UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 15, 2003
(Date of Report)
February 18, 2003
(Date of earliest event reported)
INVESTORS REAL ESTATE TRUST
| North Dakota (State or other jurisdiction of incorporation) |
0-14851 (Commission File Number) |
45-0311232 (IRS Employer Identification Number) |
| 12 South Main Street, Suite 100, Minot, ND (Address of principal executive offices) |
58701 (Zip Code) |
(701) 837-4738
(Registrant’s telephone number, including area code)
| ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS | ||||||||
| SIGNATURES | ||||||||
| INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION | ||||||||
The undersigned Registrant hereby amends its Current Report on Form 8-K dated February 1, 2003, which was filed with the Securities and Exchange Commission on February 18, 2003, to include the financial statements required by Item 7 (a) of Form 8-K and the pro forma financial information required by Item 7 (b) of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
| (a) | Financial Statements: See Index to Financial Statements and Pro Forma Financial Information appearing on Page F-1 of this Form 8-K/A. | |
| (b) | Pro Forma Financial Information: See Index to Financial Statements and Pro Forma Financial Information appearing on page F-1 of this Form 8-K/A. | |
| (c) | Exhibits | |
| None |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INVESTORS REAL ESTATE TRUST | ||||
| By: | /s/ Thomas A. Wentz, Jr. | |||
| Thomas A. Wentz, Jr. Senior Vice President & General Counsel |
||||
April 15, 2003
INDEX TO FINANCIAL STATEMENTS
AND PRO FORMA FINANCIAL INFORMATION
T. F. James Company |
|||||
Independent Auditor’s Report |
F-2 | ||||
Historical Summary of Gross Income and Direct Operating Expenses
for the Year Ended September 30, 2002 |
F-3 | ||||
Notes to Historical Summary of Gross Income and Direct Operating
Expenses for the Year Ended September 30, 2002 |
F-4 | ||||
Unaudited Estimated Taxable Operating Results |
F-6 | ||||
Unaudited Consolidated Balance Sheet as of January 31, 2003 |
F-7 | ||||
Pro Forma Consolidated Statement of Operations for the Nine
Months Ended January 31, 2003 |
F-8 | ||||
Pro Forma Consolidated Statement of Operations for the Twelve
Months Ended April 30, 2002 |
F-9 | ||||
F-1
Independent Auditor’s Report
To the Board of Trustees of Investors Real Estate Trust
We have audited the accompanying Consolidated Historical Summary of Gross Income and Direct Operating Expenses of T. F. James Company and Subsidiary (“Historical Summary”) for the year ended September 30, 2002. This Consolidated Historical Summary is the responsibility of the management. Our responsibility is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Consolidated Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Consolidated Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Consolidated Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 3, and is not intended to be a complete presentation of T. F. James Company and Subsidiary revenue and expenses.
In our opinion, the Consolidated Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 3 of T. F. James Company and Subsidiary for the year ended September 30, 2002, in conformity with accounting principles generally accepted in the United States of America.
Brady, Martz, and Associates, P.C.
Minot, North Dakota
April 10, 2003
F-2
T. F. James Company and Subsidiary Consolidated Historical Summary of Gross Income and Direct Operating Expenses for the Year Ended September 30, 2002
| T. F. James | IRET- | |||||||||||||||||
| Consolidated | Eliminations | Company | Westlake, Inc. | |||||||||||||||
REVENUES |
||||||||||||||||||
Sales and Rental Income |
$ | 7,444,967 | $ | (42,000 | ) | $ | 6,442,209 | $ | 1,044,758 | |||||||||
Less Cost of Sales |
835,287 | 0 | 0 | 835,287 | ||||||||||||||
Gross Profit and Rental Income |
$ | 6,609,680 | $ | (42,000 | ) | $ | 6,442,209 | $ | 209,471 | |||||||||
OPERATING EXPENSES |
||||||||||||||||||
Interest |
$ | 2,569,074 | $ | 0 | $ | 2,569,074 | $ | 0 | ||||||||||
Utilities, Maintenance and Other
Expenses |
292,683 | 0 | 292,683 | 0 | ||||||||||||||
Real Estate Taxes |
178,371 | 0 | 178,371 | 0 | ||||||||||||||
General and Administration |
247,432 | (42,000 | ) | 65,676 | 223,756 | |||||||||||||
Total expenses |
$ | 3,287,560 | $ | (42,000 | ) | $ | 3,105,804 | $ | 223,756 | |||||||||
INCOME BEFORE OTHER INCOME |
$ | 3,322,120 | $ | 0 | $ | 3,336,405 | $ | (14,285 | ) | |||||||||
Other Income, Net |
96,530 | 0 | 96,530 | 0 | ||||||||||||||
NET INCOME |
$ | 3,418,650 | $ | 0 | $ | 3,432,935 | $ | (14,285 | ) | |||||||||
The Notes to Historical Summary of Gross Income and Direct Operating Expenses are an integral part of this summary.
The remainder of this page has been intentionally left blank.
F-3
T. F. James Company and Subsidiary Notes to Consolidated Historical Summary of Gross Income and Direct Operating Expenses for the Year Ended September 30, 2002
| Note 1. | Nature of Business | |
| T. F. James Company is a privately held Iowa corporation primarily engaged in the development and ownership of retail and commercial real estate in Minnesota and surrounding states. The company office is located at 21500 Highway 7, Greenwood, Minnesota. The company owns and manages 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. IRET-Westlake, Inc., formerly known as Westlake Liquor, Inc., a wholly owned subsidiary, is engaged in retail sales of offsale liquors. On February 1, 2003, the T. F. James Company and Subsidiary merged into IRET, Inc., the wholly owned subsidiary of Investors Real Estate Trust | ||
| Note 2. | Principles of Consolidation | |
| The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and accounts have been eliminated in consolidation | ||
| Note 3. | Basis of Presentation | |
| IRET, Inc., purchased T. F. James Company February 1, 2003. The historical summary has been prepared for the purpose of complying with Regulation S-X, Rule 3-14 of the Securities and Exchange Commission (“SEC”), which requires certain information with respect to real estate operations acquired to be included with certain filings with the SEC. This historical summary includes the historical gross income and direct operating expenses of T. F. James Company, exclusive of the following expenses, which may not be comparable to the proposed future operations: | ||
| (a) depreciation of property and equipment | ||
| (b) professional expenses | ||
| (c) certain salary and benefits | ||
| (d) revenues and expenses of property not acquired | ||
| (e) trustee fees | ||
| (f) various administrative expenses | ||
| Note 4. | Summary of Significant Accounting Policies | |
| 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 | ||
| Capitalization Policy — Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs, which do not add to the value or extend useful lives, are charged to expense as incurred | ||
| Revenue Recognition — Rental revenue is recognized on the straight-line basis, which averages minimum rents over the terms of the leases. All leases are classified as operating leases and expire at various dates prior to April 4, 2027. The following is a schedule by years of future actual minimum rents receivable on non-cancelable operating leases in effect as of September 30, 2002. |
F-4
T. F. James Company and Subsidiary Notes to Consolidated Historical Summary of Gross Income and Direct Operating Expenses — continued
| Year | Amount | |||
2003 |
$ | 6,058,524 | ||
2004 |
5,657,374 | |||
2005 |
5,147,224 | |||
2006 |
4,828,224 | |||
2007 |
4,432,224 | |||
Thereafter |
14,798,387 | |||
Total |
$ | 40,921,957 | ||
| Expense Reimbursement – Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenditures are incurred. T. F. James Company receives payments for these reimbursements from substantially all its multi-tenant commercial tenants throughout the year based on estimates. Differences between estimated recoveries and the final billed amounts, which are immaterial, are recognized in the subsequent year |
The remainder of this page has been left intentionally blank.
F-5
T. F. James Company Unaudited Estimated Taxable Operating Results
The table below represents estimated taxable operating results of T. F. James Company, Greenwood, Minnesota, for the first twelve-month period of the acquisition.
| Cash Flow Projections | ||||
Rental Revenue |
$ | 7,087,746 | ||
Direct Operating Expense |
-1,306,085 | |||
Interest Expense |
-2,590,030 | |||
Administrative Expense |
-657,880 | |||
Principal Mortgage Reduction |
-1,659,895 | |||
OPERATING CASH FLOW |
$ | 873,856 | ||
The remainder of this page has been intentionally left blank.
F-6
INVESTORS REAL ESTATE TRUST
Unaudited Consolidated Balance Sheet as of January 31, 2003
| IRET | T. F. James | |||||||||||||
| Consolidated | Consolidated | |||||||||||||
| 01/31/03 | 02/01/03 | Pro Forma | ||||||||||||
| Unaudited(1) | Unaudited | Consolidated(2) | ||||||||||||
ASSETS |
||||||||||||||
Real Estate Investments |
||||||||||||||
Property Owned |
$ | 838,880,283 | $ | 69,217,945 | $ | 908,098,228 | ||||||||
Less Accumulated Depreciation |
(71,192,670 | ) | 0 | (71,192,670 | ) | |||||||||
| $ | 767,687,613 | $ | 69,217,945 | $ | 836,905,558 | |||||||||
Mortgage Loans Receivable |
5,279,735 | 0 | 5,279,735 | |||||||||||
Total Real Estate Investments |
$ | 772,967,348 | $ | 69,217,945 | $ | 842,185,293 | ||||||||
OTHER ASSETS |
||||||||||||||
Cash |
$ | 17,930,052 | $ | 356,348 | $ | 18,286,400 | ||||||||
Marketable Securities-Available for sale |
3,070,897 | 0 | 3,070,897 | |||||||||||
Rent Receivable, Net |
4,440,528 | 0 | 4,440,528 | |||||||||||
Real Estate Deposits |
214,100 | 0 | 214,100 | |||||||||||
Notes Receivable Related Party |
0 | 0 | 0 | |||||||||||
Prepaid and Other Assets |
790,034 | 584,722 | 1,374,756 | |||||||||||
Tax, Insurance and Other Escrow |
7,985,040 | 151,547 | 8,136,587 | |||||||||||
Deferred Charges and Leasing Costs |
4,687,548 | 1,330,175 | 6,017,723 | |||||||||||
Furniture & Fixtures, Net |
639,338 | 0 | 639,338 | |||||||||||
Goodwill |
1,440,817 | 0 | 1,440,817 | |||||||||||
TOTAL ASSETS |
$ | 814,165,702 | $ | 71,640,737 | $ | 885,806,439 | ||||||||
LIABILITIES |
||||||||||||||
Accounts Payable and Accrued Expenses |
$ | 22,054,937 | $ | 3,012,572 | $ | 25,067,509 | ||||||||
Notes Payable |
0 | 3,169,588 | 3,169,588 | |||||||||||
Mortgages Payable |
504,879,656 | 31,898,856 | 536,778,512 | |||||||||||
Investment Certificates Issued |
11,798,340 | 0 | 11,798,340 | |||||||||||
TOTAL LIABILITIES |
$ | 538,732,933 | $ | 38,081,016 | $ | 576,813,949 | ||||||||
Minority Interest in Partners |
$ | 14,248,864 | $ | 0 | $ | 14,248,864 | ||||||||
Minority Interest of Unitholders in
Operating Partnership
10,155,540 on 01/31/03
9,636,247 on 04/30/02 |
$ | 81,035,331 | $ | 0 | $ | 81,035,331 | ||||||||
SHAREHOLDERS’ EQUITY |
||||||||||||||
Shares of Beneficial Interest
32,415,937 on 01/31/03
27,847,079 on 04/30/02 |
$ | 204,350,743 | $ | 33,559,721 | $ | 237,910,464 | ||||||||
Accumulated Distributions in Excess
of Net Income |
(24,202,169 | ) | 0 | (24,202,169 | ) | |||||||||
Total Shareholder’s Equity |
$ | 180,148,574 | $ | 33,559,721 | $ | 213,708,295 | ||||||||
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ | 814,165,702 | $ | 71,640,737 | $ | 885,806,439 | ||||||||
| (1) | Reflects the Company’s Consolidated Balance Sheet as of January 31, 2003, as reported on Form 10-Q. | |
| (2) | The balance sheet reflects the acquisition of the T. F. James Company and twelve real estate properties that were acquired during the nine months ended January 31, 2003. |
F-7
Investors Real Estate Trust
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended January 31, 2003, and Twelve Months Ended April 30, 2002
The unaudited pro forma Consolidated Statement of Operations for the nine months ended January 31, 2003, and for the year ended April 30, 2002, is presented as if the acquisitions (1)(3)(4) had occurred on May 1, 2001. The unaudited pro forma Consolidated Statement of Operations for the nine months ended January 31, 2003, and for the twelve months ended April 30, 2002, is not necessarily indicative of what the actual results of operations would have been assuming the transactions had occurred as of the beginning of the period presented, nor does it purport to represent the results of operations for future periods.
Pro Forma Consolidated Statement of Operations for Nine Months Ended January 31, 2003 (unaudited)
| Acquisitions | |||||||||||||||||||||
| Nine Months | Per 8-K/A | Total | |||||||||||||||||||
| Ended | T. F. James | Insignificant | filed | Consolidated | |||||||||||||||||
| January 2003 | Company(1)(2) | Acquisitions(3) | 13-Dec-02(4) | Pro Forma | |||||||||||||||||
REVENUE |
|||||||||||||||||||||
Real estate rentals |
$ | 87,301,502 | $ | 5,315,810 | $ | 1,399,228 | $ | 4,052,163 | $ | 98,068,703 | |||||||||||
Discounts, fees and other income |
165,668 | 0 | 0 | 0 | 165,668 | ||||||||||||||||
Total Revenue |
$ | 87,467,170 | $ | 5,315,810 | $ | 1,399,228 | $ | 4,052,163 | $ | 98,234,371 | |||||||||||
EXPENSES |
|||||||||||||||||||||
Interest |
$ | 27,134,538 | $ | 1,942,523 | $ | 446,250 | $ | 1,276,729 | $ | 30,800,040 | |||||||||||
Depreciation |
14,081,207 | 789,845 | 254,377 | 532,416 | 15,657,845 | ||||||||||||||||
Utilities and maintenance |
14,312,632 | 699,994 | 388,004 | 633,055 | 16,033,685 | ||||||||||||||||
Real estate taxes |
9,918,486 | 190,428 | 99,605 | 579,212 | 10,787,731 | ||||||||||||||||
Insurance |
1,573,435 | 89,142 | 14,502 | 76,054 | 1,753,133 | ||||||||||||||||
Property management expenses |
5,894,498 | 0 | 60,678 | 113,849 | 5,894,498 | ||||||||||||||||
Property management related party |
371,634 | 0 | 0 | 0 | 371,634 | ||||||||||||||||
Administrative expenses |
1,359,360 | 493,410 | 0 | 0 | 1,852,770 | ||||||||||||||||
Advisory and trustee services |
85,155 | 0 | 0 | 0 | 85,155 | ||||||||||||||||
Operating expenses |
747,107 | 0 | 0 | 0 | 747,107 | ||||||||||||||||
Amortization |
494,161 | 0 | 0 | 0 | 494,161 | ||||||||||||||||
Total Expenses |
$ | 75,972,213 | $ | 4,205,342 | $ | 1,263,416 | $ | 3,211,315 | $ | 84,652,286 | |||||||||||
Non-Operating Income |
$ | 688,127 | $ | 0 | $ | 0 | $ | 0 | $ | 688,127 | |||||||||||
Income before gain/loss on properties
and minority interest |
$ | 12,183,084 | $ | 1,110,468 | $ | 135,812 | $ | 840,848 | $ | 14,270,212 | |||||||||||
Gain on sale of properties |
315,342 | 0 | 0 | 0 | 315,342 | ||||||||||||||||
Minority interest portion – Other Partnership |
(673,550 | ) | 0 | 0 | 0 | (673,550 | ) | ||||||||||||||
Minority Interest portion – Operating Partnership |
(2,928,754 | ) | (265,402 | ) | (32,459 | ) | (205,167 | ) | (3,431,782 | ) | |||||||||||
Income from continued operations |
$ | 8,896,122 | $ | 845,066 | $ | 103,353 | $ | 635,681 | $ | 10,480,222 | |||||||||||
Discontinued Operations, net |
$ | (448,577 | ) | $ | 0 | $ | 0 | $ | 0 | $ | (448,577 | ) | |||||||||
Net Income |
$ | 8,447,545 | $ | 845,066 | $ | 103,353 | $ | 635,681 | $ | 10,031,645 | |||||||||||
Net income per share (basic and diluted) |
$ | 0.25 | $ | 0.02 | $ | 0.00 | $ | 0.02 | $ | 0.29 | |||||||||||
Weighted Average Shares |
34,931,780 | 34,931,780 | 34,931,780 | 34,931,780 | 34,931,780 | ||||||||||||||||
F-8
Pro Forma Consolidated Statement of Operations for Twelve Months Ended April 30, 2002 (unaudited)
| Acquisitions | |||||||||||||||||||||
| Twelve Months | Per 8-K/A | Total | |||||||||||||||||||
| Ended | T. F. James | Insignificant | filed | Consolidated | |||||||||||||||||
| January 2002 | Company(1)(2) | Acquisitions(3) | 13-Dec-02(4) | Pro Forma | |||||||||||||||||
REVENUE |
|||||||||||||||||||||
Real estate rentals |
$ | 91,738,602 | $ | 7,087,746 | $ | 1,865,637 | $ | 12,817,316 | $ | 113,509,301 | |||||||||||
Discounts, fees and other income |
215,344 | 0 | 0 | 0 | 1,215,344 | ||||||||||||||||
Total Revenue |
$ | 91,953,946 | $ | 7,087,746 | $ | 1,865,637 | $ | 12,817,316 | $ | 113,724,645 | |||||||||||
EXPENSES |
|||||||||||||||||||||
Interest |
$ | 30,604,846 | $ | 2,590,030 | $ | 595,000 | $ | 4,053,533 | $ | 37,843,409 | |||||||||||
Depreciation |
15,515,168 | 1,053,127 | 339,169 | 1,726,755 | 18,634,219 | ||||||||||||||||
Utilities and maintenance |
12,709,614 | 933,325 | 517,338 | 1,950,551 | 16,110,828 | ||||||||||||||||
Real estate taxes |
9,184,599 | 253,904 | 132,806 | 1,680,012 | 11,251,321 | ||||||||||||||||
Insurance |
1,352,622 | 118,856 | 19,336 | 223,002 | 1,713,816 | ||||||||||||||||
Property management expenses |
6,664,194 | 0 | 80,904 | 375,931 | 7,121,029 | ||||||||||||||||
Property management related party |
321,348 | 0 | 0 | 0 | 321,348 | ||||||||||||||||
Administrative expenses |
1,569,853 | 657,880 | 0 | 0 | 2,227,733 | ||||||||||||||||
Advisory and trustee services |
112,889 | 0 | 0 | 0 | 112,889 | ||||||||||||||||
Operating expenses |
565,802 | 0 | 0 | 0 | 565,802 | ||||||||||||||||
Amortization |
549,200 | 0 | 0 | 0 | 549,200 | ||||||||||||||||
Total Expenses |
$ | 79,150,135 | $ | 5,607,122 | $ | 1,684,553 | $ | 10,009,784 | $ | 96,451,594 | |||||||||||
Non-Operating Income |
$ | 1,062,123 | $ | 0 | $ | 0 | $ | 0 | $ | 1,062,123 | |||||||||||
Income before gain/loss on properties
and minority interest |
$ | 13,865,934 | $ | 1,480,624 | $ | 181,084 | $ | 2,807,532 | $ | 18,335,174 | |||||||||||
Gain on sale of properties |
546,927 | 0 | 0 | 0 | 546,927 | ||||||||||||||||
Minority interest portion – Other Partnership |
(198,564 | ) | 0 | 0 | 0 | (198,564 | ) | ||||||||||||||
Minority Interest portion – Operating Partnership |
(3,614,168 | ) | (380,520 | ) | (46,539 | ) | (721,536 | ) | (4,762,763 | ) | |||||||||||
Income from continued operations |
$ | 10,600,129 | $ | 1,100,104 | $ | 134,545 | $ | 2,085,996 | $ | 13,920,774 | |||||||||||
Discontinued Operations, net |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
Net Income |
$ | 10,600,129 | $ | 1,100,104 | $ | 134,545 | $ | 2,085,996 | $ | 13,920,774 | |||||||||||
Net income per share (basic and diluted) |
$ | 0.31 | $ | 0.03 | $ | 0.00 | $ | 0.06 | $ | 0.40 | |||||||||||
Weighted Average Shares |
34,931,780 | 34,931,780 | 34,931,780 | 34,931,780 | 34,931,780 | ||||||||||||||||
| (1) | The pro forma income and expense items reflect estimated operations which was acquired on February 1, 2003. | |
| (2) | IRET-Westlake, Inc., reported as a net number under Discounts, fees and other income, projected to break even. | |
| (3) | The real estate assets acquired by IRET in fiscal year 2003 during the period November 1, 2002, to January 31, 2003, are as follows: Plaza VII Office Building, Boise, ID (acquired January 31, 2003), Westgate Plaza, Boise, ID (acquired January 31, 2003). | |
| (4) | The real estate assets acquired by IRET in fiscal year 2003 during the period form May 1, 2002, to October 31, 2002, are as follows: Three Paramount Plaza Office Building, Bloomington, MN, (acquired May 20, 2002), Bermans, The Leather Experts Corporate Office and Distribution Complex, Brooklyn Park, MN, (acquired June 21, 2002), East Park Apartments, Sioux Falls, SD, (acquired July 15, 2002), Sycamore Village Apartments, Sioux Falls, SD (acquired July 15, 2002), Park Dental, Brooklyn Center, MN (acquired September 17, 2002), Park Nicollet Clinic — Airport — Bloomington, MN (acquired September 17, 2002), Gardenview Medical Condominium, St. Paul, MN (acquired September 17, 2002), Abbott Northwestern Specialty Care Center, Sartell, MN (acquired September 17, 2002), Brenwood Office Complex, Minnetonka, MN (acquired October 1, 2002), Dixon Avenue Industrial Complex, Des Moines, IA (acquired October 1, 2002). |
F-9