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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
During the period from October 2, 2002, to February 1, 2003, Investors Real Estate Trust (“IRET”) completed three transactions that resulted in the acquisition of $84,500,000 of assets by IRET. Individually, the three transactions 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 and then again on February 1, 2003, as a result of the three transactions previously described above. We filed a Form 8-K on October 15, 2002, and an amended Form 8-K on December 16, 2002, describing our fiscal year-to-date acquisitions through October 1, 2002, and disclosing audited financial statements and proforma financial information.
The three transactions entered into by us in fiscal year 2003 during the period from October 2, 2002 to February 1, 2003, that will result in us acquiring a "significant amount of assets" as defined in Regulation S-X are as follows:
Plaza VII Office Building - Boise, Idaho
On January 31, 2003, we acquired the Plaza VII office building,
a 27,297 square foot, multi-tenant commercial office building
that was constructed in 1974. The property is located at
5257 Fairview Avenue, Boise, Idaho. The purchase price for
the property was $3,350,000. In addition to the purchase
price, we incurred acquisition costs of $42,662 for closing costs,
commissions, environmental reports and legal fees.
As of February 1, 2003, the building is 78% leased to ten tenants, with remaining lease terms ranging from two months to seven years. All rents paid by the current tenants are at market rates, and no single tenant occupies more than 39% of the total leasable space.
Westgate Plaza - Boise, Idaho
On January 31, 2003, we acquired Westgate Plaza, which consists
of two buildings; a 73,403 square foot single story building that
was constructed in 1970 and a 29,939 square foot single story
building constructed in 1998. Both buildings are located
at 1700 Westgate Drive, Boise, Idaho. The purchase price
was $11,500,000. The purchase price was paid in cash.
In addition to the purchase price, we incurred acquisition costs
of $117,750 for commissions, legal fees, environmental reports
and closing costs. The property is 100% leased to the Health
and Welfare Department of the State of Idaho through July 31,
2007. The annual base rental amount is $1,369,075.
In addition to the base rent, the tenant is obligated to pay that
portion of the operating costs that exceed an agreed base amount.
We expect to receive approximately $302,591 in additional rent
from the State of Idaho as reimbursement of operating expenses
and improvements under the terms of the lease. Operating
expenses to be paid by us are estimated to be $685,000 annually
resulting in annual net income to us before debt service of $996,666.
Pursuant to the lease, the State of Idaho may elect to cancel
the lease without penalty with 60 days written notice. We
have entered into a non-binding loan agreement with GE Business
Asset
Funding (GEBAF) for approximately $8,050,000 at 5.85% annual interest fixed for 5 years and amortized over a 20-year term. We expect the loan to close in March 2003.
Showroom & Warehouse - Boise, Idaho
As part of our purchase of Westgate and Plaza VII in Boise, we
sold our vacant 69,599 square foot showroom and warehouse located
at 8688 West Fairview Avenue for $3,350,000. The building
has been vacant for the previous 24 months. In fiscal year
2000, we recognized an impairment loss on our investment in the
building of $1,008,000 due to the bankruptcy of the tenant.
The sale resulted in a loss to us of an additional $305,000, for
a total loss of $1,313,000.
T. F. James Company Merger
On February 1, 2003, we entered into a Merger Agreement with the
T. F. James Company, a privately held Iowa corporation primarily
engaged in the development and ownership of retail and commercial
real estate in Minnesota and surrounding states. Under the
terms of the Agreement and Plan of Reorganization all of the assets
and liabilities of the T. F. James Company, including the company
office located at 21500 Highway 7, Greenwood, Minnesota, were
merged into IRET, Inc., the wholly-owned subsidiary of Investors
Real Estate Trust. As a result of the merger, we acquired
approximately 52 retail and commercial real estate properties
containing approximately 807,154 square feet of rentable space
as well as eight underdeveloped or primarily vacant parcels of
real estate. The merger increased IRET’s real estate
portfolio by $70,197,945, and is expected to increase gross rental
revenues by $6,356,000 on an annual basis. As part of the
merger, we also acquired all of the outstanding debt and liabilities
of the T. F. James Company in the amount of $37,732,004.
We also acquired eight undeveloped and vacant properties that
accounted for approximately $2,760,000 of the total transaction.
These eight properties will either require additional funds for
redevelopment or must be sold before we will recognize any income
or value.
A copy of the agreement and plan of the merger was filed as an exhibit to Form 8-K with the Securities and Exchange Commission on January 31, 2003, and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
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Financial Statements of Business and Real Estate 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 October 2, 2002 to February 1, 2003, 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, except that audited financial statements for the T. F. James Company for the period of August 31, 2001 to September 1, 2002, were previously filed as Schedule 3.12 to the Agreement and Plan of Merger attached as part of Item 7(c), Exhibit 10 to Form 8-K dated and filed on January 31, 2003, and are incorporated herein by reference. |
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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. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has, on February 18, 2003, caused this report to be signed on its behalf by the undersigned who is duly authorized to do so.
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INVESTORS
REAL ESTATE TRUST By:
/S/ Thomas A. Wentz, Jr.
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