SOURCE: Investors Real Estate Trust

March 07, 2008 17:14 ET

Investors Real Estate Trust Acquires Senior Housing Facilities for $44.7 Million; Acquires Minnesota Medical Portfolio for $52 Million

MINOT, ND--(Marketwire - March 7, 2008) - Investors Real Estate Trust (IRET) (NASDAQ: IRETS) (NASDAQ: IRETP) announced today the recent completion of two separate acquisition transactions.

Edgewood Vista Senior Housing Portfolio

On March 6, 2008, IRET completed its acquisition of five senior housing facilities with a total of 237 units/beds for an aggregate purchase price (excluding closing costs) of $32.1 million. IRET acquired the facilities from affiliates of Edgewood Vista Senior Living, Inc. ("Edgewood Vista"), a developer and operator of senior living communities with which IRET has had an existing long-term business relationship. On February 29, 2008, IRET acquired 100% of the member interests in limited liability companies owning three senior housing facilities with a total of 92 units/beds for an aggregate purchase price (excluding closing costs) of $12.6 million, also from affiliates of Edgewood Vista.

IRET also announced that it expects to close within the next several weeks on the acquisition of an additional senior housing property, a two-building senior housing complex constructed in 1995, consisting of two single-story facilities containing approximately 93,708 square feet and 9,693 square feet, respectively, with a combined total of 184 units/beds, for a purchase price of $14.8 million.

The eight facilities that IRET has acquired are located in Minnesota, Montana, Nebraska, North Dakota and South Dakota, as follows:

East Grand Forks, Minnesota: a single-story senior housing facility consisting of approximately 18,488 square feet with 36 units/beds, constructed in 1997 and 2001;

Belgrade, Montana: a single-story senior housing facility consisting of approximately 5,192 square feet with 13 units/beds, constructed in 1999;

Billings, Montana: a single-story 28 units/beds senior housing facility consisting of approximately 11,800 square feet, constructed in 1997;

Columbus, Nebraska: a single-story senior housing facility consisting of approximately 5,194 square feet with 13 units/beds, constructed in 1998;

Grand Island, Nebraska: a single-story senior housing facility consisting of approximately 5,185 square feet with 13 units/beds, constructed in 1998;

Norfolk, Nebraska: a single-story senior housing facility consisting of approximately 5,135 square feet with 13 units/beds constructed in 2000;

Fargo, North Dakota: a three-story senior housing facility consisting of approximately 156,001 square feet with 185 units/beds and underground heated parking, seven individual single-story patio homes of approximately 1,600 square feet each, and a separate management office building, all constructed in 2007; and

Sioux Falls, South Dakota: a single-story senior housing facility consisting of approximately 11,800 square feet with 28 units/beds, constructed in 1997 and substantially renovated in 2001.

IRET has leased the eight acquired facilities, and expects to lease the remaining facility it is currently working to close, to subsidiary companies of Sunwest Management, Inc. ("Sunwest"). Sunwest, one of the largest private senior housing operators and developers in the United States, currently owns and operates approximately 250 senior housing properties located in 39 states, and is acquiring the assets of Edgewood Vista.

As part of the acquisition transactions summarized above, IRET also bought out certain options held by its tenant, Edgewood Vista, to purchase eleven existing senior housing facilities owned by IRET and leased by Edgewood Vista. IRET paid approximately $14.8 million to Edgewood Vista to extinguish purchase options on these eleven senior housing facilities, which have a total of 741 units/beds and are located in Bismarck, North Dakota; Spearfish, South Dakota; Brainerd, Minnesota; Hermantown, Minnesota (two facilities); Omaha, Nebraska; Fremont, Nebraska; Hastings, Nebraska; Kalispell, Montana; Missoula, Montana, and Virginia, Minnesota. IRET has leased these locations to subsidiaries of Sunwest on terms and rates substantially in excess of the terms and rates in effect under the previous leases with Edgewood Vista.

The Sunwest leases are on a triple-net basis with twenty-one year initial terms, with capped CPI increases at intervals during the term. Sunwest will have options to purchase any or all of the twenty facilities leased from IRET, with such options opening at various times throughout the 21-year lease term. The purchase options provide for the purchase of the locations at IRET's cost of acquisition (including closing and financing costs) increased by a set percentage each year after lease commencement, or the appraised value, whichever is greater.

IRET Senior Vice President Thomas A. Wentz, Jr. said, "IRET is extremely pleased to have provided the real estate solution needed for Sunwest to complete its acquisition of IRET's existing tenant, Edgewood Vista. This transaction has resulted in IRET not only continuing to own and lease its existing senior housing facilities on substantially improved terms that reflect the tremendous price appreciation of these assets, but also being able to acquire the balance of the facilities owned by Edgewood Vista, and lease these facilities to Sunwest as well."

Minnesota Medical Portfolio

On March 3, 2008, IRET closed on its acquisition of a portfolio of six medical office properties located in the greater Minneapolis, Minnesota metropolitan area. In regard to three of the six buildings, the Company acquired leasehold interests only. IRET paid $6.9 million in cash for the portfolio, assumed existing financing totaling approximately $17.8 million, placed new financing of $21.9 million, and caused the issuance of approximately 567,000 limited partnership units of its operating partnership, IRET Properties, valued at $9.45 per unit or approximately $5.4 million in total, for a total aggregate consideration for the portfolio of $52 million, excluding acquisition costs, and excluding costs totaling approximately $1.7 million associated with the early prepayment of the debt encumbering four of the six locations. IRET placed new long-term debt at the time of closing, bearing interest at 6.10% for a fixed term of 10 years. The portfolio was purchased from a group of local private investors who developed the properties.

As of the closing date of the acquisition, the newly-acquired medical portfolio is approximately 99.5% leased to multiple tenants.

The properties acquired by IRET in this transaction are as follows:

6405 France Medical: IRET acquired the sellers' interest in a lease of air rights covering three floors of this five-story medical office building located in Edina, Minnesota. The three floors total approximately 55,478 rentable square feet ("rsf"). The remaining two floors are owned by the air rights lessor, Fairview Health Services. The 6405 France Medical building is connected to the Fairview Southdale Hospital. The three floors acquired by IRET currently are 100% leased to multiple tenants.

6363 France Medical: a five-story, approximately 70,934 rsf medical office building in Edina, Minnesota, located adjacent to Fairview Southdale Hospital, and connected to the hospital by an underground tunnel. The property is subject to a ground lease terminating in October 2041. 6363 France is currently approximately 98.2% leased to multiple tenants.

Riverside Medical: a five-story, approximately 57,212 rsf medical office building located in Minneapolis, Minnesota. The Riverside Medical building is located on the campus of Riverside Hospital and is connected to the main hospital buildings by an underground tunnel. The property is subject to a ground lease terminating in October 2041. The ground lease provides for three options to extend the term, the first such extension for 15 years, and the other two for 10 years each. The building is currently 100% leased to multiple tenants.

Ridgeview Medical: a three-story, approximately 53,466 rsf medical office building located on the Fairview Ridges Hospital campus in Burnsville, Minnesota. The building is connected to the main hospital. This property is currently 100% leased to multiple tenants.

Ridgeview South: a three-story, approximately 36,199 rsf medical office building located on the Fairview Ridges Hospital campus in Burnsville, Minnesota. The building is connected to the hospital. Ridgeview South is currently 100% leased to multiple tenants.

1440 Duckwood Medical: a one-story, approximately 17,640 rsf off-campus medical office building located in Eagan, Minnesota. The building is currently 100% leased to two tenants.

"We are very pleased to make this significant addition to our existing portfolio of medical properties in the greater Minneapolis area, which is a core market for us," commented Thomas A. Wentz, Jr., IRET Senior Vice President, Asset Management and Finance. "In particular, we believe that our existing ownership of the Southdale Medical Building in Edina, Minnesota, which we are currently expanding and which is located near the 6405 France and 6363 France buildings that are part of this recent transaction, will permit us to achieve attractive operating and leasing efficiencies. The other four buildings are also well located near areas with strong demographics and in close proximity to major hospitals and transportation corridors."

The acquisition of the Edgewood Vista Senior Housing Portfolio (excluding the additional senior housing facility that has yet to close, but which IRET expects to close within the next several weeks), and the Minnesota Medical Portfolio, increases IRET's medical office portfolio from 35 medical properties (including senior housing) containing approximately 1.7 million square feet of leasable space, to 49 medical properties comprising approximately 2.2 million rentable square feet, an increase of approximately 510,000 square feet of leasable space, or approximately 29.2%.

About Investors Real Estate Trust

IRET is a self-administered, self-managed equity real estate investment trust investing in income-producing properties located primarily in the upper Midwest. IRET owns a diversified portfolio of properties consisting of multi-family residential properties and commercial office, medical, industrial and retail properties. IRET's distributions have increased every year for 37 consecutive years. IRET common and preferred shares are publicly traded on the NASDAQ Global Select Market (symbols: IRETS and IRETP). IRET's press releases are available on the Company's website at www.iret.com or by contacting Investor Relations at 701.837.4738.

Safe Harbor

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from projected results. Such risks, uncertainties and other factors include, but are not limited to: the failure to consummate expected acquisition transactions either at all or on the expected terms, fluctuations in interest rates, the effect of government regulation, the availability of capital, changes in general and local economic and real estate market conditions, competition, our ability to attract and retain skilled personnel, and those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including our 2007 Form 10-K. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Contact Information

  • CONTACT INFO:

    Michelle R. Saari
    Investor Relations
    PO Box 1988
    12 Main Street S
    Minot, North Dakota 58701
    phone: 701.837.4738
    fax: 701.838.7785
    email: msaari@iret.com