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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
During the period from May 1, 2002, to October 1, 2002, Investors Real Estate Trust (“IRET”) purchased ten real estate properties at a total cost of $77,476,000, plus acquisition costs incurred at the time of closing of $867,944. Individually, the ten real estate properties are insignificant as defined by Regulation S-X, but in the aggregate constitute a “significant amount of assets” as defined in Regulation S-X. When acquisitions are individually insignificant but significant in the aggregate, Regulation S-X requires the presentation of audited financial statements for assets comprising a substantial majority of the individually insignificant properties. IRET’s fiscal year 2003 real estate asset purchases first exceeded the minimum level of significance on October 1, 2002, with the purchase of a warehouse and manufacturing complex located in Des Moines, Iowa.
The real estate assets acquired by IRET in fiscal year 2003 during the period from May 1, 2002 to October 1, 2002 are as follows:
Three Paramount Plaza Office Building – Bloomington,
Minnesota
On May 20, 2002, we acquired Three Paramount Plaza, a 75,526
square foot, multi-tenant commercial office building that was
constructed in 1983. The property is located at 7831 Glenroy
Road, Bloomington, Minnesota. The purchase price for the
property was $7,350,000. In addition to the purchase price,
we incurred acquisition costs of $60,414 for closing fees, loan
fees, environmental reports and legal fees.
As of October 1, 2002, the building is 97.84% leased to twelve tenants, with remaining lease terms ranging from two months to six years. All rents paid by the current tenants are at market rates, and no single tenant occupies more than 41.44% of the total leasable space.
As of October 1, 2002, we have made capital improvements to the property totaling $146,326.
Bermans, The Leather Experts Corporate Office, Warehouse
and Distribution Complex – Brooklyn Park, Minnesota
On June 21, 2002, we acquired Bermans the Leather Experts
corporate office, warehouse and distribution complex, a 353,049
square foot single story building that was constructed in 1982
with an addition in 1995. The building is located at 7401
Boone Avenue North, Brooklyn Park, Minnesota. The purchase
price was $13,000,000. The purchase price was paid in cash.
In addition to the purchase price, we incurred acquisition costs
of $53,614 for commissions, legal fees, environmental reports
and closing costs. On September 3, 2002, we placed a loan
on the property in the amount of $9,100,000. The property is 100%
leased to Bermans the Leather Experts, Inc. until June 2017, with
the tenant having the option to terminate the lease after ten
years upon payment of a termination fee of $500,000.
East Park Apartments – Sioux Falls, South Dakota
On July 15, 2002, we acquired the East Park Apartments, an
84-unit multifamily residential property located on 2.21 acres
that was constructed in 1978. The property is located at
3400-3404 East 11th Street, Sioux Falls, South Dakota. The
purchase price for the property was $2,512,640. The purchase
price was paid with cash and cash equivalents in the amount of
$968,524, with the balance of $1,544,116 paid for with 145,809
limited partnership units of IRET Properties, a North Dakota Limited
Partnership, having a value of $10.59 per unit. The limited
partnership units are convertible on a one-to-one basis to shares
of beneficial interest of Investors Real Estate Trust after a
two-year holding period, and each unit is entitled to the same
quarterly distribution that may be declared and paid on a corresponding
share of beneficial interest of Investors Real Estate Trust.
In addition to the purchase price, we incurred acquisition costs
of $9,964 for closing fees, environmental reports and legal fees.
As of October 1, 2002, the property is 96.43% occupied.
Sycamore Village Apartments – Sioux Falls, South Dakota
On July 15, 2002, we acquired the Sycamore Village Apartments,
a 48-unit multifamily residential property located on 1.75 acres
that was constructed in 1978. The property is located at 401-405
Sycamore Avenue, Sioux Falls, South Dakota. The purchase
price for the property was $1,413,360. The purchase price
was paid with cash and cash equivalents in the amount of $544,795,
with the balance of $868,565 paid for with 82,017 limited partnership
units of IRET Properties, a North Dakota Limited Partnership,
having a value of $10.59 per unit. The limited partnership
units are convertible on a one-to-one basis to shares of beneficial
interest of Investors Real Estate Trust after a two-year holding
period, and each unit is entitled to the same quarterly distribution
that may be declared and paid on a corresponding share of beneficial
interest of Investors Real Estate Trust. In addition to
the purchase price, we incurred acquisition costs of $6,589 for
closing fees, environmental reports and legal fees. As of
October 1, 2002, the property is 89.58% occupied.
Park Dental – Brooklyn Center, Minnesota
On September 17, 2002, we acquired the Park Dental office building,
a 10,008 square foot dental office that was constructed in 2001
and is located at 6437 Brooklyn Boulevard, Brooklyn Center, Minnesota,
for a purchase price of $2,900,000. The purchase price was
paid with cash and cash equivalents in the amount of $1,039,324,
with the balance paid by the assumption of existing debt with
an unpaid principal balance of $1,860,676. The assumed debt
is secured by the property, bears interest at a fixed rate of
7.9%, and is payable in monthly installments of $18,523 amortized
over a remaining term of 15 years, with a balloon payment of all
remaining principle and interest due on June 1, 2016. In
addition to the purchase price, we incurred acquisition costs
of $52,053 for commissions, loan assumption costs, legal fees,
closing costs and environmental reports.
As of October 1, 2002, the property is 100% leased to PDHC, LTD doing business as Park Dental through March 31, 2021.
Park Nicollet Clinic – Airport – Bloomington,
Minnesota
On September 17, 2002, we acquired the Park Nicollet Clinic,
a single-story medical office building containing 24,218 square
feet of net leasable space located on 3.1 acres. The building
was constructed in 2000 and is located at 7550 34th Ave South,
Bloomington, Minnesota. The purchase price for the property
was $4,600,000. The purchase price was paid with cash and
cash equivalents in the amount of $1,355,745, with the balance
paid by the assumption of existing debt with an unpaid principal
balance of $3,244,255. The assumed debt is secured by the
property, bear interest at a fixed rate of 7.9%, and is payable
in monthly installments of $32,296 amortized over 12.75 years,
with a balloon payment of all remaining principal and interest
due on June 1, 2016. In addition to the purchase price,
we incurred acquisition costs of $78,418 for closing fees, loan
assumption fees, environmental reports and legal costs.
As of October 1, 2002, the property is 100% leased to Park Nicollet Health Systems through February 28, 2020.
Garden View Medical Condominium – St. Paul, Minnesota
On September 17, 2002, we acquired the top two full floors
located in the Garden View Medical Condominium. The property
is a six-floor medical office building including a tunnel connecting
the facility to the adjacent hospital. The two floors contain
approximately 43,046 square feet of net leasable space.
The building was constructed in 1999 and is located at 347 North
Smith Avenue, St. Paul, Minnesota. The purchase price for
the two condominium floors was $7,300,000, plus a tenant improvement
escrow of $292,731. The purchase price was paid with cash
and cash equivalents in the amount of $2,612,421, with the balance
of the purchase price paid by the assumption of existing debt
with an unpaid principal balance of $4,980,310. The assumed
debt is secured by the property, bears interest at a fixed rate
of 8.1%, and is payable in monthly installments of $51,917.44
amortized over twelve years, with a balloon payment of all remaining
principal and interest due on August 1, 2015. In addition
to the purchase price, we incurred acquisition costs of $180,510
for closing fees, loan assumption fees, environmental reports
and legal costs.
As of October 1, 2002, the two floors are 100% occupied by nine different tenants with remaining lease term of eight to nine years. No one tenant occupies more than 33% of the total leasable square footage.
Abbott Northwestern Specialty Care Center – Sartell,
Minnesota
On September 17, 2002, we acquired the Abbott Northwestern
Specialty Care Center, a three-story building containing approximately
60,095 square feet of net leasable space. The property was
constructed in 2001 and is located at 2000 Le Sauk Drive, Sartell,
Minnesota. The building is located on a parcel of real property
that is leased from Allina Health System for a 99-year term expiring
on February 13, 2100. The purchase price for the building
and land lease was $12,700,000, plus a lender holdback of $1,212,968.
The purchase price was paid with cash in the amount of $904,891,with
the balance paid for with 437,759 limited partnership units
of IRET Properties, a North Dakota Limited Partnership at a price
of $9.50 per unit for a value of $4,158,716, and with the remaining
balance paid by the assumption of existing debt having an unpaid
principal balance of $8,849,361. The limited partnership
units are convertible on a one-to-one basis to shares of beneficial
interest of Investors Real Estate Trust after a two-year holding
period, and each unit is entitled to the same quarterly distribution
that may be declared and paid on a corresponding share of beneficial
interest of Investors Real Estate Trust. The debt is secured
by the building and land lease, bears interest at a fixed rate
of 7.65% per year, and is payable in monthly installments of $85,084
amortized over 15 years, with a balloon payment of all remaining
principal and interest due on December 1, 2016. In addition
to the purchase price, we incurred acquisition costs of $293,496
for closing fees, loan assumption fees, environmental reports
and legal fees.
As of October 1, 2002, the building was 100% leased to 5 different tenants, all with remaining lease terms of 9 years. No one tenant occupies more than 40% of the total leasable area.
Brenwood Office Complex - Minnetonka, Minnesota and Dixon
Avenue Industrial Complex - Des Moines, Iowa
On October 1, 2002, we acquired a 51% ownership interest in
IRET-BD, LLC, a Minnesota limited liability company for $13,107,000,
with the total joint venture project having an independent third-party
appraised value of $25,700,000. Our joint venture partners
are Steven B. Hoyt who owns 29.44%, Marisa Moe who owns 9.8% and
Natalie Hoyt who owns 9.8%. Steven B. Hoyt is a member of
our Board of Trustees. Marisa Moe and Natalie Hoyt are the
adult daughters of Mr. Steven B. Hoyt. Steven B. Hoyt, Natalie
Hoyt and Marisa Moe acquired their respective interest in the
joint venture by contributing a parcel of real estate known as
Brenwood Office Complex located at 5620 in Minnetonka, Minnesota.
The office complex was appraised by an independent third-party
MAI appraiser on September 13, 2002 at $13,900,000. In addition
to the purchase price, the joint venture incurred acquisition
costs of $132,886.
The project consists of the four office buildings contributed by Steven B. Hoyt, Michelle Moe and Natalie Hoyt, as well as three industrial/warehouse buildings purchased by the joint venture on October 1, 2002, for $11,800,000. The individual properties are as follows:
| Property | Address |
Built |
Leasable Square Footage |
|
| Brenwood I | 5720 Smetana Drive, Minnetonka, MN |
|
50,150 |
|
| Brenwood II | 5700 Smetana Drive, Minnetonka, MN |
|
51,077 |
|
| Brenwood III | 5640 Smetana Drive, Minnetonka, MN |
|
38,065 |
|
| Brenwood IV | 5620 Smetana Drive, Minnetonka, MN |
|
37,625 |
|
| 4121 Dixon Avenue | Des Moines, IA |
|
177,431 |
|
| 4141 Dixon Avenue | Des Moines, IA |
|
263,196 |
|
| 4161 Dixon Avenue | Des Moines, IA |
|
164,084 |
|
Our 51% interest in the joint venture was acquired by contributing cash in the amount of $1,546,765, with the balance paid by the assumption, joint and severally with our joint venture partners, of existing debt with an unpaid principal balance of $22,729,238 as of October 1, 2002. The assumed debt consists of a loan from Allstate Life Insurance Company secured by a first mortgage on the Brenwood Office Complex, with an unpaid principal balance $8,769,176 as of October 1, 2002, bearing interest at a fixed rate of 8.1%, and amortized over 25 years with monthly installment payments of $70,061,with a final payment of all outstanding principal due on October 1, 2010.
The balance of the assumed debt currently consists of two short-term unsecured promissory notes from us as the managing member. Both notes bear interest at a variable rate equal to the Prime Rate plus 150 basis points or 1.5%. The rate is currently 6.25% with a provision that the rate may never be below 6%.
We are in the process of replacing the temporary loans with permanent fixed financing from a third-party lender. This refinancing should be complete within the next 60 to 90 days.
As of October 1, 2002, the Brenwood Office Complex is 78% leased to approximately 24 different tenants, with remaining lease terms of one month to five years. No one tenant occupies more than 22% of the total leasable space.
As of October 1, 2002, the three Dixon Avenue buildings are 93% leased to 9 different tenants, with remaining lease terms of one month to five years. No one tenant occupies more than 32% of the total leasable space.
Item 7. Financial Statements and Exhibits
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Financial Statements of Business Acquired The required financial statements for those real estate assets acquired by IRET which constitute a "substantial majority" of the real estate assets acquired by IRET in fiscal year 2003 during the period from May 1, 2002 to October 1, 2002, as measured by cost pursuant to Regulation S-X, will be filed by amendment hereto no later than sixty days after the date this report is required to be filed. |
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Pro Forma Financial Information The required pro forma financial information will be filed by amendment hereto no later than sixty days after the date this report is to be filed. space |
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Member Control and Operating Agreement of IRET-BD, LLC Exhibit 10 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has, on October 15, 2002, caused this report to be signed on its behalf by the undersigned who is duly authorized to do so.
INVESTORS REAL ESTATE TRUST
(Registrant)
By: _/s/ Thomas A.
Wentz, Jr._______
(Signature)
Thomas A. Wentz, Jr.
Senior President & General Council