
compliance with present ADA and FHAA requirements.
Competition
Investing
in and operating real estate is a very competitive business. We compete with
other owners and developers of multi-family 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. Our multi-family properties
compete directly with other rental apartments, as well as with 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 properties for tenants. Additionally, we compete with other real
estate investors, including other REITs, pension and investment funds,
partnerships and investment companies, to acquire properties. This competition
affects our ability to acquire properties we want to add to our portfolio and
the price we pay in acquisitions. We do not believe we have a dominant position
in any of the geographic markets in which we operate, but some of our
competitors are 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
The
Company’s Board of Trustees has adopted various policies and initiatives to
strengthen the Company’s corporate governance and increase the transparency of
financial reporting. Each of the committees of the Company’s Board of
Trustees operates under written charters, and the Company’s independent trustees
meet regularly in executive sessions at which only the independent trustees are
present. The Board of Trustees has also adopted a Code of Conduct
applicable to trustees, officers and employees, and a Code of Ethics for Senior
Financial Officers, and has established processes for shareholder communications
with the Board of Trustees.
Additionally,
the Company’s 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 Company 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 the Company
by the Company’s independent registered public accounting firm.
The
Company will disclose any amendment to its Code of Ethics for Senior Financial
officers on its website. In the event the Company waives compliance by any of
its trustees or officers subject to the Code of Ethics or Code of Conduct, the
Company 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” tab under the Investors/Financial Reporting section of our
website, our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our
current reports on Form 8-K, 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 forms 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 Committees of our
Board of Trustees are also available on our website under the heading “Corporate
Governance” in the Investors/Corporate Profile 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 internet website does not constitute part of this
Annual Report on Form 10-K.
Risks
Related to Our Properties and Business
Our performance and share value are
subject to risks associated with the real estate industry. 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. These risks include, but are not limited to, the
following factors which, among others, may adversely affect the income generated
by our properties:
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downturns
in national, regional and local economic conditions (particularly
increases in unemployment);
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competition
from other commercial and multi-family residential
properties;
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local
real estate market conditions, such as oversupply or reduction in demand
for commercial and multi-family residential
space;
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changes
in interest rates and availability of attractive
financing;
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declines
in the economic health and financial condition of our tenants and our
ability to collect rents from our
tenants;
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vacancies,
changes in market rental rates and the need periodically to repair,
renovate and re-lease space;
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increased
operating costs, including real estate taxes, state and local taxes,
insurance expense, utilities, and security
costs;
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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;
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weather
conditions, civil disturbances, natural disasters, or terrorist acts or
acts of war which may result in uninsured or underinsured
losses; and
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decreases
in the underlying value of our real
estate.
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Adverse global market and economic
conditions may continue to adversely affect us and could cause us to recognize
additional impairment charges or otherwise harm our
performance. Recent market and economic conditions have been
challenging with tighter credit conditions through the end of 2008 and
continuing in 2009. Continued concerns about the availability and
cost of credit, the U.S. mortgage market, inflation, unemployment levels,
geopolitical issues and declining equity and real estate markets have
contributed to increased market volatility and diminished expectations for the
U.S. economy. The commercial real estate sector in particular has been
negatively affected by these recent market and economic conditions. These
conditions may result in our tenants delaying lease commencements, requesting
rent reductions, declining to extend or renew leases upon expiration and/or
renewing at lower rates. These conditions also have forced some weaker tenants,
in some cases, to declare bankruptcy and/or vacate leased premises. We may be
unable to re-lease vacated space at attractive rents or at all. We
are unable to predict whether, or to what extent or for how long, these adverse
market and economic conditions will persist. The continuation and/or
intensification of these conditions may impede our ability to generate
sufficient operating cash flow to pay expenses, maintain properties, pay
distributions and repay debt.
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 the majority of
our multi-family residential 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. Since 2007,
Fannie Mae and Freddie Mac have reported substantial losses and a need for
substantial amounts of additional capital. In response to the deteriorating
financial condition of Fannie Mae and Freddie Mac and the recent credit market
disruptions, Congress and the U.S. Treasury have undertaken a series of actions
to stabilize these GSEs and the financial markets generally. 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 have 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 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 multi-family residential mortgage
market. The effect of the actions taken by the U.S. Government
remains uncertain, and the scope and nature of the actions that the U.S.
Government will ultimately undertake are unknown and will continue to evolve.
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 multi-family
residential 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.
Our property acquisition activities
subject us to various risks which could adversely affect our operating results.
We have acquired in the past and intend to continue to pursue the
acquisition of properties and portfolios of properties, including large
portfolios that could increase our size and result in alterations to our capital
structure. Our acquisition activities and their success are subject to numerous
risks, including, but not limited to:
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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;
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we
may be unable to obtain financing for acquisitions on favorable terms or
at all;
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acquired
properties may fail to perform as
expected;
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the
actual costs of repositioning or redeveloping acquired properties may be
greater than our estimates; and
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we
may be unable quickly and efficiently to integrate new acquisitions into
our existing operations.
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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 properties may subject us
to unknown liabilities which could adversely affect our operating results.
We may acquire properties subject to liabilities and without any
recourse, or with only limited recourse against prior owners or other third
parties, with respect to unknown liabilities. As a result, if
liability were asserted against us based upon ownership of these properties, we
might have to pay substantial sums to settle or contest it, which could
adversely affect our results of operations 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 in losses due to our significant
exposure to the effects of economic and real estate conditions in those
markets. For the fiscal year ended April 30, 2009, we received
approximately 68.5% 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 enter into new leases on favorable terms or at all as our existing leases
expire, our revenue, operating results and cash flows will be
reduced. We may be unable to renew leases with our existing
tenants or enter into new leases with new tenants due to economic and other
factors as our existing leases expire or are terminated prior to the expiration
of their current terms. As a result, we could lose a significant
source of revenue while remaining responsible for the payment of our
obligations. In addition, even if we were able to renew existing
leases or enter into new leases 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 renewal 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
leases on favorable 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, 2009, approximately 1.1 million square feet,
or 9.0% of our total commercial property square footage, was vacant.
Approximately 688 of our 9,645 apartment units, or 7.1%, were vacant. As of
April 30, 2009, leases covering approximately 7.8% of our total commercial
segments net rentable square footage will expire in fiscal year 2010, 18.1% in
fiscal year 2011, 11.7% in fiscal year 2012, 7.3% in fiscal year 2013, and 6.9%
in fiscal year 2014.
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 partially or wholly terminate the lease in
advance of the termination date in consideration for a lease
termination
fee that is less than 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 improvements and leasing commissions in
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 vary our portfolio quickly in response to 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. 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.
Inability to manage rapid growth
effectively may adversely affect our operating results. We have
experienced significant growth at various times in the past; for example, we
increased our total assets from approximately $1.4 billion at April 30, 2007, to
$1.6 billion at April 30, 2009, principally through the acquisition of
additional real estate properties. Subject to our continued 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:
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the
need to expand our management team and
staff;
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the
need to enhance internal operating systems and
controls;
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increased
reliance on outside advisors and property managers;
and
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the
ability to consistently achieve targeted returns on individual
properties.
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We may
not be able to maintain similar rates of growth in the future, or manage our
growth effectively. 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 our properties and the cost of required renovations or tenant
improvements. With respect to acquisition and development investment
opportunities, this competition may 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.
An inability to make accretive
property acquisitions may adversely affect our ability to increase our
net income. From our fiscal year ended April 30, 2006, to our fiscal year
ended April 30, 2009, our net income decreased from $11.6 million to $8.5
million. 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.
High leverage on our overall
portfolio may result in losses. As of April 30, 2009, our ratio of total
indebtedness to total Net Assets (as that term is used in our Bylaws, which
usage is not in accordance with GAAP, “Net Assets” means our total assets at
cost before deducting depreciation or other non-cash reserves, less total
liabilities) was approximately 141.8%. As of April 30, 2008 and 2007, our
percentage of total indebtedness to total Net Assets was approximately 143.8%
and 149.6%, respectively. Under our Bylaws we may increase our total
indebtedness up to
300.0% of
our Net Assets, or by an additional approximately $1.2 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 loss or be unable to make
distributions to the holders 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 leverage
could adversely affect our ability to obtain additional financing and may have
an adverse effect on the market price of our common shares.
Our inability to renew, repay or
refinance our debt may result in losses. We incur a significant amount of
debt in the ordinary course of our business and in connection with acquisitions
of real properties. In addition, 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 debt
financing, including the risk that:
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our
cash flow will be insufficient to meet required payments of principal and
interest;
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we
will not be able to renew, refinance or repay our indebtedness when due;
and
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the
terms of any renewal or refinancing will be less favorable than the terms
of our current indebtedness.
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These
risks increase when credit markets are tight, as they are now; 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. Therefore, we are likely to 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, the mortgagee could foreclose upon the
property, appoint a receiver and receive an assignment of rents and leases or
pursue other remedies, all with a consequent loss of our 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, 2009, approximately 13.1% of our mortgage debt is due for repayment in
fiscal year 2010. As of April 30, 2009, we had approximately $140.5
million of principal payments and approximately $63.9 million of interest
payments due in fiscal year 2010 on fixed and variable-rate mortgages secured by
our real estate.
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,
2009, $9.6 million, or approximately 0.9%, of the principal amount of our total
mortgage indebtedness was subject to variable interest rate
agreements. 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. We depend on distributions and other payments
from our subsidiaries that they may be prohibited from making to us, which could
impair our ability to make distributions to holders of our shares of beneficial
interest. Substantially all of our assets are held through IRET
Properties, our operating partnership, and other of our subsidiaries. As a
result,
we depend on distributions and other payments from our subsidiaries in order to
satisfy our financial obligations and make distributions to the holders of our
shares of beneficial interest. The ability of our subsidiaries to
make such distributions and other payments depends on their earnings, and may be
subject to statutory or contractual limitations. As an equity
investor in our subsidiaries, our right to receive assets upon their liquidation
or reorganization effectively will be subordinated to the claims of their
creditors. To the extent that we are recognized as a creditor of such
subsidiaries, our claims may still be subordinate to any security interest in or
other lien on their assets and to any of their debt or other obligations that
are senior to our claims.
Our current or future insurance may
not protect us against possible losses. We carry comprehensive liability,
fire, extended coverage and rental loss 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, this 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 do not currently carry insurance against losses as a
result of environmental contamination. Should an uninsured or underinsured loss
occur to a property, we could be required to use our own funds for restoration
or lose all or part of our investment in, and anticipated revenues from, the
property. 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. Any
material increase in insurance rates or decrease in available coverage in the
future could adversely affect our business and financial condition and results
of operations, which could cause a decline in the market value of our
securities.
We have significant investments in
medical properties and adverse trends in healthcare provider operations may
negatively affect our lease revenues from these properties. We have
acquired a significant number of specialty medical properties (including senior
housing) and may acquire more in the future. As of April 30, 2009, our real
estate portfolio consisted of 49 medical properties, with a total real estate
investment amount, net of accumulated depreciation, of $345.9 million, or
approximately 23.6% of the total real estate investment amount, net of
accumulated depreciation, of our entire real estate portfolio. The
healthcare industry is currently experiencing changes in the demand for, and
methods of delivery of, healthcare services; changes in third-party
reimbursement policies; significant unused capacity in certain areas, which has
created substantial competition for patients among healthcare providers in those
areas; continuing pressure by private and governmental payors to reduce payments
to providers of services; and increased scrutiny of billing, referral and other
practices by federal and state authorities. Sources of revenue for our medical
property tenants may include the federal Medicare program, state Medicaid
programs, private insurance carriers and health maintenance organizations, among
others. Efforts by such payors to reduce healthcare costs will likely continue,
which may result in reductions or slower growth in reimbursement for certain
services provided by some of our tenants. These factors may adversely
affect the economic performance of some or all of our medical services tenants
and, in turn, our lease revenues. The American Reinvestment and
Recovery Act of 2009, which was signed into law on February 17, 2009,
provides $87 billion in additional federal Medicaid funding for states’
Medicaid expenditures between October 1, 2008 and December 31, 2010.
Under this Act, states meeting certain eligibility requirements will temporarily
receive additional money in the form of an increase in the federal medical
assistance percentage (FMAP). Thus, for a limited period of time, the share of
Medicaid costs that are paid for by the federal government will go up, and each
state’s share will go down. We cannot predict whether states are, or will
remain, eligible to receive the additional federal Medicaid funding, or whether
the states will have sufficient funds for their Medicaid programs. We also
cannot predict the impact that this broad-based, far-reaching legislation will
have on the U.S. economy or our business. In addition, if we or our tenants
terminate the leases for these properties, or our tenants lose their regulatory
authority to operate such properties, we may not be able to locate suitable
replacement tenants to lease the properties for their specialized uses.
Alternatively, we 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 hinder our ability to make
distributions to the holders of our shares of beneficial interest.
Adverse
changes in applicable laws may affect our potential liabilities relating to our properties and
operations. Increases in real estate taxes 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, future
enactment of rent control or rent stabilization laws or other laws regulating
multi-family residential properties may reduce rental revenues or increase
operating costs.
Complying with laws benefiting
disabled persons or other safety regulations and requirements may affect our
costs and investment
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. Additionally, 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 authorities or the award of
damages to private litigants. The costs 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. This 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 due 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 flow
and results of operations.
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 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 finding of liability for an environmental condition as to any one or
more properties 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.
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
asbestos or air quality remediation programs could be costly, necessitate the
temporary relocation of some or all of the property’s tenants 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 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 specialized business segments in which we operate, and the
loss of them would likely have a material adverse effect on our operations, and
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, our business and prospects could be
harmed. The location of our company headquarters in Minot, North
Dakota, may make it more difficult and expensive to attract, relocate and retain
current and future officers and employees.
Failure to comply with changing
regulation of corporate governance and public disclosure could have a material
adverse effect on our business, operating results and stock price, and
continuing compliance will result in additional expenses. The
Sarbanes-Oxley Act of 2002, as well as new rules and standards subsequently
implemented by the Securities and Exchange Commission and NASDAQ, have required
changes in some of our corporate governance and accounting practices, and are
creating uncertainty for us and many other public companies, due to varying
interpretations of the rules and their evolving application in
practice. We expect these laws, rules and regulations to increase our
legal and financial compliance costs, and to subject us to additional
risks. In particular, if we fail to maintain the adequacy of our
internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of
2002, as such standards may be modified, supplemented or amended from time to
time, a material misstatement could go undetected, and we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting. Failure to maintain an effective
internal control environment could have a material adverse effect on our
business, operating results, and stock price. Additionally, our
efforts to comply with Section 404 of the Sarbanes-Oxley Act and the related
regulations have required, and we believe will continue to require, the
commitment of significant financial and managerial resources.
Risks
Related to Our Structure and Organization
We may incur tax liabilities as a
consequence of failing to qualify as a REIT. Although our management
believes that we are organized and have operated and are operating in such a
manner to qualify as a “real estate investment trust,” as that term is defined
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.
Qualification as a REIT involves the application of highly technical and complex
Internal Revenue Code provisions 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 percent 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, excluding net capital
gains. 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, if IRET Properties, our operating partnership, 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, 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, new 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 failed 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, which would likely 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 could
be subject to increased state and local taxes, and, unless entitled to relief
under applicable statutory provisions, we would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
we lost our qualification. This treatment would reduce funds available for
investment or distributions to the holders of our securities because of the
additional tax liability to us for the year or years involved. In addition, we
would no longer be able to deduct, and would not be required to make,
distributions to holders of our securities. 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 Articles
of Amendment and Third Restated Declaration of Trust may limit a change in control and deter a
takeover. In order to maintain our qualification as a REIT, our Third
Restated Declaration of Trust provides that any transaction, other than a
transaction entered into through the NASDAQ National Market, (renamed the NASDAQ
Global 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.
Complying with REIT requirements may
force us to forego 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 asses not withstanding
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 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 the 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 IRS describing each asset that caused the failure, and (d) we pay an
additional tax of the greater of $50,000 or the product of 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 liquidate or forego otherwise attractive
investments. These actions could have the effect of reducing 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. Even if
we qualify for taxation as a REIT, 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 a 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. In addition, in order
to meet the REIT qualification requirements, or to avert the imposition of a
100% tax that applies to certain gains derived by a REIT from dealer property or
inventory, we may in the future hold some of our assets through a taxable REIT
subsidiary.
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 be successful in operating so we can continue to qualify as a
REIT. At any time, new laws, interpretations, or court decisions may
change the federal tax laws or the U.S. federal income tax consequences of our
qualification as a REIT.
Our board of trustees may make
changes to our major policies without approval of the holders of our shares of
beneficial interest. Our operating and financial policies, including
policies relating to development and acquisition of real estate, financing,
growth, operations, indebtedness, capitalization and distributions, are
exclusively determined by our board of trustees. Our board of trustees may amend
or revoke those policies, and other policies, without advance notice to, or the
approval of, the holders of our shares of beneficial
interest. Accordingly, our shareholders do not control these
policies, and policy changes could adversely affect our financial condition and
results of operations.
Risks
Related to the Purchase of our Shares of Beneficial Interest
Our future growth depends, in part,
on our ability to raise additional equity capital, which will have the
effect of diluting the interests of the holders 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, and of limited partnership units for which
we subsequently issue common shares upon the redemption of the limited
partnership units, will dilute the interests of the current holders of our
common shares. Additionally, sales of substantial amounts of our
common shares or preferred shares in the public market, or issuances of our
common shares upon redemption of limited partnership units in our operating
partnership, 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 beneficial interest with rights and preferences
that are superior to the rights and preferences 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 not guaranteed.
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:
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|
•
|
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.
|
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 prior to 2010 has
been reduced to a maximum rate of 15%. 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 which, currently, are as
high as 35%. 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 our securities. 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 and
any other securities to be issued in the future. These conditions include, but
are not limited to:
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•
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market
perception of REITs in general;
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•
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market
perception of REITs relative to other investment
opportunities;
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•
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market
perception of our financial condition, performance, distributions and
growth potential;
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•
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prevailing
interest rates;
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•
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general
economic and business conditions;
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•
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government
action or regulation, including changes in the tax laws;
and
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•
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relatively
low trading volumes in securities of
REITS.
|
Higher market interest rates may
adversely affect the market price of our securities, and low trading volume on
the NASDAQ Global Select Market may prevent the timely resale of our securities. One
of the factors that investors may consider important in deciding whether to buy
or sell shares of a REIT is the distribution with respect to such REIT’s shares
as a percentage of the price of those shares, relative to market interest
rates. If market interest rates rise, prospective purchasers of REIT
shares may expect a higher distribution rate in order to maintain their
investment. Higher market interest rates would likely increase our
borrowing costs and might decrease funds available for
distribution. Thus, higher market interest rates could cause the
market price of our common shares to decline. In addition, although
our common shares of beneficial interest are listed on the NASDAQ Global Select
Market, 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, 2008, through April 30, 2009, was 243,304 shares and the
average monthly trading volume for the period of May 1, 2008 through April 30,
2009 was 5,105,451 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.
None.
IRET is
organized as a REIT under Section 856-858 of the Code, and is in the business 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.
Certain
financial information from fiscal 2008 and 2007 was adjusted to reflect the
effects of discontinued operations. See the Property Dispositions section in
Item 7, Management’s Discussion and Analysis of Financial Condition and Results
of Operations, and the discussion in Note 12 to our Consolidated Financial
Statements.
Total
Real Estate Rental Revenue
As of
April 30, 2009, our real estate portfolio consisted of 77 multi-family
residential properties and 167 commercial properties, consisting of office,
medical, industrial and retail properties, comprising 29.1%, 34.0%, 23.6%, 6.5%,
and 6.8%, 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, 2009. 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:
|
Fiscal
Year Ended April 30,
(in
thousands)
|
Multi-Family
Residential
Gross
Revenue
|
%
|
Commercial
Office Gross Revenue
|
%
|
Commercial
Medical Gross Revenue
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%
|
Commercial
Industrial Gross Revenue
|
%
|
Commercial
Retail Gross Revenue
|
%
|
Total
Revenue
|
|||||||||||||||||||||||||||||||||
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2009
|
$ | 76,716 | 31.9 | % | $ | 83,446 | 34.8 | % | $ | 52,564 | 21.9 | % | $ | 12,711 | 5.3 | % | $ | 14,568 | 6.1 | % | $ | 240,005 | ||||||||||||||||||||||
|
2008
|
$ | 72,827 | 32.9 | % | $ | 84,042 | 38.0 | % | $ | 38,412 | 17.4 | % | $ | 11,691 | 5.3 | % | $ | 14,198 | 6.4 | % | $ | 221,170 | ||||||||||||||||||||||
|
2007
|
$ | 66,972 | 33.9 | % | $ | 73,603 | 37.3 | % | $ | 34,783 | 17.6 | % | $ | 8,091 | 4.1 | % | $ | 14,089 | 7.1 | % | $ | 197,538 | ||||||||||||||||||||||
Economic
Occupancy Rates
Economic
occupancy levels on a stabilized property and all-property basis are shown below
for each property type in each of the three most recent fiscal years ended April
30. Economic occupancy represents actual rental revenues recognized for the
period indicated as a percentage of scheduled rental revenues for the
period. Percentage rents, tenant concessions, straightline
adjustments and expense reimbursements are not considered in computing either
actual revenues or scheduled rent revenues. Scheduled rent revenue is
determined by valuing occupied units or square footage at contract rates and
vacant units or square footage at market rates. Stabilized properties are those
properties owned for the entirety of both periods being
compared. While results presented on a stabilized property basis are
not determined in accordance with GAAP, management believes that measuring
performance on a stabilized property basis is useful to investors and to
management because it enables evaluation of how the Company’s properties are
performing year over year. In the case of multi-family residential properties,
lease arrangements with individual tenants vary from month-to-month to one-year
leases. Leases on commercial properties generally vary from month-to-month to 20
years.
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Segments
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Stabilized
Properties
|
All
Properties
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||||||||||||||||||||||
|
Fiscal
Year Ended April 30,
|
Fiscal
Year Ended April 30,
|
|||||||||||||||||||||||
|
2009
|
2008
|
2007
|
2009
|
2008
|
2007
|
|||||||||||||||||||
|
Multi
- Family Residential
|
93.9 | % | 93.4 | % | 93.2 | % | 93.5 | % | 92.7 | % | 93.2 | % | ||||||||||||
|
Commercial
- Office
|
88.9 | % | 92.1 | % | 90.8 | % | 89.1 | % | 92.1 | % | 91.9 | % | ||||||||||||
|
Commercial
- Medical
|
96.0 | % | 95.6 | % | 96.7 | % | 95.7 | % | 95.8 | % | 96.7 | % | ||||||||||||
|
Commercial
- Industrial
|
97.3 | % | 96.8 | % | 94.8 | % | 97.8 | % | 96.3 | % | 95.1 | % | ||||||||||||
|
Commercial
- Retail
|
87.1 | % | 87.4 | % | 89.3 | % | 87.1 | % | 87.4 | % | 89.6 | % | ||||||||||||
Certain
Lending Requirements
In
certain instances, in connection with the acquisition 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-owned subsidiary corporations, and IRET Properties
has organized several limited partnerships, 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.
Management
and Leasing of Our Real Estate Assets
We
conduct our operations from offices in Minot, North Dakota and Minneapolis,
Minnesota. We also have property management offices in Omaha,
Nebraska; Kansas City, Kansas; St. Louis, Missouri and Jamestown,
North Dakota. The day-to-day management of our commercial properties is carried
out by our own employees and by third-party property management companies. The
management and leasing of our multi-family residential properties are generally
handled by locally-based, third-party 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 utilize third-party
professional management companies for day-to-day management. However,
all decisions relating to purchase, sale, insurance coverage, 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. As of April 30, 2009, we have under
internal management 103 commercial properties. Our remaining 64
commercial properties are managed by third parties. We also
internally manage two of our multi-family residential properties. We
plan to continue evaluating our portfolio to identify other commercial
properties and multi-family properties that may be candidates for management by
our own employees.
As of
April 30, 2009, we had property management contracts and/or leasing agreements
with the following companies:
|
Residential
Management
|
Commercial
Management and Leasing
|
|
• Builder’s
Management & Investment Co., Inc.
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• A
& L Management Services, LLC
|
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• ConAm
Management Corporation
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• AJB,
Inc. dba Points West Realty Management
|
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• Investors
Management & Marketing, Inc.
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• Balke
Brown Associates, Inc.
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• Illies Nohava Heinen Property
Management, Inc.
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• Bayport
Properties US, Inc.
|
|
• Kahler
Property Management
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• BTO
Development Corporation
|
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• Paramark
Corp.
|
• CB
Richard Ellis, Inc.
|
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• Cushman
& Wakefield of Minnesota, Inc.
|
|
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• Dakota
Commercial and Development Co.
|
|
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• Davis
Real Estate Services Group
|
|
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• DESCO
Commercial, LLC., dba NAI Desco
|
|
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• Duemelands
Commercial LLLP
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• Frauenshuh
Companies
|
|
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• Ferguson
Property Management Services, L.C.
|
|
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• Illies
Nohava Heinen Property Management, Inc.
|
|
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• Inland
Companies, Inc.
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• Northco
Real Estate Services, LLC
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• NorthMarq
Real Estate Brokerage LLC
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|
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• Pacific
Realty Commercial LLC dba Grubb & Ellis/Pacific
Realty
|
|
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• Paramount
Real Estate Corporation
|
|
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• Red
Brokerage LLC
|
|
|
• Thornton
Oliver Keller, Commercial, LLC
|
|
|
• Turley Martin Tucker Company, Inc. dba Colliers
Turley Martin Tucker Company
|
|
|
• United
Properties, LLC
|
|
|
• Vector
Property Services, LLC
|
|
|
• Welsh
Companies, LLC
|
|
|
• Winbury
Realty of K.C.
|
Generally,
our management contracts provide for compensation ranging from 1.5% to 5.0% of
gross rent collections and, typically, we may terminate these contracts in 60
days or less 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
|
As of April 30, (in
thousands)
|
2009
|
%
|
2008
|
%
|
2007
|
%
|
||||||||||||||||||
|
Real
estate investments
|
||||||||||||||||||||||||
|
Property
owned
|
$ | 1,729,585 | $ | 1,648,259 | $ | 1,489,287 | ||||||||||||||||||
|
Less
accumulated depreciation
|
(262,871 | ) | (219,379 | ) | (180,544 | ) | ||||||||||||||||||
| $ | 1,466,714 | 99.6 | % | $ | 1,428,880 | 98.1 | % | $ | 1,308,743 | 99.4 | % | |||||||||||||
|
Development
in progress
|
0 | 0.0 | % | 22,856 | 1.6 | % | 3,498 | 0.3 | % | |||||||||||||||
|
Unimproved
land
|
5,701 | 0.4 | % | 3,901 | 0.3 | % | 3,894 | 0.3 | % | |||||||||||||||
|
Mortgage
loans receivable
|
160 | 0.0 | % | 541 | 0.0 | % | 399 | 0.0 | % | |||||||||||||||
|
Total
real estate investments
|
$ | 1,472,575 | 100.0 | % | $ | 1,456,178 | 100.0 | % | $ | 1,316,534 | 100.0 | % | ||||||||||||
Summary
of Individual Properties Owned as of April 30, 2009
The
following table presents information regarding our 244 properties owned as of
April 30, 2009. 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.
Occupancy rates given are the average economic occupancy rates for the fiscal
year ended April 30, 2009:
* = Real estate not owned in fee; all
or a portion is leased under a ground or air rights lease.
|
Property
Name and Location
|
Units
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
MULTI-FAMILY
RESIDENTIAL
|
||||||||||||
|
17
South Main Apartments - Minot, ND
|
4 | $ | 222 | 99.5 | % | |||||||
|
401
South Main Apartments - Minot, ND
|
10 | 1,283 | 60.6 | % | ||||||||
|
Arbors
Apartments - S Sioux City, NE
|
192 | 7,552 | 90.9 | % | ||||||||
|
Boulder
Court - Eagan, MN
|
115 | 7,946 | 95.8 | % | ||||||||
|
Brookfield
Village Apartments - Topeka, KS
|
160 | 7,981 | 95.4 | % | ||||||||
|
Candlelight
Apartments - Fargo, ND
|
66 | 1,863 | 93.7 | % | ||||||||
|
Canyon
Lake Apartments - Rapid City, SD
|
109 | 4,584 | 91.6 | % | ||||||||
|
Castle
Rock - Billings, MT
|
165 | 6,828 | 93.9 | % | ||||||||
|
Chateau
Apartments - Minot, ND
|
64 | 3,438 | 99.5 | % | ||||||||
|
Cimarron
Hills - Omaha, NE
|
234 | 13,214 | 85.4 | % | ||||||||
|
Colonial
Villa - Burnsville, MN
|
240 | 16,059 | 88.1 | % | ||||||||
|
Colton
Heights Properties - Minot, ND
|
18 | 999 | 99.0 | % | ||||||||
|
Cottonwood
Community - Bismarck, ND
|
268 | 20,614 | 93.5 | % | ||||||||
|
Country
Meadows Community - Billings, MT
|
134 | 9,022 | 95.3 | % | ||||||||
|
Crestview
Apartments - Bismarck, ND
|
152 | 5,331 | 97.9 | % | ||||||||
|
Crown
Colony Apartments - Topeka, KS
|
220 | 12,028 | 92.6 | % | ||||||||
|
Dakota
Hill At Valley Ranch - Irving, TX
|
504 | 39,707 | 91.7 | % | ||||||||
|
East
Park Apartments - Sioux Falls, SD
|
84 | 3,047 | 90.7 | % | ||||||||
|
Evergreen
Apartments - Isanti, MN
|
36 | 3,150 | 93.8 | % | ||||||||
|
Forest
Park Estates - Grand Forks, ND
|
270 | 10,107 | 89.6 | % | ||||||||
|
Greenfield
Apartments - Omaha, NE
|
96 | 4,931 | 97.5 | % | ||||||||
|
Heritage
Manor - Rochester, MN
|
182 | 8,823 | 98.4 | % | ||||||||
|
Indian
Hills Apartments - Sioux City, IA
|
120 | 5,639 | 80.5 | % | ||||||||
|
IRET
Corporate Plaza Apartments - Minot, ND
|
71 | 16,955 | 54.2 | % | ||||||||
|
Jenner
Properties - Grand Forks, ND
|
90 | 2,468 | 93.3 | % | ||||||||
|
Kirkwood
Manor - Bismarck, ND
|
108 | 4,406 | 95.7 | % | ||||||||
|
Lancaster
Place - St. Cloud, MN
|
84 | 3,909 | 78.8 | % | ||||||||
|
Legacy
Community - Grand Forks, ND
|
358 | 27,671 | 97.1 | % | ||||||||
|
Magic
City Apartments - Minot, ND
|
200 | 5,748 | 98.8 | % | ||||||||
|
Meadows
Community - Jamestown, ND
|
81 | 6,084 | 99.7 | % | ||||||||
|
Property
Name and Location
|
Units
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
MULTI-FAMILY RESIDENTIAL
-
continued
|
||||||||||||
|
Minot
4th Street Apartments - Minot, ND
|
4 | $ | 89 | 100.0 | % | |||||||
|
Minot
11th Street Apartments - Minot, ND
|
3 | 65 | 100.0 | % | ||||||||
|
Minot
Fairmont Apartments - Minot, ND
|
12 | 367 | 100.0 | % | ||||||||
|
Minot
Westridge Apartments - Minot, ND
|
33 | 1,971 | 99.4 | % | ||||||||
|
Miramont
Apartments - Fort Collins, CO
|
210 | 15,442 | 95.4 | % | ||||||||
|
Monticello
Apartments - Monticello, MN
|
60 | 4,533 | 94.1 | % | ||||||||
|
Neighborhood
Apartments - Colorado Springs, CO
|
192 | 13,716 | 91.6 | % | ||||||||
|
North
Pointe - Bismarck, ND
|
49 | 2,542 | 99.7 | % | ||||||||
|
Oakmont
Apartments - Sioux Falls, SD
|
80 | 5,446 | 97.4 | % | ||||||||
|
Oakwood
- Sioux Falls, SD
|
160 | 6,637 | 93.8 | % | ||||||||
|
Olympic
Village - Billings, MT
|
274 | 13,149 | 97.9 | % | ||||||||
|
Olympik
Village Apartments - Rochester, MN
|
140 | 7,571 | 95.2 | % | ||||||||
|
Oxbow
- Sioux Falls, SD
|
120 | 5,682 | 96.5 | % | ||||||||
|
Park
Meadows Community - Waite Park, MN
|
360 | 14,444 | 88.3 | % | ||||||||
|
Pebble
Springs - Bismarck, ND
|
16 | 834 | 98.1 | % | ||||||||
|
Pinecone
Apartments - Fort Collins, CO
|
195 | 14,376 | 94.2 | % | ||||||||
|
Pinehurst
Apartments - Billings, MT
|
21 | 850 | 97.4 | % | ||||||||
|
Pointe
West - Rapid City, SD
|
90 | 4,885 | 96.9 | % | ||||||||
|
Prairie
Winds Apartments - Sioux Falls, SD
|
48 | 2,299 | 89.5 | % | ||||||||
|
Prairiewood
Meadows - Fargo, ND
|
85 | 3,621 | 88.0 | % | ||||||||
|
Quarry
Ridge Apartments - Rochester, MN
|
154 | 14,828 | 96.6 | % | ||||||||
|
Ridge
Oaks - Sioux City, IA
|
132 | 5,752 | 91.1 | % | ||||||||
|
Rimrock
Apartments - Billings, MT
|
78 | 4,262 | 98.1 | % | ||||||||
|
Rocky
Meadows - Billings, MT
|
98 | 7,097 | 95.8 | % | ||||||||
|
Rum
River Apartments - Isanti, MN
|
72 | 5,676 | 96.5 | % | ||||||||
|
SCSH
Campus Center Apartments - St. Cloud, MN
|
90 | 2,677 | 90.7 | % | ||||||||
|
SCSH
Campus Heights Apartments - St. Cloud, MN
|
49 | 753 | 62.6 | % | ||||||||
|
SCSH
Campus Knoll I Apartments - St. Cloud, MN
|
71 | 1,811 | 86.0 | % | ||||||||
|
SCSH
Campus Plaza Apartments - St. Cloud, MN
|
24 | 371 | 72.0 | % | ||||||||
|
SCSH
Campus Side Apartments - St. Cloud, MN
|
48 | 744 | 86.2 | % | ||||||||
|
SCSH
Campus View Apartments - St. Cloud, MN
|
48 | 735 | 87.3 | % | ||||||||
|
SCSH
Cornerstone Apartments - St. Cloud, MN
|
24 | 377 | 90.3 | % | ||||||||
|
SCSH
University Park Place Apartments - St. Cloud, MN
|
35 | 540 | 89.5 | % | ||||||||
|
Sherwood
Apartments - Topeka, KS
|
300 | 17,744 | 98.4 | % | ||||||||
|
Southbrook
& Mariposa - Topeka, KS
|
54 | 5,735 | 96.0 | % | ||||||||
|
South
Pointe - Minot, ND
|
195 | 11,804 | 99.7 | % | ||||||||
|
Southview
Apartments - Minot, ND
|
24 | 911 | 99.0 | % | ||||||||
|
Southwind
Apartments - Grand Forks, ND
|
164 | 7,298 | 94.8 | % | ||||||||
|
Sunset
Trail - Rochester, MN
|
146 | 14,991 | 97.1 | % | ||||||||
|
Sweetwater
Properties - Grafton, ND
|
42 | 952 | 63.8 | % | ||||||||
|
Sycamore
Village Apartments - Sioux Falls, SD
|
48 | 1,777 | 86.3 | % | ||||||||
|
Terrace
On The Green - Moorhead, MN
|
116 | 3,287 | 92.7 | % | ||||||||
|
Thomasbrook
Apartments - Lincoln, NE
|
240 | 10,611 | 89.1 | % | ||||||||
|
Valley
Park Manor - Grand Forks, ND
|
168 | 6,242 | 91.3 | % | ||||||||
|
Village
Green - Rochester, MN
|
36 | 2,883 | 95.6 | % | ||||||||
|
West
Stonehill - Waite Park, MN
|
313 | 14,687 | 94.4 | % | ||||||||
|
Westwood
Park - Bismarck, ND
|
64 | 2,817 | 96.8 | % | ||||||||
|
Winchester
- Rochester, MN
|
115 | 7,328 | 95.3 | % | ||||||||
|
Woodridge
Apartments - Rochester, MN
|
110 | 7,729 | 97.1 | % | ||||||||
|
TOTAL
MULTI-FAMILY RESIDENTIAL
|
9,645 | $ | 542,547 | 93.5 | % | |||||||
|
Property
Name and Location
|
Approximate
Net Rentable Square Footage
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
OFFICE
BUILDINGS
|
||||||||||||
|
1st
Avenue Building - Minot, ND
|
15,446 | $ | 694 | 35.5 | % | |||||||
|
12
South Main - Minot, ND
|
10,126 | 393 | 0.0 | % | ||||||||
|
610
Business Center IV - Brooklyn Park, MN
|
78,190 | 9,403 | 100.0 | % | ||||||||
|
2030
Cliff Road - Eagan, MN
|
13,374 | 983 | 100.0 | % | ||||||||
|
7800
West Brown Deer Road - Milwaukee, WI
|
175,610 | 11,477 | 100.0 | % | ||||||||
|
American
Corporate Center - Mendota Heights, MN
|
138,959 | 20,870 | 92.1 | % | ||||||||
|
Ameritrade
- Omaha, NE
|
73,742 | 8,349 | 100.0 | % | ||||||||
|
Benton
Business Park - Sauk Rapids, MN
|
30,464 | 1,527 | 100.0 | % | ||||||||
|
Bismarck
715 East Broadway - Minot, ND
|
22,500 | 1,672 | 100.0 | % | ||||||||
|
Bloomington
Business Plaza - Bloomington, MN
|
121,064 | 8,050 | 63.4 | % | ||||||||
|
Brenwood
- Minnetonka, MN
|
176,789 | 16,793 | 78.4 | % | ||||||||
|
Brook
Valley I - La Vista, NE
|
30,000 | 2,055 | 68.2 | % | ||||||||
|
Burnsville
Bluffs II - Burnsville, MN
|
45,158 | 3,352 | 83.8 | % | ||||||||
|
Cold
Spring Center - St. Cloud, MN
|
77,634 | 9,146 | 91.2 | % | ||||||||
|
Corporate
Center West - Omaha, NE
|
141,724 | 21,405 | 100.0 | % | ||||||||
|
Crosstown
Centre - Eden Prairie, MN
|
185,000 | 17,933 | 100.0 | % | ||||||||
|
Dewey
Hill Business Center - Edina, MN
|
73,338 | 5,341 | 29.6 | % | ||||||||
|
Farnam
Executive Center - Omaha, NE
|
94,832 | 13,592 | 100.0 | % | ||||||||
|
Flagship
- Eden Prairie, MN
|
138,825 | 24,127 | 100.0 | % | ||||||||
|
Gateway
Corporate Center - Woodbury, MN
|
59,827 | 9,489 | 100.0 | % | ||||||||
|
Golden
Hills Office Center - Golden Valley, MN
|
190,758 | 24,202 | 97.6 | % | ||||||||
|
Great
Plains - Fargo, ND
|
122,040 | 15,375 | 100.0 | % | ||||||||
|
Highlands
Ranch - Highlands Ranch, CO
|
81,173 | 11,912 | 95.2 | % | ||||||||
|
Highlands
Ranch I - Highlands Ranch, CO
|
71,430 | 10,630 | 100.0 | % | ||||||||
|
Interlachen
Corporate Center - Edina, MN
|
105,084 | 16,819 | 10.7 | % | ||||||||
|
Intertech
Building - Fenton, MO
|
64,607 | 6,099 | 90.9 | % | ||||||||
|
IRET
Corporate Plaza - Minot, ND
|
50,360 | 6,317 | 0.0 | % | ||||||||
|
Mendota
Office Center I - Mendota Heights, MN
|
59,852 | 7,337 | 89.0 | % | ||||||||
|
Mendota
Office Center II - Mendota Heights, MN
|
88,398 | 12,472 | 72.8 | % | ||||||||
|
Mendota
Office Center III - Mendota Heights, MN
|
60,776 | 6,813 | 90.2 | % | ||||||||
|
Mendota
Office Center IV - Mendota Heights, MN
|
72,231 | 9,283 | 100.0 | % | ||||||||
|
Minnesota
National Bank - Duluth, MN
|
17,108 | 1,745 | 100.0 | % | ||||||||
|
Miracle
Hills One - Omaha, NE
|
83,448 | 12,665 | 95.9 | % | ||||||||
|
Nicollett
VII - Burnsville, MN
|
118,125 | 7,444 | 79.6 | % | ||||||||
|
Northgate
I - Maple Grove, MN
|
79,297 | 8,242 | 100.0 | % | ||||||||
|
Northgate
II - Maple Grove, MN
|
26,000 | 2,445 | 100.0 | % | ||||||||
|
Northpark
Corporate Center - Arden Hills, MN
|
146,087 | 17,551 | 83.8 | % | ||||||||
|
Pacific
Hills - Omaha, NE
|
143,075 | 16,952 | 93.6 | % | ||||||||
|
Pillsbury
Business Center - Bloomington, MN
|
42,220 | 1,906 | 49.2 | % | ||||||||
|
Plaza
VII - Boise, ID
|
28,994 | 3,769 | 79.7 | % | ||||||||
|
Plymouth
5095 Nathan Lane - Plymouth, MN
|
20,528 | 1,897 | 100.0 | % | ||||||||
|
Plymouth
I - Plymouth, MN
|
26,186 | 1,690 | 92.8 | % | ||||||||
|
Plymouth
II - Plymouth, MN
|
26,186 | 1,671 | 100.0 | % | ||||||||
|
Plymouth
III - Plymouth, MN
|
26,186 | 2,352 | 54.4 | % | ||||||||
|
Plymouth
IV & V - Plymouth, MN
|
126,930 | 15,292 | 95.2 | % | ||||||||
|
Prairie
Oak Business Center - Eden Prairie, MN
|
36,421 | 5,896 | 100.0 | % | ||||||||
|
Rapid
City 900 Concourse Drive - Rapid City, SD
|
75,815 | 7,088 | 100.0 | % | ||||||||
|
Riverport
- Maryland Heights, MO
|
122,567 | 20,885 | 100.0 | % | ||||||||
|
Southeast
Tech Center - Eagan, MN
|
58,300 | 6,358 | 100.0 | % | ||||||||
|
Spring
Valley IV - Omaha, NE
|
15,700 | 1,154 | 100.0 | % | ||||||||
|
Spring
Valley V - Omaha, NE
|
24,171 | 1,558 | 62.5 | % | ||||||||
|
|
||||||||||||
|
Property
Name and Location
|
Approximate
Net Rentable Square Footage
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
OFFICE BUILDINGS -
continued
|
||||||||||||
|
Spring
Valley X - Omaha, NE
|
24,000 | $ | 1,232 | 75.3 | % | |||||||
|
Spring
Valley XI - Omaha, NE
|
24,000 | 1,265 | 100.0 | % | ||||||||
|
Superior
Office Building - Duluth, MN
|
20,000 | 2,539 | 100.0 | % | ||||||||
|
TCA
Building - Eagan, MN
|
103,640 | 9,928 | 86.3 | % | ||||||||
|
Three
Paramount Plaza - Bloomington, MN
|
75,526 | 8,450 | 83.8 | % | ||||||||
|
Thresher
Square - Minneapolis, MN
|
117,144 | 12,659 | 44.8 | % | ||||||||
|
Timberlands
- Leawood, KS
|
90,388 | 14,859 | 78.2 | % | ||||||||
|
UHC
Office - International Falls, MN
|
30,000 | 2,505 | 100.0 | % | ||||||||
|
US
Bank Financial Center - Bloomington, MN
|
153,947 | 16,809 | 95.7 | % | ||||||||
|
Viromed
- Eden Prairie, MN
|
48,700 | 4,864 | 100.0 | % | ||||||||
|
Wells
Fargo Center - St Cloud, MN
|
86,192 | 10,052 | 94.8 | % | ||||||||
|
West
River Business Park - Waite Park, MN
|
24,075 | 1,476 | 74.1 | % | ||||||||
|
Westgate
- Boise, ID
|
103,342 | 12,237 | 100.0 | % | ||||||||
|
Whitewater
Plaza - Minnetonka, MN
|
61,138 | 5,664 | 48.4 | % | ||||||||
|
Wirth
Corporate Center - Golden Valley, MN
|
74,568 | 9,054 | 96.4 | % | ||||||||
|
Woodlands
Plaza IV
|
61,820 | 5,502 | 79.9 | % | ||||||||
|
TOTAL
OFFICE BUILDINGS
|
5,011,135 | $ | 571,565 | 89.1 | % | |||||||
|
Property
Name and Location
|
Approximate
Net Rentable Square Footage
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
MEDICAL
|
||||||||||||
|
2800
Medical Building - Minneapolis, MN
|
54,490 | $ | 8,676 | 92.3 | % | |||||||
|
2828
Chicago Avenue - Minneapolis, MN
|
56,239 | 16,506 | 71.9 | % | ||||||||
|
Abbott
Northwest - Sartell, MN*
|
59,760 | 12,653 | 95.7 | % | ||||||||
|
Airport
Medical - Bloomington, MN*
|
24,218 | 4,678 | 100.0 | % | ||||||||
|
Barry
Pointe Office Park - Kansas City, MO
|
18,502 | 2,845 | 87.8 | % | ||||||||
|
Burnsville
303 Nicollet Medical (Ridgeview) - Burnsville, MN
|
53,466 | 8,609 | 100.0 | % | ||||||||
|
Burnsville
305 Nicollet Medical (Ridgeview South) - Burnsville, MN
|
36,199 | 5,850 | 100.0 | % | ||||||||
|
Denfeld
Clinic - Duluth, MN
|
20,512 | 3,099 | 100.0 | % | ||||||||
|
Eagan
1440 Duckwood Medical - Eagan, MN
|
17,640 | 2,587 | 100.0 | % | ||||||||
|
Edgewood
Vista - Belgrade, MT
|
5,192 | 814 | 100.0 | % | ||||||||
|
Edgewood
Vista - Billings, MT
|
11,800 | 1,882 | 100.0 | % | ||||||||
|
Edgewood
Vista - Bismarck, ND
|
74,112 | 9,740 | 100.0 | % | ||||||||
|
Edgewood
Vista - Brainerd, MN
|
82,535 | 9,620 | 100.0 | % | ||||||||
|
Edgewood
Vista - Columbus, NE
|
5,194 | 867 | 100.0 | % | ||||||||
|
Edgewood
Vista - East Grand Forks, MN
|
18,488 | 1,642 | 100.0 | % | ||||||||
|
Edgewood
Vista - Fargo, ND
|
168,801 | 21,843 | 100.0 | % | ||||||||
|
Edgewood
Vista - Fremont, NE
|
6,042 | 588 | 100.0 | % | ||||||||
|
Edgewood
Vista - Grand Island, NE
|
5,185 | 807 | 100.0 | % | ||||||||
|
Edgewood
Vista - Hastings, NE
|
6,042 | 606 | 100.0 | % | ||||||||
|
Edgewood
Vista - Hermantown I, MN
|
119,349 | 11,660 | 100.0 | % | ||||||||
|
Edgewood
Vista - Hermantown II, MN
|
160,485 | 11,269 | 100.0 | % | ||||||||
|
Edgewood
Vista - Kalispell, MT
|
5,895 | 624 | 100.0 | % | ||||||||
|
Edgewood
Vista - Missoula, MT
|
10,150 | 999 | 100.0 | % | ||||||||
|
Edgewood
Vista - Norfolk, NE
|
5,135 | 764 | 100.0 | % | ||||||||
|
Edgewood
Vista - Omaha, NE
|
6,042 | 676 | 100.0 | % | ||||||||
|
Edgewood
Vista - Sioux Falls, SD
|
11,800 | 1,289 | 100.0 | % | ||||||||
|
Edgewood
Vista - Spearfish, SD
|
60,161 | 6,156 | 100.0 | % | ||||||||
|
Edgewood
Vista - Virginia, MN
|
147,183 | 12,146 | 100.0 | % | ||||||||
|
Property
Name and Location
|
Approximate
Net Rentable Square Footage
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
MEDICAL -
continued
|
||||||||||||
|
Edina
6363 France Medical - Edina, MN*
|
70,934 | $ | 12,695 | 82.0 | % | |||||||
|
Edina
6405 France Medical - Edina, MN*
|
55,478 | 12,201 | 100.0 | % | ||||||||
|
Edina
6517 Drew Avenue - Edina, MN
|
12,140 | 1,537 | 100.0 | % | ||||||||
|
Edina
6525 France SMC II - Edina, MN
|
67,409 | 14,633 | 96.8 | % | ||||||||
|
Edina
6545 France SMC I - Edina, MN*
|
227,626 | 44,324 | 84.4 | % | ||||||||
|
Fox
River Cottages - Grand Chute, WI
|
26,336 | 3,808 | 100.0 | % | ||||||||
|
Fresenius
- Duluth, MN
|
9,052 | 1,572 | 100.0 | % | ||||||||
|
Garden
View - St. Paul, MN*
|
43,404 | 7,870 | 100.0 | % | ||||||||
|
Gateway
Clinic - Sandstone, MN*
|
12,444 | 1,765 | 100.0 | % | ||||||||
|
Health
East St John & Woodwinds - Maplewood & Woodbury,
MN
|
114,316 | 21,602 | 100.0 | % | ||||||||
|
High
Pointe Health Campus - Lake Elmo, MN
|
60,294 | 12,180 | 94.3 | % | ||||||||
|
Mariner
Clinic - Superior, WI*
|
28,928 | 3,788 | 100.0 | % | ||||||||
|
Minneapolis
701 25th Avenue Medical (Riverside) - Minneapolis, MN*
|
57,212 | 7,873 | 98.3 | % | ||||||||
|
Nebraska
Orthopaedic Hospital - Omaha, NE*
|
61,758 | 20,512 | 100.0 | % | ||||||||
|
Park
Dental - Brooklyn Center, MN
|
9,998 | 2,952 | 100.0 | % | ||||||||
|
Pavilion
I - Duluth, MN*
|
45,081 | 10,174 | 100.0 | % | ||||||||
|
Pavilion
II - Duluth, MN
|
73,000 | 19,325 | 100.0 | % | ||||||||
|
Ritchie
Medical Plaza - St Paul, MN
|
52,328 | 9,576 | 67.1 | % | ||||||||
|
St
Michael Clinic - St Michael, MN
|
10,796 | 2,851 | 100.0 | % | ||||||||
|
Stevens
Point - Stevens Point, WI
|
47,950 | 14,825 | 100.0 | % | ||||||||
|
Wells
Clinic - Hibbing, MN
|
18,810 | 2,661 | 100.0 | % | ||||||||
|
TOTAL
MEDICAL
|
2,355,911 | $ | 388,219 | 95.7 | % | |||||||
|
Property
Name and Location
|
Approximate
Net Rentable Square Footage
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
INDUSTRIAL
|
||||||||||||
|
API
Building - Duluth, MN
|
35,000 | $ | 1,723 | 100.0 | % | |||||||
|
Bloomington
2000 West 94th Street - Bloomington, MN
|
100,850 | 6,229 | 100.0 | % | ||||||||
|
Bodycote
Industrial Building - Eden Prairie, MN
|
41,880 | 2,152 | 100.0 | % | ||||||||
|
Cedar
Lake Business Center - St. Louis Park, MN
|
50,400 | 3,711 | 97.4 | % | ||||||||
|
Dixon
Avenue Industrial Park - Des Moines, IA
|
604,886 | 13,181 | 91.6 | % | ||||||||
|
Eagan
2785 & 2795 Highway 55 - Eagan, MN
|
198,600 | 5,628 | 100.0 | % | ||||||||
|
Lexington
Commerce Center - Eagan, MN
|
90,260 | 6,480 | 100.0 | % | ||||||||
|
Lighthouse
- Duluth, MN
|
59,292 | 1,885 | 81.6 | % | ||||||||
|
Metal
Improvement Company - New Brighton, MN
|
49,620 | 2,507 | 100.0 | % | ||||||||
|
Minnetonka
13600 County Road 62 - Minnetonka, MN
|
69,984 | 3,702 | 100.0 | % | ||||||||
|
Roseville
2929 Long Lake Road - Roseville, MN
|
172,057 | 10,712 | 100.0 | % | ||||||||
|
Stone
Container - Fargo, ND
|
195,075 | 7,141 | 100.0 | % | ||||||||
|
Stone
Container - Roseville, MN
|
229,072 | 8,250 | 100.0 | % | ||||||||
|
Urbandale
3900 106th Street - Urbandale, IA
|
528,353 | 14,124 | 100.0 | % | ||||||||
|
Waconia
Industrial Building - Waconia, MN
|
29,440 | 2,040 | 100.0 | % | ||||||||
|
Wilson's
Leather - Brooklyn Park, MN
|
353,049 | 13,875 | 100.0 | % | ||||||||
|
Winsted
Industrial Building - Winsted, MN
|
41,685 | 1,007 | 46.7 | % | ||||||||
|
Woodbury
1865 Woodland - Woodbury, MN
|
69,600 | 3,756 | 100.0 | % | ||||||||
|
TOTAL
INDUSTRIAL
|
2,919,103 | $ | 108,103 | 97.8 | % | |||||||
|
Property
Name and Location
|
Approximate
Net Rentable Square Footage
|
(in thousands)
Investment (initial cost plus improvements)
|
Fiscal
2009 Economic Occupancy
|
|||||||||
|
RETAIL
|
||||||||||||
|
17
South Main - Minot, ND
|
2,454 | $ | 287 | 100.0 | % | |||||||
|
Anoka
Strip Center - Anoka, MN
|
10,625 | 744 | 50.0 | % | ||||||||
|
Burnsville
1 Strip Center - Burnsville, MN
|
8,526 | 1,181 | 100.0 | % | ||||||||
|
Burnsville
2 Strip Center - Burnsville, MN
|
8,400 | 962 | 84.2 | % | ||||||||
|
Champlin
South Pond - Champlin, MN
|
26,020 | 3,593 | 85.2 | % | ||||||||
|
Chan
West Village – Chanhassen, MN
|
137,572 | 21,423 | 99.0 | % | ||||||||
|
Dakota
West Plaza - Minot , ND
|
16,921 | 611 | 90.3 | % | ||||||||
|
Duluth
Denfeld Retail - Duluth, MN
|
37,617 | 4,990 | 94.5 | % | ||||||||
|
Duluth
NAPA - Duluth, MN
|
15,582 | 1,933 | 97.7 | % | ||||||||
|
Eagan
Community - Eagan, MN
|
23,187 | 3,143 | 90.0 | % | ||||||||
|
East
Grand Station - East Grand Forks, MN
|
16,103 | 1,694 | 100.0 | % | ||||||||
|
Fargo
Express Community - Fargo, ND
|
34,226 | 1,813 | 81.2 | % | ||||||||
|
Forest
Lake Auto - Forest Lake, MN
|
6,836 | 509 | 100.0 | % | ||||||||
|
Forest
Lake Westlake Center - Forest Lake, MN
|
100,570 | 8,205 | 100.0 | % | ||||||||
|
Grand
Forks Carmike - Grand Forks, ND
|
28,528 | 2,546 | 100.0 | % | ||||||||
|
Grand
Forks Medpark Mall - Grand Forks, ND
|
59,117 | 5,721 | 99.2 | % | ||||||||
|
Jamestown
Buffalo Mall - Jamestown, ND
|
213,271 | 6,183 | 81.0 | % | ||||||||
|
Jamestown
Business Center - Jamestown, ND
|
100,249 | 2,492 | 92.1 | % | ||||||||
|
Kalispell
Retail Center - Kalispell, MT
|
52,000 | 3,473 | 100.0 | % | ||||||||
|
Kentwood
Thomasville Furniture - Kentwood, MI
|
16,080 | 2,123 | 100.0 | % | ||||||||
|
Ladysmith
Pamida - Ladysmith, WI
|
41,000 | 1,500 | 100.0 | % | ||||||||
|
Lakeville
Strip Center - Lakeville, MN
|
9,488 | 1,971 | 97.2 | % | ||||||||
|
Livingston
Pamida - Livingston, MT
|
41,200 | 1,800 | 100.0 | % | ||||||||
|
Minot
Arrowhead - Minot, ND
|
77,912 | 8,268 | 99.2 | % | ||||||||
|
Minot
Plaza - Minot, ND
|
10,843 | 608 | 100.0 | % | ||||||||
|
Monticello
C Store - Monticello, MN
|
3,575 | 893 | 100.0 | % | ||||||||
|
Omaha
Barnes & Noble - Omaha, NE
|
26,985 | 3,699 | 100.0 | % | ||||||||
|
Pine
City C Store - Pine City, MN
|
4,800 | 442 | 100.0 | % | ||||||||
|
Pine
City Evergreen Square - Pine City, MN
|
63,225 | 3,356 | 67.5 | % | ||||||||
|
Rochester
Maplewood Square - Rochester, MN
|
118,398 | 12,011 | 51.8 | % | ||||||||
|
St.
Cloud Westgate - St. Cloud, MN
|
104,928 | 6,841 | 60.2 | % | ||||||||
|
Weston
Retail - Weston, WI
|
25,644 | 1,681 | 75.0 | % | ||||||||
|
Weston
Walgreens - Weston, WI
|
14,820 | 2,455 | 100.0 | % | ||||||||
|
TOTAL
RETAIL
|
1,456,702 | $ | 119,151 | 87.1 | % | |||||||
|
SUBTOTAL
|
$ | 1,729,585 | ||||||||||
|
Property
Name and Location
|
(in thousands)
Investment (initial cost plus improvements)
|
|||
|
UNIMPROVED
LAND
|
||||
|
Bismarck
2130 South 12th Street - Bismarck, ND
|
$ | 587 | ||
|
Bismarck
700 East Main - Bismarck, ND
|
827 | |||
|
Eagan
Unimproved Land - Eagan, MN
|
423 | |||
|
IRET
Corporate Plaza Out-lot - Minot, ND
|
323 | |||
|
Kalispell
Unimproved Land - Kalispell, MT
|
1,424 | |||
|
Monticello
Unimproved Land - Monticello, MN
|
97 | |||
|
Quarry
Ridge Unimproved Land - Rochester, MN
|
942 | |||
|
River
Falls Unimproved Land - River Falls, WI
|
205 | |||
|
Thomasbrook
24 Units - Lincoln, NE
|
56 | |||
|
Urbandale
Unimproved Land - Urbandale, IA
|
5 | |||
|
Weston
Unimproved Land - Weston, WI
|
812 | |||
|
TOTAL
UNIMPROVED LAND
|
$ | 5,701 | ||
|
TOTAL
UNITS – RESIDENTIAL SEGMENT
|
9,645
|
|||
|
TOTAL
SQUARE FOOTAGE – COMMERCIAL SEGMENTS
|
11,742,851
|
|||
|
TOTAL
INVESTMENTS
|
$ | 1,735,286 | ||
Mortgages
Payable
As of
April 30, 2009, individual first mortgage loans on the above properties totaled
$1.1 billion. Of the $1.1 billion of mortgage indebtedness on April 30, 2009,
$9.6 million or 0.9% 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. Principal payments due on our mortgage indebtedness are as
follows:
|
Year
Ended April 30,
|
Mortgage
Principal
(in
thousands)
|
|||
|
2010
|
$ | 140,456 | ||
|
2011
|
104,089 | |||
|
2012
|
113,381 | |||
|
2013
|
48,682 | |||
|
2014
|
57,537 | |||
|
Thereafter
|
606,013 | |||
|
Total
|
$ | 1,070,158 | ||
Future
Minimum Lease Receipts
The
future minimum lease receipts to be received under leases for commercial
properties in place as of April 30, 2009, assuming that no options to renew or
buy out the leases are exercised, are as follows:
|
Year
Ended April 30,
|
Lease
Payments
(in
thousands)
|
|||
|
2010
|
$ | 111,786 | ||
|
2011
|
99,833 | |||
|
2012
|
84,440 | |||
|
2013
|
72,039 | |||
|
2014
|
61,911 | |||
|
Thereafter
|
267,961 | |||
|
Total
|
$ | 697,970 | ||
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. For the year
ended April 30, 2009, we spent approximately $28.0 million on capital
improvements.
Contracts
or Options to Purchase
We have
granted options to purchase certain of our properties to tenants in these
properties, under lease agreements with the tenant. 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, 2009, our properties
subject to purchase options, the cost, plus improvements, of each such property
and its gross rental revenue are as follows:
|
(in
thousands)
|
||||||||||||||||
|
Gross
Rental Revenue
|
||||||||||||||||
|
Property
|
Investment
Cost
|
2009
|
2008
|
2007
|
||||||||||||
|
Abbott
Northwest-Sartell, MN
|
$ | 12,653 | $ | 1,292 | $ | 1,292 | $ | 1,252 | ||||||||
|
Edgewood
Vista-Belgrade, MT
|
2,135 | 196 | 31 | 0 | ||||||||||||
|
Edgewood
Vista-Billings, MT
|
4,274 | 396 | 66 | 0 | ||||||||||||
|
Edgewood
Vista-Bismarck, ND
|
10,903 | 1,008 | 985 | 980 | ||||||||||||
|
Edgewood
Vista-Brainerd, MN
|
10,667 | 988 | 971 | 968 | ||||||||||||
|
Edgewood
Vista-Columbus, NE
|
1,481 | 136 | 21 | 0 | ||||||||||||
|
Edgewood
Vista-East Grand Forks, MN
|
5,012 | 464 | 78 | 0 | ||||||||||||
|
Edgewood
Vista-Fargo, ND
|
26,322 | 2,065 | 310 | 0 | ||||||||||||
|
Edgewood
Vista-Fremont, NE
|
588 | 72 | 69 | 68 | ||||||||||||
|
Edgewood
Vista-Grand Island, NE
|
1,431 | 132 | 20 | 0 | ||||||||||||
|
Edgewood
Vista-Hastings, NE
|
606 | 76 | 69 | 68 | ||||||||||||
|
Edgewood
Vista-Hermantown I, MN
|
21,510 | 2,040 | 1,557 | 1,472 | ||||||||||||
|
Edgewood
Vista-Hermantown II, MN
|
12,359 | 1,144 | 1,127 | 1,124 | ||||||||||||
|
Edgewood
Vista-Kalispell, MT
|
624 | 76 | 72 | 72 | ||||||||||||
|
Edgewood
Vista-Missoula, MT
|
999 | 96 | 132 | 132 | ||||||||||||
|
Edgewood
Vista-Norfolk, NE
|
1,332 | 124 | 19 | 0 | ||||||||||||
|
Edgewood
Vista-Omaha, NE
|
676 | 80 | 77 | 76 | ||||||||||||
|
Edgewood
Vista-Sioux Falls, SD
|
3,357 | 312 | 52 | 0 | ||||||||||||
|
Edgewood
Vista-Spearfish, SD
|
6,792 | 628 | 612 | 608 | ||||||||||||
|
Edgewood
Vista-Virginia, MN
|
17,132 | 1,736 | 1,381 | 1,320 | ||||||||||||
|
Fox
River Cottages - Grand Chute, WI
|
3,956 | 388 | 387 | 260 | ||||||||||||
|
Healtheast
St John & Woodwinds- Maplewood & Woodbury, MN
|
21,601 | 2,052 | 2,032 | 2,032 | ||||||||||||
|
Great
Plains - Fargo, ND
|
15,375 | 1,876 | 1,876 | 1,876 | ||||||||||||
|
Minnesota
National Bank - Duluth, MN
|
2,104 | 211 | 205 | 135 | ||||||||||||
|
St.
Michael Clinic - St. Michael, MN
|
2,851 | 240 | 229 | 35 | ||||||||||||
|
Stevens
Point - Stevens Point, WI
|
15,020 | 1,356 | 1,279 | 630 | ||||||||||||
|
Total
|
$ | 201,760 | $ | 19,184 | $ | 14,949 | $ | 13,108 | ||||||||
Properties
by State
The
following table presents, as of April 30, 2009, the total real estate investment
amount, net of accumulated depreciation, by state of each of the five major
segments of properties owned by us - multi-family residential, office, medical,
industrial and retail:
|
(in
thousands)
|
||||||||||||||||||||||||||||
|
State
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
%
of Total
|
|||||||||||||||||||||
|
Minnesota
|
$ | 118,503 | $ | 310,178 | $ | 259,500 | $ | 65,319 | $ | 64,374 | $ | 817,874 | 55.8 | % | ||||||||||||||
|
North
Dakota
|
114,440 | 20,203 | 30,155 | 5,204 | 22,023 | 192,025 | 13.1 | % | ||||||||||||||||||||
|
Nebraska
|
30,309 | 74,017 | 21,886 | 0 | 2,653 | 128,865 | 8.8 | % | ||||||||||||||||||||
|
Colorado
|
30,598 | 20,702 | 0 | 0 | 0 | 51,300 | 3.5 | % | ||||||||||||||||||||
|
Kansas
|
35,123 | 13,914 | 0 | 0 | 0 | 49,037 | 3.3 | % | ||||||||||||||||||||
|
Montana
|
31,539 | 0 | 3,869 | 0 | 4,583 | 39,991 | 2.7 | % | ||||||||||||||||||||
|
South
Dakota
|
25,067 | 5,595 | 6,888 | 0 | 0 | 37,550 | 2.6 | % | ||||||||||||||||||||
|
Wisconsin
|
0 | 9,639 | 20,852 | 0 | 4,996 | 35,487 | 2.4 | % | ||||||||||||||||||||
|
Iowa
|
9,895 | 0 | 0 | 24,733 | 0 | 34,628 | 2.4 | % | ||||||||||||||||||||
|
Missouri
|
0 | 30,740 | 2,724 | 0 | 0 | 33,464 | 2.3 | % | ||||||||||||||||||||
|
Texas
|
31,344 | 0 | 0 | 0 | 0 | 31,344 | 2.1 | % | ||||||||||||||||||||
|
All
Other States*
|
0 | 13,617 | 0 | 0 | 1,532 | 15,149 | 1.0 | % | ||||||||||||||||||||
|
Total
|
$ | 426,818 | $ | 498,605 | $ | 345,874 | $ | 95,256 | $ | 100,161 | $ | 1,466,714 | 100.0 | % | ||||||||||||||
|
*
|
Idaho
and Michigan
|
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.
No
matters were submitted to our shareholders during the fourth quarter of the
fiscal year ended April 30, 2009.
PART
II
Quarterly
Share and Distribution Data
Our
common shares of beneficial interest trade on the NASDAQ Global Select Market
under the symbol IRET (formerly IRETS; we changed our symbol to IRET on July 1,
2008). On June 30, 2009, the last reported sales price per share of our common
shares on the NASDAQ was $8.89. The following table sets forth the quarterly
high and low closing sales prices per share of our common shares as reported on
the NASDAQ Global Select Market, and the distributions per common share and
limited partnership unit declared with respect to each period.
|
Quarter
Ended
|
High
|
Low
|
Distributions
Declared
(per
share and unit)
|
|||||||||
|
Fiscal
Year 2009
|
||||||||||||
|
April
30, 2009
|
$ | 10.43 | $ | 8.60 | $ | 0.1700 | ||||||
|
January
31, 2009
|
10.71 | 7.43 | 0.1695 | |||||||||
|
October
31, 2008
|
11.19 | 7.66 | 0.1690 | |||||||||
|
July
31, 2008
|
10.68 | 9.54 | 0.1685 | |||||||||
|
Quarter
Ended
|
High
|
Low
|
Distributions
Declared
(per
share and unit)
|
|||||||||
|
Fiscal
Year 2008
|
||||||||||||
|
April
30, 2008
|
$ | 10.47 | $ | 8.95 | $ | 0.1680 | ||||||
|
January
31, 2008
|
10.55 | 8.84 | 0.1675 | |||||||||
|
October
31, 2007
|
11.59 | 9.35 | 0.1670 | |||||||||
|
July
31, 2007
|
10.86 | 9.40 | 0.1665 | |||||||||
It is
IRET’s 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, IRET
has paid quarterly cash distributions in the months of January, April, July and
October.
Shareholders
As of
June 30, 2009, the Company had 3,908 common shareholders of record, and
63,460,743 common shares of beneficial interest (plus 20,836,972 limited
partnership units potentially convertible into 20,836,972 common shares) were
outstanding.
Unregistered
Sales of Shares
Sales of Unregistered Securities.
During the fiscal years ended April 30, 2009, 2008 and 2007,
respectively, we issued an aggregate of 338,286, and 389,670 and 219,587
unregistered common shares to holders of limited partnership units of IRET
Properties upon redemption and conversion of an aggregate of 338,286, and
389,670 and 219,587 limited partnership units of IRET Properties on a
one-for-one basis. All such issuances of our common shares were exempt from
registration as private placements under Section 4(2) of the Securities Act,
including Regulation D promulgated thereunder. We have registered the re-sale of
such common shares under the Securities Act.
Issuer Purchases of Equity
Securities. The Company did not repurchase any of its equity securities
during fiscal year 2009, except for repurchases of nominal amounts of fractional
shares, at shareholder request.
Comparative
Stock Performance
The
information contained in this Comparative Stock Performance Graph section shall
not be deemed to be “soliciting material” or “filed” or incorporated by
reference in future filings with the SEC, or subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate it by reference into a document filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
Set forth
below is a graph that compares, for the five fiscal years commencing May 1,
2004, and ending April 30, 2009, the cumulative total returns for the Company’s
common shares with the comparable cumulative total return of two indexes, the
Standard & Poor’s 500 Index (“S&P 500”), and the FTSE NAREIT Equity
REITs Index, 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 New York Stock Exchange, the American Stock Exchange
and the NASDAQ Market.
The
performance graph assumes that at the close of trading on April 30, 2004, the
last trading day of fiscal year 2004, $100 was invested in the Company’s common
shares and in each of the indexes. The comparison assumes the
reinvestment of all distributions. Cumulative total shareholder
returns for the Company’s common shares, the S&P 500 and the FTSE NAREIT
Equity REITs Index are based on the Company’s fiscal year ending April
30.
|
FY04
|
FY05
|
FY06
|
FY07
|
FY08
|
FY09
|
|||||||||||||||||||
|
Investors
Real Estate Trust
|
100.00 | 100.61 | 112.75 | 134.28 | 138.55 | 134.27 | ||||||||||||||||||
|
S&P
500
|
100.00 | 106.34 | 122.73 | 141.43 | 134.82 | 87.21 | ||||||||||||||||||
|
FTSE
NAREIT Equity REITs
|
100.00 | 134.62 | 170.40 | 215.49 | 188.52 | 97.63 | ||||||||||||||||||
Source: Research
Data Group, Inc.
Set forth
below is selected financial data on a historical basis for the Company for the
five most recent fiscal years ended April 30. 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)
|
||||||||||||||||||||
|
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
|
Consolidated
Income Statement Data
|
||||||||||||||||||||
|
Revenue
|
$ | 240,005 | $ | 221,170 | $ | 197,538 | $ | 170,171 | $ | 152,759 | ||||||||||
|
Income
before minority interest and discontinued operations and gain on sale of
other investments
|
$ | 10,659 | $ | 15,021 | $ | 14,255 | $ | 11,119 | $ | 9,871 | ||||||||||
|
Gain
on sale of real estate, land, and other investments
|
$ | 54 | $ | 556 | $ | 4,602 | $ | 3,293 | $ | 8,605 | ||||||||||
|
Minority
interest portion of operating partnership income
|
$ | (2,227 | ) | $ | (3,524 | ) | $ | (3,217 | ) | $ | (1,892 | ) | $ | (1,727 | ) | |||||
|
Income
from continuing operations
|
$ | 8,526 | $ | 11,675 | $ | 11,026 | $ | 8,766 | $ | 7,768 | ||||||||||
|
Income
from discontinued operations
|
$ | 0 | $ | 413 | $ | 3,084 | $ | 2,801 | $ | 7,308 | ||||||||||
|
Net
income
|
$ | 8,526 | $ | 12,088 | $ | 14,110 | $ | 11,567 | $ | 15,076 | ||||||||||
|
Consolidated
Balance Sheet Data
|
||||||||||||||||||||
|
Total
real estate investments
|
$ | 1,472,575 | $ | 1,456,178 | $ | 1,316,534 | $ | 1,126,400 | $ | 1,067,345 | ||||||||||
|
Total
assets
|
$ | 1,605,091 | $ | 1,618,026 | $ | 1,435,389 | $ | 1,207,315 | $ | 1,151,158 | ||||||||||
|
Mortgages
payable
|
$ | 1,070,158 | $ | 1,063,858 | $ | 951,139 | $ | 765,890 | $ | 708,558 | ||||||||||
|
Shareholders’
equity
|
$ | 333,935 | $ | 345,006 | $ | 284,969 | $ | 289,560 | $ | 295,172 | ||||||||||
|
Consolidated
Per Common Share Data
(basic
and diluted)
|
||||||||||||||||||||
|
Income
from continuing operations
|
$ | .11 | $ | .17 | $ | .18 | $ | .14 | $ | .13 | ||||||||||
|
Income
from discontinued operations
|
$ | .00 | $ | .01 | $ | .06 | $ | .06 | $ | .17 | ||||||||||
|
Net
income
|
$ | .11 | $ | .18 | $ | .24 | $ | .20 | $ | .30 | ||||||||||
|
Distributions
|
$ | .68 | $ | .67 | $ | .66 | $ | .65 | $ | .65 | ||||||||||
|
CALENDAR
YEAR
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
|
Tax
status of distributions
|
||||||||||||||||||||
|
Capital
gain
|
0.00 | % | 1.49 | % | 1.22 | % | 16.05 | % | 0.00 | % | ||||||||||
|
Ordinary
income
|
53.43 | % | 51.69 | % | 42.01 | % | 41.48 | % | 44.65 | % | ||||||||||
|
Return
of capital
|
46.57 | % | 46.82 | % | 56.77 | % | 42.47 | % | 55.35 | % | ||||||||||
The
following information is provided in connection with, and should be read in
conjunction with, the consolidated financial statements included in this Annual
Report on Form 10-K. We operate on a fiscal year ending on April 30. The
following discussion and analysis is for the fiscal year ended April 30,
2009.
Overview
We are a
self-advised equity real estate investment trust engaged in owning and operating
income-producing real properties. Our investments include multi-family
residential properties and commercial properties located primarily in the upper
Midwest states of Minnesota and North Dakota. Our properties are diversified in
property type and location. As of April 30, 2009, our real estate portfolio
consisted of 77 multi-family residential properties containing 9,645 apartment
units and having a total real estate investment amount net of accumulated
depreciation of $426.8 million, and 167 commercial properties containing
approximately 11.7 million square feet of leasable space and having a total real
estate investment amount net of accumulated depreciation of $1.0 billion. Our
commercial properties consist of:
|
|
•
|
67
office properties containing approximately 5.0 million square feet of
leasable space and having a total real estate investment amount net of
accumulated depreciation of $498.6
million;
|
|
|
•
|
49
medical properties (including senior housing) containing approximately 2.3
million square feet of leasable space and having a total real estate
investment amount net of accumulated depreciation of $345.9
million;
|
|
|
•
|
18
industrial properties containing approximately 2.9 million square feet of
leasable space and having a total real estate investment amount net of
accumulated depreciation of $95.2 million;
and
|
|
|
•
|
33
retail properties containing approximately 1.5 million square feet of
leasable space and having a total real estate investment amount net of
accumulated depreciation of $100.2
million.
|
Our
primary source of income and cash is rents associated with multi-family
residential and commercial leases. Our business objective is to
increase shareholder value by employing a disciplined investment
strategy. This strategy is focused on growing assets in desired
geographical markets, achieving diversification by property type and location,
and adhering to targeted returns in acquiring properties.
In April
2009, the Company commenced the sale of up to $50 million of Common Shares
pursuant to a continuous offering program. Through April 30, 2009, the Company
sold 632,712 common shares as part of this program. The net proceeds (before
offering expenses but after underwriting discounts and commissions) from the
offering of $6.0 million through April 30, 2009 were used for general corporate
purposes. Through April 30, 2009, the Company paid Robert W. Baird & Co.
Incorporated, its agent under this program, $122,000 in fees with respect to the
common shares sold through this program.
Total
revenues of IRET Properties, our operating partnership, increased by $18.8
million to $240.0 million in fiscal year 2009, compared to $221.2 million in
fiscal year 2008. This increase was primarily attributable to the
addition of new real estate properties. We estimate that rent
concessions offered to tenants during the twelve months ended April 30, 2009
lowered our operating revenues by approximately $3.4 million, compared to $3.0
million for fiscal year 2008. Expenses increased during fiscal year
2009 as well, with real estate taxes, maintenance, utilities and property
management expense all increasing from year-earlier levels. While
some of this increase was due to existing real estate, the majority was due to
the addition of new real estate properties to our portfolio.
On an
all-property basis, economic occupancy levels in our total commercial property
segments decreased to 91.8% in fiscal year 2009 from 93.0% in fiscal year
2008. Economic occupancy rates in our commercial industrial segment
increased; the economic occupancy rates in our commercial office, medical and
retail segments decreased. Economic occupancy in our multi-family
residential segment increased to 93.5% in fiscal year 2009 on an all-property
basis, from 92.7% in fiscal year 2008.
We have
written off or recorded as past due a total of approximately $570,000 at IRET’s
Fox River project (Grand Chute, WI) and approximately $874,000 at the Stevens
Point project (Stevens Point, WI) as of April 30, 2009. The Fox River
project was acquired by IRET in fiscal year 2006 as a partially-completed
eight-unit senior housing project with adjoining vacant land, and IRET
subsequently funded the completion of the eight senior living villas and the
construction of ten new senior living patio homes, which were completed in
September 2007. The Stevens Point project was acquired by IRET in
fiscal year 2006, and at acquisition consisted of an existing senior housing
complex and an adjoining vacant parcel of land. IRET subsequently
funded the construction of an expansion to the existing facility on the
adjoining parcel, which was completed in June 2007. The tenants in
these two properties, affiliates of Sunwest Management, Inc., have filed for
bankruptcy under Chapter 11 of the Bankruptcy Code, and have been unable to
finance their portion of the construction cost for the ten new Fox River patio
homes and have been unable to fund the shortfall between the Stevens Point
project’s cash flow and the lease payments due to IRET. IRET’s
investment in the Fox River and Stevens Point properties leased to Sunwest is
approximately $3.8 million and $14.8 million, respectively, or approximately
0.2% and 0.9% of IRET’s property owned as of April 30, 2009.
IRET is
currently receiving all of the cash flow generated by the Stevens Point project
(approximately $85,000 per month, or approximately 58.3% of the Scheduled Rent
and other obligations due under the lease). IRET is currently receiving no
payments from the Fox River project, and its exercise of its rights under the
lease to remove Sunwest as the tenant and manager at the project and to pursue
collection of amounts owed under guarantees provided in conjunction with the
lease agreement has been suspended following the tenant’s bankruptcy filing.
IRET is evaluating its options in respect of this project; at this time IRET
considers that, subject to its analysis of market values in Appleton, Wisconsin,
IRET would proceed to market the patio homes and senior living villas and the
balance of the vacant parcel (approximately 12 acres) in an attempt to recover
its investment and provide some return on investment.
Additional
information and more detailed discussions of our fiscal year 2009 operating
results are found in the following sections of this Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
Critical
Accounting Policies
Set forth
below is a summary of the accounting policies that management believes are
critical to the preparation of the consolidated financial statements included in
this Annual Report on Form 10-K.
Real Estate. Real estate is
carried at cost, net of accumulated depreciation, less an adjustment for
impairment, if any. Depreciation requires an estimate by management of the
useful life of each property as well as an allocation of the costs associated
with a property to its various components. As described further below, the
process of allocating property costs to its components involves a considerable
amount of subjective judgments to be made by Company management. If the Company
does not allocate these costs appropriately or incorrectly estimates the useful
lives of its real estate, depreciation expense may be misstated. Depreciation is
computed on a straight-line basis over the estimated useful lives of the assets.
The Company uses a 20-40 year estimated life for buildings and improvements and
a 5-12 year estimated life for furniture, fixtures and equipment. Maintenance
and repairs are charged to operations as incurred. Renovations and improvements
that improve and/or extend the useful life of the asset are capitalized over
their estimated useful life, generally five to ten years.
Upon
acquisitions of real estate, the Company assesses the fair value of acquired
tangible assets (including land, buildings and personal property), which is
determined by valuing the property as if it were vacant, and considers whether
there were significant intangible assets acquired (for example, above-and
below-market leases, the value of acquired in-place leases, and tenant
relationships) and acquired liabilities, and allocates the purchase price based
on these assessments. The as-if-vacant value is allocated to land, buildings,
and personal property based on management’s determination of the relative fair
value of these assets. The estimated fair value of the property is the amount
that would be recoverable upon the disposition of the property. Techniques used
to estimate fair value include discounted cash flow analysis and reference to
recent sales of comparable properties. Estimates of future cash flows are based
on a number of factors including the historical operating results, known trends,
and
market/economic
conditions that may affect the property. Land value is assigned based on the
purchase price if land is acquired separately, or based on estimated market
value if acquired in a merger or in a portfolio acquisition.
Above-market
and below-market in-place lease values for acquired properties are estimated
based on the present value of the difference between (i) the contractual amounts
to be paid pursuant to the in-place leases and (ii) management’s estimate of
fair market lease rates for the corresponding in-place leases, measured over a
period equal to the remaining non-cancelable term of the lease. The Company
performs this analysis on a lease-by-lease basis. The capitalized above-market
or below-market intangible is amortized to rental income over the remaining
non-cancelable terms of the respective leases.
Other
intangible assets acquired include amounts for in-place lease values that are
based upon the Company’s evaluation of the specific characteristics of the
leases. Factors considered in these analyses include an estimate of carrying
costs during hypothetical expected lease-up periods, considering current market
conditions, and costs to execute similar leases. The Company also considers
information about each property obtained during its pre-acquisition due
diligence and marketing and leasing activities in estimating the fair value of
the tangible and intangible assets acquired.
Property
sales or dispositions are recorded when title transfers and sufficient
consideration is received by the Company and the Company has no significant
continuing involvement with the property sold. The Company’s properties are
reviewed for impairment if events or circumstances change indicating that the
carrying amount of the assets may not be recoverable. This review requires
management to exercise judgment, including making estimates about the future
performance of the properties being reviewed. If the Company incorrectly
estimates the values at acquisition or the undiscounted cash flows, initial
allocations of purchase price and future impairment charges may be different.
The impact of the Company’s estimates in connection with acquisitions and future
impairment analysis could be material to the Company’s financial
statements.
Allowance for Doubtful Accounts.
The Company periodically evaluates the collectibility of amounts due from
tenants and maintains an allowance for doubtful accounts (approximately $286,000
as of April 30, 2009) for estimated losses resulting from the inability of
tenants to make required payments under their respective lease agreements. The
Company also maintains an allowance for receivables arising from the
straight-lining of rents (approximately $842,000 as of April 30, 2009) and from
mortgage loans (approximately $3,000 as of April 30, 2009). The straight-lining
of rents receivable arises from earnings recognized in excess of amounts
currently due under lease agreements. Management exercises judgment in
establishing these allowances and considers payment history and current credit
status in developing these estimates. If estimates differ from actual results
this would impact reported results.
Revenue Recognition - The
Company has the following revenue sources and revenue recognition
policies:
|
|
•
|
Base Rents - income
arising from tenant leases. These rents are recognized over the
non-cancelable term of the related leases on a straight-line basis, which
includes the effects of rent increases and abated rent under the
leases. Certain leases provide for tenant occupancy during
periods for which no rent is due or where minimum rent payments increase
during the term of the lease. Rental revenue is recorded for the full term
of each lease on a straight-line basis. Accordingly, the Company records a
receivable from tenants for rents that it expects to collect over the
remaining lease term as deferred rents receivable. When the Company
acquires a property, the term of the existing leases is considered to
commence as of the acquisition date for the purposes of this calculation.
Revenue recognition is considered to be critical because the evaluation of
the reliability of such deferred rents receivable involves management's
assumptions relating to such tenant's
viability.
|
|
|
•
|
Percentage Rents -
income arising from retail tenant leases which are contingent upon the
sales of the tenant exceeding a defined threshold. These rents are
recognized only after the contingency has been removed (i.e., sales
thresholds have been achieved).
|
|
|
•
|
Expense Reimbursement Income
– revenue arising from tenant leases, which provide for the
recovery of all or a portion of the operating expenses and real estate
taxes of the respective property. This revenue is accrued in the same
periods as the expenses are
incurred.
|
Income Taxes. The Company
operates in a manner intended to enable it to continue to qualify as a REIT
under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under
those sections, a REIT which distributes at least 90% of its REIT taxable income
as a distribution to its shareholders each year and which meets
certain
other conditions will not be taxed on that portion of its taxable income which
is distributed to its shareholders. The Company intends to distribute to its
shareholders 100% of its taxable income. Therefore, no provision for Federal
income taxes is required. If the Company fails to distribute the required amount
of income to its shareholders, it would fail to qualify as a REIT and
substantial adverse tax consequences may result.
The
Company’s taxable income is affected by a number of factors, including, but not
limited to, the following: that the Company’s tenants perform their
obligations under their leases with the Company; that the Company’s tax and
accounting positions do not change; and that the number of issued and
outstanding shares of the Company’s common stock remain relatively
unchanged. These factors, which impact the Company’s taxable income,
are subject to change, and many are outside the control of the
Company. If actual results vary, the Company’s taxable income may
change.
Recent
Accounting Pronouncements
For
disclosure regarding recent accounting pronouncements and the anticipated impact
they will have on our operations, please refer to Note 2 to our Consolidated
Financial Statements.
RESULTS
OF OPERATIONS
Revenues
Total
revenues for fiscal year 2009 were $240.0 million, compared to $221.2 million in
fiscal year 2008 and $197.5 million in fiscal year 2007. Revenues during fiscal
year 2009 were $18.8 million greater than revenues in fiscal year 2008 and
revenues during fiscal year 2008 were $23.7 million greater than in fiscal year
2007.
For
fiscal 2009, the increase in revenue of $18.8 million resulted
from:
|
(in
thousands)
|
||||
|
Rent
from 24 properties acquired in fiscal year 2008 in excess of that
received
in
2008 from the same 24 properties
|
$ | 15,431 | ||
|
Rent
from 8 properties acquired in fiscal year 2009
|
2,093 | |||
|
Increase
in rental income on existing properties
|
1,311 | |||
| $ | 18,835 | |||
For
fiscal 2008, the increase in revenue of $23.7 million resulted
from:
|
(in
thousands)
|
||||
|
Rent
from 29 properties acquired in fiscal year 2007 in excess of that
received
in
2007 from the same 29 properties
|
$ | 14,345 | ||
|
Rent
from 24 properties acquired in fiscal year 2008
|
5,759 | |||
|
Increase
in rental income on existing properties
|
3,528 | |||
| $ | 23,632 | |||
As
illustrated above, the substantial majority (93.0% in fiscal year 2009 and 85.1%
in fiscal year 2008) of the increase in our gross revenue for fiscal years 2009
and 2008 resulted from the addition of new real estate properties to the IRET
Properties’ portfolio, with 7.0% and 14.9%, respectively, resulting
from rental increases on existing properties. For the next 12 months, we expect
acquisitions to continue to be the most significant factor in any increases in
our revenues and ultimately our net income. However, domestic financial markets
continue to experience unusual volatility and uncertainty. Although this
occurred initially most visibly within the single-family mortgage lending sector
of the credit market, liquidity has since tightened in overall domestic
financial markets, including the equity capital markets. Consequently, there is
greater uncertainty regarding our ability to access the credit markets in order
to attract financing on reasonable terms, and our ability to make acquisitions
could be adversely affected.
Gain
on Sale of Real Estate
The
Company realized a gain on sale of real estate, land and other investments for
fiscal year 2009 of approximately $54,000. This compares to approximately
$556,000 of gain on sale of real estate recognized in fiscal 2008 and
$4.6
million
recognized in fiscal 2007. A list of the properties sold during fiscal year
2008, showing sales price, depreciated cost plus sales costs and net gain is
included in this Item 7 under the caption “Property Dispositions.”
Net
Operating Income
The
following tables report segment financial information. We measure the
performance of our segments based on net operating income (“NOI”), which we
define as total real estate revenues less real estate expenses and real estate
taxes. We believe that NOI is an important supplemental measure of
operating performance for a REIT’s operating real estate because it provides a
measure of core operations that is unaffected by depreciation, amortization,
financing 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 revenues, operating expenses and NOI by reportable
operating segment for fiscal years 2009, 2008 and 2007. For a
reconciliation of net operating income of reportable segments to operating
income as reported, see Note 11 of the Notes to Consolidated Financial
Statements in this report.
The
tables also show net operating income by reportable operating segment on a
stabilized property and non-stabilized property basis. Stabilized
properties are properties owned and in operation for the entirety of the periods
being compared (including properties that were redeveloped or expanded during
the periods being compared, with properties purchased or sold during the periods
being compared excluded from the stabilized property category). This
comparison allows the Company to evaluate the performance of existing properties
and their contribution to net income. Management believes that
measuring performance on a stabilized property basis is useful to investors
because it enables evaluation of how the Company’s properties are performing
year over year. Management uses this measure to assess whether or not
it has been successful in increasing net operating income, renewing the leases
of existing tenants, controlling operating costs and appropriately handling
capital improvements.
|
(in
thousands)
|
||||||||||||||||||||||||
|
Year
Ended April 30, 2009
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Real
estate revenue
|
$ | 76,716 | $ | 83,446 | $ | 52,564 | $ | 12,711 | $ | 14,568 | $ | 240,005 | ||||||||||||
|
Real
estate expenses
|
||||||||||||||||||||||||
|
Utilities
|
7,724 | 7,851 | 2,859 | 93 | 448 | 18,975 | ||||||||||||||||||
|
Maintenance
|
10,240 | 11,287 | 4,046 | 582 | 1,448 | 27,603 | ||||||||||||||||||
|
Real
estate taxes
|
7,972 | 13,850 | 4,515 | 1,926 | 2,180 | 30,443 | ||||||||||||||||||
|
Insurance
|
1,272 | 1,003 | 419 | 175 | 182 | 3,051 | ||||||||||||||||||
|
Property
management
|
8,954 | 3,653 | 4,207 | 446 | 819 | 18,079 | ||||||||||||||||||
|
Total
real estate expenses
|
$ | 36,162 | $ | 37,644 | $ | 16,046 | $ | 3,222 | $ | 5,077 | $ | 98,151 | ||||||||||||
|
Net
operating income
|
$ | 40,554 | $ | 45,802 | $ | 36,518 | $ | 9,489 | $ | 9,491 | $ | 141,854 | ||||||||||||
|
Stabilized
net operating income
|
$ | 38,644 | $ | 43,969 | $ | 26,732 | $ | 6,882 | $ | 9,491 | $ | 125,718 | ||||||||||||
|
Non-stabilized
net operating income
|
1,910 | 1,833 | 9,786 | 2,607 | 0 | 16,136 | ||||||||||||||||||
|
Total
net operating income
|
$ | 40,554 | $ | 45,802 | $ | 36,518 | $ | 9,489 | $ | 9,491 | $ | 141,854 | ||||||||||||
|
(in
thousands)
|
||||||||||||||||||||||||
|
Year
Ended April 30, 2008
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Real
estate revenue
|
$ | 72,827 | $ | 84,042 | $ | 38,412 | $ | 11,691 | $ | 14,198 | $ | 221,170 | ||||||||||||
|
Real
estate expenses
|
||||||||||||||||||||||||
|
Utilities
|
7,388 | 7,743 | 2,111 | 131 | 420 | 17,793 | ||||||||||||||||||
|
Maintenance
|
9,637 | 10,522 | 2,757 | 558 | 1,108 | 24,582 | ||||||||||||||||||
|
Real
estate taxes
|
7,528 | 13,140 | 2,977 | 1,346 | 2,142 | 27,133 | ||||||||||||||||||
|
Insurance
|
1,162 | 901 | 257 | 135 | 169 | 2,624 | ||||||||||||||||||
|
Property
management
|
8,922 | 3,900 | 1,654 | 359 | 438 | 15,273 | ||||||||||||||||||
|
Total
real estate expenses
|
$ | 34,637 | $ | 36,206 | $ | 9,756 | $ | 2,529 | $ | 4,277 | $ | 87,405 | ||||||||||||
|
Net
operating income
|
$ | 38,190 | $ | 47,836 | $ | 28,656 | $ | 9,162 | $ | 9,921 | $ | 133,765 | ||||||||||||
|
Stabilized
net operating income
|
$ | 37,332 | $ | 47,536 | $ | 26,909 | $ | 7,576 | $ | 9,921 | $ | 129,274 | ||||||||||||
|
Non-stabilized
net operating income
|
858 | 300 | 1,747 | 1,586 | 0 | 4,491 | ||||||||||||||||||
|
Total
net operating income
|
$ | 38,190 | $ | 47,836 | $ | 28,656 | $ | 9,162 | $ | 9,921 | $ | 133,765 | ||||||||||||
|
(in
thousands)
|
||||||||||||||||||||||||
|
Year
Ended April 30, 2007
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Real
estate revenue
|
$ | 66,972 | $ | 73,603 | $ | 34,783 | $ | 8,091 | $ | 14,089 | $ | 197,538 | ||||||||||||
|
Real
estate expenses
|
||||||||||||||||||||||||
|
Utilities
|
6,666 | 6,286 | 1,771 | 57 | 377 | 15,157 | ||||||||||||||||||
|
Maintenance
|
8,619 | 9,243 | 2,611 | 218 | 1,000 | 21,691 | ||||||||||||||||||
|
Real
estate taxes
|
7,294 | 10,831 | 2,322 | 755 | 2,079 | 23,281 | ||||||||||||||||||
|
Insurance
|
1,090 | 772 | 274 | 75 | 166 | 2,377 | ||||||||||||||||||
|
Property
management
|
7,785 | 3,343 | 1,697 | 148 | 853 | 13,826 | ||||||||||||||||||
|
Total
real estate expenses
|
$ | 31,454 | $ | 30,475 | $ | 8,675 | $ | 1,253 | $ | 4,475 | $ | 76,332 | ||||||||||||
|
Net
operating income
|
$ | 35,518 | $ | 43,128 | $ | 26,108 | $ | 6,838 | $ | 9,614 | $ | 121,206 | ||||||||||||
|
Stabilized
net operating income
|
$ | 34,318 | $ | 34,675 | $ | 25,823 | $ | 6,317 | $ | 9,229 | $ | 110,362 | ||||||||||||
|
Non-stabilized
net operating income
|
1,200 | 8,453 | 285 | 521 | 385 | 10,844 | ||||||||||||||||||
|
Total
net operating income
|
$ | 35,518 | $ | 43,128 | $ | 26,108 | $ | 6,838 | $ | 9,614 | $ | 121,206 | ||||||||||||
Changes
in Expenses and Net Income
Net
income available to common shareholders for fiscal year 2009 was $6.2 million,
compared to $9.7 million in fiscal year 2008 and $11.7 million in fiscal year
2007. On a per common share basis, net income was $.11 per common share in
fiscal year 2009, compared to $.18 per common share in fiscal year 2008 and $.24
in fiscal year 2007.
These
changes in net income result from the changes in revenues and expenses detailed
below:
Changes
in net income available to common shareholders for fiscal year 2009 resulted
from:
|
(in
thousands)
|
||||
|
An
increase in net operating income primarily due to new
acquisitions
|
$ | 8,089 | ||
|
A
decrease in minority interest of operating partnership
income
|
1,297 | |||
|
A
decrease in other expenses, administrative, advisory & trustee
services
|
225 | |||
|
An
increase in gain on sale of other investments
|
12 | |||
|
These increases were offset
by:
|
||||
|
An
increase in interest expense primarily due to debt placed on new
acquisitions
|
(5,304 | ) | ||
|
An
increase in depreciation/amortization expense related to real estate
investments
|
(4,604 | ) | ||
|
A
decrease in interest income
|
(1,487 | ) | ||
|
An
increase in amortization related to non-real estate
investments
|
(592 | ) | ||
|
A
decrease in income from discontinued operations, net
|
(413 | ) | ||
|
A
decrease in other income
|
(351 | ) | ||
|
An
increase in impairment of real estate investment
|
(338 | ) | ||
|
A
decrease in minority interest of other partnership’s loss
|
(96 | ) | ||
|
Total
decrease in fiscal 2009 net income available to common
shareholders
|
$ | (3,562 | ) | |
Changes
in net income available to common shareholders for fiscal year 2008 resulted
from:
|
(in
thousands)
|
||||
|
An
increase in net operating income primarily due to new
acquisitions
|
$ | 12,559 | ||
|
An
increase in interest income
|
151 | |||
|
An
increase in minority interest of other partnership’s loss
|
110 | |||
|
An
increase in gain on sale of other investments
|
80 | |||
|
These increases were offset
by:
|
||||
|
An
increase in depreciation/amortization expense related to real estate
investments
|
(5,623 | ) | ||
|
An
increase in interest expense primarily due to debt placed on new
acquisitions
|
(5,015 | ) | ||
|
A
decrease in income from discontinued operations, net
|
(2,671 | ) | ||
|
An
increase in other expenses, administrative, advisory & trustee
services
|
(856 | ) | ||
|
An
increase in amortization related to non-real estate
investments
|
(394 | ) | ||
|
An
increase in minority interest of operating partnership
income
|
(307 | ) | ||
|
A
decrease in other income
|
(56 | ) | ||
|
Total
decrease in fiscal 2008 net income available to common
shareholders
|
$ | (2,022 | ) | |
Factors
Impacting Net Income During Fiscal Year 2009 as Compared to Fiscal Year
2008
Economic
occupancy rates in three of our five segments increased slightly compared to the
year-earlier period, and real estate revenue increased in four of our five
segments in fiscal year 2009 compared to fiscal year 2008. Net income
available to common shareholders decreased to $6.2 million in fiscal year 2009,
compared to $9.7 million in fiscal year 2008. Revenue increases
during fiscal year 2009 were offset by increases in maintenance, utilities,
mortgage interest due to increased borrowing, real estate taxes, property
management, insurance and amortization expense.
|
•
|
Economic
Occupancy. During fiscal year 2009, economic occupancy
levels at our properties increased slightly over year-earlier levels in
three of our five reportable segments (multi-family, medical and
industrial), and declined in our commercial office and retail
segments. Economic occupancy represents actual rental revenues
recognized for the period indicated as a percentage of scheduled rental
revenues for the period. Percentage rents, tenant concessions,
straightline adjustments and expense reimbursements are not considered in
computing either actual revenues or scheduled rent
revenues. Economic occupancy rates on a stabilized
property basis for the fiscal year ended April 30, 2009 compared to the
fiscal year ended April 30, 2008 are shown
below:
|
|
Fiscal
Year Ended April 30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Multi-Family
Residential
|
93.9 | % | 93.4 | % | ||||
|
Commercial
Office
|
88.9 | % | 92.1 | % | ||||
|
Commercial
Medical
|
96.0 | % | 95.6 | % | ||||
|
Commercial
Industrial
|
97.3 | % | 96.8 | % | ||||
|
Commercial
Retail
|
87.1 | % | 87.4 | % | ||||
|
•
|
Concessions. Our
overall level of tenant concessions increased for the fiscal year ended
April 30, 2009 compared to the year-earlier period. To maintain or
increase physical occupancy levels at our properties, we may offer tenant
incentives, generally in the form of lower or abated rents, which results
in decreased revenues and income from operations at our
properties. Rent concessions offered during the fiscal year
ended April 30, 2009 lowered our operating revenues by approximately $3.4
million, as compared to an approximately $3.0 million reduction in
operating revenues attributable to rent concessions offered in fiscal year
2008.
|
|
| The following table shows the approximate reduction in our operating revenues due to rent concessions, by segment, for the fiscal years ended April 30, 2009 and 2008: |
|
(in
thousands)
|
||||||||||||
|
Fiscal
Year Ended April 30,
|
||||||||||||
|
2009
|
2008
|
Change
|
||||||||||
|
Multi-Family
Residential
|
$ | 2,083 | $ | 2,254 | $ | (171 | ) | |||||
|
Commercial
Office
|
1,036 | 692 | 344 | |||||||||
|
Commercial
Medical
|
34 | 34 | 0 | |||||||||
|
Commercial
Industrial
|
220 | 0 | 220 | |||||||||
|
Commercial
Retail
|
44 | 31 | 13 | |||||||||
|
Total
|
$ | 3,417 | $ | 3,011 | $ | 406 | ||||||
|
•
|
Increased Maintenance
Expense. Maintenance expenses totaled $27.6 million in
fiscal year 2009, compared to $24.6 million in fiscal year
2008. Maintenance expenses at properties newly acquired in
fiscal years 2009 and 2008 added $1.4 million to the maintenance expense
category during fiscal year 2009 (with our commercial medical segment
accounting for $1.2 million), while maintenance expenses at existing
properties increased by approximately $1.6 million, primarily for snow
removal at our multi-family residential and commercial retail segments and
building maintenance costs at our commercial office, medical and
industrial segments, resulting in a net increase of $3.0 million or 12.3%
in maintenance expenses in fiscal year 2009 compared to fiscal year
2008. Under the terms of most of our commercial leases, the
full cost of maintenance is paid by the tenant as additional rent. For our
noncommercial real estate properties, any increase in our maintenance
costs must be collected from tenants in the form of general rent
increases.
|
|
| Maintenance expenses by reportable segment for the fiscal years ended April 30, 2009 and 2008 are as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2009
|
$ | 10,240 | $ | 11,287 | $ | 4,046 | $ | 582 | $ | 1,448 | $ | 27,603 | ||||||||||||
|
2008
|
$ | 9,637 | $ | 10,522 | $ | 2,757 | $ | 558 | $ | 1,108 | $ | 24,582 | ||||||||||||
|
%
change (2009 vs. 2008)
|
6.3 | % | 7.3 | % | 46.8 | % | 4.3 | % | 30.7 | % | 12.3 | % | ||||||||||||
|
•
|
Increased Utility
Expense. Utility expense totaled $19.0 million in fiscal
year 2009, compared to $17.8 million in fiscal year
2008. Utility expenses at properties newly acquired in fiscal
years 2009 and 2008 added $787,000 to the utility expense category during
fiscal year 2009 (with our commercial medical segment accounting for
$646,000), while utility expenses at existing properties increased by
$395,000, primarily due to increased heating costs due to unseasonably
cold temperatures and, to a lesser degree, increased rates
from
|
|
|
higher
fuel costs, (notably in our multi-family residential segment with an
increase of $224,000), for a total increase of $1.2 million or 6.6% in
utility expenses in fiscal year 2009 compared to fiscal year
2008.
|
|
| Utility expenses by reportable segment for the fiscal years ended April 30, 2009 and 2008 are as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2009
|
$ | 7,724 | $ | 7,851 | $ | 2,859 | $ | 93 | $ | 448 | $ | 18,975 | ||||||||||||
|
2008
|
$ | 7,388 | $ | 7,743 | $ | 2,111 | $ | 131 | $ | 420 | $ | 17,793 | ||||||||||||
|
%
change (2009 vs. 2008)
|
4.5 | % | 1.4 | % | 35.4 | % | (29.0 | %) | 6.7 | % | 6.6 | % | ||||||||||||
|
•
|
Increased Mortgage Interest
Expense. Our mortgage interest expense increased
approximately $5.3 million, or 8.4%, to approximately $68.0 million during
fiscal year 2009, compared to $62.7 million in fiscal year 2008. Mortgage
interest expense for properties newly acquired in fiscal years 2009 and
2008 added $5.2 million to our total mortgage interest expense in fiscal
year 2009, while mortgage interest expense on existing properties
increased $107,000. Our overall weighted average interest rate
on all outstanding mortgage debt was 6.30% as of April 30, 2009, compared
to 6.37% as of April 30, 2008. Our mortgage debt increased
approximately $6.3 million, or 0.6%, to approximately $1.1 billion as of
April 30, 2009, compared to April 30, 2008.
|
|
| Mortgage interest expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2009
|
$ | 19,696 | $ | 23,658 | $ | 16,870 | $ | 3,803 | $ | 3,939 | $ | 67,966 | ||||||||||||
|
2008
|
$ | 19,602 | $ | 23,131 | $ | 12,351 | $ | 3,481 | $ | 4,137 | $ | 62,702 | ||||||||||||
|
%
change (2009 vs. 2008)
|
0.5 | % | 2.3 | % | 36.6 | % | 9.3 | % | (4.8 | %) | 8.4 | % | ||||||||||||
|
•
|
Increased Amortization Expense.
In accordance with SFAS No. 141, Business Combinations,
which establishes standards for valuing in-place leases in purchase
transactions, the Company allocates a portion of the purchase price paid
for properties to in-place lease intangible assets. The
amortization period of these intangible assets is the term of the lease,
rather than the estimated life of the buildings and
improvements. The Company accordingly initially records
additional amortization expense due to this shorter amortization period,
which has the effect in the short term of decreasing the Company’s net
income available to common shareholders, as computed in accordance with
GAAP. Amortization expense related to in-places leases totaled
$10.2 million in fiscal year 2009, compared to $10.0 million in fiscal
year 2008. The increase in amortization expense in fiscal year 2009
compared to fiscal year 2008 was primarily due to property acquisitions
completed by the Company in fiscal year
2009.
|
|
•
|
Increased Real Estate Tax
Expense. Real estate taxes on properties newly acquired
in fiscal years 2009 and 2008 added $2.3 million to real estate tax
expense (with our commercial medical segment accounting for $1.3
million), while real estate taxes on existing properties increased by
approximately $1.0 million, for a total increase of $3.3 million or 12.2%
in real estate tax expense in fiscal year 2009 compared to fiscal year
2008, from $27.1 million to $30.4 million. The increase in real
estate taxes was primarily due to higher value assessments or increased
tax levies on our stabilized properties.
|
|
| Real estate tax expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2009
|
$ | 7,972 | $ | 13,850 | $ | 4,515 | $ | 1,926 | $ | 2,180 | $ | 30,443 | ||||||||||||
|
2008
|
$ | 7,528 | $ | 13,140 | $ | 2,977 | $ | 1,346 | $ | 2,142 | $ | 27,133 | ||||||||||||
|
%
change (2009 vs. 2008)
|
5.9 | % | 5.4 | % | 51.7 | % | 43.1 | % | 1.8 | % | 12.2 | % | ||||||||||||
|
•
|
Increased Insurance
Expense. Insurance expense increased in fiscal year 2009
compared to fiscal year 2008, from $2.6 million to $3.1 million, an
increase of approximately 16.3%. Insurance expense at
properties newly-acquired in fiscal years 2009 and 2008 added
approximately $179,000 to insurance expense, while insurance expense at
existing properties increased by approximately $248,000, for an increase
of approximately $427,000 in insurance expense in fiscal year 2009
compared to fiscal year 2008. The increase in insurance expense
at stabilized properties is due to an increase in
premiums.
|
|
| Insurance expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2009
|
$ | 1,272 | $ | 1,003 | $ | 419 | $ | 175 | $ | 182 | $ | 3,051 | ||||||||||||
|
2008
|
$ | 1,162 | $ | 901 | $ | 257 | $ | 135 | $ | 169 | $ | 2,624 | ||||||||||||
|
%
change (2009 vs. 2008)
|
9.5 | % | 11.3 | % | 63.0 | % | 29.6 | % | 7.7 | % | 16.3 | % | ||||||||||||
|
•
|
Increased Property Management
Expense. Property management expense increased in fiscal
year 2009 compared to fiscal year 2008, from $15.3 million to $18.1
million, an increase of $2.8 million or approximately 18.4%. Of
this increase, approximately $1.6 million is attributable to existing
properties, while $1.2 million is due to properties acquired in fiscal
years 2009 and 2008 (with our commercial medical segment accounting for
$826,000). The increase at existing properties is primarily due
to the increase in bad debt write-offs at our Fox River and Stevens Point
projects in our commercial medical segment of $1.4 million and in our
commercial retail segment of $279,000, offset by recoveries and decreased
write-offs in our multi-family residential and commercial office segments
compared to fiscal year 2008.
|
|
| Property management expense by reportable segment for the fiscal years ended April 30, 2009 and 2008 is as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2009
|
$ | 8,954 | $ | 3,653 | $ | 4,207 | $ | 446 | $ | 819 | $ | 18,079 | ||||||||||||
|
2008
|
$ | 8,922 | $ | 3,900 | $ | 1,654 | $ | 359 | $ | 438 | $ | 15,273 | ||||||||||||
|
%
change (2009 vs. 2008)
|
0.4 | % | (6.3 | %) | 154.4 | % | 24.2 | % | 87.0 | % | 18.4 | % | ||||||||||||
Factors
Impacting Net Income During Fiscal Year 2008 as Compared to Fiscal Year
2007
Economic
occupancy rates in three of our five segments increased slightly compared to the
year-earlier period, and real estate revenue increased in fiscal year 2008
compared to fiscal year 2007 in all of our reportable segments. Net
income available to common shareholders decreased to $9.7 million in fiscal year
2008, compared to $11.7 million in fiscal year 2007. Revenue
increases during fiscal year 2008 were offset somewhat by increases in
maintenance, utilities, mortgage interest due to increased borrowing, real
estate taxes, property management, insurance and amortization
expense.
|
•
|
Economic
Occupancy. During fiscal year 2008, economic occupancy
levels at our properties increased slightly over year-earlier levels in
three of our five reportable segments, and declined in our commercial
medical and retail segments. Economic occupancy represents
actual rental revenues recognized for the period indicated as a percentage
of scheduled rental revenues for the period. Percentage rents, tenant
concessions, straightline adjustments and expense reimbursements are not
considered in computing either actual revenues or scheduled rent
revenues. Economic occupancy rates on a stabilized
property basis for the fiscal year ended April 30, 2008 compared to the
fiscal year ended April 30, 2007 are shown
below:
|
|
Fiscal
Year Ended April 30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Multi-Family
Residential
|
93.3 | % | 93.2 | % | ||||
|
Commercial
Office
|
91.0 | % | 90.8 | % | ||||
|
Commercial
Medical
|
95.5 | % | 96.7 | % | ||||
|
Commercial
Industrial
|
96.2 | % | 94.8 | % | ||||
|
Commercial
Retail
|
87.1 | % | 89.3 | % | ||||
|
•
|
Concessions. Our
overall level of tenant concessions declined for the fiscal year ended
April 30, 2008 compared to the year-earlier period. To maintain or
increase physical occupancy levels at our properties, we may offer tenant
incentives, generally in the form of lower or abated rents, which results
in decreased revenues and income from operations at our
properties. Rent concessions offered during the fiscal year
ended April 30, 2008 lowered our operating revenues by approximately $3.0
million, as compared to an approximately $5.0 million reduction in
operating revenues attributable to rent concessions offered in fiscal year
2007.
|
|
| The following table shows the approximate reduction in our operating revenues due to rent concessions, by segment, for the fiscal years ended April 30, 2008 and 2007: |
|
(in
thousands)
|
||||||||||||
|
Fiscal
Year Ended April 30,
|
||||||||||||
|
2008
|
2007
|
Change
|
||||||||||
|
Multi-Family
Residential
|
$ | 2,254 | $ | 3,147 | (893 | ) | ||||||
|
Commercial
Office
|
692 | 1,769 | (1,077 | ) | ||||||||
|
Commercial
Medical
|
34 | 70 | (36 | ) | ||||||||
|
Commercial
Industrial
|
0 | 14 | (14 | ) | ||||||||
|
Commercial
Retail
|
31 | 22 | 9 | |||||||||
|
Total
|
$ | 3,011 | $ | 5,022 | (2,011 | ) | ||||||
|
•
|
Increased Maintenance
Expense. Maintenance expenses totaled $24.6 million in
fiscal year 2008, compared to $21.7 million in fiscal year
2007. Maintenance expenses at properties newly acquired in
fiscal years 2008 and 2007 added $2.3 million to the maintenance expense
category during fiscal year 2008, while maintenance expenses at existing
properties increased by approximately $568,000 primarily for snow removal
and janitorial contract services, resulting in a net increase of $2.9
million or 13.3% in maintenance expenses in fiscal year 2008 compared to
fiscal year 2007. Under the terms of most of our commercial
leases, the full cost of maintenance is paid by the tenant as additional
rent. For our noncommercial real estate properties, any increase in our
maintenance costs must be collected from tenants in the form of general
rent increases.
|
|
| Maintenance expenses by reportable segment for the fiscal years ended April 30, 2008 and 2007 were as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2008
|
$ | 9,637 | $ | 10,522 | $ | 2,757 | $ | 558 | $ | 1,108 | $ | 24,582 | ||||||||||||
|
2007
|
$ | 8,619 | $ | 9,243 | $ | 2,611 | $ | 218 | $ | 1,000 | $ | 21,691 | ||||||||||||
|
%
change (2008 vs. 2007)
|
11.8 | % | 13.8 | % | 5.6 | % | 156.0 | % | 10.8 | % | 13.3 | % | ||||||||||||
|
•
|
Increased Utility
Expense. Utility expense totaled $17.8 million in fiscal
year 2008, compared to $15.2 million in fiscal year
2007. Utility expenses at properties newly acquired in fiscal
years 2008 and 2007 added $1.5 million to the utility expense category
during fiscal year 2008, while utility expenses at existing properties
increased by $1.1 million, primarily due to unusually warm weather in
certain of IRET’s markets, resulting in increased cooling costs, for a
total increase of $2.6 million or 17.4% in utility expenses in fiscal year
2008 compared to fiscal year
2007.
|
|
|
Utility
expenses by reportable segment for the fiscal years ended April 30, 2008
and 2007 were as follows:
|
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2008
|
$ | 7,388 | $ | 7,743 | $ | 2,111 | $ | 131 | $ | 420 | $ | 17,793 | ||||||||||||
|
2007
|
$ | 6,666 | $ | 6,286 | $ | 1,771 | $ | 57 | $ | 377 | $ | 15,157 | ||||||||||||
|
%
change (2008 vs. 2007)
|
10.8 | % | 23.2 | % | 19.2 | % | 129.8 | % | 11.4 | % | 17.4 | % | ||||||||||||
|
•
|
Increased Mortgage Interest
Expense. Our mortgage interest expense increased
approximately $6.1 million, or 10.8%, to approximately $62.7 million
during fiscal year 2008, compared to $56.6 million in fiscal year 2007.
Mortgage interest expense for properties newly acquired in fiscal years
2008 and 2007 added $6.1 million to our total mortgage interest expense in
fiscal year 2008, while mortgage interest expense on existing properties
increased $24,000. Our overall weighted average interest rate
on all outstanding mortgage debt was 6.37% as of April 30, 2008, compared
to 6.43% as of April 30, 2007. Our mortgage debt increased
approximately $112.8 million, or 11.9%, to approximately $1.1 billion as
of April 30, 2008, compared to $951.1 million on April 30,
2007.
|
|
| Mortgage interest expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 were as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2008
|
$ | 19,602 | $ | 23,131 | $ | 12,351 | $ | 3,481 | $ | 4,137 | $ | 62,702 | ||||||||||||
|
2007
|
$ | 18,723 | $ | 20,157 | $ | 11,291 | $ | 2,325 | $ | 4,070 | $ | 56,566 | ||||||||||||
|
%
change (2008 vs. 2007)
|
4.7 | % | 14.8 | % | 9.4 | % | 49.7 | % | 1.6 | % | 10.8 | % | ||||||||||||
|
•
|
Increased Amortization Expense.
In accordance with SFAS No. 141, Business Combinations,
which establishes standards for valuing in-place leases in purchase
transactions, the Company allocates a portion of the purchase price paid
for properties to in-place lease intangible assets. The
amortization period of these intangible assets is the term of the lease,
rather than the estimated life of the buildings and
improvements. The Company accordingly initially records
additional amortization expense due to this shorter amortization period,
which has the effect in the short term of decreasing the Company’s net
income available to common shareholders, as computed in accordance with
GAAP. Amortization expense related to in-place leases totaled
$10.0 million in fiscal year 2008, compared to $9.2 million in fiscal year
2007. The increase in amortization expense in fiscal year 2008 compared to
fiscal year 2007 was primarily due to property acquisitions completed by
the Company in fiscal year
2008.
|
|
•
|
Increased Real Estate Tax
Expense. Real estate taxes on properties newly acquired
in fiscal years 2008 and 2007 added $3.1 million to real estate tax
expense, while real estate taxes on existing properties increased by
approximately $738,000, for a total increase of $3.8 million or 16.5% in
real estate tax expense in fiscal year 2008 compared to fiscal year 2007,
from $23.3 million to $27.1 million.
|
|
| Real estate tax expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 was as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2008
|
$ | 7,528 | $ | 13,140 | $ | 2,977 | $ | 1,346 | $ | 2,142 | $ | 27,133 | ||||||||||||
|
2007
|
$ | 7,294 | $ | 10,831 | $ | 2,322 | $ | 755 | $ | 2,079 | $ | 23,281 | ||||||||||||
|
%
change (2008 vs. 2007)
|
3.2 | % | 21.3 | % | 28.2 | % | 78.2 | % | 3.0 | % | 16.5 | % | ||||||||||||
|
•
|
Increased Insurance
Expense. Insurance expense increased in fiscal year 2008
compared to fiscal year 2007, from $2.4 million to $2.6 million, an
increase of approximately 10.4%. Insurance expense at
properties newly-acquired in fiscal years 2008 and 2007 added
approximately $240,000 to insurance expense,
while
|
|
|
insurance
expense at existing properties increased by approximately $7,000, for a
net increase of approximately $247,000 in insurance expense in fiscal year
2008 compared to fiscal year 2007.
|
|
| Insurance expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 was as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2008
|
$ | 1,162 | $ | 901 | $ | 257 | $ | 135 | $ | 169 | $ | 2,624 | ||||||||||||
|
2007
|
$ | 1,090 | $ | 772 | $ | 274 | $ | 75 | $ | 166 | $ | 2,377 | ||||||||||||
|
%
change (2008 vs. 2007)
|
6.6 | % | 16.7 | % | (6.2 | %) | 80.0 | % | 1.8 | % | 10.4 | % | ||||||||||||
|
•
|
Increased Property Management
Expense. Property management expense increased in fiscal
year 2008 compared to fiscal year 2007, from $13.8 million to $15.3
million, an increase of $1.4 million or approximately 10.5%. Of
this increase, approximately $240,000 million was attributable to existing
properties, while $1.2 million was due to properties acquired in fiscal
years 2008 and 2007. The increase at existing properties was
primarily due to an increase in property revenue resulting in higher
management fees payable (management fees are generally a percentage of
rents received).
|
|
| Property management expense by reportable segment for the fiscal years ended April 30, 2008 and 2007 was as follows: |
|
(in
thousands)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
Commercial
Office
|
Commercial
Medical
|
Commercial
Industrial
|
Commercial
Retail
|
Total
|
|||||||||||||||||||
|
2008
|
$ | 8,922 | $ | 3,900 | $ | 1,654 | $ | 359 | $ | 438 | $ | 15,273 | ||||||||||||
|
2007
|
$ | 7,785 | $ | 3,343 | $ | 1,697 | $ | 148 | $ | 853 | $ | 13,826 | ||||||||||||
|
%
change (2008 vs. 2007)
|
14.6 | % | 16.7 | % | (2.5 | %) | 142.6 | % | (48.7 | %) | 10.5 | % | ||||||||||||
Comparison
of Results from Commercial and Residential 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 commercial and multi-family residential properties over
the past three fiscal years:
|
(in
thousands)
|
||||||||||||||||||||||||
|
Fiscal
Years Ended April 30
|
2009
|
%
|
2008
|
%
|
2007
|
%
|
||||||||||||||||||
|
Real
Estate Investments – (cost)
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
$ | 542,547 | 31.4 | % | $ | 510,697 | 31.0 | % | $ | 489,644 | 32.9 | % | ||||||||||||
|
Commercial
Office
|
571,565 | 33.0 | % | 556,712 | 33.8 | % | 536,431 | 36.0 | % | |||||||||||||||
|
Commercial
Medical
|
388,219 | 22.4 | % | 359,986 | 21.8 | % | 274,779 | 18.4 | % | |||||||||||||||
|
Commercial
Industrial
|
108,103 | 6.3 | % | 104,060 | 6.3 | % | 75,257 | 5.1 | % | |||||||||||||||
|
Commercial
Retail
|
119,151 | 6.9 | % | 116,804 | 7.1 | % | 113,176 | 7.6 | % | |||||||||||||||
|
Total
|
$ | 1,729,585 | 100 | % | $ | 1,648,259 | 100 | % | $ | 1,489,287 | 100.0 | % | ||||||||||||
|
Net
Operating Income
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
$ | 40,554 | 28.6 | % | $ | 38,190 | 28.6 | % | $ | 35,518 | 29.4 | % | ||||||||||||
|
Commercial
Office
|
45,802 | 32.3 | % | 47,836 | 35.8 | % | 43,128 | 35.6 | % | |||||||||||||||
|
Commercial
Medical
|
36,518 | 25.7 | % | 28,656 | 21.4 | % | 26,108 | 21.5 | % | |||||||||||||||
|
Commercial
Industrial
|
9,489 | 6.7 | % | 9,162 | 6.8 | % | 6,838 | 5.6 | % | |||||||||||||||
|
Commercial
Retail
|
9,491 | 6.7 | % | 9,921 | 7.4 | % | 9,614 | 7.9 | % | |||||||||||||||
|
Total
|
$ | 141,854 | 100.0 | % | $ | 133,765 | 100.0 | % | $ | 121,206 | 100.0 | % | ||||||||||||
Analysis of Lease Expirations and
Credit Risk
The
following table shows the annual lease expiration percentages and base rent of
expiring leases for the total commercial segments properties owned by us as of
April 30, 2009, for fiscal years 2010 through 2019, and the leases that will
expire during fiscal year 2019 and beyond. Our multi-family residential
properties are excluded from this table, since residential leases are generally
for a one-year term.
|
Fiscal
Year of Lease Expiration
|
Square
Footage of Expiring Leases
|
Percentage
of Total Commercial Segments Leased Square Footage
|
Annualized
Base
Rent
of Expiring
Leases
at Expiration
|
Percentage
of Total Commercial Segments Annualized Base Rent
|
||||||||||||
|
2010
|
915,355 | 9.1 | % | $ | 7,724,008 | 6.8 | % | |||||||||
|
2011
|
2,125,056 | 21.2 | % | 16,808,994 | 14.8 | % | ||||||||||
|
2012
|
1,368,366 | 13.6 | % | 15,339,409 | 13.5 | % | ||||||||||
|
2013
|
858,447 | 8.6 | % | 9,202,739 | 8.1 | % | ||||||||||
|
2014
|
808,845 | 8.1 | % | 11,355,964 | 10.0 | % | ||||||||||
|
2015
|
507,268 | 5.1 | % | 5,561,416 | 4.9 | % | ||||||||||
|
2016
|
755,725 | 7.5 | % | 6,347,956 | 5.6 | % | ||||||||||
|
2017
|
631,238 | 6.3 | % | 8,981,845 | 7.9 | % | ||||||||||
|
2018
|
270,955 | 2.7 | % | 5,806,846 | 5.1 | % | ||||||||||
|
2019
|
434,156 | 4.3 | % | 5,439,379 | 4.8 | % | ||||||||||
|
Thereafter
|
1,353,412 | 13.5 | % | 20,968,934 | 18.5 | % | ||||||||||
|
Totals
|
10,028,823 | 100.0 | % | $ | 113,537,490 | 100.0 | % | |||||||||
The
following table lists our top ten commercial tenants on April 30, 2009, for the
total commercial segments properties owned by us as of April 30, 2009, based
upon minimum rents in place as of April 30, 2009:
|
(in
thousands)
|
||||
|
Lessee
|
%
of Total Commercial Segments Minimum Rents as of April 30,
2009
|
|||
|
Affiliates
of Edgewood Vista
|
9.9 | % | ||
|
St.
Lukes Hospital of Duluth, Inc.
|
3.5 | % | ||
|
Fairview
Health
|
2.4 | % | ||
|
Applied
Underwriters
|
2.2 | % | ||
|
Best
Buy Co., Inc. (NYSE: BBY)
|
2.0 | % | ||
|
HealthEast
Care System
|
1.7 | % | ||
|
UGS
Corp.
|
1.6 | % | ||
|
Microsoft
(Nasdaq: MSFT)
|
1.5 | % | ||
|
Smurfit
- Stone Container (Nasdaq: SSCC)(1)
|
1.5 | % | ||
|
Arcadis
Corporate Services (Nasdaq: ARCAF)
|
1.4 | % | ||
|
All
Others
|
72.3 | % | ||
|
Total
Monthly Rent as of April 30, 2009
|
100.0 | % | ||
|
(1)
|
Smurfit-Stone
Container has filed bankruptcy under Chapter 11 of the Bankruptcy Code. As
of April 30, 2009, Smurfit was current on all base rent payment under its
leases with us. We have not yet been notified of the debtor’s intentions
with respect to these leases.
|
Property
Acquisitions
IRET
Properties paid approximately $33.8 million for real estate properties
added to its
portfolio during fiscal year 2009, compared to $154.7 million in fiscal year
2008. The fiscal year 2009 and 2008 additions are detailed below.
Fiscal 2009 (May 1, 2008 to April 30,
2009)
|
(in
thousands)
|
||||||||||||||||
|
Acquisitions
and Development Projects Placed in Service
|
Land
|
Building
|
Intangible
Assets
|
Acquisition
Cost
|
||||||||||||
|
Multi-Family
Residential
|
||||||||||||||||
|
33-unit
Minot Westridge Apartments – Minot, ND
|
$ | 67 | $ | 1,887 | $ | 0 | $ | 1,954 | ||||||||
|
12-unit
Minot Fairmont Apartments – Minot, ND
|
28 | 337 | 0 | 365 | ||||||||||||
|
4-unit
Minot 4th
Street Apartments – Minot, ND
|
15 | 74 | 0 | 89 | ||||||||||||
|
3-unit
Minot 11th
Street Apartments – Minot, ND
|
11 | 53 | 0 | 64 | ||||||||||||
|
36-unit
Evergreen Apartments – Isanti, MN
|
380 | 2,720 | 0 | 3,100 | ||||||||||||
|
10-unit
401 S. Main Apartments – Minot, ND1
|
0 | 905 | 0 | 905 | ||||||||||||
|
71-unit
IRET Corporate Plaza Apartments – Minot, ND2
|
0 | 10,824 | 0 | 10,824 | ||||||||||||
| 501 | 16,800 | 0 | 17,301 | |||||||||||||
|
Commercial
Property - Office
|
||||||||||||||||
|
22,500
sq. ft. Bismarck 715 E. Bdwy – Bismarck, ND
|
389 | 1,267 | 255 | 1,911 | ||||||||||||
|
50,360
sq. ft. IRET Corporate Plaza – Minot, ND2
|
0 | 3,896 | 0 | 3,896 | ||||||||||||
| 389 | 5,163 | 255 | 5,807 | |||||||||||||
|
Commercial
Property - Medical
|
||||||||||||||||
|
56,239
sq. ft. 2828 Chicago Avenue – Minneapolis, MN3
|
0 | 5,052 | 0 | 5,052 | ||||||||||||
|
31,643
sq. ft. Southdale Medical Expansion
(6545
France) – Edina, MN4
|
0 | 779 | 0 | 779 | ||||||||||||
| 0 | 5,831 | 0 | 5,831 | |||||||||||||
|
Commercial
Property - Industrial
|
||||||||||||||||
|
69,984
sq. ft. Minnetonka 13600 Cty Rd 62
–
Minnetonka, MN
|
809 | 2,881 | 310 | 4,000 | ||||||||||||
| 809 | 2,881 | 310 | 4,000 | |||||||||||||
|
Unimproved
Land
|
||||||||||||||||
|
Bismarck
2130 S. 12th
Street – Bismarck, ND
|
576 | 0 | 0 | 576 | ||||||||||||
|
Bismarck
700 E. Main – Bismarck, ND
|
314 | 0 | 0 | 314 | ||||||||||||
| 890 | 0 | 0 | 890 | |||||||||||||
|
Total
Property Acquisitions
|
$ | 2,589 | $ | 30,675 | $ | 565 | $ | 33,829 | ||||||||
|
(1)
|
Development
property placed in service November 10, 2008. Approximately $145,000 of
this cost was incurred in the three months ended April 30,
2009. Additional costs incurred in fiscal year 2008 totaled
approximately $14,000 for a total project cost at April 30, 2009 of
approximately $919,000.
|
|
(2)
|
Development
property placed in service January 19, 2009. Approximately $1.8
million of the residential cost and $563,000 of the commercial office cost
was incurred in the three months ended April 30, 2009. Additional costs
incurred in fiscal years 2008 and 2007 totaled $8.6 million for a total
project cost at April 30, 2009 of $23.3
million.
|
|
(3)
|
Development
property placed in service September 16, 2008. Approximately $800,000 of
this cost was incurred in the three months ended January 31, 2009.
Additional costs incurred in fiscal years 2008 and 2007 totaled $7.8
million for a total project cost at April 30, 2009 of $12.9
million.
|
|
(4)
|
Development
property placed in service September 17, 2008. Approximately $364,000 of
this cost was incurred in the three months ended January 31, 2009.
Additional costs incurred in fiscal year 2008 totaled $5.4 million for a
total project cost at April 30, 2009 of $6.2
million.
|
Fiscal 2008 (May 1, 2007 to April 30,
2008)
|
(in
thousands)
|
||||||||||||||||
|
Acquisitions
and Development Projects Placed in Service
|
Land
|
Building
|
Intangible
Assets
|
Acquisition
Cost
|
||||||||||||
|
Multi-Family
Residential
|
||||||||||||||||
|
96
– unit Greenfield Apartments – Omaha, NE
|
$ | 578 | $ | 4,122 | $ | 0 | $ | 4,700 | ||||||||
|
67
– unit Cottonwood Lake IV – Bismarck, ND1
|
267 | 5,924 | 0 | 6,191 | ||||||||||||
| 845 | 10,046 | 0 | 10,891 | |||||||||||||
|
Commercial
Property – Office
|
||||||||||||||||
|
20,528
sq. ft. Plymouth 5095 Nathan Lane Office Building – Plymouth,
MN
|
604 | 1,236 | 160 | 2,000 | ||||||||||||
|
78,560
sq. ft. 610 Business Center IV – Brooklyn Park, MN
|
975 | 5,525 | 0 | 6,500 | ||||||||||||
|
64,607
sq. ft. Intertech Office Building – Fenton, MO
|
2,130 | 3,951 | 919 | 7,000 | ||||||||||||
| 3,709 | 10,712 | 1,079 | 15,500 | |||||||||||||
|
Commercial
Property—Medical (including Senior Housing)
|
||||||||||||||||
|
18,502
sq. ft. Barry Pointe Medical Building – Kansas City, MO
|
384 | 2,355 | 461 | 3,200 | ||||||||||||
|
11,800
sq. ft./28 beds Edgewood Vista – Billings, MT
|
115 | 1,743 | 2,392 | 4,250 | ||||||||||||
|
18,488
sq. ft./36 beds Edgewood Vista – East Grand Forks, MN
|
290 | 1,346 | 3,354 | 4,990 | ||||||||||||
|
11,800
sq. ft./28 beds Edgewood Vista – Sioux Falls, SD
|
314 | 971 | 2,065 | 3,350 | ||||||||||||
|
55,478
sq. ft. Edina 6405 France Medical – Edina, MN2
|
0 | 12,179 | 1,436 | 13,615 | ||||||||||||
|
70,934
sq. ft. Edina 6363 France Medical – Edina, MN2
|
0 | 12,651 | 709 | 13,360 | ||||||||||||
|
57,212
sq. ft. Minneapolis 701 25th
Ave Medical (Riverside) – Minneapolis, MN2
|
0 | 7,225 | 775 | 8,000 | ||||||||||||
|
53,466
sq. ft. Burnsville 303 Nicollet Medical (Ridgeview) – Burnsville,
MN
|
1,071 | 6,842 | 887 | 8,800 | ||||||||||||
|
36,199
sq. ft. Burnsville 305 Nicollet Medical (Ridgeview South) – Burnsville,
MN
|
189 | 5,127 | 584 | 5,900 | ||||||||||||
|
17,640
sq. ft. Eagan 1440 Duckwood Medical – Eagan, MN
|
521 | 1,547 | 257 | 2,325 | ||||||||||||
|
5,192
sq. ft./13 beds Edgewood Vista – Belgrade, MT
|
35 | 744 | 1,321 | 2,100 | ||||||||||||
|
5,194
sq. ft./13 beds Edgewood Vista – Columbus, NE
|
43 | 793 | 614 | 1,450 | ||||||||||||
|
168,801
sq. ft./185 beds Edgewood Vista – Fargo, ND
|
792 | 20,578 | 4,480 | 25,850 | ||||||||||||
|
5,185
sq. ft./13 beds Edgewood Vista – Grand Island, NE
|
34 | 742 | 624 | 1,400 | ||||||||||||
|
5,135
sq. ft./13 beds Edgewood Vista – Norfolk, NE
|
42 | 691 | 567 | 1,300 | ||||||||||||
| 3,830 | 75,534 | 20,526 | 99,890 | |||||||||||||
|
Commercial
Property – Industrial
|
||||||||||||||||
|
50,400
sq. ft. Cedar Lake Business Center – St. Louis Park, MN
|
896 | 2,802 | 342 | 4,040 | ||||||||||||
|
528,353
sq. ft. Urbandale Warehouse Building – Urbandale, IA
|
3,679 | 9,840 | 481 | 14,000 | ||||||||||||
|
69,600
sq. ft. Woodbury 1865 Woodlane – Woodbury, MN
|
1,108 | 2,613 | 279 | 4,000 | ||||||||||||
|
198,600
sq. ft. Eagan 2785 & 2795 Highway 55—Eagan, MN
|
3,058 | 2,557 | 785 | 6,400 | ||||||||||||
| 8,741 | 17,812 | 1,887 | 28,440 | |||||||||||||
|
Total
Property Acquisitions
|
$ | 17,125 | $ | 114,104 | $ | 23,492 | $ | 154,721 | ||||||||
|
(1)
|
Development
property placed in service January 2,
2008.
|
|
(2)
|
Acquisition
of leasehold interests only (air rights lease and ground
leases).
|
Property
Dispositions
During
fiscal year 2009, the Company had no material dispositions, compared to two
properties and two buildings of an apartment community sold for an
aggregate sale price of $1.4 million during fiscal 2008. Real estate assets sold
by IRET during fiscal year 2008 were as follows:
|
(in
thousands)
|
||||||||||||
|
Fiscal
2008 Dispositions
|
Sales
Price
|
Book
Value
and
Sales Cost
|
Gain/Loss
|
|||||||||
|
Multi-Family
Residential
|
||||||||||||
|
405
Grant Ave (Lonetree) Apartments – Harvey, ND
|
$ | 185 | $ | 184 | $ | 1 | ||||||
|
Sweetwater
Apartments – Devils Lake, ND
|
940 | 430 | 510 | |||||||||
| 1,125 | 614 | 511 | ||||||||||
|
Commercial
Property – Office
|
||||||||||||
|
Minnetonka
Office Buildings – Minnetonka, MN
|
310 | 307 | 3 | |||||||||
| 310 | 307 | 3 | ||||||||||
|
Total
Fiscal 2008 Property Dispositions
|
$ | 1,435 | $ | 921 | $ | 514 | ||||||
Funds
From Operations
IRET
considers Funds from Operations (“FFO”) a useful measure of performance for an
equity REIT. IRET uses the definition of FFO adopted by the National Association
of Real Estate Investment Trusts, Inc. (“NAREIT”) in 1991, as clarified in 1995,
1999 and 2002. 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.” Because of limitations of the FFO
definition adopted by NAREIT, IRET has made certain interpretations in applying
the definition. IRET believes all such interpretations not
specifically provided for in the NAREIT definition are consistent with the
definition.
IRET
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 IRET’s 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 definition of
FFO, of gains and losses from the sales of previously depreciated operating real
estate assets, allows IRET management and investors to better identify the
operating results of the long-term assets that form the core of IRET’s
investments, and assists in comparing those operating results between
periods. FFO is used by IRET’s 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 IRET’s 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 IRET’s needs or its ability to service
indebtedness or make distributions.
FFO
applicable to common shares and limited partnership units for the fiscal year
ended April 30, 2009 increased to $64.6 million, compared to $64.2 million and
$57.0 million for the fiscal years ended April 30, 2008 and 2007,
respectively.
Reconciliation of Net Income to Funds
From Operations
For the years ended April 30, 2009,
2008 and 2007:
|
(in
thousands, except per share and unit amounts)
|
||||||||||||||||||||||||||||||||||||
|
Fiscal
Years Ended April 30,
|
2009
|
2008
|
2007
|
|||||||||||||||||||||||||||||||||
|
Amount
|
Weighted
Avg
Shares
and
Units(2)
|
Per
Share
and
Unit(3)
|
Amount
|
Weighted
Avg
Shares
and
Units(2)
|
Per
Share
and
Unit(3)
|
Amount
|
Weighted
Avg
Shares
and
Units(2)
|
Per
Share
and
Unit(3)
|
||||||||||||||||||||||||||||
|
Net
income
|
$ | 8,526 | $ | $ | 12,088 | $ | $ | 14,110 | $ | |||||||||||||||||||||||||||
|
Less
dividends to preferred shareholders
|
(2,372 | ) | (2,372 | ) | (2,372 | ) | ||||||||||||||||||||||||||||||
|
Net
income available to common shareholders
|
6,154 | 58,603 | 0.11 | 9,716 | 53,060 | 0.18 | 11,738 | 47,672 | 0.24 | |||||||||||||||||||||||||||
|
Adjustments:
|
||||||||||||||||||||||||||||||||||||
|
Minority
interest in earnings of unitholders
|
2,227 | 21,217 | 3,677 | 20,417 | 4,299 | 17,017 | ||||||||||||||||||||||||||||||
|
Depreciation
and amortization(1)
|
56,295 | 51,303 | 45,559 | |||||||||||||||||||||||||||||||||
|
Gains
on depreciable property sales
|
(54 | ) | (514 | ) | (4,602 | ) | ||||||||||||||||||||||||||||||
|
Funds
from operations applicable to common shares and Units(4)
|
$ | 64,622 | 79,820 | $ | 0.81 | $ | 64,182 | 73,477 | $ | 0.87 | $ | 56,994 | 64,689 | $ | 0.88 | |||||||||||||||||||||
|
(1)
|
Real
estate depreciation and amortization consists of the sum of
depreciation/amortization related to real estate investments and
amortization related to non-real estate investments from the Consolidated
Statements of Operations, totaling $56,714, $51,518 and $45,501 and
depreciation/amortization from Discontinued Operations of $0, $47 and $
299, less corporate-related depreciation and amortization on office
equipment and other assets of $419, $262 and $241 for the fiscal year
ended April 30, 2009, 2008 and
2007.
|
|
(2)
|
UPREIT
Units of the Operating Partnership are exchangeable for common shares of
beneficial interest on a one-for-one
basis.
|
|
(3)
|
Net
income is calculated on a per share basis. FFO is calculated on a per
share and unit basis.
|
|
(4)
|
In
accordance with SEC and NAREIT guidance, IRET does not exclude impairment
write-downs from FFO (that is, impairment charges are not added back to
GAAP net income in calculating FFO). IRET recorded impairment charges of
$338, $0 and $640 for the fiscal years ended April 30, 2009, 2008 and
2007, respectively. If these impairment charges are excluded from the
Company's calculation of FFO, the Company's FFO per share and unit would
be unchanged for fiscal year 2009 and 2008, and would increase by one cent
per share and unit of fiscal year 2007, to $.89 per share and
unit.
|
Cash
Distributions
The
following cash distributions were paid to our common shareholders and UPREIT
unitholders during fiscal years 2009, 2008 and 2007:
|
Fiscal
Years
|
||||||||||||
|
Quarters
|
2009
|
2008
|
2007
|
|||||||||
|
First
|
$ | .1685 | $ | .1665 | $ | .1645 | ||||||
|
Second
|
.1690 | .1670 | .1650 | |||||||||
|
Third
|
.1695 | .1675 | .1655 | |||||||||
|
Fourth
|
.1700 | .1680 | .1660 | |||||||||
| $ | .6770 | $ | .6690 | $ | .6610 | |||||||
The
fiscal year 2009 cash distributions increased 1.2% over the cash distributions
paid during fiscal year 2008, and fiscal year 2008 cash distributions increased
1.2% over the cash distributions paid during fiscal year 2007,
respectively.
Liquidity
and Capital Resources
Overview
Management
expects that the Company’s principal liquidity demands will continue to be
distributions to holders of the Company’s preferred and common shares of
beneficial interest and UPREIT Units, capital improvements and repairs and
maintenance to the Company’s properties, acquisition of additional properties,
property development, debt repayments and tenant improvements.
The
Company expects to meet its short-term liquidity requirements through net cash
flows provided by its operating activities, and through draws from time to time
on its unsecured lines of credit. Management considers the
Company’s
ability to generate cash to be adequate to meet all operating requirements and
to make distributions to its 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 expected
to be funded from cash flow generated from operations of current
properties.
To the
extent the Company does not satisfy its long-term liquidity requirements, which
consist primarily of maturities under the Company’s long-term debt, construction
and development activities and potential acquisition opportunities, through net
cash flows provided by operating activities and its credit facilities, the
Company intends to satisfy such requirements through a combination of funding
sources which the Company believes will be available to it, including the
issuance of UPREIT 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 on terms that we consider attractive. In
particular, as a result of the current economic downturn and turmoil in the
capital markets, the availability of secured and unsecured loans has been
sharply curtailed, and long-term credit has become significantly more costly. We
cannot predict how long these conditions will continue.
We
believe that we will generate sufficient cash flow from operations and have
access to the capital resources necessary to fund our requirements. However, 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 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, 2009, the Company had three unsecured lines of credit, in the amounts
of $10.0 million, $12.0 million and $14.0 million, respectively, from (1) Bremer
Bank, Minot, ND; (2) First Western Bank and Trust, Minot, ND; and (3) First
International Bank and Trust, Watford City, ND. As of April 30, 2009, the
Company had an outstanding balance of $4.0 million at First International Bank
and Trust. Borrowings under the lines of credit bear interest based on the
following, respectively: (1) Bremer Financial Corporation Reference Rate with a
floor of 4.00%, (2) 175 basis points below the Wall Street Journal Prime Rate
with a floor of 5.25% and a ceiling of 8.25%, and (3) 50 basis points above the
Wall Street Journal Prime Rate. Increases in interest rates will increase the
Company’s interest expense on any borrowings under its lines of credit, and as a
result will affect the Company’s results of operations and cash flows. The
Company’s lines of credit with Bremer Bank, First Western Bank and First
International Bank and Trust expire in September 2009, December 2011 and
December 2009, respectively. The Company expects to renew these lines
of credit prior to their expiration. In addition to these three lines
of credit, the Company also has a fully-drawn $5.0 million line of credit
maturing in November 2009 with Dacotah Bank in Minot, North Dakota. Of this $5.0
million, the Company includes $3.5 million in mortgages payable on the Company’s
balance sheet, as secured by six small apartment properties owned by the
Company, with the remaining $1.5 million included in revolving lines of
credit.
In
September 2008, the Company filed a shelf registration statement on Form S-3 to
offer for sale from time to time common shares and preferred shares. This
registration statement was declared effective in October 2008. We may sell any
combination of common shares and preferred shares up to an aggregate initial
offering price of $150.0 million during the period that the registration
statement remains effective. This registration statement replaced the Company’s
previous shelf registration statement on Form S-3, which would have expired in
December 2008; the remaining securities available for issuance under the
previous registration statement (in an aggregate amount of approximately $30.7
million) were transferred to the current registration statement. The Company did
not issue any common or preferred shares under the previous registration
statement in fiscal year 2007. The Company issued 6.9 million common shares
under the previous registration statement in fiscal year 2008, for net proceeds
of $66.4
million.
As of April 30, 2009, the Company had available securities under the current
registration statement in the aggregate amount of approximately $143.9
million.
Continued
uncertainty in the credit markets and declines and weakness in the general
economy negatively impacted IRET during fiscal year 2009. The credit
markets have become considerably less favorable than in the recent past, and
IRET accordingly has shifted its financing strategy to include more equity sales
in order to address its financing needs. Uncertainty about the
pricing of commercial real estate and the curtailment of available financing to
facilitate transactions has significantly reduced IRET’s ability to rely on
cash-out refinancings and proceeds from the sale of real estate to provide funds
for investment opportunities. Additionally, current market conditions
are not favorable for acquisitions and development, and consequently the
potential for growth in net income from acquisitions and development is
anticipated to be limited in fiscal year 2010.
Despite
these market uncertainties, and a tightening in credit standards by lenders
during the latter half of fiscal year 2009 in particular, IRET during fiscal
year 2009 acquired or placed in service properties with an investment cost
totaling $33.8 million. The Company had no material dispositions during fiscal
year 2009.
The
Company has a Distribution Reinvestment and Share Purchase Plan (“DRIP”). The
DRIP provides shareholders of the Company an opportunity to invest their cash
distributions in common shares of the Company at a discount (currently 5%) from
the market price, and to purchase additional common shares of the Company with
voluntary cash contributions, also at a discount to the market price. During
fiscal year 2009, approximately 1.3 million common shares were issued under this
plan, with an additional 1.2 million common shares issued during fiscal year
2008, and 1.2 million common shares issued during fiscal year 2007.
The
issuance of UPREIT Units for property acquisitions continues to be a source of
capital for the Company. Approximately 362,000 units were issued in
connection with property acquisitions during fiscal year 2009, and approximately
2.3 million units and 6.7 million units, respectively, were issued in connection
with property acquisitions during fiscal years 2008 and 2007.
Primarily
as a result of the conversion of UPREIT units and the issuance of common shares
pursuant to our shelf registration statement and distribution reinvestment plan,
net of fractional shares repurchased, the Company’s equity capital increased
during fiscal 2009 by $22.4 million. Additionally, the equity capital of the
Company was increased by $3.7 million as a result of contributions of real
estate in exchange for UPREIT units, as summarized above, resulting in a total
increase in equity capital for the Company during fiscal year 2009 of $26.1
million. The Company’s equity capital increased by $108.6 million and $66.5
million in fiscal years 2008 and 2007, respectively.
Cash and
cash equivalents on April 30, 2009 totaled $33.2 million, compared to $53.5
million and $44.5 million on the same date in 2008 and 2007, respectively. Net
cash provided by operating activities decreased to $60.1 million in fiscal year
2009 from $61.9 million in fiscal year 2008, due primarily to decreased net
income as a result of higher maintenance costs. Net cash provided by operating
activities increased to $61.9 million in fiscal year 2008 from $58.4 million in
fiscal year 2007, due primarily to increased net income as a result of less cash
concessions given to tenants.
Net cash
used in investing activities decreased to $54.4 million in fiscal year 2009,
from $145.3 million in fiscal year 2008. Net cash used in investing activities
was $161.4 million in fiscal year 2007. The decrease in net cash used in
investing activities in fiscal year 2009 compared to fiscal year 2008 was
primarily a result of fewer acquisitions of property. Net cash used by financing
activities during fiscal year 2009 was $26.0 million, compared to $92.3 million
provided by financing activities during fiscal year 2008. The difference was due
primarily to a decrease in proceeds received from mortgage borrowings and
refinancings. Net cash provided from financing activities decreased to $92.3
million during fiscal year 2008, from $130.0 million during fiscal year 2007,
also due primarily to a decrease in proceeds received from mortgage borrowings
and refinancings.
Financial
Condition
Mortgage Loan Indebtedness.
Mortgage loan indebtedness was $1.1 billion on April 30, 2009 and 2008,
and $951.1 million on April 30, 2007. Approximately 99.1% of such mortgage debt
is at fixed rates of interest, with staggered maturities. This limits the
Company’s exposure to changes in interest rates, which minimizes the effect of
interest rate fluctuations on the Company’s results of operations and cash
flows. As of April 30, 2009, the weighted average rate of interest on the
Company’s mortgage debt was 6.30%, compared to 6.37% on April 30, 2008 and 6.43%
on April 30, 2007.
Revolving lines of credit. As
of April 30, 2009, the Company had an outstanding balance of $4.0 million under
its unsecured credit line with First International Bank and Trust and no amounts
outstanding under its unsecured credit lines at Bremer Bank and First Western
Bank and Trust. In addition to these three lines of credit, the Company also has
a fully-drawn $5.0 million line of credit with Dacotah Bank. Of this $5.0
million, the Company includes $3.5 million in mortgages payable on the Company’s
balance sheet, as secured by six small apartment properties owned by the
Company, with the remaining $1.5 million included in revolving lines of credit.
The Company had no amounts outstanding under these credit lines as of April 30,
2008 and 2007.
Mortgage Loans Receivable.
Mortgage loans receivable net of allowance decreased to approximately
$160,000 at April 30, 2009, from approximately $541,000 at April 30, 2008 and
approximately $399,000 at April 30, 2007.
Property Owned. Property
owned increased to $1.7 billion at April 30, 2009, from $1.6 billion at April
30, 2008. The increases resulted primarily from the acquisition of the
additional investment properties net of dispositions as described in the
“Property Acquisitions” and “Property Dispositions” subsections of this
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Cash and Cash Equivalents.
Cash and cash equivalents on April 30, 2009, totaled $33.2 million,
compared to $53.5 million on April 30, 2008 and $44.5 million on April 30, 2007.
The decrease in cash on hand on April 30, 2009, as compared to April 30, 2008,
was due primarily to a decrease in mortgage loan borrowings.
Marketable Securities. During
fiscal year 2009, IRET’s investment in marketable securities classified as
available-for-sale remained at approximately $420,000 on April 30, 2009 and
2008, a decrease from $2.0 million on April 30, 2007. Marketable securities are
held available for sale and, from time to time, the Company invests excess funds
in such securities or uses the funds so invested for operational
purposes.
Operating Partnership Units.
Outstanding limited partnership units in the Operating Partnership
decreased to 20.8 million units on April 30, 2009, compared to 21.2 million
units on April 30, 2008 and 20.0 million units on April 30, 2007. The decrease
in units outstanding at April 30, 2009 as compared to April 30, 2008, resulted
primarily from the conversion of units to shares.
Common and Preferred Shares of
Beneficial Interest. Common shares of beneficial interest outstanding on
April 30, 2009 totaled 60.3 million compared to 57.7 million common shares
outstanding on April 30, 2008 and 48.6 million common shares outstanding on
April 30, 2007. This increase in common shares outstanding from April 30, 2008
and 2007, to April 30, 2009, was due to the issuance of common shares pursuant
to our shelf registration statement and distribution reinvestment plan.
Preferred shares of beneficial interest outstanding on April 30, 2009, 2008 and
2007 totaled 1.2 million.
Contractual
Obligations and Other Commitments
The
primary contractual obligations of the Company relate to its borrowings under
its four lines of credit and mortgage notes payable. The Company had $5.5
million outstanding under its lines of credit at April 30, 2009. The principal
and interest payments on the mortgage notes payable for the years subsequent to
April 30, 2009, 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, 2009. The “Other Debt” category consists of an unsecured promissory note
issued by the Company to the sellers of an office/warehouse property located in
Minnesota. The Company acquired this property for a purchase price of
$4.0 million, consisting of $3.0 million in cash and the $1.0 million balance
payable under a promissory note with a ten-year term. If the tenant
defaults in the initial term of the lease, the then-current balance of the
promissory note is forfeited to the Company.
As of
April 30, 2009, the Company is a tenant under operating ground or air rights
leases on eleven of its properties. The Company pays a total of approximately
$503,000 per year in rent under these leases, which have remaining terms ranging
from 4 to 92 years, and expiration dates ranging from July 2012 to October
2100.
Purchase
obligations of the Company represent those costs that the Company is
contractually obligated to pay in the future. The Company’s significant purchase
obligations as of April 30, 2009, which the Company expects to finance through
debt and operating cash, are summarized in the following table. The significant
components in this purchase obligation category are costs for construction and
expansion projects and capital improvements at the Company’s properties.
Purchase obligations that are contingent upon the achievement of certain
milestones are not included in the table below, nor are service orders or
contracts for the provision of routine maintenance services at our
properties,
such as landscaping and grounds maintenance, 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)
|
||||||||||||||||||||
|
Total
|
Less
Than
1
Year
|
1-3
Years
|
3-5
Years
|
More
than
5
Years
|
||||||||||||||||
|
Long-term
debt (principal and interest)
|
$ | 1,445,283 | $ | 204,380 | $ | 319,759 | $ | 186,032 | $ | 735,112 | ||||||||||
|
Other
Debt (principal and interest)
|
$ | 1,516 | $ | 60 | $ | 170 | $ | 211 | $ | 1,075 | ||||||||||
|
Operating
Lease Obligations
|
$ | 26,080 | $ | 503 | $ | 1,006 | $ | 1,006 | $ | 23,565 | ||||||||||
|
Purchase
Obligations
|
$ | 7,138 | $ | 7,138 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Off-Balance-Sheet
Arrangements
As of
April 30, 2009, the Company 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 30, 2009, the Company paid a distribution of 51.56
cents per share on the Company’s Series A Cumulative Redeemable Preferred
Shares, to preferred shareholders of record on June 15, 2009. On July 1, 2009,
the Company paid a distribution of 17.05 cents per share on the Company’s common
shares of beneficial interest, to common shareholders and UPREIT unitholders of
record on June 15, 2009. This distribution represented an increase of .05 cents
or .3% over the previous regular quarterly distribution of 17.00 cents per
common share/unit paid April 1, 2009.
Pending
Acquisition. The Company currently has no material pending
acquisitions. In the fourth quarter of fiscal year 2009, IRET signed a purchase
agreement to acquire a portfolio of office and retail properties located in the
Minneapolis-St. Paul metropolitan area for a total of $29.7
million. The Company subsequently terminated this purchase agreement.
Subsequent to its April 30, 2009 fiscal year end, the Company signed a purchase
agreement to acquire an approximately 42,180 square foot, single-tenant office
showroom/warehouse building located in Iowa for $350,000 in cash and the
issuance of limited partnership units of IRET Properties valued at $3.0 million,
for a total purchase price of $3.4 million. This pending acquisition
is subject to various closing conditions and contingencies, and no assurances
can be given that this transaction will be completed.
Common Share
Offering. Subsequent to its April 30, 2009 fiscal year end, in
June 2009, the Company completed a public offering of 3,000,000 common shares of
beneficial interest at $8.70 per share (before underwriting discounts and
commissions). Proceeds to the Company were $24,795,000 after
deducting underwriting discounts and commissions but before deducting offering
expenses. The shares were sold pursuant to an Underwriting Agreement
with Robert W. Baird & Co., Incorporated, D.A. Davidson & Co. and J.J.B.
Hilliard, W.L. Lyons, Inc., and were issued pursuant to IRET’s registration
statement on Form S-3 filed with and declared effective by the Securities and
Exchange Commission.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk
Our
exposure to market risk is limited primarily to fluctuations in the general
level of interest rates on our current and future fixed and variable rate debt
obligations, and secondarily to our deposits with and investments in certain
products issued by various financial institutions.
Variable interest rates.
Because approximately 99.1% of our debt, as of April 30, 2009 (98.9% and
97.7% respectively, as of April 30, 2008 and 2007), is at fixed interest rates,
we have little exposure to interest rate fluctuation risk on our existing debt.
However, even though our goal is to maintain a fairly low exposure to interest
rate risk, we are still vulnerable to significant fluctuations in interest rates
on any future repricing or refinancing of our fixed or variable rate debt and on
future debt. We primarily use long-term (more than nine years) 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, 2009, we had the following
amount of future principal and interest payments due on mortgages secured by our
real estate.
|
Future
Principal Payments (in
thousands)
|
||||||||||||||||||||||||||||||||
|
Long
Term Debt
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
Total
|
Fair
Value
|
||||||||||||||||||||||||
|
Fixed
Rate
|
$ | 133,105 | $ | 103,811 | $ | 113,087 | $ | 48,370 | $ | 56,853 | $ | 605,355 | $ | 1,060,581 | $ | 1,291,494 | ||||||||||||||||
|
Variable
Rate
|
7,351 | 278 | 294 | 312 | 684 | 658 | 9,577 | 9,577 | ||||||||||||||||||||||||
| $ | 1,070,158 | $ | 1,301,071 | |||||||||||||||||||||||||||||
|
Future
Interest Payments (in
thousands)
|
||||||||||||||||||||||||||||
|
Long
Term Debt
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
Total
|
|||||||||||||||||||||
|
Fixed
Rate
|
$ | 63,680 | $ | 55,481 | $ | 46,586 | $ | 41,412 | $ | 38,257 | $ | 128,883 | $ | 374,299 | ||||||||||||||
|
Variable
Rate
|
244 | 119 | 103 | 84 | 60 | 216 | 826 | |||||||||||||||||||||
| $ | 375,125 | |||||||||||||||||||||||||||
The
weighted average interest rate on all of our debt as of April 30, 2009, was
6.30%. Any fluctuations in variable interest rates could increase or decrease
our interest expenses. For example, an increase of one percent per annum on our
$9.6 million of variable rate indebtedness would increase our annual interest
expense by $96,000.
Marketable Securities. IRET’s
investments in securities are classified as “available-for-sale.” The securities
classified as “available-for-sale” represent investments in debt and equity
securities which the Company intends to hold for an indefinite period of time.
As of April 30, 2009 and 2008, IRET had approximately $420,000 of marketable
securities classified as “available-for-sale,” consisting of bank certificates
of deposit. IRET had approximately $2.0 million of securities classified as
“available-for-sale” as of April 30, 2007. The values of these securities will
fluctuate with changes in market interest rates. As of April 30, 2007, IRET
recorded in other comprehensive income an unrealized loss of $16,000 on these
securities. During the fourth quarter of fiscal year 2008, IRET sold the
securities in its deposit account with Merrill Lynch for a gain of approximately
$42,000, recorded in other comprehensive income and in net income as of April
30, 2008.
Investments with Certain Financial
Institutions. IRET has entered into a cash management arrangement with
First Western Bank with respect to deposit accounts with First Western Bank that
exceed FDIC Insurance coverage. On a daily basis, account balances are invested
in U.S. Government securities sold to IRET by First Western Bank. IRET can
require First Western Bank to repurchase such securities at any time, at a
purchase price equal to what IRET paid for the securities, plus interest. First
Western Bank automatically repurchases obligations when collected amounts on
deposit in IRET’s deposit accounts fall below the maximum insurance amount, with
the proceeds of such repurchases being transferred to IRET’s deposit accounts to
bring the amount on deposit back up to the threshold amount. The amounts
invested by IRET pursuant to the repurchase agreement are not insured by
FDIC.
Deposits exceeding FDIC insurance.
The Company is 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. The Company has not experienced any
losses in such accounts.
Financial
statements required by this item appear with an Index to Financial Statements
and Schedules, starting on page F-1 of this report, and are incorporated herein
by reference
|
Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure
|
Not
applicable.
Disclosure
Controls and Procedures: As of April 30, 2009, 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 the Company’s
Chief Executive Officer, Chief Operating 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 Securities
Exchange act of 1934, as amended). Based upon that evaluation, the
Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective to
ensure that information required to be disclosed by IRET in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the
commission’s
rule and forms, and is accumulated and communicated to management, including the
Company’s principal executive and principal financial officers, as appropriate
to allow timely decisions regarding required disclosure.
Internal
Control Over Financial Reporting: There have been no changes in the
Company’s internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the
fourth quarter of the fiscal year to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management
of Investors Real Estate Trust (together with its consolidated subsidiaries, the
“Company”), is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control over
financial reporting is a process designed under the supervision of the Company’s
principal executive and principal financial officers to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of the Company’s financial statements for external reporting purposes in
accordance with United States generally accepted accounting
principles.
As of
April 30, 2009, management conducted an assessment of the effectiveness of the
Company’s internal control over financial reporting, based on the framework
established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this
assessment, management has determined that the Company’s internal control over
financial reporting as of April 30, 2009, was effective.
The
Company’s internal control over financial reporting includes policies and
procedures that pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect transactions and acquisitions and
dispositions of assets; provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with United States generally accepted accounting principles, and that
receipts and expenditures are being made only in accordance with authorizations
of management and the trustees of the Company; and provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of Company assets that could have a material effect on the Company’s
financial statements.
The
Company’s internal control over financial reporting as of April 30, 2009, has
been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report on page F-2 hereof, which expresses
an unqualified opinion on the effectiveness of the Company’s internal control
over financial reporting as of April 30, 2009.
|
|
(The
remainder of this page has been intentionally left
blank.)
|
During
the fourth quarter of fiscal year 2009, the Compensation Committee of the
Company’s Board of Trustees rescinded its previous decision to award 1,000
shares of IRET common shares of beneficial interest to each trustee for fiscal
year 2009 under IRET’s 2008 Incentive Award Plan, and accordingly no shares were
awarded or issued to the Company’s trustees for fiscal year 2009.
PART
III
Information
regarding executive officers required by this Item is set forth in Part I, Item
1 of this Annual Report on Form 10-K pursuant to Instruction 3 to Item 401(b) of
Regulation S-K. Other information required by this Item will be included in our
definitive Proxy Statement for our 2009 Annual Meeting of Shareholders and such
information is incorporated herein by reference. IRET has adopted a Code of
Ethics applicable to, among others, IRET’s principal executive officer and
principal financial and accounting officer. This Code is available on our
website at www.iret.com.
The
information required by this Item will be contained in our definitive Proxy
Statement for our 2009 Annual Meeting of Shareholders and such information is
incorporated herein by reference.
The
information required by this Item will be contained in our definitive Proxy
Statement for our 2009 Annual Meeting of Shareholders and such information is
incorporated herein by reference.
The
following table provides information as of April 30, 2009 regarding compensation
plans (including individual compensation arrangements) under which our common
shares of beneficial interest are available for issuance:
|
Equity
Compensation Plan Information
|
||||||||||||
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|||||||||
|
Equity
compensation plans approved by security holders(1)
|
0 | 0 | 2,000,000 | (2) | ||||||||
|
Equity
compensation plans not approved by security holders
|
0 | 0 | 0 | |||||||||
|
Total
|
0 | 0 | 2,000,000 | |||||||||
|
(1)
|
The
2008 Incentive Award Plan of Investors Real Estate Trust and IRET
Properties approved by shareholders on September 16,
2008.
|
|
(2)
|
All
of the shares available for future issuance under the 2008 Incentive Award
Plan approved by shareholders may be issued as restricted shares or
performance shares.
|
The
information required by this Item will be contained in our definitive Proxy
Statement for our 2009 Annual Meeting of Shareholders and such information is
incorporated herein by reference.
The
information required by this Item will be contained in our definitive Proxy
Statement for our 2009 Annual Meeting of Shareholders and such information is
incorporated herein by reference.
PART
IV
|
(a)
|
The following documents are
filed as part of this
report:
|
|
|
1.
|
Financial
Statements
|
The
response to this portion of Item 15 is submitted as a separate section of this
report. See the table of contents to Financial Statements and Supplemental
Data.
|
|
2.
Financial Statement
Schedules
|
The
response to this portion of Item 15 is submitted as a separate section of this
report. The following financial statement schedules should be read in
conjunction with the financial statements referenced in Part II, Item 8 of this
Annual Report on Form 10-K:
II
Valuation and Qualifying Accounts
III Real
Estate Owned and Accumulated Depreciation
IV
Investments in Mortgage Loans on Real Estate
|
|
3.
Exhibits
|
See the
list of exhibits set forth in part (b) below.
|
(b)
|
The
following is a list of Exhibits to this Annual Report on Form 10-K. We
will furnish a 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.
|
|
3.1
|
Articles of Amendment and Third
Restated Declaration of Trust of Investors Real Estate
Trust, dated September 23, 2003, and incorporated herein by
reference to Exhibit A to the Company’s Definitive Proxy Statement on
Schedule 14A for the 2003 Annual Meeting of Shareholders, filed with the
SEC on August 13, 2003.
|
|
3.2
|
Third Restated Trustees’
Regulations (Bylaws), dated May 16, 2007, and incorporated herein
by reference to the Company’s Current Report on Form 8-K , filed with the
SEC on May 16, 2007.
|
|
3.3
|
Agreement of Limited
Partnership of IRET Properties, A North Dakota Limited Partnership,
dated January 31, 1997, filed as Exhibit 3(ii) to the Registration
Statement on Form S-11, effective March 14, 1997 (SEC File No. 333-21945)
filed for the Registrant on February 18, 1997 (File No. 0-14851), and
incorporated herein by reference.
|
|
3.4
|
Articles Supplementary
classifying and designating 8.25% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, filed as Exhibit 3.2 to the
Company’s Form 8-A filed on April 22, 2004, and incorporated herein by
reference.
|
|
10.1
|
Member Control and Operating
Agreement dated September 30, 2002, filed as Exhibit 10 to the
Company’s Form 8-K filed October 15, 2003, and incorporated herein by
reference.
|
|
10.2
|
Letter Agreement dated
January 31, 2003, filed as Exhibit 10(i) to the Company’s Form 8-K filed
February 27, 2003, and incorporated herein by
reference.
|
|
10.3
|
Option Agreement dated
January 31, 2003, filed as Exhibit 10(ii) to the Company’s Form 8-K filed
February 27, 2003, and incorporated herein by
reference.
|
|
10.4
|
Financial Statements of
T.F. James Company filed as Exhibit 10 to the Company’s Form 8-K filed
January 31, 2003, and incorporated herein by
reference.
|
|
10.5
|
Agreement for Purchase and Sale
of Property dated February 13, 2004, by and between IRET Properties
and the Sellers specified therein, filed as Exhibit 10.5 to the Company’s
Form 10-K filed July 20, 2004, and incorporated herein by
reference.
|
|
10.6*
|
Description of Compensation of
Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed March 11, 2005, and incorporated herein by
reference.
|
|
10.7*
|
Description of Compensation of
Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed December 12, 2005, and incorporated herein by
reference.
|
|
10.8
|
Contribution Agreement,
filed as Exhibit 10.1 to the Company’s Form 8-K filed May 17, 2006, and
incorporated herein by reference.
|
|
10.9*
|
Description of Compensation of
Trustees, filed as Exhibit 10 to the Company’s Form 10-Q filed
September 11, 2006, and incorporated herein by
reference.
|
|
10.10
|
Loan and Security
Agreement, filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed September 18, 2006, and incorporated herein by
reference.
|
|
10.11*
|
Description of Compensation of
Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed March 12, 2007, and incorporated herein by
reference.
|
|
10.12*
|
Description of Compensation of
Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed March 11, 2008, and incorporated herein by
reference.
|
|
10.13*
|
Description of Compensation of
Executive Officers, filed as Exhibit 10 to the Company’s Form 10-Q
filed March 12, 2009, and incorporated herein by
reference.
|
|
10.14*
|
Description of Compensation of
Trustees, filed as Exhibit 10 to the Company’s Form 10-Q filed
December 10, 2007, and incorporated herein by
reference.
|
|
12.1
|
Computation of Ratio of
Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Share Dividends, filed
herewith.
|
|
21.1
|
Subsidiaries of Investors Real
Estate Trust, filed
herewith.
|
|
23.1
|
Consent of Deloitte &
Touche LLP, filed herewith.
|
|
31.1
|
Section 302 Certification of
President and Chief Executive Officer, filed
herewith.
|
|
31.2
|
Section 302 Certification of
Senior Vice President and Chief Financial Officer, filed
herewith.
|
|
32.1
|
Section 906 Certification of
the President and Chief Executive Officer, filed
herewith.
|
|
32.2
|
Section 906 Certification of
the Senior Vice President and Chief Financial Officer, filed
herewith.
|
________________________
* Indicates
management compensatory plan, contract or arrangement.
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:
July 8, 2009
|
Investors
Real Estate Trust
|
|
|
By:
|
/s/
Thomas A. Wentz, Sr.
|
|
|
Thomas
A. Wentz, Sr.
|
||
|
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
|
||
|
/s/
Jeffrey L. Miller
|
||||
|
Jeffrey
L. Miller
|
Trustee
& Chairman
|
July
8, 2009
|
||
|
/s/
Stephen L. Stenehjem
|
||||
|
Stephen
L. Stenehjem
|
Trustee
& Vice Chairman
|
July
8, 2009
|
||
|
/s/
Thomas A. Wentz. Sr.
|
||||
|
Thomas
A. Wentz, Sr.
|
President
& Chief Executive Officer
(Principal
Executive Officer)
|
July
8, 2009
|
||
|
/s/
Timothy P. Mihalick
|
||||
|
Timothy
P. Mihalick
|
Trustee,
Senior Vice President & Chief
Operating
Officer
|
July
8, 2009
|
||
|
/s/
Thomas A. Wentz, Jr.
|
||||
|
Thomas
A. Wentz, Jr.
|
Trustee
& Senior Vice President
|
July
8, 2009
|
||
|
/s/
Diane K. Bryantt
|
||||
|
Diane
K. Bryantt
|
Senior
Vice President & Chief Financial Officer (Principal Financial and
Accounting Officer)
|
July
8, 2009
|
||
|
/s/
John D. Stewart
|
||||
|
John
D. Stewart
|
Trustee
|
July
8, 2009
|
||
|
/s/
Patrick G. Jones
|
||||
|
Patrick
G. Jones
|
Trustee
|
July
8, 2009
|
||
|
/s/
C.W. “Chip” Morgan
|
||||
|
C.W.
“Chip” Morgan
|
Trustee
|
July
8, 2009
|
||
|
/s/
John T. Reed
|
||||
|
John
T. Reed
|
Trustee
|
July
8, 2009
|
||
|
/s/
W. David Scott
|
||||
|
W.
David Scott
|
Trustee
|
July
8, 2009
|
INVESTORS
REAL ESTATE TRUST
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS AS OF April 30,
2009 AND
2008,
AND THE
RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,
SHAREHOLDERS’
EQUITY AND CASH FLOWS FOR EACH OF
THE
FISCAL YEARS IN THE PERIOD ENDED April 30, 2009.
ADDITIONAL
INFORMATION
FOR THE
YEAR ENDED
April
30, 2009
and
REPORT OF
INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
PO Box
1988
3015 16th
Street SW, Suite 100
Minot, ND
58702-1988
701-837-4738
fax:
701-838-7785
info@iret.com
www.iret.com
2009 Annual Report
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
|
PAGE
|
|
|
F-2
|
|
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
– F-8
|
|
|
F-9
– F-29
|
|
|
ADDITIONAL
INFORMATION
|
|
|
F-30
|
|
|
F-31-40
|
|
|
F-41
|
Schedules other than those listed
above are omitted since they are not required or are not applicable, or the
required information is shown in the consolidated financial statements or notes
thereon.
To the
Board of Trustees and Shareholders of
Investors
Real Estate Trust
Minot,
North Dakota
We have
audited the accompanying consolidated balance sheets of Investors Real Estate
Trust and subsidiaries (the "Company") as of April 30, 2009 and 2008, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended April 30,
2009. Our audits also included the consolidated financial statement
schedules listed in the Index at Item 15. We also have audited the
Company's internal control over financial reporting as of April 30, 2009, based
on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is responsible for
these financial statements and financial statement schedules, for maintaining
effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on these financial
statements and financial statement schedules and an opinion on the Company's
internal control over financial reporting based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting
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. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
A
company's internal control over financial reporting is a process designed by, or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel 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 the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the 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 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, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in the period ended
April 30, 2009, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein. Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of April 30, 2009, based on the criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
DELOITTE
& TOUCHE LLP
Minneapolis,
Minnesota
July 13,
2009
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
April
30, 2009 and 2008
|
(in
thousands)
|
||||||||
|
April
30, 2009
|
April
30, 2008
|
|||||||
|
ASSETS
|
||||||||
|
Real
estate investments
|
||||||||
|
Property
owned
|
$ | 1,729,585 | $ | 1,648,259 | ||||
|
Less
accumulated depreciation
|
(262,871 | ) | (219,379 | ) | ||||
| 1,466,714 | 1,428,880 | |||||||
|
Development
in progress
|
0 | 22,856 | ||||||
|
Unimproved
land
|
5,701 | 3,901 | ||||||
|
Mortgage
loans receivable, net of
allowance of $3 and $11, respectively
|
160 | 541 | ||||||
|
Total
real estate investments
|
1,472,575 | 1,456,178 | ||||||
|
Other
assets
|
||||||||
|
Cash
and cash equivalents
|
33,244 | 53,481 | ||||||
|
Marketable
securities – available-for-sale
|
420 | 420 | ||||||
|
Receivable
arising from straight-lining of rents, net of allowance of $842 and
$992, respectively
|
16,012 | 14,113 | ||||||
|
Accounts
receivable, net of
allowance of $286 and $261, respectively
|
2,738 | 4,163 | ||||||
|
Real
estate deposits
|
88 | 1,379 | ||||||
|
Prepaid
and other assets
|
1,051 | 349 | ||||||
|
Intangible
assets, net of
accumulated amortization of $44,887 and $34,493,
respectively
|
52,173 | 61,649 | ||||||
|
Tax,
insurance, and other escrow
|
7,261 | 8,642 | ||||||
|
Property
and equipment, net of
accumulated depreciation of $957 and $1,328,
respectively
|
1,015 | 1,467 | ||||||
|
Goodwill
|
1,392 | 1,392 | ||||||
|
Deferred
charges and leasing costs, net of accumulated
amortization of $11,010 and $7,265, respectively
|
17,122 | 14,793 | ||||||
|
TOTAL
ASSETS
|
$ | 1,605,091 | $ | 1,618,026 | ||||
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
|
LIABILITIES
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 32,773 | $ | 33,757 | ||||
|
Revolving
lines of credit
|
5,500 | 0 | ||||||
|
Mortgages
payable
|
1,070,158 | 1,063,858 | ||||||
|
Other
|
1,516 | 978 | ||||||
|
TOTAL
LIABILITIES
|
1,109,947 | 1,098,593 | ||||||
|
COMMITMENTS
AND CONTINGENCIES (NOTE 15)
|
||||||||
|
MINORITY
INTEREST IN PARTNERSHIPS
|
13,010 | 12,609 | ||||||
|
MINORITY
INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP
|
148,199 | 161,818 | ||||||
|
(20,838,197
units at April 30, 2009 and 21,238,342 units at April 30,
2008)
|
||||||||
|
SHAREHOLDERS’
EQUITY
|
||||||||
|
Preferred
Shares of Beneficial Interest (Cumulative redeemable
preferred shares, no par value, 1,150,000 shares issued and outstanding at
April 30, 2009 and April 30, 2008, aggregate liquidation preference of
$28,750,000)
|
27,317 | 27,317 | ||||||
|
Common
Shares of Beneficial Interest (Unlimited authorization, no
par value, 60,304,154 shares issued and outstanding at April 30, 2009, and
57,731,863 shares issued and outstanding at April 30,
2008)
|
462,574 | 440,187 | ||||||
|
Accumulated
distributions in excess of net income
|
(155,956 | ) | (122,498 | ) | ||||
|
Total
shareholders’ equity
|
333,935 | 345,006 | ||||||
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 1,605,091 | $ | 1,618,026 | ||||
SEE NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED
STATEMENTS OF OPERATIONS
for
the years ended April 30, 2009, 2008, and 2007
|
(in thousands, except per share
data)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
REVENUE
|
||||||||||||
|
Real
estate rentals
|
$ | 194,758 | $ | 179,965 | $ | 162,410 | ||||||
|
Tenant
reimbursement
|
45,247 | 41,205 | 35,128 | |||||||||
|
TOTAL
REVENUE
|
240,005 | 221,170 | 197,538 | |||||||||
|
EXPENSES
|
||||||||||||
|
Interest
|
68,743 | 63,439 | 58,424 | |||||||||
|
Depreciation/amortization
related to real estate investments
|
54,646 | 50,042 | 44,419 | |||||||||
|
Utilities
|
18,975 | 17,793 | 15,157 | |||||||||
|
Maintenance
|
27,603 | 24,582 | 21,691 | |||||||||
|
Real
estate taxes
|
30,443 | 27,133 | 23,281 | |||||||||
|
Insurance
|
3,051 | 2,624 | 2,377 | |||||||||
|
Property
management expenses
|
18,079 | 15,273 | 13,826 | |||||||||
|
Administrative
expenses
|
4,430 | 4,745 | 4,162 | |||||||||
|
Advisory
and trustee services
|
452 | 458 | 289 | |||||||||
|
Other
expenses
|
1,440 | 1,344 | 1,240 | |||||||||
|
Amortization
related to non-real estate investments
|
2,068 | 1,476 | 1,082 | |||||||||
|
Impairment
of real estate investment
|
338 | 0 | 0 | |||||||||
|
TOTAL
EXPENSES
|
230,268 | 208,909 | 185,948 | |||||||||
|
Interest
income
|
608 | 2,095 | 1,944 | |||||||||
|
Other
income
|
314 | 665 | 721 | |||||||||
|
Income
before gain (loss) on sale of other investments and minority interest and
discontinued operations
|
10,659 | 15,021 | 14,255 | |||||||||
|
Gain
(loss) on sale of other investments
|
54 | 42 | (38 | ) | ||||||||
|
Minority
interest portion of operating partnership income
|
(2,227 | ) | (3,524 | ) | (3,217 | ) | ||||||
|
Minority
interest portion of other partnerships’ loss
|
40 | 136 | 26 | |||||||||
|
Income
from continuing operations
|
8,526 | 11,675 | 11,026 | |||||||||
|
Discontinued
operations, net of minority interest
|
0 | 413 | 3,084 | |||||||||
|
NET
INCOME
|
8,526 | 12,088 | 14,110 | |||||||||
|
Dividends
to preferred shareholders
|
(2,372 | ) | (2,372 | ) | (2,372 | ) | ||||||
|
NET
INCOME AVAILABLE TO COMMON SHAREHOLDERS
|
$ | 6,154 | $ | 9,716 | $ | 11,738 | ||||||
|
Earnings
per common share from continuing operations
|
$ | .11 | $ | .17 | $ | .18 | ||||||
|
Earnings
per common share from discontinued operations
|
.00 | .01 | .06 | |||||||||
|
NET
INCOME PER COMMON SHARE – BASIC & DILUTED
|
$ | .11 | $ | .18 | $ | .24 | ||||||
SEE NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
for
the years ended April 30, 2009, 2008, and 2007
|
(in
thousands)
|
||||||||||||||||||||||||||||
|
NUMBER
OF PREFERRED SHARES
|
PREFERRED
SHARES
|
NUMBER
OF COMMON SHARES
|
COMMON
SHARES
|
ACCUMULATED
DISTRIBUTIONS
IN
EXCESS OF
NET
INCOME
|
ACCUMULATED
OTHER
COMPRE-HENSIVE
(LOSS)
|
TOTAL
SHARE-
HOLDERS’
EQUITY
|
||||||||||||||||||||||
|
BALANCE
APRIL 30, 2006
|
1,150 | $ | 27,317 | 46,915 | $ | 339,384 | $ | (77,093 | ) | $ | (48 | ) | $ | 289,560 | ||||||||||||||
|
Comprehensive
Income
|
||||||||||||||||||||||||||||
|
Net
income
|
14,110 | 14,110 | ||||||||||||||||||||||||||
|
Unrealized
gain for the period on securities available-for-sale
|
32 | 32 | ||||||||||||||||||||||||||
|
Total
comprehensive income
|
14,142 | |||||||||||||||||||||||||||
|
Distributions
- common shares
|
(31,472 | ) | (31,472 | ) | ||||||||||||||||||||||||
|
Distributions
- preferred shares
|
(2,372 | ) | (2,372 | ) | ||||||||||||||||||||||||
|
Distribution
reinvestment plan
|
1,215 | 11,412 | 11,412 | |||||||||||||||||||||||||
|
Sale
of shares
|
32 | 303 | 303 | |||||||||||||||||||||||||
|
Redemption
of units for common shares
|
410 | 3,411 | 3,411 | |||||||||||||||||||||||||
|
Fractional
shares repurchased
|
(2 | ) | (15 | ) | (15 | ) | ||||||||||||||||||||||
|
BALANCE
APRIL 30, 2007
|
1,150 | $ | 27,317 | 48,570 | $ | 354,495 | $ | (96,827 | ) | $ | (16 | ) | $ | 284,969 | ||||||||||||||
|
Comprehensive
Income
|
||||||||||||||||||||||||||||
|
Net
income
|
12,088 | 12,088 | ||||||||||||||||||||||||||
|
Unrealized
gain for the period on securities available-for-sale
|
16 | 16 | ||||||||||||||||||||||||||
|
Total
comprehensive income
|
12,104 | |||||||||||||||||||||||||||
|
Distributions
- common shares
|
(35,387 | ) | (35,387 | ) | ||||||||||||||||||||||||
|
Distributions
- preferred shares
|
(2,372 | ) | (2,372 | ) | ||||||||||||||||||||||||
|
Distribution
reinvestment plan
|
1,177 | 11,274 | 11,274 | |||||||||||||||||||||||||
|
Sale
of shares
|
6,934 | 66,679 | 66,679 | |||||||||||||||||||||||||
|
Redemption
of units for common shares
|
1,052 | 7,753 | 7,753 | |||||||||||||||||||||||||
|
Fractional
shares repurchased
|
(1 | ) | (14 | ) | (14 | ) | ||||||||||||||||||||||
|
BALANCE
APRIL 30, 2008
|
1,150 | $ | 27,317 | 57,732 | $ | 440,187 | $ | (122,498 | ) | $ | 0 | $ | 345,006 | |||||||||||||||
|
Net
income
|
8,526 | 8,526 | ||||||||||||||||||||||||||
|
Distributions
- common shares
|
(39,612 | ) | (39,612 | ) | ||||||||||||||||||||||||
|
Distributions
- preferred shares
|
(2,372 | ) | (2,372 | ) | ||||||||||||||||||||||||
|
Distribution
reinvestment plan
|
1,186 | 11,385 | 11,385 | |||||||||||||||||||||||||
|
Sale
of shares
|
641 | 5,978 | 5,978 | |||||||||||||||||||||||||
|
Redemption
of units for common shares
|
746 | 5,034 | 5,034 | |||||||||||||||||||||||||
|
Fractional
shares repurchased
|
(1 | ) | (10 | ) | (10 | ) | ||||||||||||||||||||||
|
BALANCE
APRIL 30, 2009
|
1,150 | $ | 27,317 | 60,304 | $ | 462,574 | $ | (155,956 | ) | $ | 0 | $ | 333,935 | |||||||||||||||
SEE NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
for
the years ended April 30, 2009, 2008, and 2007
|
(in
thousands)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
|
Net
Income
|
$ | 8,526 | $ | 12,088 | $ | 14,110 | ||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
|
Depreciation
and amortization
|
57,832 | 52,423 | 46,695 | |||||||||
|
Minority
interest portion of income
|
2,187 | 3,541 | 4,273 | |||||||||
|
Gain
on sale of real estate, land and other investments
|
(54 | ) | (556 | ) | (4,602 | ) | ||||||
|
Impairment
of real estate investments
|
338 | 0 | 640 | |||||||||
|
Bad
debt expense
|
2,472 | 1,060 | 507 | |||||||||
|
Changes
in other assets and liabilities:
|
||||||||||||
|
Increase
in receivable arising from straight-lining of rents
|
(2,403 | ) | (1,921 | ) | (3,247 | ) | ||||||
|
Decrease
(increase) in accounts receivable
|
(603 | ) | (1,754 | ) | (1,007 | ) | ||||||
|
(Increase)
decrease in prepaid and other assets
|
(702 | ) | 219 | (132 | ) | |||||||
|
Decrease
(increase) in tax, insurance and other escrow
|
1,381 | (1,420 | ) | 1,671 | ||||||||
|
Increase
in deferred charges and leasing costs
|
(5,686 | ) | (5,468 | ) | (4,801 | ) | ||||||
|
(Decrease)
increase in accounts payable, accrued expenses and other
liabilities
|
(3,153 | ) | 3,667 | 4,334 | ||||||||
|
Net
cash provided by operating activities
|
60,135 | 61,879 | 58,441 | |||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
|
Proceeds
from sale of marketable securities - available-for-sale
|
0 | 1,740 | 525 | |||||||||
|
Net
proceeds (payments) of real estate deposits
|
1,291 | (644 | ) | 442 | ||||||||
|
Principal
proceeds on mortgage loans receivable
|
389 | 25 | 23 | |||||||||
|
Investment
in mortgage loans receivable
|
0 | (167 | ) | 0 | ||||||||
|
Purchase
of marketable securities - available-for-sale
|
0 | (54 | ) | (132 | ) | |||||||
|
Proceeds
from sale of real estate and other investments
|
68 | 1,374 | 22,375 | |||||||||
|
Insurance
proceeds received
|
2,962 | 837 | 0 | |||||||||
|
Payments
for acquisitions and improvements of real estate
investments
|
(59,077 | ) | (148,364 | ) | (184,613 | ) | ||||||
|
Net
cash used by investing activities
|
(54,367 | ) | (145,253 | ) | (161,380 | ) | ||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Proceeds
from sale of common shares, net of issue costs
|
5,978 | 66,679 | 303 | |||||||||
|
Proceeds
from mortgages payable
|
73,530 | 111,684 | 257,664 | |||||||||
|
Proceeds
from minority partner
|
717 | 0 | 54 | |||||||||
|
Proceeds
from revolving lines of credit and other debt
|
20,500 | 0 | 20,500 | |||||||||
|
Repurchase
of fractional shares and minority interest units
|
(10 | ) | (14 | ) | (15 | ) | ||||||
|
Distributions
paid to common shareholders, net of reinvestment of
$10,603, $10,518 and $10,607, respectively
|
(29,009 | ) | (24,869 | ) | (20,865 | ) | ||||||
|
Distributions
paid to preferred shareholders
|
(2,372 | ) | (2,372 | ) | (2,372 | ) | ||||||
|
Distributions
paid to unitholders of operating partnership, net reinvestment of $782, $756
and $805, respectively
|
(13,601 | ) | (12,747 | ) | (10,258 | ) | ||||||
|
Distributions
paid to other minority partners
|
(277 | ) | (179 | ) | (170 | ) | ||||||
|
Redemption
of partnership units
|
(158 | ) | 0 | 0 | ||||||||
|
Redemption
of investment certificates
|
0 | (11 | ) | (2,440 | ) | |||||||
|
Principal
payments on mortgages payable
|
(67,230 | ) | (45,759 | ) | (88,345 | ) | ||||||
|
Principal
payments on revolving lines of credit and other debt
|
(14,073 | ) | (73 | ) | (24,086 | ) | ||||||
|
Net
cash (used) provided by financing activities
|
(26,005 | ) | 92,339 | 129,970 | ||||||||
|
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(20,237 | ) | 8,965 | 27,031 | ||||||||
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
53,481 | 44,516 | 17,485 | |||||||||
|
CASH
AND CASH EQUIVALENTS AT END OF YEAR
|
$ | 33,244 | $ | 53,481 | $ | 44,516 | ||||||
SEE NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)
for
the years ended April 30, 2009, 2008, and 2007
|
(in
thousands)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
SUPPLEMENTARY
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||||||
|
Distribution
reinvestment plan
|
$ | 10,603 | $ | 10,518 | $ | 10,607 | ||||||
|
Operating
partnership distribution reinvestment plan
|
782 | 756 | 805 | |||||||||
|
Real
estate investment acquired through assumption of indebtedness and accrued
costs
|
0 | 46,794 | 16,838 | |||||||||
|
Assets
acquired through the issuance of minority interest units in the operating
partnership
|
3,730 | 22,931 | 62,427 | |||||||||
|
Operating
partnership units converted to shares
|
5,034 | 7,753 | 3,411 | |||||||||
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||||||
|
Cash
paid during the year for:
|
||||||||||||
|
Interest
on mortgages
|
$ | 67,947 | $ | 62,110 | $ | 56,918 | ||||||
|
Interest
on investment certificates
|
0 | 2 | 164 | |||||||||
|
Interest
on margin account and other
|
421 | 98 | 812 | |||||||||
| $ | 68,368 | $ | 62,210 | $ | 57,894 | |||||||
SEE NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
April
30, 2009, 2008, and 2007
NOTE 1 •
ORGANIZATION
Investors
Real Estate Trust (“IRET” or the “Company”) is a self-advised real estate
investment trust engaged in acquiring, owning and leasing multi-family and
commercial real estate. IRET has elected to be taxed as a Real Estate Investment
Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as
amended. REITs are subject to a number of organizational and operational
requirements, including a requirement to distribute 90% of ordinary taxable
income to shareholders, and, generally, are not subject to federal income tax on
net income. IRET’s multi-family residential properties and commercial properties
are located mainly in the states of North Dakota and Minnesota, but also in the
states of Colorado, Idaho, Iowa, Kansas, Montana, Missouri, Nebraska, South
Dakota, Texas, Michigan and Wisconsin. As of April 30, 2009, IRET owned 77
multi-family residential properties with approximately 9,645 apartment units and
167 commercial properties, consisting of office, medical, industrial and retail
properties, totaling approximately 11.7 million net rentable square feet. IRET
conducts a majority of its business activities through its consolidated
operating partnership, IRET Properties, a North Dakota Limited Partnership (the
“Operating Partnership”), as well as through a number of other subsidiary
entities.
All
references to IRET or the Company refer to Investors Real Estate Trust and its
consolidated subsidiaries.
NOTE 2 • BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES
BASIS
OF PRESENTATION
The
accompanying consolidated financial statements include the accounts of IRET and
all subsidiaries in which it maintains a controlling interest. All intercompany
balances and transactions are eliminated in consolidation. The Company’s fiscal
year ends April 30th.
The
accompanying consolidated financial statements include the accounts of IRET and
its general partnership interest in the Operating Partnership. The Company’s
interest in the Operating Partnership was 74.3% and 73.1% as of April 30, 2009
and 2008, which includes 100% of the general partnership interest. The limited
partners have a redemption option that they may exercise. Upon exercise of the
redemption option by the limited partners, IRET has the option of redeeming the
limited partners’ interests (“Units”) for IRET common shares of beneficial
interest, on a one-for-one basis, or for cash payment to the unitholder. The
redemption generally may be exercised by the limited partners at any time after
the first anniversary of the date of the acquisition of the Units (provided,
however, that not more than two redemptions by a limited partner may occur
during each calendar year, and each limited partner may not exercise the
redemption for less than 1,000 Units, or, if such limited partner holds less
than 1,000 Units, for all of the Units held by such limited partner). Some
limited partners have contractually agreed to a holding period of greater than
one year.
The
consolidated financial statements also reflect the ownership by the Operating
Partnership of certain joint venture entities in which the Operating Partnership
has a general partner or controlling interest. These entities are consolidated
into IRET’s other operations with minority interests reflecting the minority
partners’ share of ownership and income and expenses.
RECENT
ACCOUNTING PRONOUNCEMENTS
In May
2009, the Financial Accounting Standards Board (“FASB”) issued FAS
No. 165, Subsequent Events (“FAS
165”). FAS 165 is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued. FAS 165 is effective for interim periods or
fiscal years ending after June 15, 2009. The Company does not expect this
Statement to have a material impact on the Company’s consolidated financial
statements.
In June
2008, the FASB issued FASB Staff Position (“FSP”) on Emerging Issues Task Force
Issue 03-6, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that
unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included
NOTE 2 • continued
in the
computation of earnings per share (“EPS”) pursuant to the two-class method. FSP
EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those years. All
prior-period EPS data presented shall be adjusted retrospectively (including
interim financial statements, summaries of earnings, and selected financial
data) to conform with the provisions of FSP EITF 03-6-1. Early application is
not permitted. The Company currently has no unvested share-based payment awards
outstanding, but expects that in the future some may be granted under its 2008
Incentive Award Plan approved by shareholders in September 2008. The
Company’s adoption of this staff position on May 1, 2009 did not impact the
Company’s EPS calculations.
In April
2008, the FASB issued FSP No. FAS 142-3, Determination
of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 removes
the requirement under Statement of Financial Accounting Standards (“SFAS”) No.
142, Goodwill and Other Intangible Assets, to consider whether an intangible
asset can be renewed without substantial cost or material modifications to the
existing terms and conditions and replaces it with a requirement that an entity
consider its own historical experience in renewing similar arrangements, or a
consideration of market participant assumptions in the absence of historical
experience. FSP 142-3 also requires entities to disclose information that
enables users of financial statements to assess the extent to which the expected
future cash flows associated with the asset are affected by the entity’s intent
and/or ability to renew or extend the arrangement. FSP 142-3 is effective for
fiscal years beginning on or after December 15, 2008. Earlier
adoption is prohibited. The adoption of FSP 142-3 did not have a material impact
on the Company’s financial position and results of operations.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB 51 (“SFAS 160”).
SFAS 160 changes the accounting and reporting for minority interests. Minority
interests are recharacterized as noncontrolling interests and are reported as a
component of equity separate from the parent’s equity, and purchases or sales of
equity interests that do not result in a change in control are accounted for as
equity transactions. In addition, net income attributable to the noncontrolling
interest are included in consolidated net income on the face of the income
statement and upon a loss of control, the interest sold, as well as any interest
retained, is recorded at fair value with any gain or loss recognized in
earnings. SFAS 160 was effective for the Company on May 1, 2009. The adoption of
this statement did not have a material effect on the Company’s financial
position or results of operations.
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS
141(R)”). This new standard significantly changes the accounting for and
reporting of business combination transactions in consolidated financial
statements. SFAS 141(R) requires an acquiring entity to recognize acquired
assets and liabilities assumed in a transaction at fair value as of the
acquisition date, changes the disclosure requirements for business combination
transactions, and changes the accounting treatment for certain items, including
contingent consideration agreements, which will be required to be recorded at
acquisition date fair value, and acquisition costs which will be required to be
expensed as incurred. SFAS 141(R) is effective for fiscal years beginning after
December 15, 2008, and accordingly we adopted the standard on May 1, 2009; the
new standard impacted the accounting for acquisitions we made after our
adoption. Upon adoption of this pronouncement, we wrote off to general and
administrative expense approximately $32,000 of previously capitalized
pre-acquisition costs. The impact of this pronouncement on our
financial statements is dependent on the volume of our acquisition activity in
fiscal year 2010 and beyond. We currently expect the most significant impact of
this statement to be the treatment of transaction costs, which are expensed as a
period cost due to the adoption of this statement.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits
entities to irrevocably elect fair value on a contract-by-contract basis as the
initial and subsequent measurement attribute for many financial assets and
liabilities and certain other items including property and casualty insurance
contracts. SFAS 159 was effective for the Company on May 1, 2008, and it did not
elect the fair value option for any of its eligible financial
instruments.
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
(“SFAS 157”), which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles and expands disclosures
about fair value measurements. SFAS 157 was effective for the Company on May 1,
2008; however, FASB Staff Position No. 157-2 deferred the effective date for
certain non-financial assets and liabilities not re-
NOTE 2 • continued
measured
at fair value on a recurring basis to fiscal years beginning after November 15,
2008 (for the Company, May 1, 2009). SFAS 157 establishes a valuation
hierarchy for disclosure of the inputs to valuation used to measure fair value.
This hierarchy prioritizes the inputs into three broad levels as follows. Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities. Level 2 inputs are quoted prices for similar assets and
liabilities in active markets or inputs that are observable for the asset or
liability, either directly or indirectly through market corroboration, for
substantially the full term of the financial instrument. Level 3 inputs are
unobservable inputs based upon the Company’s own assumptions used to measure
assets and liabilities at fair value. A financial asset or liability’s
classification within the hierarchy is determined based on the lowest level of
input that is significant to the fair value measurement. At April 30,
2009, the Company’s marketable securities are carried at fair value measured on
a recurring basis. Fair values are determined through the use of unadjusted
quoted prices in active markets, which are inputs that are classified as Level 1
in the valuation hierarchy. The adoption of this statement did not have a
material effect on the Company’s consolidated financial statements.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
REAL
ESTATE INVESTMENTS
Real
estate investments are recorded at cost less accumulated depreciation and an
adjustment for impairment, if any. Acquisitions of real estate investments are
recorded based upon preliminary allocations of the purchase price which are
subject to adjustment as additional information is obtained, but in no case more
than one year after the date of acquisition. The Company allocates the purchase
price to the fair value of the tangible and intangible assets of an acquired
property (which includes the land, building, and personal property) which are
determined by valuing the property as if it were vacant and to fair value of the
intangible assets (which include in-place leases.) The as-if-vacant value is
allocated to land, buildings, and personal property based on management’s
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
land value is assigned based on the purchase price if land is acquired
separately or based on estimated fair value if acquired in a merger or in a
single or portfolio acquisition.
Above-market
and below-market in-place lease intangibles for acquired properties are recorded
based on the present value (using an interest rate which reflects the risks
associated with the leases acquired) of the difference between (i) the
contractual amounts to be paid pursuant to the in-place leases and (ii)
management’s estimate of market lease rates for the corresponding in-place
leases, measured over a period equal to the remaining non-cancelable term of the
lease.
Other
intangible assets acquired include amounts for in-place lease values that are
based upon the Company’s evaluation of the specific characteristics of the
leases. Factors considered in these analyses include an estimate of carrying
costs and foregone rental income during hypothetical expected lease-up periods,
considering current market conditions, and costs to execute similar leases. The
Company also considers information about each property obtained during its
pre-acquisition due diligence, marketing and leasing activities in estimating
the fair value of the tangible and intangible assets acquired.
Depreciation
is computed on a straight-line basis over the estimated useful lives of the
assets. The Company uses a 20-40 year estimated life for buildings and
improvements and a 5-12 year estimated life for furniture, fixtures and
equipment.
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 ten years. Property sales or dispositions are recorded when
title transfers and sufficient consideration has been received by the Company
and the Company has no significant involvement with the property
sold.
NOTE 2 • continued
In
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long Lived Assets, the Company periodically evaluates its
long-lived assets, including its investments in real estate, 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 and legal and environmental concerns. If indicators
exist, the Company compares the expected future undiscounted cash flows for the
long-lived asset 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. 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. An impairment loss of $640,000 was recorded in fiscal year
2007. No impairment losses were recorded in fiscal year 2008. An impairment loss
of $338,000 was recorded in fiscal year 2009.
REAL
ESTATE HELD FOR SALE
Real
estate held for sale is stated at the lower of its carrying amount or estimated
fair value less disposal costs. Depreciation is not recorded on assets
classified as held for sale.
The
application of current accounting principles that govern the classification of
any of our properties as held-for-sale on the balance sheet requires management
to make certain significant judgments. In evaluating whether a property meets
the criteria set forth in SFAS No. 144, Accounting for the Impairment and
Disposal of Long-Lived Assets (“SFAS 144”), the Company makes a
determination as to the point in time that it is probable that a sale will be
consummated. It is not unusual for real estate sales contracts to allow
potential buyers a period of time to evaluate the property prior to formal
acceptance of the contract. In addition, certain other matters critical to the
final sale, such as financing arrangements, often remain pending even upon
contract acceptance. As a result, properties under contract may not close within
the expected time period, or may not close at all. Due to these uncertainties,
it is not likely that the Company can meet the criteria of SFAS 144 prior to the
sale formally closing. Therefore, any properties categorized as held-for-sale
represent only those properties that management has determined are probable
to close within the requirements set forth in SFAS 144.
The
Company reports, in discontinued operations, the results of operations of a
property that has either been disposed of or is classified as held for sale and
the related gains or losses, and as a result of discontinued operations,
reclassifications of prior year revenues and expenses have been
made.
IDENTIFIED
INTANGIBLE ASSETS AND LIABILITIES AND GOODWILL
Upon
acquisition of real estate, the Company records 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. The Company amortizes 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 fiscal years 2009 and 2008,
respectively, the Company added approximately $565,000 and $38.0 million of new
intangible assets, net of intangible liabilities, all of which were classified
as in-place leases. The weighted average lives of these intangibles are 1.8
years for fiscal 2009 and 7.0 years for fiscal year 2008. 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.
NOTE 2 • continued
As of
April 30, 2009 and 2008, respectively, the net carrying amounts of the Company’s
identified intangible assets and liabilities were $51.7 million and $60.7
million (net of accumulated amortization of $42.8 million and $32.8 million),
respectively. The estimated annual amortization of the Company’s identified
intangible assets for each of the five succeeding fiscal years is as
follows:
|
Year
Ended April 30,
|
(in
thousands)
|
|||
|
2010
|
$ | 8,484 | ||
|
2011
|
6,372 | |||
|
2012
|
4,353 | |||
|
2013
|
3,361 | |||
|
2014
|
2,956 | |||
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. The Company’s goodwill has an
indeterminate life in accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible
Assets. Goodwill 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 values as of April 30, 2009 and
2008 were $1.4 million. The annual reviews for these same periods indicated no
impairment.
PROPERTY
AND EQUIPMENT
Property
and equipment consists of the equipment contained at IRET’s headquarters in
Minot, North Dakota, and other locations in Minneapolis, Minnesota; Omaha,
Nebraska; Kansas City, Kansas; St. Louis, Missouri and Jamestown, North Dakota.
The balance sheet reflects these assets at cost, net of accumulated
depreciation. As of April 30, 2009 and 2008, the cost was $2.0 million and $2.8
million, respectively. Accumulated depreciation was $1.0 million and $1.3
million as of April 30, 2009 and 2008, respectively.
MORTGAGE
LOANS RECEIVABLE
The
mortgage loans receivable (which include contracts for deed) are stated at the
outstanding principal balance, net of an allowance for uncollectibility.
Interest income is accrued and reflected in the balance sheet. Non-performing
loans are recognized as impaired in conformity with SFAS No. 114, Accounting by Creditors for Impairment of a
Loan. The Company evaluates the collectibility of both interest and
principal of each of its loans, if circumstances warrant, to determine whether
the loan is impaired. A loan is considered to be impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the existing contractual terms. An
allowance is recorded to reduce impaired loans to their estimated fair value.
Interest on impaired loans is recognized on a cash basis.
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 the
Company’s bank deposits and short-term investment certificates acquired subject
to repurchase agreements, and the Company’s deposits in a money market mutual
fund.
MARKETABLE
SECURITIES
IRET’s
investments in marketable securities are classified as “available-for-sale.” The
securities classified as “available-for-sale” represent investments in debt and
equity securities which the Company intends to hold for an indefinite period of
time. These securities are valued at current fair value with the resulting
unrealized gains and losses excluded from earnings and reported as a separate
component of shareholders’ equity until realized. Gains or losses on these
securities are computed based on the amortized cost of the specific securities
when sold.
All
securities with unrealized losses are subjected to the Company’s process for
identifying other-than-temporary impairments. The Company records a charge to
earnings to write down to fair value securities that it deems to be
other-than-temporarily impaired in the period the securities are deemed to be
other-than-temporarily impaired. The assessment of whether such impairment has
occurred is based on management’s case-by-case evaluation of the
NOTE 2 • continued
underlying
reasons for the decline in fair value. Management considers a wide range of
factors in making this assessment. Those factors include, but are not limited
to, the length and severity of the decline in value and changes in the credit
quality of the issuer or underlying assets. The Company does not engage in
trading activities.
ALLOWANCE
FOR DOUBTFUL ACCOUNTS
Management
evaluates the appropriate amount of the allowance for doubtful accounts by
assessing the recoverability of individual real estate mortgage loans and rent
receivables, through a comparison of their carrying amount with their estimated
realizable value. Management considers tenant financial condition, credit
history and current economic conditions in establishing these allowances.
Receivable balances are written off when deemed uncollectible. Recoveries of
receivables previously written off, if any, are recorded when received. A
summary of the changes in the allowance for doubtful accounts for fiscal years
ended April 30, 2009, 2008 and 2007 is as follows:
|
(in
thousands)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Balance
at beginning of year
|
$ | 1,264 | $ | 910 | $ | 725 | ||||||
|
Provision
|
2,472 | 1,060 | 507 | |||||||||
|
Write-off
|
(2,605 | ) | (706 | ) | (322 | ) | ||||||
|
Balance
at close of year
|
$ | 1,131 | $ | 1,264 | $ | 910 | ||||||
TAX,
INSURANCE, AND OTHER ESCROW
Tax,
insurance, and other escrow includes funds deposited with a lender for payment
of real estate tax 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 include funds held by escrow agents to be applied toward the
purchase of real estate or the payment of loan costs associated with loan
placement or refinancing.
DEFERRED
LEASING AND LOAN ACQUISITION COSTS
Costs and
commissions incurred in obtaining tenant leases are amortized on the
straight-line method over the terms of the related leases. Costs incurred in
obtaining long-term financing are amortized to interest expense over the life of
the loan using the straight-line method, which approximates the effective
interest method.
MINORITY
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
minority interests in accordance with the terms of the Operating Partnership
agreement.
IRET
reflects minority interests in Mendota Properties LLC, IRET–BD LLC,
IRET-Candlelight LLC, IRET-Golden Jack LLC, and IRET-1715 YDR LLC on the balance
sheet for the portion of properties consolidated by IRET that are not wholly
owned by IRET. The earnings or losses from these properties attributable to the
minority interests are reflected as minority interest portion of other
partnerships’ income in the consolidated statements of operations.
INCOME
TAXES
IRET
operates in a manner intended to enable it 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 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. The Company intends to
NOTE 2 • continued
distribute
all of its taxable income and realized capital gains from property dispositions
within the prescribed time limits and, accordingly, there is no provision or
liability for income taxes shown on the accompanying consolidated financial
statements.
IRET
conducts its business activity as an Umbrella Partnership Real Estate Investment
Trust (“UPREIT”) through its Operating Partnership. UPREIT status allows IRET to
accept the contribution of real estate in exchange for Units. Generally, such a
contribution to a limited partnership allows for the deferral of gain by an
owner of appreciated real estate.
On May 1,
2008, IRET adopted FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (“FIN 48”). The adoption of FIN 48 did not have a material
impact on the Company’s consolidated financial statements.
REVENUE
RECOGNITION
Residential
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 over the terms of the leases. Rents recognized
in advance of collection are reflected as receivable arising from
straight-lining of rents, net of allowance for doubtful
accounts. Rent concessions, including free rent, are amortized on a
straight-line basis over the terms of the related leases. This treatment of rent
concessions is supported in SFAS No. 13, Accounting for Leases, which
provides that if rentals vary from a straight-line basis, the income shall be
recognized on a straight-line basis.
Reimbursements
from tenants for real estate taxes and other recoverable operating expenses are
recognized as revenue in the period the applicable expenditures are incurred.
IRET receives payments for these reimbursements from substantially all of its
multi-tenant commercial tenants 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.
Interest
on mortgage loans receivable is recognized in income as it accrues during the
period the loan is outstanding. In the case of non-performing loans, income is
recognized as discussed above in the Mortgage Loans Receivable section of this
Note 2.
NET
INCOME PER SHARE
Basic net
income per share is computed as net income available to common shareholders
divided by the weighted average number of common shares outstanding for the
period. The Company has no potentially dilutive financial interests; the
potential exchange of Units for common shares will have no effect on net income
per share because Unitholders and common shareholders effectively share equally
in the net income of the Operating Partnership.
NOTE
3 • CREDIT RISK
The
Company is potentially exposed to credit risk for cash deposited with
FDIC-insured financial institutions in accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.
IRET has
entered into a cash management arrangement with First Western Bank with respect
to deposit accounts that exceed FDIC Insurance coverage. On a daily basis,
account balances are invested in United States government securities sold to
IRET by First Western Bank. IRET can require First Western Bank to repurchase
such securities at any time, at a purchase price equal to what IRET paid for the
securities plus interest. First Western Bank automatically repurchases
securities when collected amounts on deposit in IRET’s deposit accounts fall
below the maximum insurance amount, with the proceeds of such repurchases being
transferred to IRET’s deposit accounts to bring the amount on deposit back up to
the threshold amount. The amounts invested by IRET pursuant to the repurchase
agreement are not insured by FDIC.
NOTE
4 • PROPERTY OWNED
Property,
consisting principally of real estate, is stated at cost less accumulated
depreciation and totaled $1.5 billion and $1.4 billion as of April 30, 2009, and
April 30, 2008, respectively.
Construction
period interest of approximately, $912,000, $505,000, and $69,000, has been
capitalized for the years ended April 30, 2009, 2008, and 2007,
respectively.
The
future minimum lease receipts to be received under non-cancellable leases for
commercial properties as of April 30, 2009, assuming that no options to renew or
buy out the lease are exercised, are as follows:
|
Year
Ended April 30,
|
(in
thousands)
|
|||
|
2010
|
$ | 111,786 | ||
|
2011
|
99,833 | |||
|
2012
|
84,440 | |||
|
2013
|
72,039 | |||
|
2014
|
61,911 | |||
|
Thereafter
|
267,961 | |||
| $ | 697,970 | |||
During
fiscal 2009, the Company incurred a loss of approximately $338,000 due to
impairment of the property formerly used as IRET’s Minot headquarters. During
fiscal 2008, the Company incurred no losses due to impairment. For the year
ended April 30, 2007, the Company incurred a loss of approximately $640,000 due
to impairment of three properties and one parcel of unimproved land. The 2007
impairment losses were related to properties which were subsequently sold;
accordingly such losses are included in discontinued operations (Note
12).
NOTE
5 • MORTGAGE LOANS RECEIVABLE - NET
The
mortgage loans receivable consists of one contract for deed that is
collateralized by real estate. The interest rate on this loan is 7.0% and it
matures in fiscal 2013. Future principal payments due under this mortgage loan
as of April 30, 2009, are as follows:
|
Year
Ended April 30,
|
(in
thousands)
|
|||
|
2010
|
$ | 2 | ||
|
2011
|
2 | |||
|
2012
|
2 | |||
|
2013
|
157 | |||
| 163 | ||||
|
Less
allowance for doubtful accounts
|
(3 | ) | ||
| $ | 160 | |||
There
were no non-performing mortgage loans receivable as of April 30, 2009, and
2008.
NOTE 6 • MARKETABLE
SECURITIES
The
amortized cost and fair value of marketable securities available-for-sale at
April 30, 2009 and 2008 are as follows.
|
(in
thousands)
|
||||||||||||||||
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Fair
Value
|
|||||||||||||
|
Bank
certificates of deposit
|
$ | 420 | $ | 0 | $ | 0 | $ | 420 | ||||||||
| $ | 420 | $ | 0 | $ | 0 | $ | 420 | |||||||||
As of
April 30, 2009, the investment in bank certificates of deposit will mature in
less than one year.
There
were no realized gains or losses on sales of securities available-for-sale for
the fiscal year ended April 30, 2009. There was a realized gain on sale of
securities available-for-sale of $42,000 for the fiscal year ended April 30,
2008. There were no realized gains or losses on sales of securities
available-for-sale for the fiscal year ended April 30, 2007.
NOTE
7 • REVOLVING LINES OF CREDIT
IRET has
lines of credit with four financial institutions as of April 30, 2009. Interest
payments on outstanding borrowings are due monthly. These credit facilities are
summarized in the following table:
|
(in
thousands)
|
|||||||||||||||||||||
|
Financial
Institution
|
Amount
Available
|
Amount
Outstanding as of April 30, 2009
|
Amount
Outstanding as of April 30, 2008
|
Applicable
Interest Rate as of April 30, 2009
|
Maturity
Date
|
Weighted
Average Int. Rate on Borrowings during fiscal year 2009
|
|||||||||||||||
|
Lines
of Credit
|
|||||||||||||||||||||
|
(1)
Bremer Bank
|
$ | 10,000 | $ | 0 | $ | 0 | 4.00 | % |
09/01/09
|
4.6 | % | ||||||||||
|
(2)
First Western Bank & Trust
|
12,000 | 0 | 0 | 5.25 | % |
12/10/11
|
4.5 | % | |||||||||||||
|
(3)
First International Bank
&
Trust
|
14,000 | 4,000 | 0 | 3.75 | % |
12/19/09
|
4.8 | % | |||||||||||||
|
(4)
Dacotah Bank
|
1,500 | 1,500 | 0 | 3.25 | % |
11/4/09
|
3.3 | % | |||||||||||||
|
Total
|
$ | 37,500 | $ | 5,500 | $ | 0 | |||||||||||||||
Borrowings
under the lines of credit bear interest based on the following: (1) Bremer
Financial Corporation Reference Rate with a floor of 4.00%, (2) 175 basis points
below the Wall Street Journal Prime Rate with a floor of 5.25% and a ceiling of
8.25% and (3) 50 basis points above the Wall Street Journal Prime
Rate. In addition to these three lines of credit, the Company also
has a fully-drawn $5.0 million line of credit maturing in November 2009 with
Dacotah Bank in Minot, North Dakota. Of this $5.0 million, the Company includes
$3.5 million in mortgages payable on the Company’s balance sheet, as secured by
six small apartment properties owned by the Company, with the remaining $1.5
million included in revolving lines of credit. Borrowings under the Dacotah Bank
line of credit bear interest based on the Wall Street Journal Prime
Rate.
NOTE
8 • MORTGAGES PAYABLE
The
Company’s mortgages payable are collateralized by substantially all of its
properties owned. The majority of the Company’s mortgages payable are secured by
individual properties or groups of properties, and are non-recourse to the
Company, other than for standard carve-out obligations such as fraud, waste,
failure to insure, environmental conditions and failure to pay real estate
taxes. Interest
rates on mortgages payable range from 2.75% to 9.75%, and the mortgages have
varying maturity dates from August 1, 2009, through April 1, 2040.
Of the
mortgages payable, the balance of fixed rate mortgages totaled $1.1 billion at
April 30, 2009 and 2008, and the balances of variable rate mortgages totaled
$9.6 million and $11.7 million as of April 30, 2009, and 2008, respectively. The
Company does not utilize derivative financial instruments to mitigate its
exposure to changes in market interest rates. Most of the fixed rate mortgages
have substantial pre-payment penalties. As of April 30, 2009, the weighted
average rate of interest on the Company’s mortgage debt was 6.30%, compared to
6.37% on April 30, 2008. The aggregate amount of required future principal
payments on mortgages payable as of April 30, 2009, is as follows:
|
Year
Ended April 30,
|
(in
thousands)
|
|||
|
2010
|
$ | 140,456 | ||
|
2011
|
104,089 | |||
|
2012
|
113,381 | |||
|
2013
|
48,682 | |||
|
2014
|
57,537 | |||
|
Thereafter
|
606,013 | |||
|
Total
payments
|
$ | 1,070,158 | ||
NOTE 9 • TRANSACTIONS WITH RELATED
PARTIES
PROPERTY
ACQUISITION
During
fiscal year 2008, the Company acquired a two-story office building consisting of
approximately 65,000 rentable square feet, located in Fenton, Missouri, for a
purchase price of $7.0 million. The Company purchased the property
from entities controlled by W. David Scott, a trustee of the
Company. In accordance with the requirements of the Company’s
Declaration of Trust, the transaction was approved by a majority of the trustees
and by a majority of the independent trustees not otherwise interested in the
transaction.
BANKING
SERVICES
The
Company maintains an unsecured line of credit with First International Bank and
Trust, Watford City, North Dakota (First International). During fiscal years
2009, 2008 and 2007, respectively, the Company’s
interest charges were approximately $91,000, $0, and $71,000, for borrowings under the
First International line of credit. During fiscal year 2007, the
Company entered into two mortgage loans with First International in the amounts
of $450,000 and $2.4 million, respectively, paying a total of approximately
$34,000 in origination fees and loan closing costs for these two loans, and
paying interest on the loans of approximately $26,000 and $69,000, respectively,
during fiscal year 2007, and interest of approximately $34,000 and $174,000,
respectively, on the loans in fiscal year 2008, and interest of approximately
$33,000 and $171,000, respectively, during fiscal year 2009. The
Company also maintains a number of checking accounts with First
International. In each of fiscal years 2009, 2008 and 2007,
respectively, IRET paid less than $500 in total in various wire transfer and
other fees charged on these checking accounts. Stephen L. Stenehjem,
a member of the Company’s Board of Trustees and Audit Committee, is the
President and Chief Executive Officer of First International, and the bank is
owned by Mr. Stenehjem and members of his family.
NOTE 10 • ACQUISITIONS AND
DISPOSITIONS IN FISCAL YEARS 2009 AND 2008
PROPERTY
ACQUISITIONS
IRET
Properties paid approximately $33.8 million for real estate properties added to
its portfolio during fiscal year 2009, compared to $154.7 million in fiscal year
2008. Of the $33.8 million paid for real estate properties added to the
Company’s portfolio in fiscal year 2009, approximately $3.7 million was paid in
the form of limited partnership units of the Operating Partnership, with the
remainder paid in cash. Of the $154.7 million paid in fiscal year
2008, approximately $22.9 million consisted of the value of limited partnership
units of the Operating Partnership and approximately $46.8 million consisted of
the assumption of mortgage debt, with the remainder paid in cash. The fiscal
year 2009 and 2008 additions are detailed below.
NOTE 10 • continued
Fiscal 2009 (May 1, 2008 to April 30,
2009)
|
(in
thousands)
|
||||||||||||||||
|
Acquisitions
and Development Projects Placed in Service
|
Land
|
Building
|
Intangible
Assets
|
Acquisition
Cost
|
||||||||||||
|
Multi-Family
Residential
|
||||||||||||||||
|
33-unit
Minot Westridge Apartments – Minot, ND
|
$ | 67 | $ | 1,887 | $ | 0 | $ | 1,954 | ||||||||
|
12-unit
Minot Fairmont Apartments – Minot, ND
|
28 | 337 | 0 | 365 | ||||||||||||
|
4-unit
Minot 4th
Street Apartments – Minot, ND
|
15 | 74 | 0 | 89 | ||||||||||||
|
3-unit
Minot 11th
Street Apartments – Minot, ND
|
11 | 53 | 0 | 64 | ||||||||||||
|
36-unit
Evergreen Apartments – Isanti, MN
|
380 | 2,720 | 0 | 3,100 | ||||||||||||
|
10-unit
401 S. Main Apartments – Minot, ND1
|
0 | 905 | 0 | 905 | ||||||||||||
|
71-unit
IRET Corporate Plaza Apartments – Minot, ND2
|
0 | 10,824 | 0 | 10,824 | ||||||||||||
| 501 | 16,800 | 0 | 17,301 | |||||||||||||
|
Commercial
Property - Office
|
||||||||||||||||
|
22,500
sq. ft. Bismarck 715 E. Bdwy – Bismarck, ND
|
389 | 1,267 | 255 | 1,911 | ||||||||||||
|
50,360
sq. ft. IRET Corporate Plaza – Minot, ND2
|
0 | 3,896 | 0 | 3,896 | ||||||||||||
| 389 | 5,163 | 255 | 5,807 | |||||||||||||
|
Commercial
Property - Medical
|
||||||||||||||||
|
56,239
sq. ft. 2828 Chicago Avenue – Minneapolis, MN3
|
0 | 5,052 | 0 | 5,052 | ||||||||||||
|
31,643
sq. ft. Southdale Medical Expansion
(6545
France) – Edina, MN4
|
0 | 779 | 0 | 779 | ||||||||||||
| 0 | 5,831 | 0 | 5,831 | |||||||||||||
|
Commercial
Property - Industrial
|
||||||||||||||||
|
69,984
sq. ft. Minnetonka 13600 Cty Rd 62
–
Minnetonka, MN
|
809 | 2,881 | 310 | 4,000 | ||||||||||||
| 809 | 2,881 | 310 | 4,000 | |||||||||||||
|
Unimproved
Land
|
||||||||||||||||
|
Bismarck
2130 S. 12th
Street – Bismarck, ND
|
576 | 0 | 0 | 576 | ||||||||||||
|
Bismarck
700 E. Main – Bismarck, ND
|
314 | 0 | 0 | 314 | ||||||||||||
| 890 | 0 | 0 | 890 | |||||||||||||
|
Total
Property Acquisitions
|
$ | 2,589 | $ | 30,675 | $ | 565 | $ | 33,829 | ||||||||
|
(1)
|
Development
property placed in service November 10, 2008. Approximately $145,000 of
this cost was incurred in the three months ended April 30,
2009. Additional costs incurred in fiscal year 2008 totaled
approximately $14,000 for a total project cost at April 30, 2009 of
approximately $919,000.
|
|
(2)
|
Development
property placed in service January 19, 2009. Approximately $1.8
million of the residential cost and $563,000 of the commercial office cost
was incurred in the three months ended April 30, 2009. Additional costs
incurred in fiscal years 2008 and 2007 totaled $8.6 million for a total
project cost at April 30, 2009 of $23.3
million.
|
|
(3)
|
Development
property placed in service September 16, 2008. Approximately $800,000 of
this cost was incurred in the three months ended January 31, 2009.
Additional costs incurred in fiscal years 2008 and 2007 totaled $7.8
million for a total project cost at April 30, 2009 of $12.9
million.
|
|
(4)
|
Development
property placed in service September 17, 2008. Approximately $364,000 of
this cost was incurred in the three months ended January 31, 2009.
Additional costs incurred in fiscal year 2008 totaled $5.4 million for a
total project cost at April 30, 2009 of $6.2
million.
|
NOTE 10 • continued
Fiscal 2008 (May 1, 2007 to April 30,
2008)
|
(in
thousands)
|
||||||||||||||||
|
Acquisitions
and Development Projects Placed in Service
|
Land
|
Building
|
Intangible
Assets
|
Acquisition
Cost
|
||||||||||||
|
Multi-Family
Residential
|
||||||||||||||||
|
96
– unit Greenfield Apartments – Omaha, NE
|
$ | 578 | $ | 4,122 | $ | 0 | $ | 4,700 | ||||||||
|
67
– unit Cottonwood Lake IV – Bismarck, ND1
|
267 | 5,924 | 0 | 6,191 | ||||||||||||
| 845 | 10,046 | 0 | 10,891 | |||||||||||||
|
Commercial
Property – Office
|
||||||||||||||||
|
20,528
sq. ft. Plymouth 5095 Nathan Lane Office Building – Plymouth,
MN
|
604 | 1,236 | 160 | 2,000 | ||||||||||||
|
78,560
sq. ft. 610 Business Center IV – Brooklyn Park, MN
|
975 | 5,525 | 0 | 6,500 | ||||||||||||
|
64,607
sq. ft. Intertech Office Building – Fenton, MO
|
2,130 | 3,951 | 919 | 7,000 | ||||||||||||
| 3,709 | 10,712 | 1,079 | 15,500 | |||||||||||||
|
Commercial
Property—Medical (including Senior Housing)
|
||||||||||||||||
|
18,502
sq. ft. Barry Pointe Medical Building – Kansas City, MO
|
384 | 2,355 | 461 | 3,200 | ||||||||||||
|
11,800
sq. ft./28 beds Edgewood Vista – Billings, MT
|
115 | 1,743 | 2,392 | 4,250 | ||||||||||||
|
18,488
sq. ft./36 beds Edgewood Vista – East Grand Forks, MN
|
290 | 1,346 | 3,354 | 4,990 | ||||||||||||
|
11,800
sq. ft./28 beds Edgewood Vista – Sioux Falls, SD
|
314 | 971 | 2,065 | 3,350 | ||||||||||||
|
55,478
sq. ft. Edina 6405 France Medical – Edina, MN2
|
0 | 12,179 | 1,436 | 13,615 | ||||||||||||
|
70,934
sq. ft. Edina 6363 France Medical – Edina, MN2
|
0 | 12,651 | 709 | 13,360 | ||||||||||||
|
57,212
sq. ft. Minneapolis 701 25th
Ave Medical (Riverside) – Minneapolis, MN2
|
0 | 7,225 | 775 | 8,000 | ||||||||||||
|
53,466
sq. ft. Burnsville 303 Nicollet Medical (Ridgeview) – Burnsville,
MN
|
1,071 | 6,842 | 887 | 8,800 | ||||||||||||
|
36,199
sq. ft. Burnsville 305 Nicollet Medical (Ridgeview South) – Burnsville,
MN
|
189 | 5,127 | 584 | 5,900 | ||||||||||||
|
17,640
sq. ft. Eagan 1440 Duckwood Medical – Eagan, MN
|
521 | 1,547 | 257 | 2,325 | ||||||||||||
|
5,192
sq. ft./13 beds Edgewood Vista – Belgrade, MT
|
35 | 744 | 1,321 | 2,100 | ||||||||||||
|
5,194
sq. ft./13 beds Edgewood Vista – Columbus, NE
|
43 | 793 | 614 | 1,450 | ||||||||||||
|
168,801
sq. ft./185 beds Edgewood Vista – Fargo, ND
|
792 | 20,578 | 4,480 | 25,850 | ||||||||||||
|
5,185
sq. ft./13 beds Edgewood Vista – Grand Island, NE
|
34 | 742 | 624 | 1,400 | ||||||||||||
|
5,135
sq. ft./13 beds Edgewood Vista – Norfolk, NE
|
42 | 691 | 567 | 1,300 | ||||||||||||
| 3,830 | 75,534 | 20,526 | 99,890 | |||||||||||||
|
Commercial
Property – Industrial
|
||||||||||||||||
|
50,400
sq. ft. Cedar Lake Business Center – St. Louis Park, MN
|
896 | 2,802 | 342 | 4,040 | ||||||||||||
|
528,353
sq. ft. Urbandale Warehouse Building – Urbandale, IA
|
3,679 | 9,840 | 481 | 14,000 | ||||||||||||
|
69,600
sq. ft. Woodbury 1865 Woodlane – Woodbury, MN
|
1,108 | 2,613 | 279 | 4,000 | ||||||||||||
|
198,600
sq. ft. Eagan 2785 & 2795 Highway 55—Eagan, MN
|
3,058 | 2,557 | 785 | 6,400 | ||||||||||||
| 8,741 | 17,812 | 1,887 | 28,440 | |||||||||||||
|
Total
Property Acquisitions
|
$ | 17,125 | $ | 114,104 | $ | 23,492 | $ | 154,721 | ||||||||
|
(1)
|
Development
property placed in service January 2,
2008.
|
|
(2)
|
Acquisition
of leasehold interests only (air rights lease and ground
leases).
|
NOTE 10 • continued
PROPERTY
DISPOSITIONS
During
fiscal year 2009, the Company had no material dispositions, compared to two
properties and two buildings of an apartment community sold for an
aggregate sale price of $1.4 million during fiscal 2008. Real estate assets sold
by IRET during fiscal year 2008 were as follows:
|
(in
thousands)
|
||||||||||||
|
Fiscal
2008 Dispositions
|
Sales
Price
|
Book
Value
and
Sales Cost
|
Gain/Loss
|
|||||||||
|
Multi-Family
Residential
|
||||||||||||
|
405
Grant Ave (Lonetree) Apartments – Harvey, ND
|
$ | 185 | $ | 184 | $ | 1 | ||||||
|
Sweetwater
Apartments – Devils Lake, ND
|
940 | 430 | 510 | |||||||||
| 1,125 | 614 | 511 | ||||||||||
|
Commercial
Property – Office
|
||||||||||||
|
Minnetonka
Office Buildings – Minnetonka, MN
|
310 | 307 | 3 | |||||||||
| 310 | 307 | 3 | ||||||||||
|
Total
Fiscal 2008 Property Dispositions
|
$ | 1,435 | $ | 921 | $ | 514 | ||||||
NOTE 11 • OPERATING
SEGMENTS
IRET
reports its results in five reportable segments: multi-family residential
properties, and commercial office, medical (including senior housing),
industrial and retail properties. Our reportable segments are
aggregations of similar properties. The accounting policies of each
of these segments are the same as those described in Note 2. We disclose segment
information in accordance with SFAS 131, Disclosures about Segments of an
Enterprise and Related Disclosures (“SFAS 131”). SFAS 131
requires that segment disclosures present the measure(s) used by the chief
operating decision maker for purposes of assessing segment
performance.
Segment
information in this report is presented based on net operating income, which we
define as total revenues less property operating expenses and real estate
taxes. The following tables present revenues and net operating income
for the fiscal years ended April 30, 2009, 2008 and 2007 from our five
reportable segments, and reconcile net operating income of reportable segments
to income before gain (loss) on sale of other investments and minority interest
and discontinued operations as reported. Segment assets are also reconciled to
Total Assets as reported in the consolidated financial statements.
|
(in
thousands)
|
||||||||||||||||||||||||
|
Year
Ended April 30, 2009
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Real
estate revenue
|
$ | 76,716 | $ | 83,446 | $ | 52,564 | $ | 12,711 | $ | 14,568 | $ | 240,005 | ||||||||||||
|
Real
estate expenses
|
36,162 | 37,644 | 16,046 | 3,222 | 5,077 | 98,151 | ||||||||||||||||||
|
Net
operating income
|
$ | 40,554 | $ | 45,802 | $ | 36,518 | $ | 9,489 | $ | 9,491 | 141,854 | |||||||||||||
|
Interest
|
(68,743 | ) | ||||||||||||||||||||||
|
Depreciation/amortization
|
(56,714 | ) | ||||||||||||||||||||||
|
Administrative,
advisory and trustee fees
|
(4,882 | ) | ||||||||||||||||||||||
|
Other
expenses
|
(1,440 | ) | ||||||||||||||||||||||
|
Impairment
of real estate investment
|
(338 | ) | ||||||||||||||||||||||
|
Other
income
|
922 | |||||||||||||||||||||||
|
Income
before gain (loss) on sale of other investments and minority interest and
discontinued operations
|
$ | 10,659 | ||||||||||||||||||||||
NOTE 11 • continued
|
(in
thousands)
|
||||||||||||||||||||||||
|
Year
Ended April 30, 2008
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Real
estate revenue
|
$ | 72,827 | $ | 84,042 | $ | 38,412 | $ | 11,691 | $ | 14,198 | $ | 221,170 | ||||||||||||
|
Real
estate expenses
|
34,637 | 36,206 | 9,756 | 2,529 | 4,277 | 87,405 | ||||||||||||||||||
|
Net
operating income
|
$ | 38,190 | $ | 47,836 | $ | 28,656 | $ | 9,162 | $ | 9,921 | 133,765 | |||||||||||||
|
Interest
|
(63,439 | ) | ||||||||||||||||||||||
|
Depreciation/amortization
|
(51,518 | ) | ||||||||||||||||||||||
|
Administrative,
advisory and trustee fees
|
(5,203 | ) | ||||||||||||||||||||||
|
Other
expenses
|
(1,344 | ) | ||||||||||||||||||||||
|
Other
income
|
2,760 | |||||||||||||||||||||||
|
Income
before gain (loss) on sale of other investments and minority interest and
discontinued operations
|
$ | 15,021 | ||||||||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||||||
|
Year
Ended April 30, 2007
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Real
estate revenue
|
$ | 66,972 | $ | 73,603 | $ | 34,783 | $ | 8,091 | $ | 14,089 | $ | 197,538 | ||||||||||||
|
Real
estate expenses
|
31,454 | 30,475 | 8,675 | 1,253 | 4,475 | 76,332 | ||||||||||||||||||
|
Net
operating income
|
$ | 35,518 | $ | 43,128 | $ | 26,108 | $ | 6,838 | $ | 9,614 | 121,206 | |||||||||||||
|
Interest
|
(58,424 | ) | ||||||||||||||||||||||
|
Depreciation/amortization
|
(45,501 | ) | ||||||||||||||||||||||
|
Administrative,
advisory and trustee fees
|
(4,451 | ) | ||||||||||||||||||||||
|
Other
expenses
|
(1,240 | ) | ||||||||||||||||||||||
|
Other
income
|
2,665 | |||||||||||||||||||||||
|
Income
before gain (loss) on sale of other investments and minority interest and
discontinued operations
|
$ | 14,255 | ||||||||||||||||||||||
Segment
Assets and Accumulated Depreciation
|
(in
thousands)
|
||||||||||||||||||||||||
|
As
of April 30, 2009
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Segment
assets
|
||||||||||||||||||||||||
|
Property
owned
|
$ | 542,547 | $ | 571,565 | $ | 388,219 | $ | 108,103 | $ | 119,151 | $ | 1,729,585 | ||||||||||||
|
Less
accumulated depreciation
|
(115,729 | ) | (72,960 | ) | (42,345 | ) | (12,847 | ) | (18,990 | ) | (262,871 | ) | ||||||||||||
|
Total
property owned
|
$ | 426,818 | $ | 498,605 | $ | 345,874 | $ | 95,256 | $ | 100,161 | $ | 1,466,714 | ||||||||||||
|
Cash
and cash equivalents
|
33,244 | |||||||||||||||||||||||
|
Marketable
securities – available-for-sale
|
420 | |||||||||||||||||||||||
|
Receivables
and other assets
|
98,852 | |||||||||||||||||||||||
|
Unimproved
land
|
5,701 | |||||||||||||||||||||||
|
Mortgage
receivables, net of allowance
|
160 | |||||||||||||||||||||||
|
Total
Assets
|
$ | 1,605,091 | ||||||||||||||||||||||
NOTE 11 • continued
|
(in
thousands)
|
||||||||||||||||||||||||
|
As
of April 30, 2008
|
Multi-Family
Residential
|
Commercial-Office
|
Commercial-Medical
|
Commercial-Industrial
|
Commercial-Retail
|
Total
|
||||||||||||||||||
|
Segment
assets
|
||||||||||||||||||||||||
|
Property
owned
|
$ | 510,697 | $ | 556,712 | $ | 359,986 | $ | 104,060 | $ | 116,804 | $ | 1,648,259 | ||||||||||||
|
Less
accumulated depreciation
|
(101,964 | ) | (58,095 | ) | (32,466 | ) | (10,520 | ) | (16,334 | ) | (219,379 | ) | ||||||||||||
|
Total
property owned
|
$ | 408,733 | $ | 498,617 | $ | 327,520 | $ | 93,540 | $ | 100,470 | $ | 1,428,880 | ||||||||||||
|
Cash
and cash equivalents
|
53,481 | |||||||||||||||||||||||
|
Marketable
securities – available-for-sale
|
420 | |||||||||||||||||||||||
|
Receivables
and other assets
|
107,947 | |||||||||||||||||||||||
|
Development
in progress
|
22,856 | |||||||||||||||||||||||
|
Unimproved
land
|
3,901 | |||||||||||||||||||||||
|
Mortgage
receivables, net of allowance
|
541 | |||||||||||||||||||||||
|
Total
Assets
|
$ | 1,618,026 | ||||||||||||||||||||||
NOTE
12 • DISCONTINUED OPERATIONS
SFAS No.
144, Accounting for the
Impairment or Disposal of Long Lived Assets, requires the Company to
report in discontinued operations the results of operations of a property that
has either been disposed of or is classified as held for sale. It also requires
that any gains or losses from the sale of a property be reported in discontinued
operations. There were no properties classified as held for sale as of April 30,
2009, 2008 and 2007. The following information shows the effect on net income,
net of minority interest, and the gains or losses from the sale of properties
classified as discontinued operations for the fiscal years ended April 30, 2008
and 2007. There were no sales of property classified as discontinued operations
for the fiscal year ended April 30, 2009.
|
(in
thousands)
|
||||||||
|
2008
|
2007
|
|||||||
|
REVENUE
|
||||||||
|
Real
estate rentals
|
$ | 208 | $ | 1,609 | ||||
|
Tenant
reimbursement
|
2 | 66 | ||||||
|
TOTAL
REVENUE
|
210 | 1,675 | ||||||
|
EXPENSES
|
||||||||
|
Interest
|
0 | 415 | ||||||
|
Depreciation/amortization
related to real estate investments
|
47 | 299 | ||||||
|
Utilities
|
35 | 205 | ||||||
|
Maintenance
|
22 | 214 | ||||||
|
Real
estate taxes
|
28 | 202 | ||||||
|
Insurance
|
4 | 31 | ||||||
|
Property
management expenses
|
22 | 132 | ||||||
|
Administrative
expenses
|
0 | 2 | ||||||
|
Other
expenses
|
0 | 9 | ||||||
|
Impairment
of real estate investment
|
0 | 640 | ||||||
|
TOTAL
EXPENSES
|
158 | 2,149 | ||||||
|
Income
before minority interest and gain on sale of discontinued
operations
|
52 | (474 | ) | |||||
|
Minority
interest portion of operating partnership income
|
(153 | ) | (1,082 | ) | ||||
|
Gain
on sale of discontinued operations
|
514 | 4,640 | ||||||
|
DISCONTINUED
OPERATIONS, NET OF MINORITY INTEREST
|
$ | 413 | $ | 3,084 | ||||
|
Segment
Data
|
||||||||
|
Multi-Family
Residential
|
$ | 415 | $ | 1,783 | ||||
|
Commercial
- Office
|
(2 | ) | 392 | |||||
|
Commercial
- Medical
|
0 | 605 | ||||||
|
Commercial
- Industrial
|
0 | 0 | ||||||
|
Commercial
- Retail
|
0 | 170 | ||||||
|
Unimproved
Land
|
0 | 134 | ||||||
|
Total
|
$ | 413 | $ | 3,084 | ||||
NOTE 12 • continued
|
(in
thousands)
|
||||||||
|
2008
|
2007
|
|||||||
|
Property
Sale Data
|
||||||||
|
Sales
price
|
$ | 1,435 | $ | 22,543 | ||||
|
Net
book value and sales costs
|
921 | 17,903 | ||||||
|
Gain
on sale of discontinued operations
|
$ | 514 | $ | 4,640 | ||||
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. The Company has no outstanding options, warrants, convertible stock
or other contractual obligations requiring issuance of additional common shares
that would result in a dilution of earnings. While Units can be exchanged for
shares on a one-for-one basis after a minimum holding period of one year, the
exchange of Units for common shares has no effect on diluted earnings per share,
as Unitholders and common shareholders effectively share equally in the net
income of the Operating Partnership. The following table presents a
reconciliation of the numerator and denominator used to calculate basic and
diluted earnings per share reported in the consolidated financial statements for
the fiscal years ended April 30, 2009, 2008 and 2007:
|
For
Years Ended April 30,
|
||||||||||||
|
(in
thousands, except per share data)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
NUMERATOR
|
||||||||||||
|
Income
from continuing operations
|
$ | 8,526 | $ | 11,675 | $ | 11,026 | ||||||
|
Discontinued
operations
|
0 | 413 | 3,084 | |||||||||
|
Net
income
|
8,526 | 12,088 | 14,110 | |||||||||
|
Dividends
to preferred shareholders
|
(2,372 | ) | (2,372 | ) | (2,372 | ) | ||||||
|
Numerator
for basic earnings per share – net income available to
common
shareholders
|
6,154 | 9,716 | 11,738 | |||||||||
|
Minority
interest portion of operating partnership income
|
2,227 | 3,677 | 4,299 | |||||||||
|
Numerator
for diluted earnings per share
|
$ | 8,381 | $ | 13,393 | $ | 16,037 | ||||||
|
DENOMINATOR
|
||||||||||||
|
Denominator
for basic earnings per share weighted average shares
|
58,603 | 53,060 | 47,672 | |||||||||
|
Effect
of dilutive securities convertible operating partnership
units
|
21,217 | 20,417 | 17,017 | |||||||||
|
Denominator
for diluted earnings per share
|
79,820 | 73,477 | 64,689 | |||||||||
|
Earnings
per common share from continuing operations – basic and
diluted
|
$ | .11 | $ | .17 | $ | .18 | ||||||
|
Earnings
per common share from discontinued operations –
basic and
diluted
|
.00 | .01 | .06 | |||||||||
|
NET
INCOME PER COMMON SHARE – BASIC & DILUTED
|
$ | .11 | $ | .18 | $ | .24 | ||||||
NOTE 14 • RETIREMENT
PLANS
IRET
sponsors a defined contribution profit sharing retirement plan and a defined
contribution 401(k) plan. IRET’s defined contribution profit sharing
retirement plan is available to employees over the age of 21 who have completed
one year of service. Participation in IRET’s defined contribution
401(k) plan is available to all employees over the age of 21 immediately upon
their employment with the Company, and employees participating in the 401(k)
plan may contribute up to maximum levels established by the
IRS. Employer contributions to the profit sharing and 401(k) plans
are at the discretion of the Company’s management. IRET currently
contributes 4.5% of the salary of each employee participating in the profit
sharing plan, and 3% of the salary of each employee participating in the 401(k)
plan, for a total contribution of 7.5% of the salary of each of the employees
participating in both plans. Contributions by IRET to these plans on behalf of
employees totaled approximately $356,000 in fiscal year 2009, $305,000 in fiscal
year 2008 and $258,000 in fiscal year 2007.
NOTE 15 • COMMITMENTS AND
CONTINGENCIES
Ground Leases. As of April
30, 2009, the Company is a tenant under operating ground or air rights leases on
eleven of its properties. The Company pays a total of approximately $503,000 per
year in rent under these ground leases, which have remaining terms ranging from
4 to 92 years, and expiration dates ranging from July 2012 to October 2100. The
Company has renewal options for five of the eleven 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, 2009 is
as follows:
|
(in
thousands)
|
||||
|
Year
Ended April 30,
|
Lease
Payments
|
|||
|
2010
|
$ | 503 | ||
|
2011
|
503 | |||
|
2012
|
503 | |||
|
2013
|
503 | |||
|
2014
|
503 | |||
|
Thereafter
|
23,565 | |||
|
Total
|
$ | 26,080 | ||
Legal Proceedings. IRET is
involved in various lawsuits arising in the normal course of business.
Management believes that such matters will not have a material effect on the
Company’s financial statements.
Environmental Matters. It is
generally IRET’s policy to obtain a Phase I environmental assessment of each
property that the Company seeks to acquire. Such assessments have not
revealed, nor is the Company aware of, any environmental liabilities that IRET
believes would have a material adverse effect on IRET’s financial position or
results of operations. IRET owns properties that contain or potentially contain
(based on the age of the property) asbestos or lead, or have underground fuel
storage tanks. For certain of these properties, the Company estimated the fair
value of the conditional asset retirement obligation in accordance with FASB
Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations, or FIN 47, and chose not to book a liability,
because the amounts involved were immaterial. With respect to certain other
properties, the Company has not recorded any related asset retirement
obligation, as the fair value of the liability cannot be reasonably estimated,
due to uncertainties in the timing and manner of settlement of these
obligations.
Tenant
Improvements. In entering into leases with tenants, IRET may
commit itself 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 IRET is 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, 2009, the Company is committed to fund
approximately $7.1 million in tenant improvements, within approximately the next
12 months.
Purchase Options. The Company
has granted options to purchase certain IRET properties to tenants in these
properties, under lease agreements. In general, the 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 of the property to IRET. The property cost and gross rental
revenue of these properties are as follows:
NOTE 15 • continued
|
(in
thousands)
|
||||||||||||||||
|
Gross
Rental Revenue
|
||||||||||||||||
|
Property
|
Investment
Cost
|
2009
|
2008
|
2007
|
||||||||||||
|
Abbott
Northwest-Sartell, MN
|
$ | 12,653 | $ | 1,292 | $ | 1,292 | $ | 1,252 | ||||||||
|
Edgewood
Vista-Belgrade, MT
|
2,135 | 196 | 31 | 0 | ||||||||||||
|
Edgewood
Vista-Billings, MT
|
4,274 | 396 | 66 | 0 | ||||||||||||
|
Edgewood
Vista-Bismarck, ND
|
10,903 | 1,008 | 985 | 980 | ||||||||||||
|
Edgewood
Vista-Brainerd, MN
|
10,667 | 988 | 971 | 968 | ||||||||||||
|
Edgewood
Vista-Columbus, NE
|
1,481 | 136 | 21 | 0 | ||||||||||||
|
Edgewood
Vista-East Grand Forks, MN
|
5,012 | 464 | 78 | 0 | ||||||||||||
|
Edgewood
Vista-Fargo, ND
|
26,322 | 2,065 | 310 | 0 | ||||||||||||
|
Edgewood
Vista-Fremont, NE
|
588 | 72 | 69 | 68 | ||||||||||||
|
Edgewood
Vista-Grand Island, NE
|
1,431 | 132 | 20 | 0 | ||||||||||||
|
Edgewood
Vista-Hastings, NE
|
606 | 76 | 69 | 68 | ||||||||||||
|
Edgewood
Vista-Hermantown I, MN
|
21,510 | 2,040 | 1,557 | 1,472 | ||||||||||||
|
Edgewood
Vista-Hermantown II, MN
|
12,359 | 1,144 | 1,127 | 1,124 | ||||||||||||
|
Edgewood
Vista-Kalispell, MT
|
624 | 76 | 72 | 72 | ||||||||||||
|
Edgewood
Vista-Missoula, MT
|
999 | 96 | 132 | 132 | ||||||||||||
|
Edgewood
Vista-Norfolk, NE
|
1,332 | 124 | 19 | 0 | ||||||||||||
|
Edgewood
Vista-Omaha, NE
|
676 | 80 | 77 | 76 | ||||||||||||
|
Edgewood
Vista-Sioux Falls, SD
|
3,357 | 312 | 52 | 0 | ||||||||||||
|
Edgewood
Vista-Spearfish, SD
|
6,792 | 628 | 612 | 608 | ||||||||||||
|
Edgewood
Vista-Virginia, MN
|
17,132 | 1,736 | 1,381 | 1,320 | ||||||||||||
|
Fox
River Cottages - Grand Chute, WI
|
3,956 | 388 | 387 | 260 | ||||||||||||
|
Healtheast
St John & Woodwinds- Maplewood & Woodbury, MN
|
21,601 | 2,052 | 2,032 | 2,032 | ||||||||||||
|
Great
Plains - Fargo, ND
|
15,375 | 1,876 | 1,876 | 1,876 | ||||||||||||
|
Minnesota
National Bank - Duluth, MN
|
2,104 | 211 | 205 | 135 | ||||||||||||
|
St.
Michael Clinic - St. Michael, MN
|
2,851 | 240 | 229 | 35 | ||||||||||||
|
Stevens
Point - Stevens Point, WI
|
15,020 | 1,356 | 1,279 | 630 | ||||||||||||
|
Total
|
$ | 201,760 | $ | 19,184 | $ | 14,949 | $ | 13,108 | ||||||||
Income Guarantees. In
connection with its acquisition in April 2004 of a portfolio of properties
located in and near Duluth, Minnesota, the Company received from the seller of
the properties a guarantee, for five years from the closing date of the
acquisition, of a specified minimum amount of annual net operating income,
before debt service (principal and interest payments), from two of the
properties included in the portfolio. As of April 30, 2009, the Company has
recorded a receivable for payment of approximately $215,000 under this
guarantee.
Restrictions on Taxable
Dispositions. Approximately 131 of the Company’s properties,
consisting of approximately 7.3 million square feet of our combined commercial
segment’s properties and 4,101 apartment units, 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 $862.3
million at April 30, 2009. The restrictions on taxable dispositions
are effective for varying periods. The terms of these agreements
generally prevent us from selling the properties in taxable
transactions. The Company does not believe that the agreements
materially affect the conduct of its business or its decisions whether to
dispose of restricted properties during the restriction period because the
Company generally holds these and its other properties for investment purposes,
rather than for sale. Historically, however, where the Company has
deemed it to be in its shareholders’ best interests to dispose of restricted
properties, the Company has done so through transactions structured as
tax-deferred transactions under Section 1031 of the Internal Revenue
Code.
Redemption Value of UPREIT
Units. The limited partnership units (“UPREIT Units”) of the
Company’s operating partnership, IRET Properties, are redeemable at the option
of the holder for cash, or, at our option, for the Company’s common shares of
beneficial interest on a one-for-one basis, after a minimum one-year holding
period. All UPREIT Units receive the same cash distributions as those paid
on common shares. UPREIT Units are redeemable for an amount of cash
per Unit equal to the average of the daily market price of an IRET common
share
NOTE 15 • continued
for the
ten consecutive trading days immediately preceding the date of valuation of the
Unit. As of April 30, 2009 and 2008, the aggregate redemption value
of the then-outstanding UPREIT Units of the operating partnership owned by
limited partners was approximately $198.2 million and $218.3 million,
respectively.
Joint Venture Buy/Sell
Options. Certain 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. We have one joint venture which allows
our unaffiliated partner, at its election, to require that we 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. In
accordance with Statement of Accounting Standards No. 5, Accounting for Contingencies,
we have not recorded a liability or the related asset that would result from the
acquisition in connection with the above potential obligation because the
probability of our unaffiliated partner requiring us to buy their interest is
not currently determinable, and we are unable to estimate the amount of the
payment required for that purpose.
Development
Projects. The Company completed several development or
renovation projects during fiscal year 2009; these projects are included in the
Acquisitions and Development Projects Placed in Service table in Note 10
above. IRET currently is constructing a 24-unit apartment building in
Lincoln, NE, to replace the building in its Thomasbrook apartment complex
destroyed by fire in July 2008. The construction of this apartment
building is expected to cost approximately $2.2 million, of which $2.1 million
will be covered by insurance. The remaining cost not covered by
insurance is due to various property upgrades incorporated in the project by
IRET to modernize and enhance the marketability of the units being
constructed.
Crosstown Circle Office Building,
Eden Prairie, MN. The Company’s Crosstown Circle Office Building in Eden
Prairie, Minnesota was acquired in October 2004 from Best Buy Company, which is
leasing all but 7,500 square feet of the 185,000 square foot building under a
master lease expiring September 30, 2010. Under the terms of the financing
obtained by the Company for this building, the Company is obligated to fund a
leasing reserve account in the event that a specified occupancy level is not met
at the time the Best Buy master lease expires. The amount to be deposited in the
leasing reserve account would be calculated by multiplying a specified amount
per square foot by the difference between the specified occupancy level and the
building’s actual occupied square feet. The maximum amount the Company would be
required to deposit in such leasing reserve account is $4,625,000. Funds in the
leasing reserve account would be released as leases for vacant space in the
building are executed.
Pending Acquisition.
Subsequent to its April 30, 2009 fiscal year end, the Company signed a purchase
agreement to acquire an approximately 42,180 square foot, single-tenant office
showroom/warehouse building located in Iowa for $350,000 in cash and the
issuance of limited partnership units of IRET Properties valued at $3.0 million,
for a total purchase price of $3.4 million. This pending acquisition
is subject to various closing conditions and contingencies, and no assurances
can be given that this transaction will be completed.
NOTE 16 • FAIR VALUE OF FINANCIAL
INSTRUMENTS
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments.
Mortgage Loans Receivable.
Fair values are based on the discounted value of future cash flows
expected to be received for a loan using current rates at which similar loans
would be made to borrowers with similar credit risk and the same remaining
maturities. Terms are short term in nature and carrying value approximates the
estimated fair value.
Cash and Cash Equivalents.
The carrying amount approximates fair value because of the short
maturity.
Marketable Securities. The
fair values of these instruments are estimated based on quoted market prices for
the security.
Other Debt. The fair value of
other debt is estimated based on the discounted cash flows of the loan using
current market rates.
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 current market rates.
NOTE 16 • continued
The
estimated fair values of the Company’s financial instruments as of April 30,
2009 and 2008, are as follows:
|
(in
thousands)
|
||||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
|
FINANCIAL
ASSETS
|
||||||||||||||||
|
Mortgage
loans receivable
|
$ | 160 | $ | 160 | $ | 541 | $ | 541 | ||||||||
|
Cash
and cash equivalents
|
33,244 | 33,244 | 53,481 | 53,481 | ||||||||||||
|
Marketable
securities - available-for-sale
|
420 | 420 | 420 | 420 | ||||||||||||
|
FINANCIAL
LIABILITIES
|
||||||||||||||||
|
Other
debt
|
1,000 | 1,129 | 73 | 74 | ||||||||||||
|
Mortgages
payable
|
1,070,158 | 1,301,071 | 1,063,858 | 1,079,986 | ||||||||||||
NOTE 17 • COMMON AND PREFERRED SHARES
OF BENEFICIAL INTEREST AND SHAREHOLDERS’ EQUITY
Distribution Reinvestment and Share
Purchase Plan. During fiscal years 2009 and 2008, IRET issued
1.3 million and 1.2 million common shares, respectively, pursuant to its
distribution reinvestment and share purchase plan, at a total value at issuance
of $12.4 million and $11.4 million, respectively. The shares issued under the
distribution reinvestment and share purchase plan during fiscal year 2009
consisted of 1.2 million shares valued at issuance at $11.4 million that were
issued for reinvested distributions and approximately 108,000 shares valued at
$1.0 million at issuance that were sold for voluntary cash
contributions. All the shares issued under the distribution reinvestment plan
during fiscal year 2008 were issued for reinvested distributions. IRET’s
distribution reinvestment plan is available to common shareholders of IRET and
all limited partners of IRET Properties. Under the distribution reinvestment
plan, shareholders or limited partners may elect to have all or a portion of
their distributions used to purchase additional IRET common shares, and may
elect to make voluntary cash contributions for the purchase of IRET
common shares, at a discount (currently 5%) from the market price.
Conversion of Units to Common
Shares. During fiscal years 2009 and 2008, respectively,
approximately 746,000 and 1.1 million Units were converted to common shares,
with a total value of $5.0 million and $7.8 million included in shareholders’
equity.
Issuance of Common
Shares. In April 2009, the Company commenced the sale of up to
$50 million of common shares pursuant to a continuous offering program. Through
April 30, 2009, the Company sold 632,712 common shares as part of this program.
The net proceeds (before offering expenses but after underwriting discounts and
commissions) from the offering of $6.0 million through April 30, 2009 will be
used for general corporate purposes. Through April 30, 2009, the Company paid
Robert W. Baird & Co. Incorporated, its agent under this program, $122,000
in fees with respect to the common shares sold through this program. In October
2007, the Company sold 6.9 million common shares at $10.20 per share in an
underwritten public offering, for net proceeds to the Company of approximately
$66.4 million, after payment of commissions and other expenses of the offering.
The Company conducted no public offerings of common shares in fiscal year 2007,
other than sales of common shares under its Distribution Reinvestment
Plan.
Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest. During fiscal year
2004, the Company issued 1,150,000 shares of 8.25% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest for total proceeds of $27.3
million, net of selling costs. Holders of the Company’s Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest 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 securities of the Company at
the election of the holders. However, the Company, at its option, may redeem the
shares at a redemption price of $25.00 per share, plus any accrued and unpaid
distributions through the date of redemption. The shares have no maturity date
and will remain outstanding indefinitely unless redeemed by the
Company.
NOTE 18 • QUARTERLY RESULTS OF
CONSOLIDATED OPERATIONS (unaudited)
|
(in
thousands, except per share data)
|
||||||||||||||||
|
QUARTER
ENDED
|
July
31, 2008
|
October
31, 2008
|
January
31, 2009
|
April
30, 2009
|
||||||||||||
|
Revenues
|
$ | 58,846 | $ | 59,573 | $ | 60,934 | $ | 60,652 | ||||||||
|
Net
Income available to common shareholders
|
$ | 1,765 | $ | 1,930 | $ | 785 | $ | 1,674 | ||||||||
|
Net
Income per common share - basic & diluted
|
$ | .03 | $ | .03 | $ | .02 | $ | .03 | ||||||||
|
(in
thousands, except per share data)
|
||||||||||||||||
|
QUARTER
ENDED
|
July
31, 2007
|
October
31, 2007
|
January
31, 2008
|
April
30, 2008
|
||||||||||||
|
Revenues
|
$ | 53,573 | $ | 54,211 | $ | 54,424 | $ | 58,962 | ||||||||
|
Net
Income available to common shareholders
|
$ | 2,388 | $ | 2,243 | $ | 2,390 | $ | 2,695 | ||||||||
|
Net
Income per common share - basic & diluted
|
$ | .05 | $ | .04 | $ | .04 | $ | .05 | ||||||||
The above financial information is
unaudited. In the opinion of management, all adjustments (which are of a normal
recurring nature) have been included for a fair
presentation.
NOTE 19 • SUBSEQUENT
EVENTS
Common and Preferred Share
Distributions. On June 30, 2009, the Company paid a distribution of 51.56
cents per share on the Company’s Series A Cumulative Redeemable Preferred Shares
to preferred shareholders of record on June 15, 2009. On July 1, 2009, the
Company paid a distribution of 17.05 cents per share on the Company’s common
shares and units, to common shareholders and Unitholders of record on June 15,
2009. This common share/unit distribution represented an increase of .05 cents
or 0.3% over the previous regular quarterly distribution of 17.00 cents per
common share/unit paid April 1, 2009.
Common Share
Offering. Subsequent to the fourth quarter of fiscal year
2009, IRET completed a public offering of 3,000,000 common shares of beneficial
interest at $8.70 per share (before underwriting discounts and
commissions). Proceeds to the Company were $24,795,000 after
deducting underwriting discounts and commissions but before deducting offering
expenses. The shares were sold pursuant to an Underwriting Agreement
with Robert W. Baird & Co., Incorporated, D.A. Davidson & Co. and J.J.B.
Hilliard, W.L. Lyons, Inc., and were issued pursuant to IRET’s registration
statement on Form S-3 filed with and declared effective by the Securities and
Exchange Commission.
Pending
Acquisition. The
Company currently has no material pending acquisitions. In the fourth quarter of
fiscal year 2009, IRET signed a purchase agreement to acquire a portfolio of
office and retail properties located in the Minneapolis-St. Paul metropolitan
area for a total of $29.7 million. The Company subsequently
terminated this purchase agreement. Subsequent to its April 30, 2009
fiscal year end, the Company signed a purchase agreement to acquire an
approximately 42,180 square foot, single-tenant office showroom/warehouse
building located in Iowa for $350,000 in cash and the issuance of limited
partnership units of IRET Properties valued at $3.0 million, for a total
purchase price of $3.4 million. This pending acquisition is subject
to various closing conditions and contingencies, and no assurances can be given
that this transaction will be completed.
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
VALUATION
AND QUALIFYING ACCOUNTS
|
(in
thousands)
|
||||||||||||||||
|
Column
A
|
Column
B
|
Column
C
|
Column
E
|
|||||||||||||
|
Description
|
Balance
at Beginning of Year
|
Additions
Charged Against Operations
|
Uncollectible
Accounts Written-off
|
Balance
at End of Year
|
||||||||||||
|
Fiscal
Year Ended April 30, 2009
Allowance
for doubtful accounts
|
$ | 1,264 | $ | 2,472 | $ | (2,605 | ) | $ | 1,131 | |||||||
|
Fiscal
Year Ended April 30, 2008
Allowance
for doubtful accounts
|
$ | 910 | $ | 1,060 | $ | (706 | ) | $ | 1,264 | |||||||
|
Fiscal
Year Ended April 30, 2007
Allowance
for doubtful accounts
|
$ | 725 | $ | 507 | $ | (322 | ) | $ | 910 | |||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Multi-Family
Residential
|
||||||||||||||||||||||||||||||||||
|
17
South Main Apartments - Minot, ND
|
$ | 198 | $ | 0 | $ | 0 | $ | 222 | $ | 0 | $ | 222 | $ | 222 | $ | (16 | ) |
2006
|
40
years
|
|||||||||||||||
|
401
South Main Apartments - Minot, ND
|
693 | 158 | 334 | 791 | 164 | 1,119 | 1,283 | (17 | ) |
1987
|
24-40
years
|
|||||||||||||||||||||||
|
Arbors
Apartments - S Sioux City, NE
|
4,272 | 350 | 6,625 | 577 | 373 | 7,179 | 7,552 | (556 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Boulder
Court - Eagan, MN
|
4,075 | 1,067 | 5,498 | 1,381 | 1,272 | 6,674 | 7,946 | (989 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Brookfield
Village Apartments - Topeka, KS
|
5,667 | 509 | 6,698 | 774 | 579 | 7,402 | 7,981 | (1,072 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Candlelight
Apartments - Fargo, ND
|
1,392 | 80 | 758 | 1,025 | 216 | 1,647 | 1,863 | (667 | ) |
1992
|
24-40
years
|
|||||||||||||||||||||||
|
Canyon
Lake Apartments - Rapid City, SD
|
2,702 | 305 | 3,958 | 321 | 325 | 4,259 | 4,584 | (808 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Castle
Rock - Billings, MT
|
7,101 | 736 | 4,864 | 1,228 | 834 | 5,994 | 6,828 | (1,623 | ) |
1998
|
40
years
|
|||||||||||||||||||||||
|
Chateau
Apartments - Minot, ND
|
1,802 | 122 | 2,224 | 1,092 | 168 | 3,270 | 3,438 | (847 | ) |
1998
|
12-40
years
|
|||||||||||||||||||||||
|
Cimarron
Hills - Omaha, NE
|
0 | 706 | 9,588 | 2,920 | 997 | 12,217 | 13,214 | (2,555 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Colonial
Villa - Burnsville, MN
|
8,149 | 2,401 | 11,515 | 2,143 | 2,633 | 13,426 | 16,059 | (2,035 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Colton
Heights Properties - Minot, ND
|
548 | 80 | 672 | 247 | 111 | 888 | 999 | (578 | ) |
1984
|
40
years
|
|||||||||||||||||||||||
|
Cottonwood
Community - Bismarck, ND
|
16,460 | 1,056 | 17,372 | 2,186 | 1,255 | 19,359 | 20,614 | (3,714 | ) |
1997
|
40
years
|
|||||||||||||||||||||||
|
Country
Meadows Community - Billings, MT
|
5,345 | 491 | 7,809 | 722 | 518 | 8,504 | 9,022 | (2,171 | ) |
1995
|
33-40
years
|
|||||||||||||||||||||||
|
Crestview
Apartments - Bismarck, ND
|
4,240 | 235 | 4,290 | 806 | 449 | 4,882 | 5,331 | (2,015 | ) |
1994
|
24-40
years
|
|||||||||||||||||||||||
|
Crown
Colony Apartments - Topeka, KS
|
8,800 | 620 | 9,956 | 1,452 | 725 | 11,303 | 12,028 | (2,720 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Dakota
Hill At Valley Ranch - Irving, TX
|
22,730 | 3,650 | 33,810 | 2,247 | 4,139 | 35,568 | 39,707 | (8,364 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
East
Park Apartments - Sioux Falls, SD
|
1,591 | 115 | 2,405 | 527 | 155 | 2,892 | 3,047 | (530 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Evergreen
Apartments - Isanti, MN
|
2,155 | 380 | 2,720 | 50 | 380 | 2,770 | 3,150 | (43 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Forest
Park Estates - Grand Forks, ND
|
6,178 | 810 | 5,579 | 3,718 | 1,081 | 9,026 | 10,107 | (3,292 | ) |
1993
|
24-40
years
|
|||||||||||||||||||||||
|
Greenfield
Apartments - Omaha, NE
|
3,650 | 578 | 4,122 | 231 | 616 | 4,315 | 4,931 | (145 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Heritage
Manor - Rochester, MN
|
4,714 | 403 | 6,968 | 1,452 | 442 | 8,381 | 8,823 | (2,309 | ) |
1998
|
40
years
|
|||||||||||||||||||||||
|
Indian
Hills Apartments - Sioux City, IA
|
0 | 294 | 2,921 | 2,424 | 314 | 5,325 | 5,639 | (190 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
IRET
Corporate Plaza Apartments - Minot, ND
|
0 | 1,038 | 0 | 15,917 | 1,038 | 15,917 | 16,955 | (108 | ) |
2009
|
40
years
|
|||||||||||||||||||||||
|
Jenner
Properties - Grand Forks, ND
|
1,624 | 184 | 1,513 | 771 | 266 | 2,202 | 2,468 | (631 | ) |
1997
|
40
years
|
|||||||||||||||||||||||
|
Kirkwood
Manor - Bismarck, ND
|
1,925 | 449 | 2,725 | 1,232 | 537 | 3,869 | 4,406 | (1,191 | ) |
1997
|
12-40
years
|
|||||||||||||||||||||||
|
Lancaster
Place - St. Cloud, MN
|
1,172 | 289 | 2,899 | 721 | 432 | 3,477 | 3,909 | (877 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Legacy
Community - Grand Forks, ND
|
17,393 | 1,362 | 21,727 | 4,582 | 1,957 | 25,714 | 27,671 | (5,732 | ) |
1995-2004
|
24-40
years
|
|||||||||||||||||||||||
|
Magic
City Apartments - Minot, ND
|
2,706 | 370 | 3,875 | 1,503 | 511 | 5,237 | 5,748 | (1,560 | ) |
1997
|
12-40
years
|
|||||||||||||||||||||||
|
Meadows
Community - Jamestown, ND
|
2,809 | 590 | 4,519 | 975 | 629 | 5,455 | 6,084 | (1,233 | ) |
1998
|
40
years
|
|||||||||||||||||||||||
|
Minot
4th Street Apartments - Minot, ND
|
99 | 15 | 74 | 0 | 15 | 74 | 89 | (2 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Minot
11th Street Apartments - Minot, ND
|
99 | 11 | 53 | 1 | 11 | 54 | 65 | (1 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule
III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Multi-Family Residential
- continued
|
||||||||||||||||||||||||||||||||||
|
Minot
Fairmont Apartments - Minot, ND
|
$ | 396 | $ | 28 | $ | 337 | $ | 2 | $ | 28 | $ | 339 | $ | 367 | $ | (8 | ) |
2008
|
40
years
|
|||||||||||||||
|
Minot
Westridge Apartments - Minot, ND
|
1,981 | 68 | 1,887 | 16 | 70 | 1,901 | 1,971 | (46 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Miramont
Apartments - Fort Collins, CO
|
10,944 | 1,470 | 12,765 | 1,207 | 1,580 | 13,862 | 15,442 | (4,368 | ) |
1996
|
40
years
|
|||||||||||||||||||||||
|
Monticello
Apartments - Monticello, MN
|
3,145 | 490 | 3,756 | 287 | 592 | 3,941 | 4,533 | (537 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Neighborhood
Apartments - Colorado Springs, CO
|
9,871 | 1,034 | 9,812 | 2,870 | 1,148 | 12,568 | 13,716 | (3,882 | ) |
1997
|
40
years
|
|||||||||||||||||||||||
|
North
Pointe - Bismarck, ND
|
2,108 | 143 | 2,244 | 155 | 160 | 2,382 | 2,542 | (816 | ) |
1995
|
24-40
years
|
|||||||||||||||||||||||
|
Oakmont
Apartments - Sioux Falls, SD
|
3,737 | 423 | 4,838 | 185 | 430 | 5,016 | 5,446 | (907 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Oakwood
- Sioux Falls, SD
|
3,480 | 543 | 2,784 | 3,310 | 757 | 5,880 | 6,637 | (2,278 | ) |
1993
|
40
years
|
|||||||||||||||||||||||
|
Olympic
Village - Billings, MT
|
7,656 | 1,164 | 10,441 | 1,544 | 1,400 | 11,749 | 13,149 | (2,698 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Olympik
Village Apartments - Rochester, MN
|
4,999 | 1,034 | 6,109 | 428 | 1,091 | 6,480 | 7,571 | (723 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Oxbow
- Sioux Falls, SD
|
3,793 | 404 | 3,152 | 2,126 | 474 | 5,208 | 5,682 | (1,849 | ) |
1994
|
24-40
years
|
|||||||||||||||||||||||
|
Park
Meadows Community - Waite Park, MN
|
9,606 | 1,143 | 9,099 | 4,202 | 1,485 | 12,959 | 14,444 | (4,687 | ) |
1997
|
40
years
|
|||||||||||||||||||||||
|
Pebble
Springs - Bismarck, ND
|
340 | 7 | 748 | 79 | 36 | 798 | 834 | (206 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Pinecone
Apartments - Fort Collins, CO
|
9,804 | 905 | 12,105 | 1,366 | 1,034 | 13,342 | 14,376 | (4,687 | ) |
1995
|
40
years
|
|||||||||||||||||||||||
|
Pinehurst
Apartments - Billings, MT
|
402 | 72 | 687 | 91 | 74 | 776 | 850 | (144 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Pointe
West - Rapid City, SD
|
2,910 | 240 | 3,538 | 1,107 | 304 | 4,581 | 4,885 | (1,742 | ) |
1994
|
24-40
years
|
|||||||||||||||||||||||
|
Prairie
Winds Apartments - Sioux Falls, SD
|
1,553 | 144 | 1,816 | 339 | 208 | 2,091 | 2,299 | (869 | ) |
1993
|
24-40
years
|
|||||||||||||||||||||||
|
Prairiewood
Meadows - Fargo, ND
|
2,564 | 280 | 2,531 | 810 | 335 | 3,286 | 3,621 | (754 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Quarry
Ridge Apartments - Rochester, MN
|
12,618 | 1,312 | 13,362 | 154 | 1,320 | 13,508 | 14,828 | (892 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Ridge
Oaks - Sioux City, IA
|
2,619 | 178 | 4,073 | 1,501 | 252 | 5,500 | 5,752 | (1,306 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Rimrock
Apartments - Billings, MT
|
2,174 | 330 | 3,489 | 443 | 390 | 3,872 | 4,262 | (971 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Rocky
Meadows - Billings, MT
|
3,089 | 656 | 5,726 | 715 | 744 | 6,353 | 7,097 | (2,061 | ) |
1995
|
40
years
|
|||||||||||||||||||||||
|
Rum
River Apartments - Isanti, MN
|
3,913 | 843 | 4,823 | 10 | 843 | 4,833 | 5,676 | (247 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
Campus Center Apartments - St. Cloud, MN
|
1,539 | 395 | 2,244 | 38 | 395 | 2,282 | 2,677 | (127 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
Campus Heights Apartments - St. Cloud, MN
|
0 | 110 | 628 | 15 | 110 | 643 | 753 | (36 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
Campus Knoll I Apartments - St. Cloud, MN
|
1,026 | 265 | 1,512 | 34 | 266 | 1,545 | 1,811 | (87 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
Campus Plaza Apartments - St. Cloud, MN
|
0 | 54 | 311 | 6 | 54 | 317 | 371 | (18 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
Campus Side Apartments - St. Cloud, MN
|
0 | 107 | 615 | 22 | 108 | 636 | 744 | (36 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
Campus View Apartments - St. Cloud, MN
|
0 | 107 | 615 | 13 | 107 | 628 | 735 | (35 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
Cornerstone Apartments - St. Cloud, MN
|
0 | 54 | 311 | 12 | 54 | 323 | 377 | (18 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
SCSH
University Park Place Apartments - St. Cloud, MN
|
0 | 78 | 451 | 11 | 78 | 462 | 540 | (26 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Sherwood
Apartments - Topeka, KS
|
13,200 | 1,150 | 14,684 | 1,910 | 1,487 | 16,257 | 17,744 | (3,983 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (in
thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Multi-Family Residential
- continued
|
||||||||||||||||||||||||||||||||||
|
Southbrook
& Mariposa - Topeka, KS
|
$ | 3,170 | $ | 399 | $ | 5,110 | $ | 226 | $ | 419 | $ | 5,316 | $ | 5,735 | $ | (592 | ) |
2004
|
40
years
|
|||||||||||||||
|
South
Pointe - Minot, ND
|
9,521 | 550 | 9,548 | 1,706 | 1,246 | 10,558 | 11,804 | (3,470 | ) |
1995
|
24-40
years
|
|||||||||||||||||||||||
|
Southview
Apartments - Minot, ND
|
738 | 185 | 469 | 257 | 219 | 692 | 911 | (257 | ) |
1994
|
24-40
years
|
|||||||||||||||||||||||
|
Southwind
Apartments - Grand Forks, ND
|
6,079 | 400 | 5,034 | 1,864 | 689 | 6,609 | 7,298 | (2,193 | ) |
1995
|
24-40
years
|
|||||||||||||||||||||||
|
Sunset
Trail - Rochester, MN
|
7,767 | 336 | 12,814 | 1,841 | 479 | 14,512 | 14,991 | (2,992 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Sweetwater
Properties - Grafton, ND
|
0 | 50 | 403 | 499 | 58 | 894 | 952 | (570 | ) |
1974
|
5-40
years
|
|||||||||||||||||||||||
|
Sycamore
Village Apartments - Sioux Falls, SD
|
895 | 101 | 1,317 | 359 | 146 | 1,631 | 1,777 | (308 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Terrace
On The Green - Moorhead, MN
|
1,416 | 24 | 1,490 | 1,773 | 130 | 3,157 | 3,287 | (2,154 | ) |
1970
|
33-40
years
|
|||||||||||||||||||||||
|
Thomasbrook
Apartments - Lincoln, NE
|
5,077 | 544 | 7,847 | 2,220 | 700 | 9,911 | 10,611 | (2,742 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Valley
Park Manor - Grand Forks, ND
|
3,547 | 293 | 4,137 | 1,812 | 407 | 5,835 | 6,242 | (1,555 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Village
Green - Rochester, MN
|
1,560 | 234 | 2,296 | 353 | 326 | 2,557 | 2,883 | (375 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
West
Stonehill - Waite Park, MN
|
9,338 | 939 | 10,167 | 3,581 | 1,171 | 13,516 | 14,687 | (4,766 | ) |
1995
|
40
years
|
|||||||||||||||||||||||
|
Westwood
Park - Bismarck, ND
|
1,006 | 116 | 1,909 | 792 | 237 | 2,580 | 2,817 | (780 | ) |
1998
|
40
years
|
|||||||||||||||||||||||
|
Winchester
- Rochester, MN
|
3,819 | 748 | 5,622 | 958 | 966 | 6,362 | 7,328 | (959 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Woodridge
Apartments - Rochester, MN
|
2,518 | 370 | 6,028 | 1,331 | 432 | 7,297 | 7,729 | (2,381 | ) |
1997
|
40
years
|
|||||||||||||||||||||||
|
Total
Multi-Family Residential
|
$ | 316,207 | $ | 39,974 | $ | 403,755 | $ | 98,818 | $ | 48,181 | $ | 494,366 | $ | 542,547 | $ | (115,729 | ) | |||||||||||||||||
|
Office
|
||||||||||||||||||||||||||||||||||
|
1st
Avenue Building - Minot, ND
|
$ | 0 | $ | 30 | $ | 80 | $ | 584 | $ | 33 | $ | 661 | $ | 694 | $ | (339 | ) |
1981
|
33-40
years
|
|||||||||||||||
|
12
South Main - Minot, ND
|
0 | 29 | 0 | 364 | 29 | 364 | 393 | (140 | ) |
1987
|
24-40
years
|
|||||||||||||||||||||||
|
610
Business Center IV - Brooklyn Park, MN
|
7,432 | 975 | 5,542 | 2,886 | 980 | 8,423 | 9,403 | (319 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
2030
Cliff Road - Eagan, MN
|
495 | 146 | 835 | 2 | 146 | 837 | 983 | (168 | ) |
2001
|
19-40
years
|
|||||||||||||||||||||||
|
7800
West Brown Deer Road - Milwaukee, WI
|
11,360 | 1,455 | 9,267 | 755 | 1,475 | 10,002 | 11,477 | (1,839 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
American
Corporate Center - Mendota Heights, MN
|
9,597 | 893 | 16,768 | 3,209 | 893 | 19,977 | 20,870 | (4,240 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Ameritrade
- Omaha, NE
|
4,140 | 327 | 7,957 | 65 | 327 | 8,022 | 8,349 | (2,011 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Benton
Business Park - Sauk Rapids, MN
|
800 | 188 | 1,261 | 78 | 188 | 1,339 | 1,527 | (205 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Bismarck
715 East Broadway - Bismarck, ND
|
0 | 389 | 0 | 1,283 | 389 | 1,283 | 1,672 | (22 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Bloomington
Business Plaza - Bloomington, MN
|
4,297 | 1,300 | 6,106 | 644 | 1,305 | 6,745 | 8,050 | (1,529 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Brenwood
- Minnetonka, MN
|
7,640 | 1,762 | 12,138 | 2,893 | 1,770 | 15,023 | 16,793 | (3,055 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Brook
Valley I - La Vista, NE
|
1,459 | 347 | 1,671 | 37 | 347 | 1,708 | 2,055 | (154 | ) |
2005
|
45
years
|
|||||||||||||||||||||||
|
Burnsville
Bluffs II - Burnsville, MN
|
1,267 | 300 | 2,154 | 898 | 301 | 3,051 | 3,352 | (751 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Cold
Spring Center - St. Cloud, MN
|
4,212 | 588 | 7,808 | 750 | 592 | 8,554 | 9,146 | (1,806 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (in
thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Office - continued
|
||||||||||||||||||||||||||||||||||
|
Corporate
Center West - Omaha, NE
|
$ | 17,315 | $ | 3,880 | $ | 17,509 | $ | 16 | $ | 3,880 | $ | 17,525 | $ | 21,405 | $ | (1,150 | ) |
2006
|
40
years
|
|||||||||||||||
|
Crosstown
Centre - Eden Prairie, MN
|
14,973 | 2,884 | 14,569 | 480 | 2,887 | 15,046 | 17,933 | (1,741 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Dewey
Hill Business Center - Edina, MN
|
2,663 | 985 | 3,507 | 849 | 995 | 4,346 | 5,341 | (1,106 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Farnam
Executive Center - Omaha, NE
|
12,160 | 2,188 | 11,404 | 0 | 2,188 | 11,404 | 13,592 | (748 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Flagship
- Eden Praire, MN
|
21,565 | 1,899 | 21,638 | 590 | 1,899 | 22,228 | 24,127 | (1,548 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Gateway
Corporate Center - Woodbury, MN
|
8,700 | 1,637 | 7,763 | 89 | 1,637 | 7,852 | 9,489 | (524 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Golden
Hills Office Center - Golden Valley, MN
|
14,537 | 3,018 | 24,482 | (3,298 | ) | 3,018 | 21,184 | 24,202 | (3,797 | ) |
2003
|
40
years
|
||||||||||||||||||||||
|
Great
Plains - Fargo, ND
|
5,295 | 126 | 15,240 | 9 | 126 | 15,249 | 15,375 | (3,701 | ) |
1997
|
40
years
|
|||||||||||||||||||||||
|
Highlands
Ranch - Highlands Ranch, CO
|
8,940 | 1,437 | 9,549 | 926 | 1,437 | 10,475 | 11,912 | (1,326 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Highlands
Ranch I - Highlands Ranch, CO
|
9,014 | 2,268 | 8,362 | 0 | 2,268 | 8,362 | 10,630 | (514 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Interlachen
Corporate Center - Edina, MN
|
9,886 | 1,650 | 14,983 | 186 | 1,652 | 15,167 | 16,819 | (2,931 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Intertech
Building - Fenton, MO
|
4,820 | 2,130 | 3,969 | 0 | 2,130 | 3,969 | 6,099 | (136 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
IRET
Corporate Plaza - Minot, ND
|
0 | 389 | 5,217 | 711 | 389 | 5,928 | 6,317 | (46 | ) |
2009
|
40
years
|
|||||||||||||||||||||||
|
Mendota
Office Center I - Mendota Heights, MN
|
3,806 | 835 | 6,169 | 333 | 835 | 6,502 | 7,337 | (1,269 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Mendota
Office Center II - Mendota Heights, MN
|
6,094 | 1,121 | 10,085 | 1,266 | 1,121 | 11,351 | 12,472 | (2,436 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Mendota
Office Center III - Mendota Heights, MN
|
3,554 | 970 | 5,734 | 109 | 970 | 5,843 | 6,813 | (1,101 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Mendota
Office Center IV - Mendota Heights, MN
|
4,615 | 1,070 | 7,635 | 578 | 1,070 | 8,213 | 9,283 | (1,437 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Minnesota
National Bank - Duluth, MN
|
1,038 | 287 | 1,454 | 4 | 288 | 1,457 | 1,745 | (184 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Miracle
Hills One - Omaha, NE
|
8,895 | 1,974 | 10,117 | 574 | 1,974 | 10,691 | 12,665 | (841 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Nicollett
VII - Burnsville, MN
|
4,090 | 429 | 6,931 | 84 | 436 | 7,008 | 7,444 | (1,418 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Northgate
I - Maple Grove, MN
|
5,807 | 1,062 | 6,358 | 822 | 1,067 | 7,175 | 8,242 | (816 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Northgate
II - Maple Grove, MN
|
1,312 | 359 | 1,944 | 142 | 403 | 2,042 | 2,445 | (521 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Northpark
Corporate Center - Arden Hills, MN
|
13,704 | 2,034 | 14,584 | 933 | 2,034 | 15,517 | 17,551 | (1,238 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Pacific
Hills - Omaha, NE
|
16,770 | 4,220 | 11,988 | 744 | 4,220 | 12,732 | 16,952 | (895 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Pillsbury
Business Center - Bloomington, MN
|
959 | 284 | 1,556 | 66 | 284 | 1,622 | 1,906 | (339 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Plaza
VII - Boise, ID
|
1,209 | 300 | 3,058 | 411 | 351 | 3,418 | 3,769 | (585 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Plymouth
5095 Nathan Lane - Plymouth, MN
|
1,327 | 604 | 1,253 | 40 | 604 | 1,293 | 1,897 | (58 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Plymouth
I - Plymouth, MN
|
1,302 | 530 | 1,133 | 27 | 530 | 1,160 | 1,690 | (140 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Plymouth
II - Plymouth, MN
|
1,302 | 367 | 1,264 | 40 | 367 | 1,304 | 1,671 | (161 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Plymouth
III - Plymouth, MN
|
1,602 | 507 | 1,495 | 350 | 507 | 1,845 | 2,352 | (201 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Plymouth
IV & V - Plymouth, MN
|
7,962 | 1,336 | 12,692 | 1,264 | 1,338 | 13,954 | 15,292 | (2,949 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Prairie
Oak Business Center - Eden Prairie, MN
|
3,609 | 531 | 4,069 | 1,296 | 563 | 5,333 | 5,896 | (1,015 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (in
thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Office - continued
|
||||||||||||||||||||||||||||||||||
|
Rapid
City 900 Concourse Drive - Rapid City, SD
|
$ | 2,731 | $ | 285 | $ | 6,600 | $ | 203 | $ | 321 | $ | 6,767 | $ | 7,088 | $ | (1,493 | ) |
2000
|
40
years
|
|||||||||||||||
|
Riverport
- Maryland Heights, MO
|
19,690 | 1,891 | 18,982 | 12 | 1,903 | 18,982 | 20,885 | (1,246 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Southeast
Tech Center - Eagan, MN
|
3,549 | 560 | 5,496 | 302 | 569 | 5,789 | 6,358 | (1,501 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Spring
Valley IV - Omaha, NE
|
868 | 178 | 916 | 60 | 186 | 968 | 1,154 | (98 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Spring
Valley V - Omaha, NE
|
955 | 212 | 1,123 | 223 | 212 | 1,346 | 1,558 | (112 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Spring
Valley X - Omaha, NE
|
886 | 180 | 1,024 | 28 | 180 | 1,052 | 1,232 | (98 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Spring
Valley XI - Omaha, NE
|
868 | 143 | 1,094 | 28 | 143 | 1,122 | 1,265 | (102 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Superior
Office Building - Duluth, MN
|
1,561 | 336 | 2,200 | 3 | 336 | 2,203 | 2,539 | (278 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
TCA
Building - Eagan, MN
|
8,766 | 627 | 8,571 | 730 | 684 | 9,244 | 9,928 | (1,494 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Three
Paramount Plaza - Bloomington, MN
|
3,969 | 1,261 | 6,149 | 1,040 | 1,298 | 7,152 | 8,450 | (1,377 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Thresher
Square - Minneapolis, MN
|
0 | 1,094 | 10,026 | 1,539 | 1,104 | 11,555 | 12,659 | (2,057 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Timberlands
- Leawood, KS
|
13,155 | 2,375 | 12,218 | 266 | 2,408 | 12,451 | 14,859 | (945 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
UHC
Office - International Falls, MN
|
1,323 | 119 | 2,366 | 20 | 119 | 2,386 | 2,505 | (308 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
US
Bank Financial Center - Bloomington, MN
|
14,547 | 3,117 | 13,350 | 342 | 3,119 | 13,690 | 16,809 | (1,415 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Viromed
- Eden Prairie, MN
|
1,415 | 666 | 4,197 | 1 | 666 | 4,198 | 4,864 | (1,071 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Wells
Fargo Center - St Cloud, MN
|
6,897 | 869 | 8,373 | 810 | 869 | 9,183 | 10,052 | (956 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
West
River Business Park - Waite Park, MN
|
800 | 235 | 1,195 | 46 | 235 | 1,241 | 1,476 | (187 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Westgate
- Boise, ID
|
6,570 | 1,000 | 10,618 | 619 | 1,000 | 11,237 | 12,237 | (1,803 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Whitewater
Plaza - Minnetonka, MN
|
4,057 | 530 | 4,860 | 274 | 577 | 5,087 | 5,664 | (990 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Wirth
Corporate Center - Golden Valley, MN
|
4,258 | 970 | 7,659 | 425 | 971 | 8,083 | 9,054 | (1,616 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Woodlands
Plaza IV - Maryland Heights, MO
|
4,360 | 771 | 4,609 | 122 | 771 | 4,731 | 5,502 | (363 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Total
Office
|
$ | 372,749 | $ | 69,459 | $ | 470,924 | $ | 31,182 | $ | 69,914 | $ | 501,651 | $ | 571,565 | $ | (72,960 | ) | |||||||||||||||||
|
Medical
|
||||||||||||||||||||||||||||||||||
|
2800
Medical Building - Minneapolis, MN
|
$ | 6,091 | $ | 204 | $ | 7,135 | $ | 1,337 | $ | 229 | $ | 8,447 | $ | 8,676 | $ | (876 | ) |
2005
|
40
years
|
|||||||||||||||
|
2828
Chicago Avenue - Minneapolis, MN
|
0 | 726 | 11,319 | 4,461 | 726 | 15,780 | 16,506 | (309 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Abbott
Northwest - Sartell, MN
|
5,910 | 0 | 11,781 | 872 | 0 | 12,653 | 12,653 | (2,170 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Airport
Medical - Bloomington, MN
|
2,116 | 0 | 4,678 | 0 | 0 | 4,678 | 4,678 | (1,029 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Barry
Pointe Office Park - Kansas City, MO
|
1,544 | 384 | 2,366 | 95 | 384 | 2,461 | 2,845 | (121 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Burnsville
303 Nicollet Medical (Ridgeview) - Burnsville, MN
|
7,867 | 1,071 | 6,842 | 696 | 1,071 | 7,538 | 8,609 | (212 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Burnsville
305 Nicollet Medical (Ridgeview South) - Burnsville, MN
|
4,917 | 189 | 5,127 | 534 | 189 | 5,661 | 5,850 | (165 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (in
thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Medical - continued
|
||||||||||||||||||||||||||||||||||
|
Denfeld
Clinic - Duluth, MN
|
$ | 2,041 | $ | 501 | $ | 2,597 | $ | 1 | $ | 501 | $ | 2,598 | $ | 3,099 | $ | (328 | ) |
2004
|
40
years
|
|||||||||||||||
|
Eagan
1440 Duckwood Medical - Eagan, MN
|
1,967 | 521 | 1,547 | 519 | 521 | 2,066 | 2,587 | (72 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Belgrade, MT
|
0 | 35 | 779 | 0 | 35 | 779 | 814 | (22 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Billings, MT
|
976 | 115 | 1,782 | (15 | ) | 115 | 1,767 | 1,882 | (54 | ) |
2008
|
40
years
|
||||||||||||||||||||||
|
Edgewood
Vista - Bismarck, ND
|
6,520 | 511 | 9,193 | 36 | 511 | 9,229 | 9,740 | (834 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Brainerd, MN
|
6,444 | 587 | 8,999 | 34 | 587 | 9,033 | 9,620 | (817 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Columbus, NE
|
0 | 43 | 824 | 0 | 43 | 824 | 867 | (23 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - East Grand Forks, MN
|
1,453 | 290 | 1,383 | (31 | ) | 290 | 1,352 | 1,642 | (41 | ) |
2008
|
40
years
|
||||||||||||||||||||||
|
Edgewood
Vista - Fargo, ND
|
14,497 | 792 | 21,050 | 1 | 792 | 21,051 | 21,843 | (592 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Fremont, NE
|
652 | 56 | 490 | 42 | 56 | 532 | 588 | (104 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Grand Island, NE
|
0 | 33 | 773 | 1 | 33 | 774 | 807 | (22 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Hastings, NE
|
672 | 49 | 517 | 40 | 49 | 557 | 606 | (111 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Hermantown I, MN
|
18,020 | 288 | 9,871 | 1,501 | 288 | 11,372 | 11,660 | (2,169 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Hermantown II, MN
|
7,467 | 719 | 10,517 | 33 | 719 | 10,550 | 11,269 | (954 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Kalispell, MT
|
674 | 70 | 502 | 52 | 70 | 554 | 624 | (107 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Missoula, MT
|
957 | 109 | 854 | 36 | 109 | 890 | 999 | (268 | ) |
1996
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Norfolk, NE
|
0 | 42 | 722 | 0 | 42 | 722 | 764 | (20 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Omaha, NE
|
426 | 89 | 547 | 40 | 89 | 587 | 676 | (112 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Sioux Falls, SD
|
975 | 314 | 1,001 | (26 | ) | 314 | 975 | 1,289 | (30 | ) |
2008
|
40
years
|
||||||||||||||||||||||
|
Edgewood
Vista - Spearfish, SD
|
4,059 | 315 | 5,807 | 34 | 315 | 5,841 | 6,156 | (527 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
Edgewood
Vista - Virginia, MN
|
15,328 | 246 | 11,823 | 77 | 246 | 11,900 | 12,146 | (1,867 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Edina
6363 France Medical - Edina, MN
|
8,159 | 0 | 12,675 | 20 | 0 | 12,695 | 12,695 | (520 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edina
6405 France Medical - Edina, MN
|
9,323 | 0 | 12,201 | 0 | 0 | 12,201 | 12,201 | (366 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Edina
6517 Drew Avenue - Edina, MN
|
1,244 | 353 | 660 | 524 | 372 | 1,165 | 1,537 | (223 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Edina
6525 France SMC II - Edina, MN
|
9,798 | 755 | 8,054 | 5,824 | 755 | 13,878 | 14,633 | (2,669 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Edina
6545 France SMC I - Edina, MN
|
21,973 | 3,480 | 30,743 | 10,101 | 3,480 | 40,844 | 44,324 | (7,672 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Fox
River Cottages - Grand Chute, WI
|
2,308 | 305 | 2,746 | 757 | 305 | 3,503 | 3,808 | (192 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Fresenius
- Duluth, MN
|
952 | 50 | 1,520 | 2 | 50 | 1,522 | 1,572 | (192 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Garden
View - St. Paul, MN
|
3,079 | 0 | 7,408 | 462 | 0 | 7,870 | 7,870 | (1,377 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Gateway
Clinic - Sandstone, MN
|
1,182 | 66 | 1,699 | 0 | 66 | 1,699 | 1,765 | (214 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Health
East St John & Woodwinds - Maplewood & Woodbury,
MN
|
14,705 | 3,239 | 18,363 | 0 | 3,239 | 18,363 | 21,602 | (4,112 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
High
Pointe Health Campus - Lake Elmo, MN
|
3,605 | 1,305 | 10,528 | 347 | 1,308 | 10,872 | 12,180 | (1,305 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Mariner
Clinic - Superior, WI
|
2,586 | 0 | 3,781 | 7 | 6 | 3,782 | 3,788 | (478 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (in
thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Medical - continued
|
||||||||||||||||||||||||||||||||||
|
Minneapolis
701 25th Avenue Medical (Riverside) - Minneapolis, MN
|
$ | 6,834 | $ | 0 | $ | 7,873 | $ | 0 | $ | 0 | $ | 7,873 | $ | 7,873 | $ | (221 | ) |
2008
|
40
years
|
|||||||||||||||
|
Nebraska
Orthopaedic Hospital - Omaha, NE
|
13,500 | 0 | 20,272 | 240 | 0 | 20,512 | 20,512 | (2,542 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Park
Dental - Brooklyn Center, MN
|
1,213 | 185 | 2,767 | 0 | 185 | 2,767 | 2,952 | (458 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Pavilion
I - Duluth, MN
|
6,813 | 1,245 | 8,898 | 31 | 1,245 | 8,929 | 10,174 | (1,090 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Pavilion
II - Duluth, MN
|
12,537 | 2,715 | 14,673 | 1,937 | 2,715 | 16,610 | 19,325 | (2,642 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Ritchie
Medical Plaza - St Paul, MN
|
7,290 | 1,615 | 7,851 | 110 | 1,647 | 7,929 | 9,576 | (772 | ) |
2005
|
40
years
|
|||||||||||||||||||||||
|
St
Michael Clinic - St Michael, MN
|
2,078 | 328 | 2,259 | 264 | 328 | 2,523 | 2,851 | (131 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Stevens
Point - Stevens Point, WI
|
11,306 | 442 | 3,888 | 10,495 | 442 | 14,383 | 14,825 | (899 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Wells
Clinic - Hibbing, MN
|
1,803 | 162 | 2,497 | 2 | 162 | 2,499 | 2,661 | (314 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Total
Medical
|
$ | 253,861 | $ | 24,544 | $ | 322,182 | $ | 41,493 | 24,629 | $ | 363,590 | $ | 388,219 | $ | (42,345 | ) | ||||||||||||||||||
|
Industrial
|
||||||||||||||||||||||||||||||||||
|
API
Building - Duluth, MN
|
$ | 1,058 | $ | 115 | $ | 1,605 | $ | 3 | $ | 115 | $ | 1,608 | $ | 1,723 | $ | (203 | ) |
2004
|
40
years
|
|||||||||||||||
|
Bloomington
2000 West 94th Street
-
Bloomington, MN
|
4,076 | 2,133 | 4,096 | 0 | 2,133 | 4,096 | 6,229 | (245 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Bodycote
Industrial Building - Eden Prairie, MN
|
1,313 | 198 | 1,154 | 800 | 198 | 1,954 | 2,152 | (662 | ) |
1992
|
40
years
|
|||||||||||||||||||||||
|
Cedar
Lake Business Center - St. Louis Park, MN
|
2,487 | 895 | 2,810 | 6 | 895 | 2,816 | 3,711 | (133 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Dixon
Avenue Industrial Park - Des Moines, IA
|
7,786 | 1,439 | 10,758 | 984 | 1,439 | 11,742 | 13,181 | (2,073 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Eagan
2785 & 2795 Highway 55 - Eagan, MN
|
3,776 | 3,058 | 2,570 | 0 | 3,058 | 2,570 | 5,628 | (80 | ) |
2008
|
40
years
|
|||||||||||||||||||||||
|
Lexington
Commerce Center - Eagan, MN
|
2,854 | 453 | 4,352 | 1,675 | 480 | 6,000 | 6,480 | (1,558 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Lighthouse
- Duluth, MN
|
1,111 | 90 | 1,788 | 7 | 90 | 1,795 | 1,885 | (227 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Metal
Improvement Company - New Brighton, MN
|
1,217 | 240 | 2,189 | 78 | 240 | 2,267 | 2,507 | (404 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Minnetonka
13600 County Road 62 - Minnetonka, MN
|
2,499 | 809 | 434 | 2,459 | 809 | 2,893 | 3,702 | (18 | ) |
2009
|
40
years
|
|||||||||||||||||||||||
|
Roseville
2929 Long Lake Road - Roseville, MN
|
5,995 | 1,966 | 7,272 | 1,474 | 1,980 | 8,732 | 10,712 | (488 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Stone
Container - Fargo, ND
|
3,124 | 440 | 6,597 | 104 | 440 | 6,701 | 7,141 | (1,938 | ) |
1995
|
40
years
|
|||||||||||||||||||||||
|
Stone
Container - Roseville, MN
|
4,173 | 810 | 7,440 | 0 | 810 | 7,440 | 8,250 | (1,372 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Urbandale
3900 106th Street - Urbandale, IA
|
10,800 | 3,680 | 10,089 | 355 | 3,721 | 10,403 | 14,124 | (498 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Waconia
Industrial Building - Waconia, MN
|
1,122 | 165 | 1,492 | 383 | 187 | 1,853 | 2,040 | (479 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Wilson's
Leather - Brooklyn Park, MN
|
7,295 | 1,368 | 11,643 | 864 | 1,368 | 12,507 | 13,875 | (2,140 | ) |
2002
|
40
years
|
|||||||||||||||||||||||
|
Winsted
Industrial Building - Winsted, MN
|
0 | 100 | 901 | 6 | 100 | 907 | 1,007 | (212 | ) |
2001
|
40
years
|
|||||||||||||||||||||||
|
Woodbury
1865 Woodland - Woodbury, MN
|
2,926 | 1,108 | 2,628 | 20 | 1,108 | 2,648 | 3,756 | (117 | ) |
2007
|
40
years
|
|||||||||||||||||||||||
|
Total
Industrial
|
$ | 63,612 | $ | 19,067 | $ | 79,818 | $ | 9,218 | $ | 19,171 | $ | 88,932 | $ | 108,103 | $ | (12,847 | ) | |||||||||||||||||
|
Retail
|
||||||||||||||||||||||||||||||||||
|
17
South Main - Minot, ND
|
$ | 0 | $ | 15 | $ | 75 | $ | 197 | $ | 17 | $ | 270 | $ | 287 | $ | (103 | ) |
2000
|
40
years
|
|||||||||||||||
|
Anoka
Strip Center - Anoka, MN
|
0 | 123 | 602 | 19 | 134 | 610 | 744 | (95 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (in
thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Retail - continued
|
||||||||||||||||||||||||||||||||||
|
Burnsville
1 Strip Center - Burnsville, MN
|
$ | 578 | $ | 207 | $ | 772 | $ | 202 | $ | 208 | $ | 973 | $ | 1,181 | $ | (143 | ) |
2003
|
40
years
|
|||||||||||||||
|
Burnsville
2 Strip Center - Burnsville, MN
|
460 | 291 | 469 | 202 | 291 | 671 | 962 | (106 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Champlin
South Pond - Champlin, MN
|
1,957 | 842 | 2,703 | 48 | 866 | 2,727 | 3,593 | (356 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Chan
West Village - Chanhassen, MN
|
14,323 | 5,035 | 14,665 | 1,723 | 5,606 | 15,817 | 21,423 | (2,533 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Dakota
West Plaza - Minot , ND
|
421 | 92 | 493 | 26 | 106 | 505 | 611 | (39 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Duluth
Denfeld Retail - Duluth, MN
|
2,970 | 276 | 4,699 | 15 | 276 | 4,714 | 4,990 | (601 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Duluth
NAPA - Duluth, MN
|
899 | 130 | 1,800 | 3 | 130 | 1,803 | 1,933 | (227 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Eagan
Community - Eagan, MN
|
1,501 | 702 | 1,588 | 853 | 703 | 2,440 | 3,143 | (315 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
East
Grand Station - East Grand Forks, MN
|
330 | 150 | 1,235 | 309 | 151 | 1,543 | 1,694 | (301 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
Fargo
Express Community - Fargo, ND
|
1,132 | 374 | 1,420 | 19 | 385 | 1,428 | 1,813 | (208 | ) | 2003-2005 |
40
years
|
|||||||||||||||||||||||
|
Forest
Lake Auto - Forest Lake, MN
|
0 | 50 | 446 | 13 | 50 | 459 | 509 | (69 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Forest
Lake Westlake Center - Forest Lake, MN
|
4,805 | 2,446 | 5,304 | 455 | 2,480 | 5,725 | 8,205 | (891 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Grand
Forks Carmike - Grand Forks, ND
|
1,943 | 184 | 2,360 | 2 | 184 | 2,362 | 2,546 | (856 | ) |
1994
|
40
years
|
|||||||||||||||||||||||
|
Grand
Forks Medpark Mall - Grand Forks, ND
|
2,907 | 680 | 4,808 | 233 | 720 | 5,001 | 5,721 | (1,182 | ) |
2000
|
40
years
|
|||||||||||||||||||||||
|
Jamestown
Buffalo Mall - Jamestown, ND
|
1,594 | 566 | 3,209 | 2,408 | 857 | 5,326 | 6,183 | (594 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Jamestown
Business Center - Jamestown, ND
|
699 | 297 | 1,023 | 1,172 | 326 | 2,166 | 2,492 | (371 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Kalispell
Retail Center - Kalispell, MT
|
1,543 | 250 | 2,250 | 973 | 253 | 3,220 | 3,473 | (446 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Kentwood
Thomasville Furniture - Kentwood, MI
|
529 | 225 | 1,889 | 9 | 225 | 1,898 | 2,123 | (592 | ) |
1996
|
40
years
|
|||||||||||||||||||||||
|
Ladysmith
Pamida - Ladysmith, WI
|
1,081 | 89 | 1,411 | 0 | 89 | 1,411 | 1,500 | (219 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Lakeville
Strip Center - Lakeville, MN
|
1,129 | 46 | 1,142 | 783 | 94 | 1,877 | 1,971 | (351 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Livingston
Pamida - Livingston, MT
|
1,284 | 227 | 1,573 | 0 | 227 | 1,573 | 1,800 | (244 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Minot
Arrowhead - Minot, ND
|
5,008 | 100 | 1,064 | 7,104 | 722 | 7,546 | 8,268 | (2,934 | ) |
1973
|
15
1/2-40 years
|
|||||||||||||||||||||||
|
Minot
Plaza - Minot, ND
|
634 | 50 | 453 | 105 | 72 | 536 | 608 | (220 | ) |
1993
|
40
years
|
|||||||||||||||||||||||
|
Monticello
C Store - Monticello, MN
|
0 | 86 | 769 | 38 | 118 | 775 | 893 | (123 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Omaha
Barnes & Noble - Omaha, NE
|
2,931 | 600 | 3,099 | 0 | 600 | 3,099 | 3,699 | (1,046 | ) |
1995
|
40
years
|
|||||||||||||||||||||||
|
Pine
City C Store - Pine City, MN
|
333 | 83 | 357 | 2 | 83 | 359 | 442 | (56 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Pine
City Evergreen Square - Pine City, MN
|
2,043 | 154 | 2,646 | 556 | 385 | 2,971 | 3,356 | (495 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Rochester
Maplewood Square - Rochester, MN
|
3,660 | 3,275 | 8,610 | 126 | 3,294 | 8,717 | 12,011 | (2,131 | ) |
1999
|
40
years
|
|||||||||||||||||||||||
|
St.
Cloud Westgate - St. Cloud, MN
|
3,691 | 1,219 | 5,535 | 87 | 1,242 | 5,599 | 6,841 | (724 | ) |
2004
|
40
years
|
|||||||||||||||||||||||
|
Weston
Retail - Weston, WI
|
0 | 79 | 1,575 | 27 | 80 | 1,601 | 1,681 | (247 | ) |
2003
|
40
years
|
|||||||||||||||||||||||
|
Weston
Walgreens - Weston, WI
|
3,344 | 66 | 1,718 | 671 | 66 | 2,389 | 2,455 | (172 | ) |
2006
|
40
years
|
|||||||||||||||||||||||
|
Total
Retail
|
$ | 63,729 | $ | 19,009 | $ | 81,762 | $ | 18,380 | $ | 21,040 | $ | 98,111 | $ | 119,151 | $ | (18,990 | ) | |||||||||||||||||
|
Subtotal
|
$ | 1,070,158 | $ | 172,053 | $ | 1,358,441 | $ | 199,091 | $ | 182,935 | $ | 1,546,650 | $ | 1,729,585 | $ | (262,871 | ) | |||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule III - REAL ESTATE AND ACCUMULATED
DEPRECIATION (in
thousands)
|
Initial
Cost to Company
|
Gross
amount at which carried at
close
of period
|
|||||||||||||||||||||||||||||||||
|
Description
|
Encumbrances
|
Land
|
Buildings
& Improvements
|
Costs
capitalized subsequent to acquisition
|
Land
|
Buildings
& Improvements
|
Total
|
Accumulated
Depreciation
|
Date
of Construction or Acquisition
|
Life
on which depreciation in latest income statement is
computed
|
||||||||||||||||||||||||
|
Unimproved
Land
|
||||||||||||||||||||||||||||||||||
|
Bismarck
2130 S 12th St - Bismarck, ND
|
$ | 0 | $ | 576 | $ | 0 | $ | 11 | $ | 587 | $ | 0 | $ | 587 | $ | 0 |
2008
|
40
years
|
||||||||||||||||
|
Bismarck
700 E Main - Bismarck, ND
|
0 | 314 | 0 | 513 | 314 | 513 | 827 | 0 |
2008
|
40
years
|
||||||||||||||||||||||||
|
Eagan
Unimproved Land - Eagan, MN
|
0 | 423 | 0 | 0 | 423 | 0 | 423 | 0 |
2006
|
40
years
|
||||||||||||||||||||||||
|
IRET
Corporate Plaza Out-lot - Minot, ND
|
0 | 323 | 0 | 0 | 323 | 0 | 323 | 0 |
2009
|
40
years
|
||||||||||||||||||||||||
|
Kalispell
Unimproved Land - Kalispell, MT
|
0 | 1,400 | 0 | 24 | 1,411 | 13 | 1,424 | 0 |
2003
|
40
years
|
||||||||||||||||||||||||
|
Monticello
Unimproved Land - Monticello, MN
|
0 | 95 | 0 | 2 | 97 | 0 | 97 | 0 |
2006
|
40
years
|
||||||||||||||||||||||||
|
Quarry
Ridge Unimproved Land - Rochester, MN
|
0 | 942 | 0 | 0 | 942 | 0 | 942 | 0 |
2006
|
40
years
|
||||||||||||||||||||||||
|
River
Falls Unimproved Land - River Falls, WI
|
0 | 200 | 0 | 5 | 203 | 2 | 205 | 0 |
2003
|
40
years
|
||||||||||||||||||||||||
|
Thomasbrook
24 Units - Lincoln, NE
|
0 | 56 | 0 | 0 | 56 | 0 | 56 | 0 |
2008
|
40
years
|
||||||||||||||||||||||||
|
Urbandale
Unimproved Land - Urbandale, IA
|
0 | 5 | 0 | 0 | 5 | 0 | 5 | 0 |
2009
|
40
years
|
||||||||||||||||||||||||
|
Weston
Unimproved Land - Weston, WI
|
0 | 812 | 0 | 0 | 812 | 0 | 812 | 0 |
2006
|
40
years
|
||||||||||||||||||||||||
|
Total
Unimproved Land
|
$ | 0 | $ | 5,146 | $ | 0 | $ | 555 | $ | 5,173 | $ | 528 | $ | 5,701 | $ | 0 | ||||||||||||||||||
|
Total
|
$ | 1,070,158 | $ | 177,199 | $ | 1,358,441 | $ | 199,646 | $ | 188,108 | $ | 1,547,178 | $ | 1,735,286 | (262,871 | ) | ||||||||||||||||||
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
April
30, 2009
Schedule
III
REAL
ESTATE AND ACCUMULATED DEPRECIATION
Reconciliations
of total real estate carrying value for the three years ended April 30, 2009,
2008, and 2007 are as follows:
|
(in
thousands)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Balance
at beginning of year
|
$ | 1,648,259 | $ | 1,489,287 | $ | 1,269,423 | ||||||
|
Additions
during year
|
||||||||||||
|
Multi-Family
Residential
|
23,215 | 11,159 | 38,562 | |||||||||
|
Commercial
Office
|
8,573 | 14,473 | 147,302 | |||||||||
|
Commercial
Medical
|
19,084 | 82,233 | 5,638 | |||||||||
|
Commercial
Industrial
|
4,337 | 27,132 | 15,467 | |||||||||
|
Commercial
Retail
|
0 | 0 | 2,382 | |||||||||
|
Improvements
and Other
|
27,971 | 25,787 | 30,865 | |||||||||
| 1,731,439 | 1,650,071 | 1,509,639 | ||||||||||
|
Deductions
during year
|
||||||||||||
|
Cost
of real estate sold
|
(49 | ) | (1,812 | ) | (19,797 | ) | ||||||
|
Impairment
charge
|
(338 | ) | 0 | (555 | ) | |||||||
|
Other(1)
|
(1,467 | ) | 0 | 0 | ||||||||
|
Balance
at close of year(2)
|
$ | 1,729,585 | $ | 1,648,259 | $ | 1,489,287 | ||||||
Reconciliations
of accumulated depreciation/amortization for the three years ended April 30,
2009, 2008, and 2007, are as follows:
|
(in
thousands)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
Balance
at beginning of year
|
$ | 219,379 | $ | 180,544 | $ | 148,607 | ||||||
|
Additions
during year
|
||||||||||||
|
Provisions
for depreciation
|
44,227 | 39,806 | 35,143 | |||||||||
|
Deductions
during year
|
||||||||||||
|
Accumulated
depreciation on real estate sold
|
(36 | ) | (971 | ) | (3,206 | ) | ||||||
|
Other(1)
|
(699 | ) | 0 | 0 | ||||||||
|
Balance
at close of year
|
$ | 262,871 | $ | 219,379 | $ | 180,544 | ||||||
|
|
(1)
|
Consists
of miscellaneous disposed assets.
|
|
|
(2)
|
The
net basis of the Company’s real estate investments for Federal Income Tax
purposes is approximately $1.2
billion.
|
|
INVESTORS
REAL ESTATE TRUST AND SUBSIDIARIES
|
April
30, 2009
|
(in
thousands)
|
||||||||||||||||||||||
|
Interest
Rate
|
Final
Maturity
Date
|
Payment
Terms
|
Prior
Liens
|
Face
Amt. of
Mortgages
|
Carrying
Amt.
of
Mortgages
|
Prin.
Amt
of
Loans
Subject
to
Delinquent
Prin.
or Int.
|
||||||||||||||||
|
First
Mortgage
|
||||||||||||||||||||||
|
Liberty
Holdings, LLC
|
7.00 | % |
11/01/12
|
Monthly/
Balloon
|
0 | 167 | 163 | 0 | ||||||||||||||
| $ | 0 | $ | 167 | $ | 163 | $ | 0 | |||||||||||||||
|
Less:
|
||||||||||||||||||||||
|
Allowance
for Loan Losses
|
$ | (3 | ) | |||||||||||||||||||
| $ | 160 | |||||||||||||||||||||
|
(in
thousands)
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
MORTGAGE
LOANS RECEIVABLE, BEGINNING OF YEAR
|
$ | 541 | $ | 399 | $ | 409 | ||||||
|
New
participations in and advances on mortgage loans
|
0 | 167 | 0 | |||||||||
| $ | 541 | $ | 566 | $ | 409 | |||||||
|
Collections
|
(381 | ) | (25 | ) | (22 | ) | ||||||
|
Transferred
to other assets
|
0 | 0 | 12 | |||||||||
|
MORTGAGE
LOANS RECEIVABLE, END OF YEAR
|
$ | 160 | $ | 541 | $ | 399 | ||||||