EX-99.1 3 a16-10796_1ex99d1.htm EX-99.1

EXHIBIT 99.1

PART I

Item 1. Business

Overview

Investors Real Estate Trust (“we,” “us,” “IRET” or the “Company”) is a self-advised equity Real Estate Investment Trust, or 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 multifamily residential properties and commercial properties composed of healthcare, industrial and other. These properties are located primarily in the upper Midwest states of Minnesota and North Dakota. For the fiscal year ended April 30, 2015, our real estate investments in these two states accounted for 71.3% of our total gross revenue. Our principal executive office is located in Minot, North Dakota. We also have corporate offices in Minneapolis and St. Cloud, Minnesota, and additional property management offices located in the states where we own properties.

We seek to diversify our investments among multifamily and commercial properties. Our commercial properties consist of healthcare, industrial and other. In January 2015, we revised our strategic plan and are exploring the potential sale of substantially all of our office and retail properties. As of April 30, 2015, our real estate portfolio consisted of:

· 100 multifamily properties containing 11,844 apartment units, having a total real estate investment amount net of accumulated depreciation of $766.1 million;

· 65 healthcare properties (including senior housing) containing approximately 2.9 million square feet of leasable space, having a total real estate investment amount net of accumulated depreciation of $382.5 million;

· 7 industrial properties containing approximately 1.2 million square feet of leasable space, having a total real estate investment amount net of accumulated depreciation of $49.4 million; and

· 76 other properties containing approximately 5.4 million square feet of leasable space, having a total real estate investment amount net of accumulated depreciation of $448.7 million. Of the 76 other properties, 66 properties containing approximately 5.0 million square feet of leasable space and having a total real estate investment amount net of accumulated depreciation of $416.0 million were classified as both held for sale and discontinued operations in fiscal year 2016.

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, 2015, no individual tenant accounted for more than 10% of our total real estate rentals, although affiliated entities of Edgewood Vista together accounted for approximately 31.6% of our total commercial segments’ minimum rents.

Structure

We were organized under the laws of North Dakota on July 31, 1970, and have operated as a REIT under Sections 856-858 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) since our formation. On February 1, 1997, we were restructured as an UPREIT, and have conducted our daily business operations primarily through IRET Properties.

IRET Properties was 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 multifamily 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

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general partnership interest in IRET Properties. As of April 30, 2015, IRET, Inc. owned an 89.9% 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 implemented by growing income-producing assets in desired geographical markets in real estate classes we believe will provide a consistent return on investment for our shareholders.

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 “Units”), which are convertible, after the expiration of a minimum holding period of one year, into cash or, at our sole discretion, into our common shares on a one-to-one basis.

Our investment strategy involves investing in multifamily properties and commercial properties that are leased to single or multiple tenants, usually for five years or longer, and are located throughout the upper Midwest. Our commercial properties consist of healthcare, industrial and other. Since January 2015, we have concentrated on multifamily and healthcare property acquisitions, and are exploring the potential sale of substantially all of our office and retail properties. We operate mainly within the states of North Dakota and Minnesota, although we also have real estate investments in Idaho, Iowa, Kansas, Montana, Nebraska, South Dakota, Wisconsin and Wyoming.

In order to implement our investment strategy we have certain investment policies. Our significant investment policies are as follows:

Investments in the securities of, or interests in, entities primarily 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 multifamily properties and/or commercial properties in 10 states, excluding discontinued operations. 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, 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, except we may not invest in or make a mortgage loan without obtaining an appraisal concerning the value of the underlying property unless it is a loan insured or guaranteed by a government or a governmental agency. Unless otherwise approved by our Board of Trustees, it is our policy that we will not invest in mortgage loans on

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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, 2015 and 2014, we had no junior mortgages outstanding. We had no investments in real estate mortgages at April 30, 2015 and 2014.

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 Regarding Other Activities

Our current policies as they pertain to other activities are described as follows:

Distributions to shareholders and holders of limited partnership units. One of the requirements of the Internal Revenue Code for a REIT is that it distribute 90% of its net taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our distributions meet these requirements. Our general policy has been to make cash distributions to our common shareholders and the holders of limited partnership units of approximately 65.0% to 90.0% of our funds from operations and to use the remaining funds for capital improvements or the purchase of additional properties. This policy may be changed at any time by our Board of Trustees without notice to, or approval of, our shareholders. Distributions to our common shareholders and unitholders in fiscal years 2015 and 2014 totaled approximately 81.3% and 82.5%, respectively, on a per share and unit basis of our funds from operations.

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”), and on August 7, 2012, we issued 4,600,000 shares of 7.95% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B preferred shares”). Depending on future interest rates and market conditions, we may issue additional preferred shares or other senior securities which would have dividend and liquidation preference over our common shares.

Borrowing money. We rely 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 generally accepted accounting principles (“GAAP”). “Net Assets” means our total assets at cost before deducting depreciation or other non-cash reserves, less total liabilities. Our Bylaws do not impose any limitation on the amount that we may borrow against any one particular property. As of April 30, 2015, our ratio of total indebtedness to total real estate investments was 64.1% while our ratio of total indebtedness as compared to our Net Assets (computed in accordance with our Bylaws) was 97.8%.

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 their limited partnership units are converted into common shares.

Our Declaration of Trust, as amended (our “Declaration of Trust”), does not contain any restrictions on our ability to offer limited partnership units of IRET Properties in exchange for property. As a result, any decision to do so is vested solely in our Board of Trustees. This policy may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders. For the three most recent fiscal years ended April 30, we have issued the following limited partnership units of IRET Properties in exchange for properties:

|  | (in thousands) |
|  | 2015 |  | 2014 |  | 2013 |
Limited partnership units issued |  | 89 |  | 361 |  | 1,620 |
Value at issuance, net of issue costs |  | $ | 800 |  | $ | 3,480 |  | $ | 12,632 |

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Acquiring or repurchasing shares. As a REIT, it is our intention to invest only in real estate assets. Our 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 Internal Revenue Code. Any policy regarding the acquisition or repurchase of shares or other securities is vested solely in our Board of Trustees and may be changed at any time, or from time to time, without notice to, or a vote of, our shareholders.

During fiscal year 2015, we did not repurchase any of our outstanding common shares, preferred shares or limited partnership units.

Making loans to other persons. Our organizational structure allows us to make loans to other persons, subject to certain conditions and subject to our election to be taxed as a REIT. All loans must be secured by real property or limited partnership units of IRET Properties. We had no investments in real estate mortgages at April 30, 2015 and 2014.

Investing 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 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 three reportable real estate segments: multifamily; healthcare, including senior housing; and industrial. For further information on these segments and other related information, see Note 11 of our consolidated financial statements as well as Item 2 Properties and Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations below.

Employees

As of April 30, 2015, we had 433 employees, of whom 387 were full-time and 46 were part-time. 59 of these employees were corporate staff located in our Minot, North Dakota and Minneapolis, Minnesota offices, and 374 were property management employees based either at our properties or in local property management offices.

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, personal injuries, and investigation and clean-up costs incurred in connection with any contamination. In addition, some environmental laws create a lien on a contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. These laws often impose liability without regard to whether the current owner was responsible for, or even knew of, the presence of such substances. It is generally our policy to obtain from independent environmental consultants a “Phase I” environmental audit (which involves visual inspection but not soil or groundwater analysis) on all properties that we seek to acquire. We do not believe that any of our properties are subject to any material environmental contamination. However, no assurances can be given that:

· a prior owner, operator or occupant of the properties we own or the properties we intend to acquire did not create a material environmental condition not known to us, which might have been revealed by more in-depth study of the properties; and

· future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations) will not result in the imposition of environmental liability upon us.

In addition to laws and regulations relating to the protection of the environment, many other laws and governmental regulations are applicable 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

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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 multifamily and commercial properties to attract tenants to our properties. Ownership of competing properties is diversified among other REITs, financial institutions, individuals and public and private companies who are actively engaged in this business. Our multifamily 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 for 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 may be dominant in selected markets. Many of our competitors have greater financial and management resources than we have. We believe, however, that the geographic diversity of our investments, the experience and abilities of our management, the quality of our assets and the financial strength of many of our commercial tenants affords us some competitive advantages that have in the past and will in the future allow us to operate our business successfully despite the competitive nature of our business.

Corporate Governance

Our Board of Trustees has adopted various policies and initiatives to strengthen our corporate governance and increase the transparency of financial reporting. Each of the committees of the Board of Trustees operates under written charters, and our independent trustees meet regularly in executive sessions at which only the independent trustees are present. The Board of Trustees has adopted a Code of Conduct applicable to trustees, officers and employees; adopted a Code of Ethics for Senior Financial Officers; and has established processes for shareholders and all interested parties for communication with the Board of Trustees.

Additionally, our Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by our employees of concerns regarding accounting or auditing matters. The Audit Committee also maintains a policy requiring Audit Committee approval of all audit and non-audit services provided to us by our independent registered public accounting firm.

We will disclose any amendment to our Code of Ethics for Senior Financial officers on our website. In the event we waive compliance with the Code of Ethics or Code of Conduct by any of our trustees or officers, we will disclose such waiver in a Form 8-K filed within four business days.

Website and Available Information

Our internet address is www.iret.com. We make available, free of charge, through the “SEC filings” tab under the Investors Information/Financial Reporting section of our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits and amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports are filed with or furnished to the SEC. Current copies of our Code of Conduct; Code of Ethics for Senior Financial Officers; and Charters for the Audit, Compensation, Executive and Nominating and Governance Committees of our Board of Trustees are also available on our website under the heading “Corporate Governance” in the Investors Information/Corporate Overview section of our website. Copies of these documents are also available to shareholders upon request addressed to the Secretary at Investors Real Estate Trust, P.O. Box 1988, Minot, North Dakota 58702-1988. Information on our website does not constitute part of this Annual Report on Form 10-K.

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Item 2. Properties

We are organized as a REIT under Section 856-858 of the Internal Revenue Code, and are structured as an UPREIT, through which we conduct 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.

Total Real Estate Rental Revenue

As of April 30, 2015, our real estate portfolio consisted of 100 multifamily properties and 83 commercial properties, consisting of healthcare, industrial and other properties, comprising 62.1%, 31.0%, 4.0%, and 2.9%, respectively, of our total real estate portfolio, based on the dollar amount of our original investment plus capital improvements, net of accumulated depreciation, through April 30, 2015. 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 |  | Gross Revenue (in thousands) |
30, |  | Multifamily |  | % |  | Healthcare |  | % |  | Industrial |  | % |  | Other |  | % |  | Total |
2015 |  | $ | 118,526 |  | 59.0 | % | $ | 65,828 |  | 32.8 | % | $ | 6,491 |  | 3.2 | % | $ | 10,150 |  | 5.0 | % | $ | 200,995 |
2014 |  | $ | 102,059 |  | 55.1 | % | $ | 64,887 |  | 35.0 | % | $ | 6,894 |  | 3.7 | % | $ | 11,539 |  | 6.2 | % | $ | 185,379 |
2013 |  | $ | 89,923 |  | 53.0 | % | $ | 61,625 |  | 36.3 | % | $ | 6,700 |  | 3.9 | % | $ | 11,485 |  | 6.8 | % | $ | 169,733 |

Average Effective Annual Rent

The table below sets out the average effective annual rent per square foot or unit at same-store properties for each of the last five fiscal years in each of our three segments. Same-store properties are properties owned or in service for the entirety of the periods being compared, and, in the case of development or re-development properties, which have achieved a target level of occupancy of 90% for multifamily properties and 85% for healthcare and industrial properties.

|  | Average Effective Annual Rent per square foot or unit(1) |
As of April 30, |  | Multifamily(2) |  | Healthcare(3) |  | Industrial(3) |
2015 |  | $ | 829 |  | $ | 16 |  | $ | 5 |
2014 |  | $ | 783 |  | $ | 17 |  | $ | 4 |
2013 |  | $ | 744 |  | $ | 16 |  | $ | 4 |
2012 |  | $ | 719 |  | $ | 16 |  | $ | 4 |
2011 |  | $ | 691 |  | $ | 19 |  | $ | 4 |

(1) Previously reported amounts are not revised for discontinued operations or changes in the composition of the same-store properties pool.

(2) Monthly rent per unit, calculated as annualized rental revenue, net of free rent, including rent abatements and rent credits, divided by the occupied units as of April 30.

(3) Monthly rental rate per square foot calculated as annualized contractual base rental income, net of free rent and excluding operating expense reimbursements, divided by the leased square feet as of April 30.

Occupancy Rates

Occupancy represents the actual number of units or square footage leased divided by the total number of units or square footage at the end of the period. Occupancy levels on a same-store property and all-property basis are shown below for each property type in each of the three most recent fiscal years ended April 30. In the case of multifamily properties, lease arrangements with individual tenants vary from month-to-month to one-year leases. Leases on commercial properties generally vary from month-to-month to 20 years.

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Occupancy Levels on a Same-Store Property and All Property Basis:

|  | Same-Store Properties |  | All Properties |
|  | Fiscal Year Ended April 30, |  | Fiscal Year Ended April 30, |
Segments |  | 2015 |  | 2014 |  | 2013 |  | 2015 |  | 2014 |  | 2013 |
Multifamily |  | 94.7 | % | 93.4 | % | 95.3 | % | 92.0 | % | 93.0 | % | 94.6 | %
Healthcare |  | 95.7 | % | 96.3 | % | 95.1 | % | 95.9 | % | 96.4 | % | 94.9 | %
Industrial |  | 100.0 | % | 100.0 | % | 95.7 | % | 83.4 | % | 87.8 | % | 96.4 | %

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 liability companies, 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 corporate operations from offices in Minot, North Dakota and Minneapolis and St. Cloud, Minnesota. We also have property management offices located in the states where we own properties. The day-to-day management of our properties is carried out by our own employees and in certain cases by third-party property management companies. In markets where the amount of rentable square footage we own does not justify self-management, when properties acquired have effective pre-existing property management in place, or when for other reasons particular properties are in our judgment not attractive candidates for self-management, we utilize third-party professional management companies for day-to-day management. During the fourth quarter of fiscal year 2015 we transferred the property management of the majority of our office and retail properties to a third-party company, as part of our plan to explore the sale of these assets. 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. Generally, our management contracts provide for compensation ranging from 2.5% to 6.0% 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

|  | (in thousands, except percentages) |
As of April 30, |  | 2015 |  | % |  | 2014 |  | % |  | 2013 |  | % |
Real estate investments |  |  |  |  |  |  |  |  |  |  |  |  |
Property owned |  | $ | 1,546,367 |  |  |  | $ | 1,450,216 |  |  |  | $ | 1,435,574 |  |  |
Less accumulated depreciation |  | (313,308 | ) |  |  | (302,405 | ) |  |  | (289,624 | ) |  |
|  | $ | 1,233,059 |  | 87.3 | % | $ | 1,147,811 |  | 90.0 | % | $ | 1,145,950 |  | 94.4 | %
Development in progress |  | 153,994 |  | 10.9 | % | 104,609 |  | 8.2 | % | 46,782 |  | 3.8 | %
Unimproved land |  | 25,827 |  | 1.8 | % | 22,864 |  | 1.8 | % | 21,503 |  | 1.8 | %
Total real estate investments |  | $ | 1,412,880 |  | 100.0 | % | $ | 1,275,284 |  | 100.0 | % | $ | 1,214,235 |  | 100.0 | %

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Summary of Individual Properties Owned as of April 30, 2015

The following table presents information regarding our 182 multifamily, commercial and other properties as well as unimproved land, development properties and discontinued operations as of April 30, 2015. We own the following interests in real estate either through our wholly-owned subsidiaries or by ownership of a controlling interest in an entity owning the real estate. We account for these interests on a consolidated basis. Additional information is included in Schedule III to our financial statements below.

Property Name and Location |  | Units |  | (in thousands) Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
MULTIFAMILY |  |  |  |  |  |  |
11th Street 3 Plex - Minot, ND |  | 3 |  | $ | 83 |  | 100.0 | %
4th Street 4 Plex - Minot, ND |  | 4 |  | 123 |  | 100.0 | %
Alps Park - Rapid City, SD |  | 71 |  | 6,003 |  | 98.6 | %
Apartments on Main - Minot, ND |  | 10 |  | 1,334 |  | 100.0 | %
Arbors - S Sioux City, NE |  | 192 |  | 8,898 |  | 99.0 | %
Arcata - Golden Valley, MN |  | 165 |  | 31,823 |  | 20.0 | %
Ashland - Grand Forks, ND |  | 84 |  | 8,473 |  | 100.0 | %
Boulder Court - Eagan, MN |  | 115 |  | 9,570 |  | 98.3 | %
Brookfield Village - Topeka, KS |  | 160 |  | 8,746 |  | 96.9 | %
Brooklyn Heights - Minot, ND |  | 72 |  | 2,474 |  | 97.2 | %
Campus Center - St. Cloud, MN |  | 92 |  | 2,882 |  | 88.0 | %
Campus Heights - St. Cloud, MN |  | 49 |  | 895 |  | 67.3 | %
Campus Knoll - St. Cloud, MN |  | 71 |  | 1,958 |  | 88.7 | %
Campus Plaza - St. Cloud, MN |  | 24 |  | 450 |  | 58.3 | %
Campus Side - St. Cloud, MN |  | 48 |  | 883 |  | 93.8 | %
Campus View - St. Cloud, MN |  | 48 |  | 878 |  | 77.1 | %
Canyon Lake - Rapid City, SD |  | 109 |  | 5,915 |  | 95.4 | %
Castlerock - Billings, MT |  | 166 |  | 7,765 |  | 98.8 | %
Chateau I - Minot, ND |  | 32 |  | 6,407 |  | 93.8 | %
Cimarron Hills - Omaha, NE |  | 234 |  | 14,640 |  | 95.3 | %
Colonial Villa - Burnsville, MN |  | 240 |  | 21,387 |  | 91.7 | %
Colony - Lincoln, NE |  | 232 |  | 17,916 |  | 95.7 | %
Colton Heights - Minot, ND |  | 18 |  | 1,173 |  | 88.9 | %
Commons at Southgate - Minot, ND |  | 233 |  | 35,622 |  | 92.7 | %
Cornerstone - St. Cloud, MN |  | 24 |  | 453 |  | 79.2 | %
Cottage West Twin Homes - Sioux Falls, SD |  | 50 |  | 5,162 |  | 100.0 | %
Cottonwood - Bismarck, ND |  | 268 |  | 21,722 |  | 92.2 | %
Country Meadows - Billings, MT |  | 133 |  | 9,786 |  | 93.2 | %
Crestview - Bismarck, ND |  | 152 |  | 6,207 |  | 100.0 | %
Crown - Rochester, MN |  | 48 |  | 3,796 |  | 100.0 | %
Crown Colony - Topeka, KS |  | 220 |  | 12,964 |  | 99.5 | %
Cypress Court - St. Cloud, MN |  | 196 |  | 20,605 |  | 91.3 | %
Dakota Commons - Williston, ND |  | 44 |  | 10,444 |  | 95.5 | %
Evergreen - Isanti, MN |  | 36 |  | 3,236 |  | 97.2 | %
Evergreen II - Isanti, MN |  | 36 |  | 3,530 |  | 100.0 | %
Fairmont - Minot, ND |  | 12 |  | 482 |  | 100.0 | %
First Avenue - Minot, ND |  | 20 |  | $ | 3,057 |  | 100.0 | %

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Property Name and Location |  | Units |  | (in thousands) Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
MULTIFAMILY - continued |  |  |  |  |  |  |
Forest Park - Grand Forks, ND |  | 269 |  | 13,796 |  | 98.1 | %
Gables Townhomes - Sioux Falls, SD |  | 24 |  | 2,443 |  | 100.0 | %
Grand Gateway - St. Cloud, MN |  | 116 |  | 8,705 |  | 100.0 | %
Greenfield - Omaha, NE |  | 96 |  | 5,469 |  | 90.6 | %
Heritage Manor - Rochester, MN |  | 182 |  | 10,167 |  | 95.1 | %
Homestead Garden - Rapid City, SD |  | 152 |  | 14,950 |  | 94.7 | %
Indian Hills - Sioux City, IA |  | 120 |  | 6,924 |  | 97.5 | %
Kirkwood Manor - Bismarck, ND |  | 108 |  | 4,850 |  | 98.1 | %
Lakeside Village - Lincoln, NE |  | 208 |  | 17,494 |  | 91.8 | %
Landing at Southgate - Minot, ND |  | 108 |  | 15,302 |  | 80.6 | %
Landmark - Grand Forks, ND |  | 90 |  | 2,791 |  | 98.9 | %
Legacy - Grand Forks, ND |  | 361 |  | 29,754 |  | 90.9 | %
Legacy Heights - Bismarck, ND |  | 79 |  | 10,039 |  | 30.4 | %
Mariposa - Topeka, KS |  | 54 |  | 6,044 |  | 92.6 | %
Meadows - Jamestown, ND |  | 81 |  | 6,464 |  | 100.0 | %
Monticello Village - Monticello, MN |  | 60 |  | 4,737 |  | 98.3 | %
Northern Valley - Rochester, MN |  | 16 |  | 849 |  | 93.8 | %
North Pointe - Bismarck, ND |  | 73 |  | 4,882 |  | 83.6 | %
Northridge - Bismarck, ND |  | 68 |  | 8,426 |  | 95.6 | %
Oakmont Estates - Sioux Falls, SD |  | 79 |  | 5,898 |  | 97.5 | %
Oakwood Estates - Sioux Falls, SD |  | 160 |  | 7,663 |  | 97.5 | %
Olympic Village - Billings, MT |  | 274 |  | 14,691 |  | 96.7 | %
Olympik Village - Rochester, MN |  | 140 |  | 9,111 |  | 91.4 | %
Oxbow Park - Sioux Falls, SD |  | 120 |  | 6,450 |  | 99.2 | %
Park Meadows - Waite Park, MN |  | 360 |  | 16,034 |  | 81.1 | %
Pebble Springs - Bismarck, ND |  | 16 |  | 920 |  | 93.8 | %
Pinehurst - Billings, MT |  | 21 |  | 1,010 |  | 100.0 | %
Pinecone Villas - Sartell, MN |  | 24 |  | 2,802 |  | 95.8 | %
Pines - Minot, ND |  | 16 |  | 435 |  | 93.8 | %
Plaza - Minot, ND |  | 71 |  | 16,106 |  | 97.2 | %
Pointe West - Rapid City, SD |  | 90 |  | 5,305 |  | 100.0 | %
Ponds at Heritage Place - Sartell, MN |  | 58 |  | 5,279 |  | 100.0 | %
Prairie Winds - Sioux Falls, SD |  | 48 |  | 2,447 |  | 100.0 | %
Quarry Ridge - Rochester, MN |  | 313 |  | 33,670 |  | 99.7 | %
Red 20 - Minneapolis, MN |  | 130 |  | 28,316 |  | 75.4 | %
Regency Park Estates - St. Cloud, MN |  | 145 |  | 12,365 |  | 90.3 | %
Renaissance Heights - Williston, ND |  | 216 |  | 46,075 |  | 56.9 | %
Ridge Oaks - Sioux City, IA |  | 132 |  | 6,688 |  | 100.0 | %
Rimrock West - Billings, MT |  | 78 |  | 5,329 |  | 97.4 | %
River Ridge - Bismarck, ND |  | 146 |  | 25,400 |  | 93.8 | %
Rocky Meadows - Billings, MT |  | 98 |  | 7,583 |  | 100.0 | %
Rum River - Isanti, MN |  | 72 |  | 5,881 |  | 100.0 | %
Sherwood - Topeka, KS |  | 300 |  | 18,890 |  | 98.0 | %
Sierra Vista - Sioux Falls, SD |  | 44 |  | 2,773 |  | 100.0 | %
Silver Springs - Rapid City, SD |  | 52 |  | 3,269 |  | 98.1 | %
South Pointe - Minot, ND |  | 196 |  | $ | 12,945 |  | 95.4 | %

9

Property Name and Location |  | Units |  | (in thousands) Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
MULTIFAMILY - continued |  |  |  |  |  |  |
Southpoint - Grand Forks, ND |  | 96 |  | 10,517 |  | 93.8 | %
Southview - Minot, ND |  | 24 |  | 1,064 |  | 100.0 | %
Southwind - Grand Forks, ND |  | 164 |  | 8,408 |  | 98.2 | %
Summit Park - Minot, ND |  | 95 |  | 3,609 |  | 100.0 | %
Sunset Trail - Rochester, MN |  | 146 |  | 15,802 |  | 92.5 | %
Temple - Minot, ND |  | 4 |  | 231 |  | 100.0 | %
Terrace Heights - Minot, ND |  | 16 |  | 483 |  | 87.5 | %
Thomasbrook - Lincoln, NE |  | 264 |  | 14,242 |  | 97.7 | %
University Park Place - St. Cloud, MN |  | 35 |  | 643 |  | 68.6 | %
Valley Park - Grand Forks, ND |  | 167 |  | 7,939 |  | 89.2 | %
Villa West - Topeka, KS |  | 308 |  | 18,273 |  | 88.3 | %
Village Green - Rochester, MN |  | 36 |  | 3,492 |  | 86.1 | %
West Stonehill - Waite Park, MN |  | 312 |  | 16,330 |  | 98.1 | %
Westridge - Minot, ND |  | 33 |  | 2,218 |  | 93.9 | %
Westwood Park - Bismarck, ND |  | 65 |  | 3,809 |  | 89.2 | %
Whispering Ridge - Omaha, NE |  | 336 |  | 28,295 |  | 92.3 | %
Williston Garden - Williston, ND |  | 145 |  | 19,181 |  | 85.5 | %
Winchester - Rochester, MN |  | 115 |  | 8,216 |  | 96.5 | %
Woodridge - Rochester, MN |  | 108 |  | 8,605 |  | 100.0 | %
TOTAL MULTIFAMILY |  | 11,844 |  | $ | 946,520 |  | 92.0 | %

Property Name and Location |  | Approximate Net Rentable Square Footage |  | (in thousands) Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
HEALTHCARE |  |  |  |  |  |  |
2800 Medical Building - Minneapolis, MN |  | 53,632 |  | $ | 9,831 |  | 81.7 | %
2828 Chicago Avenue - Minneapolis, MN |  | 56,239 |  | 17,672 |  | 100.0 | %
Airport Medical - Bloomington, MN* |  | 24,218 |  | 4,678 |  | 100.0 | %
Billings 2300 Grant Road - Billings, MT |  | 14,705 |  | 1,865 |  | 100.0 | %
Burnsville 303 Nicollet Medical (Ridgeview) - Burnsville, MN |  | 53,896 |  | 9,881 |  | 100.0 | %
Burnsville 305 Nicollet Medical (Ridgeview South) - Burnsville, MN |  | 36,199 |  | 6,287 |  | 100.0 | %
Casper 1930 E 12th Street (Park Place) - Casper, WY |  | 65,160 |  | 6,391 |  | 100.0 | %
Casper 3955 E 12th Street (Meadow Wind) - Casper, WY |  | 57,822 |  | 11,458 |  | 100.0 | %
Cheyenne 4010 N College Drive (Aspen Wind) - Cheyenne, WY |  | 47,509 |  | 11,170 |  | 100.0 | %
Cheyenne 4606 N College Drive (Sierra Hills) - Cheyenne, WY |  | 54,072 |  | 8,200 |  | 100.0 | %
Denfeld Clinic - Duluth, MN |  | 20,512 |  | 3,099 |  | 100.0 | %
Eagan 1440 Duckwood Medical - Eagan, MN |  | 17,640 |  | 2,624 |  | 100.0 | %
Edgewood Vista - Belgrade, MT |  | 5,192 |  | 835 |  | 100.0 | %
Edgewood Vista - Billings, MT |  | 11,800 |  | 1,948 |  | 100.0 | %
Edgewood Vista - Bismarck, ND |  | 74,112 |  | 9,881 |  | 100.0 | %
Edgewood Vista - Brainerd, MN |  | 82,535 |  | 9,720 |  | 100.0 | %
Edgewood Vista - Columbus, NE |  | 5,194 |  | 891 |  | 100.0 | %
Edgewood Vista - East Grand Forks, MN |  | 18,488 |  | 1,701 |  | 100.0 | %
Edgewood Vista - Fargo, ND |  | 167,391 |  | 21,844 |  | 100.0 | %

10

Property Name and Location |  | Approximate Net Rentable Square Footage |  | (in thousands) Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
HEALTHCARE - continued |  |  |  |  |  |  |
Edgewood Vista - Fremont, NE |  | 6,042 |  | 600 |  | 100.0 | %
Edgewood Vista - Grand Island, NE |  | 5,185 |  | 857 |  | 100.0 | %
Edgewood Vista - Hastings, NE |  | 6,042 |  | 629 |  | 100.0 | %
Edgewood Vista - Hermantown I, MN |  | 119,349 |  | 11,920 |  | 100.0 | %
Edgewood Vista - Hermantown II, MN |  | 160,485 |  | 11,357 |  | 100.0 | %
Edgewood Vista - Kalispell, MT |  | 10,295 |  | 1,205 |  | 100.0 | %
Edgewood Vista - Minot, ND |  | 108,503 |  | 12,845 |  | 100.0 | %
Edgewood Vista - Missoula, MT |  | 10,150 |  | 1,057 |  | 100.0 | %
Edgewood Vista - Norfolk, NE |  | 5,135 |  | 786 |  | 100.0 | %
Edgewood Vista - Omaha, NE |  | 6,042 |  | 689 |  | 100.0 | %
Edgewood Vista - Sioux Falls, SD |  | 11,800 |  | 1,346 |  | 100.0 | %
Edgewood Vista - Spearfish, SD |  | 84,126 |  | 9,023 |  | 100.0 | %
Edgewood Vista - Virginia, MN |  | 147,183 |  | 12,382 |  | 100.0 | %
Edina 6363 France Medical - Edina, MN* |  | 70,934 |  | 15,581 |  | 91.3 | %
Edina 6405 France Medical - Edina, MN* |  | 55,478 |  | 12,242 |  | 100.0 | %
Edina 6517 Drew Avenue - Edina, MN |  | 12,140 |  | 1,542 |  | 100.0 | %
Edina 6525 Drew Avenue - Edina, MN |  | 3,431 |  | 505 |  | 73.4 | %
Edina 6525 France SMC II - Edina, MN |  | 67,409 |  | 14,532 |  | 95.1 | %
Edina 6545 France SMC I - Edina MN* |  | 227,626 |  | 48,095 |  | 91.4 | %
Fresenius - Duluth, MN |  | 9,052 |  | 1,572 |  | 100.0 | %
Garden View - St. Paul, MN* |  | 43,404 |  | 8,306 |  | 100.0 | %
Gateway Clinic - Sandstone, MN* |  | 12,444 |  | 1,765 |  | 100.0 | %
Healtheast St John & Woodwinds - Maplewood & Woodbury, MN |  | 114,316 |  | 21,601 |  | 100.0 | %
High Pointe Health Campus - Lake Elmo, MN |  | 60,558 |  | 13,924 |  | 75.5 | %
Laramie 1072 N 22nd Street (Spring Wind) - Laramie, WY |  | 62,291 |  | 10,584 |  | 100.0 | %
Legends at Heritage Place - Sartell, MN |  | 98,174 |  | 10,890 |  | 100.0 | %
Mariner Clinic - Superior, WI* |  | 28,928 |  | 3,871 |  | 100.0 | %
Minneapolis 701 25th Avenue Medical - Minneapolis, MN* |  | 57,212 |  | 9,439 |  | 100.0 | %
Missoula 3050 Great Northern - Missoula, MT |  | 14,640 |  | 1,971 |  | 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 |  | 52,116 |  | 13,077 |  | 88.5 | %
Sartell 2000 23rd Street South - Sartell, MN* |  | 59,760 |  | 12,715 |  | 0.0 | %
Spring Creek-American Falls - American Falls, ID |  | 17,273 |  | 4,015 |  | 100.0 | %
Spring Creek-Boise - Boise, ID |  | 16,311 |  | 5,004 |  | 100.0 | %
Spring Creek-Eagle - Eagle, ID |  | 15,559 |  | 4,038 |  | 100.0 | %
Spring Creek-Fruitland - Fruitland, ID |  | 39,500 |  | 7,115 |  | 100.0 | %
Spring Creek-Meridian - Meridian, ID |  | 31,820 |  | 7,148 |  | 100.0 | %
Spring Creek-Overland - Overland, ID |  | 26,605 |  | 6,629 |  | 100.0 | %
Spring Creek-Soda Springs - Soda Springs, ID |  | 15,571 |  | 2,223 |  | 100.0 | %
Spring Creek-Ustick - Meridian, ID |  | 26,605 |  | 4,300 |  | 100.0 | %
St Michael Clinic - St Michael, MN |  | 10,796 |  | 2,851 |  | 100.0 | %
Trinity at Plaza 16 - Minot, ND |  | 24,795 |  | 9,702 |  | 100.0 | %
Wells Clinic - Hibbing, MN |  | 18,810 |  | 2,661 |  | 100.0 | %
TOTAL HEALTHCARE |  | 2,968,290 |  | $ | 495,021 |  | 95.9 | %

11

Property Name and Location |  | Approximate Net Rentable Square Footage |  | (in thousands) Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
INDUSTRIAL |  |  |  |  |  |  |
Bloomington 2000 W 94th Street - Bloomington, MN |  | 101,567 |  | $ | 7,447 |  | 100.0 | %
Lexington Commerce Center - Eagan, MN |  | 90,260 |  | 6,782 |  | 100.0 | %
Minot IPS - Minot, ND |  | 27,698 |  | 6,368 |  | 100.0 | %
Stone Container - Fargo, ND |  | 195,075 |  | 7,141 |  | 100.0 | %
Roseville 3075 Long Lake Road - Roseville, MN |  | 220,557 |  | 11,698 |  | 8.0 | %
Urbandale 3900 106th Street - Urbandale, IA |  | 518,161 |  | 15,555 |  | 100.0 | %
Woodbury 1865 Woodlane - Woodbury, MN |  | 69,600 |  | 5,620 |  | 100.0 | %
TOTAL INDUSTRIAL |  | 1,222,918 |  | $ | 60,611 |  | 83.4 | %

|  |  |  | (in thousands) |  |  |
Property Name and Location |  | Approximate Net Rentable Square Footage |  | Investment (initial cost plus improvements less impairment |  | Occupancy as of April 30, 2015 |
OTHER |  |  |  |  |  |  |
1st Avenue Building - Minot, ND |  | 4,427 |  | $ | 367 |  | 100.0 | %
17 South Main - Minot, ND |  | 2,454 |  | $ | 287 |  | 100.0 | %
Arrowhead First International Bank - Minot, ND |  | 3,702 |  | 1,306 |  | 100.0 | %
Bismarck 715 East Broadway - Bismarck, ND |  | 22,187 |  | 2,798 |  | 100.0 | %
Dakota West Plaza - Minot , ND |  | 16,921 |  | 615 |  | 94.1 | %
Grand Forks Carmike - Grand Forks, ND |  | 28,528 |  | 2,546 |  | 100.0 | %
Minot 1400 31st Ave - Minot, ND |  | 48,960 |  | 11,573 |  | 76.3 | %
Minot 2505 16th Street SW - Minot, ND |  | 15,000 |  | 2,318 |  | 100.0 | %
Minot Arrowhead - Minot, ND |  | 81,594 |  | 8,869 |  | 100.0 | %
Minot Plaza - Minot, ND |  | 11,003 |  | 658 |  | 100.0 | %
Minot Southgate Wells Fargo Bank - Minot, ND |  | 4,998 |  | 3,186 |  | 100.0 | %
Plaza 16 - Minot, ND |  | 50,610 |  | 9,692 |  | 100.0 | %
TOTAL OTHER |  | 290,384 |  | $ | 44,215 |  | 83.2 | %
SUBTOTAL |  | 4,481,592 |  | $ | 1,546,367 |  |  |

12

Property Name and Location |  |  |  | (in thousands) Investment (initial cost plus improvements less impairment) |  |  |
UNIMPROVED LAND |  |  |  |  |  |  |
Badger Hills - Rochester, MN |  |  |  | $ | 1,050 |  |  |
Bismarck 4916 - Bismarck, ND |  |  |  | 3,250 |  |  |
Bismarck 700 E Main - Bismarck, ND |  |  |  | 879 |  |  |
Creekside Crossing - Bismarck, ND |  |  |  | 4,286 |  |  |
Georgetown Square - Grand Chute, WI |  |  |  | 1,860 |  |  |
Grand Forks - Grand Forks, ND |  |  |  | 4,278 |  |  |
Isanti Unimproved - Isanti, MN |  |  |  | 58 |  |  |
Legends at Heritage Place - Sartell, MN |  |  |  | 537 |  |  |
Minot 1525 24th Ave SW - Minot, ND |  |  |  | 1,262 |  |  |
Monticello - Monticello, MN |  |  |  | 118 |  |  |
Monticello 7th Addition - Monticello, MN |  |  |  | 1,734 |  |  |
Rapid City Unimproved- Rapid City, SD |  |  |  | 1,376 |  |  |
Renaissance Heights - Williston, ND |  |  |  | 3,810 |  |  |
River Falls - River Falls, WI |  |  |  | 181 |  |  |
Spring Creek Fruitland - Fruitland, IA |  |  |  | 339 |  |  |
TCA formerly Eagan - Eagan, MN |  |  |  | 325 |  |  |
Urbandale - Urbandale, IA |  |  |  | 114 |  |  |
Weston - Weston, WI |  |  |  | 370 |  |  |
TOTAL UNIMPROVED LAND |  |  |  | $ | 25,827 |  |  |
DEVELOPMENT IN PROGRESS |  |  |  |  |  |  |
71 France - Edina, MN |  |  |  | $ | 35,137 |  |  |
Cardinal Point - Grand Forks, ND |  |  |  | 26,450 |  |  |
Chateau II - Minot, ND |  |  |  | 13,129 |  |  |
Deer Ridge - Jamestown, ND |  |  |  | 15,355 |  |  |
Edina 6565 France SMC III - Edina, MN |  |  |  | 22,549 |  |  |
Minot Southgate Retail - Minot, ND |  |  |  | 2,164 |  |  |
PrairieCare Medical - Brooklyn Park, MN |  |  |  | 19,457 |  |  |
Renaissance Heights - Williston, ND |  |  |  | 13,135 |  |  |
Other |  |  |  | 6,618 |  |  |
TOTAL DEVELOPMENT IN PROGRESS |  |  |  | $ | 153,994 |  |  |
TOTAL UNITS - MULTIFAMILY |  | 11,844 |  |  |  |  |
TOTAL SQUARE FOOTAGE - COMMERCIAL, OTHER AND DISCONTINUED OPERATIONS(2) |  | 4,481,592 |  |  |  |  |
TOTAL REAL ESTATE |  |  |  | $ | 1,726,188 |  |  |

(1) Real estate not owned in fee; all or a portion is leased under a ground or air rights lease.

(2) Excludes properties classified as held for sale at April 30, 2015 (Thresher Square, 117,144 sq ft and Nebraska Orthopaedic Hospital, 61,758 sq ft).

13

Property Name and Location |  | Approximate Net Rentable Square Footage |  | (in thousands) Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
DISCONTINUED OPERATIONS |  |  |  |  |  |  |
610 Business Center IV - Brooklyn Park, MN |  | 78,190 |  | 9,403 |  | 100.0 | %
7800 West Brown Deer Road - Milwaukee, WI |  | 175,610 |  | 12,642 |  | 98.0 | %
American Corporate Center - Mendota Heights, MN |  | 138,959 |  | 21,728 |  | 85.0 | %
Ameritrade - Omaha, NE |  | 73,742 |  | 8,349 |  | 100.0 | %
Barry Pointe Office Park - Kansas City, MO |  | 18,502 |  | 2,976 |  | 87.4 | %
Benton Business Park - Sauk Rapids, MN |  | 30,464 |  | 1,536 |  | 88.1 | %
Brenwood - Minnetonka, MN |  | 176,362 |  | 17,644 |  | 47.3 | %
Brook Valley I - La Vista, NE |  | 30,000 |  | 2,152 |  | 66.6 | %
Burnsville 1 Strip Center - Burnsville, MN |  | 8,526 |  | 1,181 |  | 100.0 | %
Champlin South Pond - Champlin, MN |  | 26,020 |  | 3,650 |  | 75.6 | %
Chan West Village - Chanhassen, MN |  | 137,572 |  | 21,779 |  | 99.2 | %
Corporate Center West - Omaha, NE |  | 141,724 |  | 9,154 |  | 100.0 | %
Crosstown Centre - Eden Prairie, MN |  | 181,224 |  | 20,636 |  | 75.0 | %
Duluth 4615 Grand - Duluth, MN |  | 15,582 |  | 2,086 |  | 100.0 | %
Duluth Denfeld Retail - Duluth, MN |  | 37,770 |  | 5,160 |  | 70.4 | %
Eden Prairie 6101 Blue Circle Drive - Eden Prairie, MN |  | 48,700 |  | 4,864 |  | 0.0 | %
Farnam Executive Center - Omaha, NE |  | 95,216 |  | 10,101 |  | 63.9 | %
Flagship - Eden Prairie, MN |  | 138,825 |  | 17,448 |  | 74.8 | %
Forest Lake Auto - Forest Lake, MN |  | 6,836 |  | 509 |  | 0.0 | %
Forest Lake Westlake Center - Forest Lake, MN |  | 100,570 |  | 9,497 |  | 69.9 | %
Gateway Corporate Center - Woodbury, MN |  | 59,827 |  | 8,300 |  | 100.0 | %
Golden Hills Office Center - Golden Valley, MN |  | 190,758 |  | 25,875 |  | 98.4 | %
Grand Forks Medpark Mall - Grand Forks, ND |  | 59,117 |  | 5,720 |  | 33.9 | %
Granite Corporate Center - St. Cloud, MN |  | 78,086 |  | 9,917 |  | 77.5 | %
Great Plains - Fargo, ND |  | 122,040 |  | 16,087 |  | 100.0 | %
Highlands Ranch I - Highlands Ranch, CO |  | 71,430 |  | 11,747 |  | 100.0 | %
Highlands Ranch II - Highlands Ranch, CO |  | 81,173 |  | 12,887 |  | 98.4 | %
Interlachen Corporate Center - Edina, MN |  | 105,084 |  | 19,163 |  | 96.4 | %
Intertech Building - Fenton, MO |  | 65,320 |  | 7,819 |  | 93.7 | %
Jamestown Buffalo Mall - Jamestown, ND |  | 213,575 |  | 9,092 |  | 85.5 | %
Jamestown Business Center - Jamestown, ND |  | 103,049 |  | 2,632 |  | 88.0 | %
Lakeville Strip Center - Lakeville, MN |  | 9,488 |  | 2,143 |  | 100.0 | %
Mendota Office Center I - Mendota Heights, MN |  | 59,852 |  | 8,406 |  | 67.2 | %
Mendota Office Center II - Mendota Heights, MN |  | 88,398 |  | 13,303 |  | 87.3 | %
Mendota Office Center III - Mendota Heights, MN |  | 60,776 |  | 7,661 |  | 100.0 | %
Mendota Office Center IV - Mendota Heights, MN |  | 72,231 |  | 10,215 |  | 100.0 | %
Minnesota National Bank - Duluth, MN |  | 18,869 |  | 1,965 |  | 100.0 | %
Miracle Hills One - Omaha, NE |  | 84,445 |  | 7,706 |  | 89.2 | %
Monticello C Store - Monticello, MN |  | 3,575 |  | 872 |  | 100.0 | %
Northpark Corporate Center - Arden Hills, MN |  | 145,439 |  | 19,115 |  | 48.9 | %
Omaha 10802 Farnam Dr - Omaha, NE |  | 58,574 |  | 7,228 |  | 98.6 | %
Omaha Barnes & Noble - Omaha, NE |  | 26,985 |  | 3,699 |  | 100.0 | %
Pacific Hills - Omaha, NE |  | 143,075 |  | 10,743 |  | 78.5 | %
Pine City C-Store - Pine City, MN |  | 4,800 |  | 452 |  | 100.0 | %
Pine City Evergreen Square - Pine City, MN |  | 63,225 |  | 4,134 |  | 47.1 | %
Plaza VII - Boise, ID |  | 28,994 |  | 1,217 |  | 41.2 | %

14

|  |  |  | (in thousands) |  |  |
Property Name and Location |  | Approximate Net Rentable Square Footage |  | Investment (initial cost plus improvements less impairment) |  | Occupancy as of April 30, 2015 |
DISCONTINUED OPERATIONS - continued |  |  |  |  |  |  |
Plymouth 5095 Nathan Lane - Plymouth, MN |  | 20,528 |  | 1,944 |  | 100.0 | %
Prairie Oak Business Center - Eden Prairie, MN |  | 36,421 |  | 7,123 |  | 77.2 | %
Rapid City 900 Concourse Drive - Rapid City, SD |  | 75,815 |  | 8,036 |  | 99.9 | %
Riverport - Maryland Heights, MO |  | 121,316 |  | 8,000 |  | 100.0 | %
Rochester Maplewood Square - Rochester, MN |  | 118,398 |  | 14,040 |  | 97.6 | %
Spring Valley IV - Omaha, NE |  | 18,055 |  | 1,154 |  | 0.0 | %
Spring Valley V - Omaha, NE |  | 24,171 |  | 1,586 |  | 100.0 | %
Spring Valley X - Omaha, NE |  | 24,000 |  | 1,284 |  | 30.0 | %
Spring Valley XI - Omaha, NE |  | 24,000 |  | 1,273 |  | 90.0 | %
St. Cloud Westgate - St. Cloud, MN |  | 105,446 |  | 7,816 |  | 78.8 | %
Superior Office Building - Duluth, MN |  | 20,000 |  | 2,679 |  | 100.0 | %
TCA Building - Eagan, MN |  | 103,640 |  | 10,113 |  | 100.0 | %
Three Paramount Plaza - Bloomington, MN |  | 75,526 |  | 9,371 |  | 62.8 | %
Timberlands - Leawood, KS |  | 91,270 |  | 12,165 |  | 97.5 | %
UHC Office - International Falls, MN |  | 30,000 |  | 2,715 |  | 100.0 | %
US Bank Financial Center - Bloomington, MN |  | 153,311 |  | 18,490 |  | 78.3 | %
Wells Fargo Center - St Cloud, MN |  | 86,477 |  | 11,198 |  | 91.7 | %
West River Business Park - Waite Park, MN |  | 24,075 |  | 1,697 |  | 87.5 | %
Westgate - Boise, ID |  | 103,342 |  | 13,551 |  | 100.0 | %
Woodlands Plaza IV - Maryland Heights, MO |  | 61,820 |  | 6,841 |  | 100.0 | %
TOTAL DISCONTINUED OPERATIONS |  | 4,996,190 |  | $ | 551,669 |  | 83.9 | %

15

Mortgages Payable and Line of Credit

As of April 30, 2015, individual first mortgage loans on the above properties totaled $662.4 million. Of the $668.1 million total of mortgage indebtedness on April 30, 2015, $38.3 million, or 5.7%, is represented by variable rate mortgages on which the future interest rate will vary based on changes in the interest rate index for each respective loan. As of April 30, 2015, the management of the Company believes there are no defaults or material compliance issues in regards to any of these mortgages payable other than one $122.6 million non-recourse loan by a Company subsidiary, for which we’ve received a default notice from the special servicer on April 14, 2015 due to nonpayment on April 6, 2015. Principal payments due on our mortgage indebtedness, excluding $11.5 million in outstanding mortgage indebtedness related to assets held for sale, are as follows:

|  | (in thousands) |
Fiscal Year Ended April 30, |  | Mortgage Principal |
2016 |  | 95,870 |
2017 |  | 41,549 |
2018 |  | 51,984 |
2019 |  | 90,716 |
2020 |  | 72,060 |
Thereafter |  | 315,933 |
Total |  | $ | 668,112 |

In addition to the individual first mortgage loans included in the Company’s $668.1 million of mortgage indebtedness, the Company also has a revolving, multi-bank line of credit with First International Bank and Trust, Watford City, North Dakota, as lead bank. This line of credit had, as of April 30, 2015, lending commitments of $90.0 million. The facility has a maturity date of September 1, 2017, and is secured by mortgages on 15 properties; under the terms of the line of credit, properties may be added and removed from the collateral pool with the agreement of the lenders. Participants in this credit facility as of April 30, 2015 included, in addition to First International Bank, the following financial institutions: The Bank of North Dakota; First Western Bank and Trust; Dacotah Bank; United Community Bank; American State Bank & Trust Company; Town & Country Credit Union and Highland Bank. The line of credit has a current interest rate of 4.75% and a minimum outstanding principal balance requirement of $17.5 million, and as of April 30, 2015, the Company had borrowed $60.5 million. The facility includes covenants and restrictions requiring the Company to achieve on a calendar quarter basis a debt service coverage ratio on borrowing base collateral of 1.25x in the aggregate and 1.00x on individual assets in the collateral pool, and the Company is also required to maintain minimum depository account(s) totaling $6.0 million with First International, of which $1.5 million is to be held in a non-interest bearing account. As of April 30, 2015, the Company believes it is in compliance with the facility covenants.

Future Minimum Lease Receipts

The future minimum lease receipts to be received under leases for commercial properties in place, including discontinued operations, as of April 30, 2015, assuming that no options to renew or buy out the leases are exercised, are as follows:

|  | (in thousands) |
Fiscal Year Ended April 30, |  | Lease Payments |
2016 |  | 112,320 |
2017 |  | 99,963 |
2018 |  | 84,455 |
2019 |  | 70,049 |
2020 |  | 52,576 |
Thereafter |  | 130,313 |
Total |  | $ | 549,676 |

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, 2015, we spent approximately $22.7 million on capital improvements, tenant improvements and other capital expenditures for continuing operations.

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The following table shows total and weighted average per square foot/unit recurring and non-recurring capital expenditures (excluding capital expenditures recoverable from tenants and capital expenditures at properties sold or classified as held for sale during the period), and, for our same-store commercial segment properties, tenant improvements (excluding tenant-funded tenant improvements) and leasing costs for the three years ended April 30, 2015, 2014 and 2013. We define recurring capital expenditures as those made on a regular or recurring basis to maintain a property’s competitive position within its market, generally with a depreciable life of 5 to 12 years, but excluding (a) capital expenditures made in the year of acquisition and in subsequent periods until the property is classified as same-store (i.e., excluding capital expenditures on non-same-store properties), (b) improvements associated with the expansion or re-development of a building, (c) renovations to a building which change the underlying classification of the building or (d) capital improvements that represent the addition of something new to a property, rather than the replacement of an existing item. We believe that recurring capital expenditures is a useful measure of performance because it provides an indication of the expenses that we can expect to incur on an on-going basis. Non-recurring capital expenditures correspond to major capital expenditures for items such as roof replacements or items that result in something new being added to the property (for example, the addition of a new heating and air conditioning unit that is not replacing one previously there), generally with a depreciable life of 20 to 40 years, and include expenditures completed in the year of acquisition and in subsequent periods until the property is classified as same-store (i.e., including capital expenditures on non-same-store properties).

|  | (in thousands except per SF or Unit data) |
|  | Years Ended April 30, |
|  | 2015 |  | 2014 |  | 2013 |
|  | Amount |  | Rate/SF or Unit |  | Amount |  | Rate/SF or Unit |  | Amount |  | Rate/SF or Unit |
Healthcare Properties: |  |  |  |  |  |  |  |  |  |  |  |  |
Non-Recoverable Capital Expenditures |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring capital expenditures |  | $ | 691 |  | 0.24 |  | $ | 0 |  | 0.00 |  | $ | 49 |  | 0.02 |
Non-recurring capital expenditures |  | $ | 821 |  | 0.28 |  | $ | 612 |  | 0.20 |  | $ | 356 |  | 0.12 |
Tenant improvements at same-store properties |  | $ | 1,427 |  | 0.50 |  | $ | 3,235 |  | 1.11 |  | $ | 1,573 |  | 0.58 |
Leasing costs at same-store properties |  | $ | 353 |  | 0.12 |  | $ | 518 |  | 0.18 |  | $ | 784 |  | 0.29 |
Industrial Properties: |  |  |  |  |  |  |  |  |  |  |  |  |
Non-Recoverable Capital Expenditures |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring capital expenditures |  | $ | 0 |  | 0.00 |  | $ | 0 |  | 0.00 |  | $ | 0 |  | 0.00 |
Non-recurring capital expenditures |  | $ | 0 |  | 0.00 |  | $ | 127 |  | 0.10 |  | $ | 0 |  | 0.00 |
Tenant improvements at same-store properties |  | $ | 173 |  | 0.17 |  | $ | 320 |  | 0.27 |  | $ | 777 |  | 0.26 |
Leasing costs at same-store properties |  | $ | 40 |  | 0.04 |  | $ | 160 |  | 0.14 |  | $ | 658 |  | 0.22 |
Multifamily Properties: |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring Capital Expenditures |  | $ | 5,444 |  | 550 |  | $ | 4,956 |  | 589 |  | $ | 5,941 |  | 713 |
Non-Recurring Capital Expenditures |  | $ | 9,663 |  | 815 |  | $ | 11,355 |  | 1,053 |  | $ | 6,737 |  | 655 |

Contracts or Options to Purchase

We have granted options to purchase certain of our properties to tenants in these properties, under lease agreements. In general, these options grant the tenant the right to purchase the property at the greater of such property’s appraised value or an annual compounded increase of a specified percentage of the initial cost to us. As of April 30, 2015, 15 of our properties were subject to purchase options, and the total investment cost, plus improvements, of all such properties was $114.9 million with total gross rental revenues in fiscal year 2015 of $10.2 million. The tenant in our Nebraska Orthopaedic Hospital property has exercised its option to purchase the property. We are currently engaged in an arbitration proceeding pursuant to the lease agreement to determine the purchase price and can give no assurance that the sale of the property pursuant to the purchase option will be completed.

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Properties by State

The following table presents, as of April 30, 2015, the total amount of property owned, net of accumulated depreciation, by state of each of the three segments of properties owned by us - multifamily, healthcare and industrial:

|  | (in thousands) |
State |  | Multifamily |  | Healthcare |  | Industrial |  | Other |  | Total |  | % of Total |
Minnesota |  | $ | 240,936 |  | $ | 235,564 |  | $ | 26,161 |  | $ | 0 |  | $ | 502,661 |  | 40.8 | %
North Dakota |  | 293,004 |  | 46,184 |  | 10,192 |  | 35,092 |  | 384,472 |  | 31.2 | %
Nebraska |  | 90,332 |  | 3,453 |  | 0 |  | 0 |  | 93,785 |  | 7.6 | %
South Dakota |  | 53,628 |  | 8,473 |  | 0 |  | 0 |  | 62,101 |  | 5.0 | %
Kansas |  | 48,591 |  | 0 |  | 0 |  | 0 |  | 48,591 |  | 3.9 | %
Idaho |  | 0 |  | 36,992 |  | 0 |  | 0 |  | 36,992 |  | 3.0 | %
Wyoming |  | 0 |  | 41,710 |  | 0 |  | 0 |  | 41,710 |  | 3.4 | %
Montana |  | 29,562 |  | 7,336 |  | 0 |  | 0 |  | 36,898 |  | 3.0 | %
Iowa |  | 10,053 |  | 0 |  | 13,002 |  | 0 |  | 23,055 |  | 1.9 | %
Wisconsin |  | 0 |  | 2,794 |  | 0 |  | 0 |  | 2,794 |  | 0.2 | %
Total |  | $ | 766,106 |  | $ | 382,506 |  | $ | 49,355 |  | $ | 35,092 |  | $ | 1,233,059 |  | 100.0 | %

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Part II

Item 6. Selected Financial Data

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) |
|  | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011 |
Consolidated Income Statement Data |  |  |  |  |  |  |  |  |  |  |
Revenue |  | $ | 204,515 |  | $ | 187,006 |  | $ | 169,733 |  | $ | 153,998 |  | $ | 146,546 |
Impairment of real estate investments in continuing and discontinued operations |  | $ | 6,105 |  | $ | 44,426 |  | $ | 305 |  | $ | 428 |  | $ | 0 |
Gain on sale of discontinued operations and real estate and other investments |  | $ | 6,093 |  | $ | 6,948 |  | $ | 6,885 |  | $ | 349 |  | $ | 19,365 |
Income from continuing operations |  | $ | 26,391 |  | $ | 10,187 |  | $ | 19,843 |  | $ | 8,925 |  | $ | 3,931 |
Income (loss) from discontinued operations |  | $ | 2,293 |  | $ | (27,127 | ) | $ | 10,129 |  | $ | 781 |  | $ | 20,420 |
Net income (loss) |  | $ | 28,684 |  | $ | (16,940 | ) | $ | 29,972 |  | $ | 9,706 |  | $ | 24,351 |
Net (income) loss attributable to noncontrolling interests — Operating Partnership |  | $ | (1,526 | ) | $ | 4,676 |  | $ | (3,633 | ) | $ | (1,359 | ) | $ | (4,449 | )
Net income (loss) attributable to Investors Real Estate Trust |  | $ | 24,087 |  | $ | (13,174 | ) | $ | 25,530 |  | $ | 8,212 |  | $ | 20,082 |
Consolidated Balance Sheet Data |  |  |  |  |  |  |  |  |  |  |
Total real estate investments |  | $ | 1,412,880 |  | $ | 1,275,284 |  | $ | 1,214,235 |  | $ | 1,083,173 |  | $ | 979,833 |
Total assets |  | $ | 1,997,837 |  | $ | 1,869,221 |  | $ | 1,889,554 |  | $ | 1,714,367 |  | $ | 1,615,363 |
Mortgages payable |  | $ | 668,112 |  | $ | 678,955 |  | $ | 715,212 |  | $ | 695,894 |  | $ | 640,006 |
Revolving lines of credit |  | $ | 60,500 |  | $ | 22,500 |  | $ | 10,000 |  | $ | 39,000 |  | $ | 30,000 |
Total Investors Real Estate Trust shareholders’ equity |  | $ | 652,110 |  | $ | 592,184 |  | $ | 612,787 |  | $ | 432,989 |  | $ | 411,690 |
Consolidated Per Common Share Data (basic and diluted) |  |  |  |  |  |  |  |  |  |  |
Income (loss) from continuing operations - Investors Real Estate Trust |  | $ | .09 |  | $ | (.01 | ) | $ | .08 |  | $ | .06 |  | $ | .01 |
Income from discontinued operations - Investors Real Estate Trust |  | $ | .02 |  | $ | (.22 | ) | $ | .09 |  | $ | .01 |  | $ | .21 |
Net income (loss) |  | $ | .11 |  | $ | (.23 | ) | $ | .17 |  | $ | .07 |  | $ | .22 |
Distributions |  | $ | .52 |  | $ | .52 |  | $ | .52 |  | $ | .56 |  | $ | .69 |

CALENDAR YEAR |  | 2014 |  | 2013 |  | 2012 |  | 2011 |  | 2010 |
Tax status of distributions |  |  |  |  |  |  |  |  |  |  |
Capital gain |  | 23.09 | % | 3.09 | % | 2.41 | % | 37.48 | % | 0.00 | %
Ordinary income |  | 25.74 | % | 28.41 | % | 23.17 | % | 18.04 | % | 28.53 | %
Return of capital |  | 51.17 | % | 68.50 | % | 74.42 | % | 44.48 | % | 71.47 | %

For the fiscal year ended April 30, 2015, IRET recognized approximately $10.9 million of net capital gain for federal income tax purposes. IRET designates the entire $10.9 million of net capital gain as capital gain dividends

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