UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☑     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2018
or  
☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 001-35624
INVESTORS REAL ESTATE TRUST
(Exact name of registrant as specified in its charter)
North Dakota
45-0311232
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
1400 31 st   Avenue SW, Suite 60, Post Office Box 1988, Minot, ND 58702-1988
(Address of principal executive offices) (Zip code)
(701) 837-4738
(Registrant’s telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.
Yes ☑
No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( § 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☑
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer ☑
Accelerated filer ☐
Non-accelerated filer ☐
Smaller Reporting Company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
No ☑
The number of common shares of beneficial interest outstanding as of March 5, 2018, was 120,064,087.
 

Table of Contents

TABLE OF CONTENTS
 
Page
 
 
 
 

2
Table of Contents

PART I
ITEM 1. FINANCIAL STATEMENTS - THIRD QUARTER - FISCAL 2018
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 
(in thousands, except per share data)
 
January 31, 2018
 
April 30, 2017
ASSETS
 
 
 
Real estate investments
 
 
 
Property owned
$
1,568,725

 
$
1,358,529

Less accumulated depreciation
(304,149
)
 
(255,599
)
 
1,264,576

 
1,102,930

Unimproved land
15,123

 
18,455

Mortgage loans receivable
10,329

 
—

Total real estate investments
1,290,028

 
1,121,385

Assets held for sale and assets of discontinued operations
—

 
283,023

Cash and cash equivalents
22,666

 
28,819

Restricted cash
121,337

 
27,981

Other assets
21,664

 
13,306

TOTAL ASSETS
$
1,455,695

 
$
1,474,514

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
 
 
 
LIABILITIES
 
 
 
Liabilities held for sale and liabilities of discontinued operations
$
—

 
$
130,904

Accounts payable and accrued expenses
35,792

 
35,566

Revolving line of credit
67,000

 
57,050

Term loan, net of unamortized loan costs of $517 and $0, respectively
69,483

 
—

Mortgages payable, net of unamortized loan costs of $2,488 and $3,054, respectively
553,388

 
565,978

Construction debt
—

 
41,741

TOTAL LIABILITIES
$
725,663

 
$
831,239

COMMITMENTS AND CONTINGENCIES (NOTE 6)

 

REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
6,644

 
7,181

EQUITY
 
 
 
Series B Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation preference, no shares issued and outstanding at January 31, 2018 and 4,600 shares issued and outstanding at April 30, 2017, aggregate liquidation preference of $115,000)
—

 
111,357

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation preference, 4,118 shares issued and outstanding at January 31, 2018 and no shares issued and outstanding at April 30, 2017, aggregate liquidation preference of $102,962)
99,456

 
—

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 120,035 shares issued and outstanding at January 31, 2018 and 121,199 shares issued and outstanding at April 30, 2017)
910,173

 
916,121

Accumulated distributions in excess of net income
(364,684
)
 
(466,541
)
Accumulated other comprehensive income
359

 
—

Total shareholders’ equity
645,304

 
560,937

Noncontrolling interests – Operating Partnership (14,168 units at January 31, 2018 and 15,617 units at April 30, 2017)
76,915

 
73,233

Noncontrolling interests – consolidated real estate entities
1,169

 
1,924

Total equity
$
723,388

 
$
636,094

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
$
1,455,695

 
$
1,474,514

See accompanying Notes to Condensed Consolidated Financial Statements.

3

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS   (unaudited)
for the three and nine months ended January 31, 2018 and 2017
 
(in thousands, except per share data)
 
Three Months Ended
January 31,
 
Nine Months Ended
January 31,
 
2018
 
2017
 
2018
 
2017
REVENUE
 
 
 
 
 
 
 
Real estate rentals
$
42,858

 
$
39,390

 
$
125,431

 
$
116,386

Tenant reimbursement
396

 
838

 
1,949

 
2,321

TOTAL REVENUE
$
43,254

 
$
40,228

 
$
127,380

 
$
118,707

EXPENSES
 
 
 
 
 
 
 
Property operating expenses, excluding real estate taxes
15,426

 
14,571

 
47,018

 
41,391

Real estate taxes
4,609

 
4,048

 
13,872

 
12,179

Depreciation and amortization
18,390

 
10,787

 
60,998

 
33,193

Impairment of real estate investments
—

 
—

 
256

 
54,153

General and administrative expenses
3,011

 
4,172

 
10,131

 
11,195

TOTAL EXPENSES
$
41,436

 
$
33,578

 
$
132,275

 
$
152,111

Operating income (loss)
1,818

 
6,650

 
(4,895
)
 
(33,404
)
Interest expense
(9,236
)
 
(8,832
)
 
(25,876
)
 
(26,033
)
Loss on extinguishment of debt
(285
)
 
(458
)
 
(818
)
 
(458
)
Interest income
408

 
272

 
628

 
354

Other income
25

 
155

 
288

 
331

Loss before gain on sale of real estate and other investments and income from discontinued operations
(7,270
)
 
(2,213
)
 
(30,673
)
 
(59,210
)
Gain on sale of real estate and other investments
12,387

 
2,437

 
17,835

 
11,292

Income (loss) from continuing operations
5,117

 
224

 
(12,838
)
 
(47,918
)
Income from discontinued operations
146,811

 
24,965

 
164,626

 
44,803

NET INCOME (LOSS)
$
151,928

 
$
25,189

 
$
151,788

 
$
(3,115
)
Net income attributable to noncontrolling interests – Operating Partnership
(16,236
)
 
(2,525
)
 
(15,365
)
 
(403
)
Net loss attributable to noncontrolling interests – consolidated real estate entities
413

 
446

 
1,239

 
16,585

Net income attributable to controlling interests
136,105

 
23,110

 
137,662

 
13,067

Dividends to preferred shareholders
(1,766
)
 
(2,503
)
 
(6,864
)
 
(8,260
)
Redemption of preferred shares
(8
)
 
(1,435
)
 
(3,657
)
 
(1,435
)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
$
134,331

 
$
19,172

 
$
127,141

 
$
3,372

Earnings (loss) per common share from continuing operations – basic and diluted
$
0.03

 
$
(0.03
)
 
$
(0.16
)
 
$
(0.30
)
Earnings per common share from discontinued operations – basic and diluted
$
1.09

 
$
0.19

 
$
1.22

 
$
0.33

NET EARNINGS PER COMMON SHARE – BASIC & DILUTED
$
1.12

 
$
0.16

 
$
1.06

 
$
0.03

DIVIDENDS PER COMMON SHARE
$
0.07

 
$
0.13

 
$
0.21

 
$
0.39

See accompanying Notes to Condensed Consolidated Financial Statements.

4

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   (unaudited)
for the three and nine months ended January 31, 2018 and 2017

 
(in thousands)
 
Three Months Ended
January 31,
 
Nine Months Ended
January 31,
 
2018
 
2017
 
2018
 
2017
Net income
$
151,928

 
$
25,189

 
$
151,788

 
$
(3,115
)
Other comprehensive income:
 
 
 
 
 
 
 
Unrealized gain from derivative instrument
287

 
—

 
287

 
—

Loss on derivative instrument reclassified into earnings
72

 
—

 
72

 
—

Total comprehensive income
$
152,287

 
$
25,189

 
$
152,147

 
$
(3,115
)
Net income attributable to noncontrolling interests – Operating Partnership
(16,273
)
 
(2,525
)
 
(15,402
)
 
(403
)
Net loss attributable to noncontrolling interests – consolidated real estate entities
413

 
446

 
1,239

 
16,585

Comprehensive income attributable to controlling interests
$
136,427

 
$
23,110

 
$
137,984

 
$
13,067




5

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY   (unaudited)
for the nine months ended January 31, 2018 and 2017
 
 
 
 
PREFERRED
SHARES
NUMBER
OF
COMMON
SHARES
 
COMMON
SHARES
 
ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME
 
ACCUMULATED OTHER COMPREHENSIVE INCOME
 
NONREDEEMABLE
NONCONTROLLING
INTERESTS
 
TOTAL
EQUITY
Balance April 30, 2016
$
138,674

121,091

 
$
922,084

 
$
(442,000
)
 
—

 
$
99,504

 
$
718,262

Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests
 
 
 
 
 
13,067

 
 
 
(15,880
)
 
(2,813
)
Distributions – common shares and units
 
 
 
 
 
(47,387
)
 
 
 
(6,332
)
 
(53,719
)
Distributions – Series A preferred shares
 
 
 
 
 
(1,403
)
 
 
 
 
 
(1,403
)
Distributions – Series B preferred shares
 
 
 
 
 
(6,857
)
 
 
 
 
 
(6,857
)
Shares issued and share-based compensation
 

553

 
1,756

 
 
 
 
 
 
 
1,756

Redemption of units for common shares
 

251

 
548

 
 
 
 
 
(548
)
 
—

Preferred shares repurchased
(27,317
)
 
 
 
 
(1,435
)
 
 
 
 
 
(28,752
)
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities
 
 
 
 
 
 
 
 
 
7,188

 
7,188

Distributions to nonredeemable noncontrolling interests – consolidated real estate entities
 
 
 
 
 
 
 
 
 
(159
)
 
(159
)
Acquisition of nonredeemable noncontrolling interests - consolidated real estate entities
 
 
 
(2,677
)
 
 
 
 
 
(2,261
)
 
(4,938
)
Conversion to equity of notes receivable from nonredeemable noncontrolling interests - consolidated real estate entities
 
 
 
 
 
 
 
 
 
(7,366
)
 
(7,366
)
Other
 
(6
)
 
24

 
 
 
 
 
(24
)
 
—

Balance January 31, 2017
$
111,357

121,889

 
$
921,735

 
$
(486,015
)
 
$
—

 
$
74,122

 
$
621,199

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance April 30, 2017
$
111,357

121,199

 
$
916,121

 
$
(466,541
)
 
—

 
$
75,157

 
$
636,094

Net income attributable to controlling interests and nonredeemable noncontrolling interests
 
 
 
 
 
137,662

 
 
 
14,663

 
152,325

Other comprehensive income - derivative instrument
 
 
 
 
 
 
 
$
359

 
 
 
359

Distributions – common shares and units
 
 
 
 
 
(25,284
)
 
 
 
(3,106
)
 
(28,390
)
Distributions – Series B preferred shares
 
 
 
 
 
(4,571
)
 
 
 
 
 
(4,571
)
Distributions – Series C preferred shares
 
 
 
 
 
(2,293
)
 
 
 
 
 
(2,293
)
Shares issued and share-based compensation
 

75

 
1,216

 
 
 
 
 
 
 
1,216

Series C preferred shares issued
99,456

 

 
 

 
 
 
 
 
 
 
99,456

Redemption of units for cash
 

 

 
 

 
 
 
 
 
(8,577
)
 
(8,577
)
Shares repurchased
(111,357
)
(1,232
)
 
(7,135
)
 
(3,657
)
 
 
 
 

 
(122,149
)
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities
 
 
 
 
 
 
 
 
 
239

 
239

Distributions to nonredeemable noncontrolling interests – consolidated real estate entities
 
 
 
 
 
 
 
 
 
(46
)
 
(46
)
Conversion to equity of notes receivable from nonredeemable noncontrolling interests - consolidated real estate entities
 
 
 
 
 
 
 
 
 
(246
)
 
(246
)
Other
 

(7
)
 
(29
)
 
 
 
 
 
 

 
(29
)
Balance January 31, 2018
$
99,456

120,035

 
$
910,173

 
$
(364,684
)
 
$
359

 
$
78,084

 
$
723,388

See accompanying Notes to Condensed Consolidated Financial Statements.

6

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   (unaudited)
for the nine months ended January 31, 2018 and 2017
 
(in thousands)
 
Nine Months Ended
January 31,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES
 

 
 

Net income (loss)
$
151,788

 
$
(3,115
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 

 
 

Depreciation and amortization, including amortization of capitalized loan costs
61,967

 
34,711

Depreciation and amortization from discontinued operations, including amortization of capitalized loan costs
8,526

 
7,749

Gain on sale of real estate, land, other investments and discontinued operations
(181,477
)
 
(37,330
)
Loss on extinguishment of debt
506

 
870

Share-based compensation expense
1,124

 
1,428

Impairment of real estate investments
256

 
54,153

Bad debt expense
552

 
234

Changes in other assets and liabilities:
 

 
 

Other assets
1,931

 
(5,665
)
Accounts payable and accrued expenses
(3,189
)
 
2,664

Net cash provided by operating activities
$
41,984

 
$
55,699

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

Proceeds from real estate deposits
38,029

 
1,370

Payments for real estate deposits
(131,139
)
 
(1,370
)
Increase in notes receivable
(10,191
)
 
—

Decrease in other investments
—

 
50

Decrease in lender holdbacks for improvements
1,619

 
1,688

Increase in lender holdbacks for improvements
(944
)
 
(646
)
Proceeds from sale of discontinued operations
426,131

 
112,932

Proceeds from sale of real estate and other investments
59,221

 
17,710

Insurance proceeds received
462

 
275

Payments for acquisitions of real estate assets
(244,878
)
 
—

Payments for development and re-development of real estate assets
(2,815
)
 
(16,082
)
Payments for improvements of real estate assets
(14,337
)
 
(33,509
)
Payments for improvements of real estate assets from discontinued operations
(1,046
)
 
(1,027
)
Net cash provided by investing activities
$
120,112

 
$
81,391

CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

Proceeds from mortgages payable
—

 
84,150

Principal payments on mortgages payable
(154,561
)
 
(242,912
)
Proceeds from revolving lines of credit
302,850

 
234,000

Principal payments on revolving lines of credit
(292,900
)
 
(94,500
)
Proceeds from term loan
69,462

 
—

Proceeds from construction debt
3,252

 
17,041

Principal payments on construction debt
(21,689
)
 
(49,080
)
Payment on financing liability
(7,900
)
 
—

Proceeds from noncontrolling partner – consolidated real estate entities
—

 
538

Payments for acquisition of noncontrolling interests – consolidated real estate entities
—

 
(4,938
)
Repurchase of common shares
(7,135
)
 
—

Proceeds from issuance of Series C preferred shares, net of issue costs
99,467

 
—

Repurchase of preferred shares
(115,017
)
 
(28,752
)
Repurchase of partnership units
(8,577
)
 
—

Distributions paid to common shareholders
(25,292
)
 
(47,387
)
Distributions paid to preferred shareholders
(7,057
)
 
(8,458
)
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership
(3,106
)
 
(6,332
)
Distributions paid to noncontrolling interests – consolidated real estate entities
(46
)
 
(159
)
Net cash used by financing activities
$
(168,249
)
 
$
(146,789
)
NET INCREASE IN CASH AND CASH EQUIVALENTS
(6,153
)
 
(9,699
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
28,819

 
66,698

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
22,666

 
$
56,999

See accompanying Notes to Condensed Consolidated Financial Statements.

7

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   (unaudited, continued)
for the nine months ended January 31, 2018 and 2017
 
(in thousands)
 
Nine Months Ended
January 31,
 
2018
 
2017
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
 

 
 

Operating partnership units converted to shares
$
—

 
$
548

Decrease to accounts payable included within real estate investments
(2,995
)
 
(543
)
Construction debt reclassified to mortgages payable
23,300

 
10,549

Increase in mortgage notes receivable
10,329

 
—

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 

 
 

Cash paid for interest, net of amounts capitalized of $0 and $298, respectively
$
27,313

 
$
26,504

See accompanying Notes to Condensed Consolidated Financial Statements.

8

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   (unaudited)
for the nine months ended January 31, 2018 and 2017
NOTE 1 • ORGANIZATION  
Investors Real Estate Trust, collectively with our consolidated subsidiaries (“IRET,” “we,” “us,” or “our”), is a multifamily real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment, and development of multifamily communities. As of January 31, 2018 , we owned interests in 89 multifamily properties consisting of 13,786 apartment homes.
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES  
BASIS OF PRESENTATION
We conduct a majority of our business activities through our consolidated operating partnership, IRET Properties, a North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities. The accompanying condensed consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation. Our fiscal year ends April 30th.
The condensed consolidated financial statements also reflect the Operating Partnership's ownership of certain joint venture entities in which the Operating Partnership has a general partner or controlling interest. These entities are consolidated into our operations, with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income and expenses.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Our interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods, have been included.
The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim condensed consolidated financial statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017 , as filed with the SEC on June 28, 2017.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP 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.
TAX CUTS AND JOBS ACT OF 2017
The Tax Cuts and Jobs Act of 2017 was passed on December 22, 2017. This Act includes a number of changes to the corporate income tax system, including (1) a reduction in the statutory federal corporate income tax rate from 35% to 21% for non-REIT “C” corporations, (2) changes to deductions for certain pass-through business income, and (3) potential limitations on interest expense, depreciation and the deductibility of executive compensation. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level and do not believe that any of the changes from the 2017 Tax Cut and Jobs Act of 2007 will have a material impact on our consolidated financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
The following table provides a brief description of recent accounting standards updates (“ASUs”).

9

Standard
Description
Date of Adoption
Effect on the Financial Statements or Other Significant Matters
ASU 2014-09,  Revenue from Contracts with Customers
This ASU will eliminate the transaction- and industry-specific revenue recognition guidance under current GAAP and replace it with a principle based approach for determining revenue recognition. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied.
This ASU is effective for annual reporting periods beginning after December 15, 2017, as a result of a deferral of the effective date arising from the issuance of ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date . Early adoption is permitted. We will adopt the new standard effective May 1, 2018 using the modified retrospective approach.
We are continuing to assess the impact of the new standard on our consolidated financial statements and internal accounting processes. The majority of our revenue is derived from rental income, which is scoped out from this standard and will be accounted for under ASC 840, Leases.  Our other revenue streams, which are being evaluated under this ASU, include but are not limited to other income from residents determined not to be within the scope of ASC 840 and gains and losses from real estate dispositions. We do not expect the adoption of ASU 2014-09 will have a material impact on our consolidated financial statements.  
ASU 2016-02, Leases
This ASU amends existing accounting standards for lease accounting, including by requiring lessees to recognize most leases on the balance sheet and making certain changes to lessor accounting.
This ASU is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted.
We are currently evaluating the impact the new standard may have on our consolidated financial statements.
ASU 2016-09,   Improvements to Employee Share-Based Payment Accounting
This ASU amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, accrual of compensation cost, classification of awards as either equity or liabilities, and classification on the statement of cash flows.
This ASU is effective for annual reporting periods beginning after December 15, 2016. We adopted this guidance effective May 1, 2017.
Upon adoption of the standard, we elected to account for forfeitures when they occur instead of estimating the forfeitures. The new standard did not have a material effect on our financial position, results of operations or earnings per share.
ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments
This ASU addresses eight specific cash flow issues with the objective of reducing diversity in practice.  The cash flow issues include debt prepayment or debt extinguishment costs and proceeds from the settlement of insurance claims.
This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted.
We are currently evaluating the impact the new standard may have on our consolidated financial statements.
ASU 2017-01, Clarifying the Definition of a Business
This ASU clarifies the definition of a business and provides further guidance for evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. This new standard is required to be applied prospectively to transactions occurring after the date of adoption.
This ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted. We adopted this standard effective May 1, 2017.
We believe that most of our future acquisitions of operating properties will qualify as asset acquisitions and most future transaction costs associated with these acquisitions will be capitalized. Adoption of the standard did not have a material effect on our financial position or results of operations. During the nine months ended January 31, 2018, acquisition costs totaling $330,000 were capitalized and allocated to the assets acquired based on the relative fair market value of those underlying assets.

10

Standard
Description
Date of Adoption
Effect on the Financial Statements or Other Significant Matters
ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
This ASU clarifies the definition of an in-substance nonfinancial asset and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business pursuant to ASU 2017-01.  This ASU allows for either a retrospective or modified retrospective approach.
This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted.
This standard allows for either a retrospective or modified retrospective approach. We are currently evaluating the impact this standard may have on our consolidated financial statements and related disclosures upon adoption.
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
This ASU clarifies hedge accounting requirements, improves disclosure of hedging arrangements, and better aligns risk management activities and financial reporting for hedging relationships.
This ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. We adopted ASU 2017-12 on November 1, 2017.
Adoption of the new standard did not have a material effect on our financial position or results of operations. See Note 10 for additional information.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.  On the Condensed Consolidated Statements of Operations, we reclassified other expenses into general and administrative expenses.
We report in discontinued operations the results of operations and the related gains or losses of properties that have either been disposed or classified as held for sale and for which the disposition represents a strategic shift that has or will have a major effect on our operations and financial results. As the result of discontinued operations, retroactive reclassifications that change prior period numbers have been made. We classified as discontinued operations 27 healthcare properties that were sold during the third quarter of fiscal year 2018. See Note 7 for additional information.
RESTRICTED CASH
As of January 31, 2018, restricted cash consisted of $116.8 million of net tax-deferred exchange proceeds remaining from the sale of our healthcare portfolio and $4.5 million of escrows held by lenders for real estate taxes, insurance, and capital additions.
IMPAIRMENT OF LONG-LIVED ASSETS
We periodically evaluate our long-lived assets, including investments in real estate, for impairment indicators. The impairment evaluation is performed on assets by property such that assets for a property form an asset group. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset group, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the long-lived asset group against the carrying amount of that asset group. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset group, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset group. If our anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates, and capital requirements that could differ materially from actual results. Reducing planned property holding periods may increase the likelihood of recording impairment losses.
During the nine months ended January 31, 2018 , we recognized impairment charges of $256,000 on a parcel of land in Bismarck, ND. This property was written down to estimated fair value during the first quarter of fiscal year 2018 based on receipt of a market offer to purchase and our intent to dispose of the property. We disposed of the property during the second quarter of fiscal year 2018.

11

During the nine months ended January 31, 2017 , we recognized impairment charges of $40.9 million , $5.8 million , $4.7 million , and $2.8 million , respectively, on three multifamily properties and one parcel of unimproved land in Williston, ND, due to deterioration of the market. These properties were written down to estimated fair value based on an independent appraisal in the case of one property and management cash flow estimates and market data in the case of the remaining assets. The properties, impaired for $40.9 million , $4.7 million , and $2.8 million , are owned by joint venture entities in which, at the time of impairment, we had an approximately 71.5% , 60% , and 70% ownership interest, respectively, and which are consolidated in our financial statements.
CHANGE IN DEPRECIABLE LIVES OF REAL ESTATE ASSETS
We review the estimated useful lives of our real estate assets on an ongoing basis. Prior to our strategic shift to become a multifamily-focused REIT, which began in fiscal year 2016, we operated in five segments (office, retail, industrial, healthcare and multifamily). Accordingly, our estimated useful lives represented a blend of these segments.
During fiscal years 2016 and 2017, we disposed of the bulk of our office, retail, and industrial portfolios as well as a portion of our healthcare portfolio. In the first quarter of fiscal year 2018, we determined it was appropriate to review and adjust our estimated useful lives to be specific to our remaining asset portfolio. Effective May 1, 2017, we changed the estimated useful lives of our real estate assets to better reflect the estimated periods during which they will be of economic benefit.  Generally, the estimated lives of buildings and improvements that previously were 20 - 40 years have been decreased to 10 - 30 years, while those that were previously nine years were changed to 5 - 10 years. The effect of this change in estimate for the nine months ended January 31, 2018 , was to increase depreciation expense by approximately $24.8 million , decrease net income by $24.8 million , and decrease earnings per share by $0.18 . Of the expense increase, $9.0 million , or $0.07 per share, represented depreciation on assets that were fully depreciated under the new estimated useful lives in the first quarter of fiscal year 2018.
MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE
In August 2017, we sold 13 multifamily properties in exchange for cash and a note secured by a mortgage on the assets. The sale was recorded using the installment method, under which cash receipts are apportioned between cost recovered and the gain on sale. The $11.0 million note is presented net of $626,000 of deferred gain in mortgage loans receivable on our Condensed Consolidated Balance Sheets. The note bears an interest rate of 5.5% and matures in August 2020. Monthly payments are interest-only, with the principal balance payable at maturity. During the three and nine months ended January 31, 2018 , we received and recognized approximately $154,000 and 273,000 , respectively, of interest income.
In July 2017, we originated a $16.2 million loan in a multifamily development located in New Hope, MN, a Minneapolis suburb. The investment will be funded in installments through the fourth quarter of fiscal year 2018. As of January 31, 2018, we had funded $10.2 million , which appears in other assets on our Condensed Consolidated Balance Sheets. The note bears an interest rate of 6% , matures in July 2023, and provides us an option to purchase the development prior to the loan maturity date.
VARIABLE INTEREST ENTITY
We have determined that our Operating Partnership and each of our less-than-wholly owned real estate partnerships are variable interest entities (“VIEs”), as the limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of the VIEs, and the partnerships are required to be consolidated on our balance sheet because we have a controlling financial interest in the VIEs and have both the power to direct the activities of the VIEs that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because our Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE.
NOTE 3 • EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of our common shares of beneficial interest (“Common Shares”) outstanding during the period. We have issued restricted stock units (“RSUs”) under our 2015 Incentive Plan, which could have a dilutive effect on our earnings per share upon exercise of the RSUs. Other than the issuance of RSUs, we have no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional shares that would result in dilution of earnings. Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their limited partnership units (“Units”) any time following the first anniversary of the date they acquired such Units (“Exchange Right”).  Upon the exercise of Exchange Rights, and in our sole discretion, we may issue Common Shares in exchange for Units on a one-for-one basis. The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the condensed consolidated financial statements for the three and nine months ended January 31, 2018 and 2017 :  

12

 
(in thousands, except per share data)
 
Three Months Ended
January 31,
 
Nine Months Ended
January 31,
 
2018
 
2017
 
2018
 
2017
NUMERATOR
 

 
 

 
 

 
 

Income (loss) from continuing operations – controlling interests
$
5,115

 
$
1,051

 
$
(9,215
)
 
$
(26,487
)
Income from discontinued operations – controlling interests
130,990

 
22,059

 
146,877

 
39,554

Net income attributable to controlling interests
136,105

 
23,110

 
137,662

 
13,067

Dividends to preferred shareholders
(1,766
)
 
(2,503
)
 
(6,864
)
 
(8,260
)
Redemption of preferred shares
(8
)
 
(1,435
)
 
(3,657
)
 
(1,435
)
Numerator for basic earnings per share – net income available to common shareholders
134,331

 
19,172

 
127,141

 
3,372

Noncontrolling interests – Operating Partnership
16,236

 
2,525

 
15,365

 
403

Numerator for diluted earnings per share
$
150,567

 
$
21,697

 
$
142,506

 
$
3,775

DENOMINATOR
 

 
 

 
 

 
 

Denominator for basic earnings per share weighted average shares
119,741

 
121,255

 
120,102

 
121,175

Effect of redeemable operating partnership units
14,434

 
16,120

 
14,768

 
16,229

Denominator for diluted earnings per share
134,175

 
137,375

 
134,870

 
137,404

Earnings (loss) per common share from continuing operations – basic and diluted
$
0.03

 
$
(0.03
)
 
$
(0.16
)
 
$
(0.30
)
Earnings per common share from discontinued operations – basic and diluted
1.09

 
0.19

 
1.22

 
0.33

NET EARNINGS (LOSS) PER COMMON SHARE – BASIC & DILUTED
$
1.12

 
$
0.16

 
$
1.06

 
$
0.03

NOTE 4 • EQUITY  
Operating Partnership Units. Outstanding Units in the Operating Partnership were 14.2 million Units at January 31, 2018 and 15.6 million Units at April 30, 2017.
Common Shares and Equity Awards . Common Shares outstanding on January 31, 2018 and April 30, 2017, totaled 120.0 million and 121.2 million , respectively. There were no shares issued under our 2015 Incentive Award Plan during the three months ended January 31, 2018 . During the nine months ended January 31, 2018 , we issued 75,000 restricted Common Shares, with a total grant-date value of $445,000 . During fiscal year 2017 , there were no shares issued during the three months ended January 31, 2017 . During the nine months ended January 31, 2017 , we issued 499,000 restricted Common Shares, with a total grant-date value of $1.9 million . These shares are issued under our 2015 Incentive Award Plan for executive officer and trustee share-based compensation. These shares vest based on performance and service criteria.
Exchange Rights . Pursuant to the exercise of Exchange Rights, during the three months ended January 31, 2018 , we redeemed 450,000 Units for an aggregate cost of $2.6 million, at an average price per Unit of $5.77 .  During the nine months ended January 31, 2018 , we redeemed 1.4 million Units for an aggregate cost of $8.6 million , at an average price per Unit of $5.92 .  There were no Units redeemed during the three or nine months ended January 31, 2017 .     
Share Repurchase Program . On December 7, 2016, our Board of Directors authorized a share repurchase program to repurchase up to $50 million of our Common Shares over a one -year period. On December 5, 2017, our Board of Trustees reauthorized this share repurchase program for an additional one -year period.  Under this program, we may repurchase Common Shares in open-market purchases, including pursuant to Rule 10b5-1 plans, as determined by management and in accordance with SEC requirements. The extent to which we repurchase our shares, and the timing of repurchases, will depend on a variety of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by our executive management. This program may be suspended or discontinued at any time.  During the third quarter of fiscal year 2018 , we repurchased and retired 152,000 common shares for an aggregate cost of $882,000 , including commissions, at an average price per share of $5.82 .  During the nine months ended January 31, 2018, we repurchased and retired 1.2 million common shares for an aggregate cost of $7.1 million , including commissions, at an average price per share of $5.79 . As of January 31, 2018 , $38.4 million remained available under the $50 million authorized share repurchase program.

13

Issuance of Series C Preferred Shares and Redemption of Series B Preferred Shares.  In the quarter ended October 31, 2017, we issued 4,118,460 shares of our 6.625% Series C Cumulative Redeemable Preferred Shares and redeemed all 4,600,000 shares of our 7.95% Series B Cumulative Redeemable Preferred Shares.
NOTE 5 • SEGMENT REPORTING  
We operate in a single reportable segment which includes the ownership, management, development, redevelopment, and acquisition of multifamily properties. Each of our operating properties is considered a separate operating segment because each property earns revenues, incurs expenses, and has discrete financial information. Our chief operating decision-makers evaluate each property's operating results to make decisions about resources to be allocated and to assess performance. We do not group our operations based on geography, size, or type. Our multifamily properties have similar long-term economic characteristics and provide similar products and services to our tenants. No multifamily property comprises more than 10% of consolidated revenues, profit, or assets. Accordingly, our multifamily properties are aggregated into a single reportable segment.
Prior to the third quarter of fiscal year 2018, we reported our results in two reportable segments: multifamily and healthcare. We sold substantially all of our healthcare portfolio during the third quarter of fiscal year 2018 and classified it as discontinued operations (see Note 7 for additional information). Healthcare no longer meets the quantitative thresholds for reporting as a separate reportable segment and is included in “all other” with other non-multifamily properties.
Our executive management team comprises our chief operating decision-makers. This team measures the performance of our reportable segment based on net operating income (“NOI”), which we define as total real estate revenues less direct real estate expenses (including real estate taxes). We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, and general and administrative expenses. NOI does not represent cash generated by operating activities in accordance with U.S. GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
The revenues and NOI for the multifamily reportable segment are summarized as follows for the three- and nine -month periods ended January 31, 2018 and 2017 , respectively, along with reconciliations to the condensed consolidated financial statements. Segment assets are also reconciled to total assets as reported in the condensed consolidated financial statements.
 
(in thousands)
Three Months Ended January 31, 2018
Multifamily

 
All Other

 
Amounts Not
Allocated To
Segments (1)
 
Total

Real estate revenue
$
41,279

 
$
1,975

 
—

 
$
43,254

Real estate expenses
18,231

 
549

 
$
1,255

 
20,035

Net operating income (loss)
$
23,048

 
$
1,426

 
$
(1,255
)
 
$
23,219

Depreciation and amortization
 
 
 
 
 
 
(18,390
)
General and administrative expenses
 
 
 
 
 
 
(3,011
)
Interest expense
 
 
 
 
 
 
(9,236
)
Loss on debt extinguishment
 
 
 
 
 
 
(285
)
Interest and other income
 
 
 
 
 
 
433

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(7,270
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
12,387

Income from continuing operations
 
 
 
 
 
 
5,117

Income from discontinued operations
 
 
 
 
 
 
146,811

Net income
 
 
 
 
 
 
$
151,928

(1)
Consists of off-site costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.

14

 
(in thousands)
Three Months Ended January 31, 2017
Multifamily

 
All Other

 
Amounts Not
Allocated To
Segments (1)
 
Total

Real estate revenue
$
36,171

 
$
4,057

 
—

 
$
40,228

Real estate expenses
16,336

 
1,000

 
$
1,283

 
18,619

Net operating income (loss)
$
19,835

 
$
3,057

 
$
(1,283
)
 
$
21,609

Depreciation and amortization
 
 
 
 
 
 
(10,787
)
General and administrative expenses
 
 
 
 
 
 
(4,172
)
Interest expense
 
 
 
 
 
 
(8,832
)
Loss on debt extinguishment
 
 
 
 
 
 
(458
)
Interest and other income
 
 
 
 
 
 
427

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(2,213
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
2,437

Income from continuing operations
 
 
 
 
 
 
224

Income from discontinued operations
 
 
 
 
 
 
24,965

Net income
 
 
 
 
 
 
$
25,189

(1)
Consists of off-site costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.
 
(in thousands)
Nine Months Ended January 31, 2018
Multifamily

 
All Other

 
Amounts Not
Allocated To
Segments (1)
 
Total

Real estate revenue
$
119,444

 
$
7,936

 
—

 
$
127,380

Real estate expenses
54,584

 
2,102

 
$
4,204

 
60,890

Net operating income (loss)
$
64,860

 
$
5,834

 
$
(4,204
)
 
$
66,490

Depreciation and amortization
 
 
 
 
 
 
(60,998
)
Impairment of real estate investments
 
 
 
 
 
 
(256
)
General and administrative expenses
 
 
 
 
 
 
(10,131
)
Interest expense
 
 
 
 
 
 
(25,876
)
Loss on debt extinguishment
 
 
 
 
 
 
(818
)
Interest and other income
 
 
 
 
 
 
916

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(30,673
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
17,835

Loss from continuing operations
 
 
 
 
 
 
(12,838
)
Income from discontinued operations
 
 
 
 
 
 
164,626

Net income
 
 
 
 
 
 
$
151,788

(1)
Consists of off-site costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.

15

 
(in thousands)
Nine Months Ended January 31, 2017
Multifamily

 
All Other

 
Amounts Not
Allocated To
Segments (1)
 
Total

Real estate revenue
$
107,400

 
$
11,307

 
—

 
$
118,707

Real estate expenses
46,781

 
2,787

 
$
4,002

 
53,570

Net operating income (loss)
$
60,619

 
$
8,520

 
$
(4,002
)
 
$
65,137

Depreciation and amortization
 
 
 
 
 
 
(33,193
)
Impairment of real estate investments
 
 
 
 
 
 
(54,153
)
General and administrative expenses
 
 
 
 
 
 
(11,195
)
Interest expense
 
 
 
 
 
 
(26,033
)
Loss on debt extinguishment
 
 
 
 
 
 
(458
)
Interest and other income
 
 
 
 
 
 
685

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(59,210
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
11,292

Loss from continuing operations
 
 
 
 
 
 
(47,918
)
Income from discontinued operations
 
 
 
 
 
 
44,803

Net loss
 
 
 
 
 
 
$
(3,115
)
(1)
Consists of off-site costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.
Segment Assets and Accumulated Depreciation
Segment assets are summarized as follows as of January 31, 2018 , and April 30, 2017 , respectively, along with reconciliations to the condensed consolidated financial statements:
 
(in thousands)
As of January 31, 2018
Multifamily

 
All Other

 
Total

Segment assets
 

 
 

 
 

Property owned
$
1,495,944

 
$
72,781

 
$
1,568,725

Less accumulated depreciation
(285,460
)
 
(18,689
)
 
(304,149
)
Total property owned
$
1,210,484

 
$
54,092

 
$
1,264,576

Mortgage loans receivable
 
 
 
 
10,329

Cash and cash equivalents
 
 
 
 
22,666

Restricted cash
 
 
 
 
121,337

Other assets
 
 
 
 
21,664

Unimproved land
 
 
 
 
15,123

Total Assets
 
 
 
 
$
1,455,695

 
(in thousands)
As of April 30, 2017
Multifamily

 
All Other

 
Total

Segment assets
 

 
 

 
 

Property owned
$
1,260,541

 
$
97,988

 
$
1,358,529

Less accumulated depreciation
(232,592
)
 
(23,007
)
 
(255,599
)
Total property owned
$
1,027,949

 
$
74,981

 
$
1,102,930

Assets held for sale and assets from discontinued operations
 
 
 
 
283,023

Cash and cash equivalents
 
 
 
 
28,819

Restricted cash
 
 
 
 
27,981

Other assets
 
 
 
 
13,306

Unimproved land
 
 
 
 
18,455

Total Assets
 
 
 
 
$
1,474,514


16

NOTE 6 • COMMITMENTS AND CONTINGENCIES
Litigation.  We are subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of our business, most of which are covered by liability insurance. Various claims of resident discrimination are also periodically brought, most of which are covered by insurance. While resolution of these matters cannot be predicted with certainty, management believes that the final outcome of these claims and  legal proceedings will not have a material effect on our liquidity, financial position, cash flows, or results of operations.
Environmental Matters.  Under various federal, state, and local laws, ordinances, and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around, or under the property. While we currently have no knowledge of any material violation of environmental laws, ordinances, or regulations at any of our properties, there can be no assurance that areas of contamination will not be identified at any of our properties or that changes in environmental laws, regulations, or cleanup requirements would not result in material costs to us.
Restrictions on Taxable Dispositions.  Twenty-six of our properties, consisting of 4,212 apartment units, are subject to restrictions on our ability to resell in taxable transactions. These restrictions are contained in agreements we entered into with some of the sellers or contributors of the properties and are effective for varying periods. The real estate investment amount of these properties (net of accumulated depreciation) was $458.4 million at January 31, 2018 .  We do not believe that these restrictions materially affect the conduct of our business or our decision as to whether to dispose of these properties during the restriction periods.
If we decide to sell one or more of these properties and are unable to structure sales of such properties as tax deferred transactions under Section 1031 of the Internal Revenue Code, we may be required to provide tax indemnification payments to the parties to these agreements.
Tax-Deferred Proceeds. As of January 31, 2018, we had $116.8 million of tax-deferred exchange proceeds remaining from the sale of our healthcare portfolio included within restricted cash on our Condensed Consolidated Balance Sheets. Replacement property must be acquired by June 27, 2018 in order to complete the exchange.
Notes Receivable.  In July 2017, we originated a $16.2 million loan in a multifamily development located in New Hope, MN, a suburb of Minneapolis. The investment will be funded in installments through the fourth quarter of fiscal year 2018. As of January 31, 2018 , $6.0 million remained to be funded. See Note 2 for additional information.
NOTE 7 • DISCONTINUED OPERATIONS
We report in discontinued operations the results of operations and the related gains or losses on the sales of properties that have either been disposed of or classified as held for sale and meet the classification of a discontinued operation as described in ASC 205 -- Presentation of Financial Statements and ASC 360 -- Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under this standard, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.
We determined that our strategic decision to exit our healthcare segment met the criteria for discontinued operations, and we consequently classified 27 healthcare properties sold during the three months ended January 31, 2018, as discontinued operations. We classified no new dispositions or properties held for sale as discontinued operations during fiscal year 2017 . During fiscal year 2016 , we determined that our strategic decision to exit senior housing met the criteria for discontinued operations, and we consequently classified 34 senior housing properties as held for sale and discontinued operations at April 30, 2016 . Thirty-two of those senior housing properties were sold during the fiscal year ended April 30, 2017 , and the remaining two senior housing properties were sold during the three months ended October 31, 2017.

17

The following information shows the effect on net income and the gains or losses from the sales of properties classified as discontinued operations for the three and nine months ended January 31, 2018 and 2017 , respectively:
 
(in thousands)
 
Three Months Ended
January 31,
 
Nine Months Ended
January 31,
 
2018
 
2017
 
2018
 
2017
REVENUE
 

 
 

 
 

 
 

Real estate rentals
$
4,495

 
$
12,211

 
$
19,744

 
$
36,061

Tenant reimbursement
2,739

 
4,058

 
11,493

 
12,177

TRS senior housing revenue
—

 
813

 
—

 
2,602

TOTAL REVENUE
$
7,234

 
$
17,082

 
$
31,237

 
$
50,840

EXPENSES
 

 
 

 
 

 
 

Property operating expenses, excluding real estate taxes
1,860

 
2,463

 
6,645

 
7,514

Real estate taxes
1,284

 
1,711

 
5,191

 
4,916

Depreciation and amortization
1,432

 
2,688

 
8,445

 
8,096

TRS senior housing expenses
—

 
840

 
—

 
2,393

Other expenses
(2
)
 
—

 
13

 
—

TOTAL EXPENSES
$
4,574

 
$
7,702

 
$
20,294

 
$
22,919

Operating income
2,660

 
9,380

 
10,943

 
27,921

Interest expense
(751
)
 
(3,048
)
 
(4,172
)
 
(9,606
)
Loss on extinguishment of debt
(6,502
)
 
(1,449
)
 
(6,508
)
 
(1,521
)
Interest income
—

 
544

 
661

 
1,634

Other income
—

 
3

 
60

 
337

(Loss) income from discontinued operations before gain on sale
(4,593
)
 
5,430

 
984

 
18,765

Gain on sale of discontinued operations
151,404

 
19,535

 
163,642

 
26,038

INCOME FROM DISCONTINUED OPERATIONS
$
146,811

 
$
24,965

 
$
164,626

 
$
44,803

The following information reconciles the carrying amounts of major classes of assets and liabilities of the discontinued operations to assets and liabilities held for sale that are presented separately on the Condensed Consolidated Balance Sheets:
 
 
(in thousands)
 
 
April 30, 2017
Carrying amounts of major classes of assets included as part of discontinued operations
 
 

Property owned and intangible assets, net of accumulated depreciation and amortization
 
$
255,466

Other assets
 
13,478

Total major classes of assets of the discontinued operations
 
268,944

Other assets included in the disposal group classified as held for sale
 
14,079

Total assets of the disposal group classified as held for sale on the balance sheet
 
$
283,023

Carrying amounts of major classes of liabilities included as part of discontinued operations
 
 

Accounts payable and accrued expenses
 
$
4,835

Mortgages payable
 
112,208

Other
 
7,977

Total major classes of liabilities of the discontinued operations
 
125,020

Other liabilities included in the disposal group classified as held for sale
 
5,884

Total liabilities of the disposal group classified as held for sale on the balance sheet
 
$
130,904


18

NOTE 8 • ACQUISITIONS, DEVELOPMENTS PLACED IN SERVICE, AND DISPOSITIONS
PROPERTY ACQUISITIONS
We added $90.6 million of new real estate property to our portfolio through property acquisitions during the three months ended January 31, 2018 , compared to $0 in the three months ended January 31, 2017 . Our acquisitions during the nine months ended January 31, 2018 qualified as asset acquisitions under ASU 2017-01, Clarifying the Definition of a Business , and are detailed below.
Nine Months Ended January 31, 2018
 
Date
Acquired
 
(in thousands)
 
 
Total
Acquisition
Cost

 
Form of
Consideration
 
Investment Allocation
Acquisitions
 
 
Cash

 
Land

 
Building

 
Intangible
Assets

Multifamily
 
 
 
 
 
 
 
 
 
 
 
191 unit - Oxbo - St. Paul, MN (1)
May 26, 2017
 
$
61,500

 
$
61,500

 
$
5,809

 
$
54,910

 
$
781

500 unit - Park Place - Plymouth, MN
September 13, 2017
 
92,250

 
92,250

 
10,609

 
80,711

 
930

274 unit - Dylan - Denver, CO
November 28, 2017
 
90,600

 
90,600

 
12,155

 
77,249

 
1,196

 
 
 
 
 
 
 
 
 
 
 
 
Total Property Acquisitions
 
 
$
244,350

 
$
244,350

 
$
28,573

 
$
212,870

 
$
2,907

(1)
Property includes 11,477 square feet of retail space.
DEVELOPMENT PROJECT PLACED IN SERVICE
The Operating Partnership placed $0 and $72.4 million of development projects in service during the nine months ended January 31, 2018 and 2017 , respectively, as detailed below.
Nine Months Ended January 31, 2017
 
 
 
(in thousands)
Development Projects Placed in Service
Date Placed
in Service
 
Land
 
Building
 
Development
Cost
Multifamily
 
 
 
 
 
 
 
241 unit - 71 France - Edina, MN (1)
May 1, 2016
 
$
4,721

 
$
67,642

 
$
72,363

 
 
 
 
 
 
 
 
Total Development Projects Placed in Service
 
 
$
4,721

 
$
67,642

 
$
72,363

(1)
Costs paid in fiscal years 2015 and 2016 totaled $70.9 million . Additional costs incurred in fiscal year 2017 totaled $1.5 million , for a total project cost at January 31, 2017 of $72.4 million . The project is owned by a joint venture entity in which we currently have an approximately 52.6% interest. The joint venture is consolidated in our financial statements.
PROPERTY DISPOSITIONS
During the three months ended January 31, 2018 , we sold two multifamily properties and 27 healthcare and two other commercial properties for a total sale price of $442.8 million . During the three months ended January 31, 2017 , we sold six commercial properties for a total sale price of $73.9 million . The following table details our dispositions for the nine months ended January 31, 2018 and 2017 :

19

Nine Months Ended January 31, 2018
 
 
 
(in thousands)
 
Dispositions
Date
Disposed
 
Sale Price
 
Book Value
and Sale Cost
 
Gain/(Loss)
 
Multifamily
 
 
 
 
 
 
 
 
327 unit - 13 Multifamily properties - Minot, ND (1)
August 22, 2017
 
$
12,263

 
$
11,562

 
$
701

(2)  
48 unit - Crown - Rochester, MN
December 1, 2017
 
5,700

 
3,318

 
$
2,382

 
16 unit - Northern Valley - Rochester, MN
December 1, 2017
 
950

 
690

 
260

 
 
 
 
$
18,913

 
$
15,570

 
$
3,343

 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
4,998 sq ft Minot Southgate Wells Fargo Bank - Minot, ND
May 15, 2017
 
3,440

 
3,332

 
108

 
90,260 sq ft Lexington Commerce Center - Eagan, MN
August 22, 2017
 
9,000

 
3,963

 
5,037

 
17,640 sq ft 1440 Duckwood Medical - Eagan, MN
August 24, 2017
 
2,100

 
1,886

 
214

 
279,834 sq ft Edgewood Vista Hermantown I & II - Hermantown, MN
October 19, 2017
 
36,884

 
24,631

 
12,253

 
518,161 sq ft Urbandale - Urbandale, IA
November 22, 2017
 
16,700

 
12,857

 
3,843

 
36,053 sq ft 3075 Long Lake Road - Roseville, MN
November 28, 2017
 
18,650

 
12,766

 
5,884

 
1,205,432 sq ft 25 Healthcare properties (3)(4)
December 29, 2017
 
370,267

 
232,768

 
137,499

 
43,404 sq ft Garden View - St. Paul, MN
January 19, 2018
 
14,000

 
6,191

 
7,809

 
52,116 sq ft Ritchie Medical - St. Paul, MN
January 19, 2018
 
16,500

 
10,419

 
6,081

 
 
 
 
$
487,541

 
$
308,813

 
$
178,728

 
 
 
 
 
 
 
 
 
 
Unimproved Land
 
 
 
 
 
 
 
 
Bismarck 4916 Unimproved Land - Bismarck, ND
August 8, 2017
 
$
3,175

 
$
3,188

 
$
(13
)
 
 
 
 
 
 
 
 
 
 
Total Property Dispositions
 
 
$
509,629

 
$
327,571

 
$
182,058

 
(1)
These properties include: 4th Street 4 Plex, 11th Street 3 Plex, Apartments on Main, Brooklyn Heights, Colton Heights, Fairmont, First Avenue (Apartments and Office), Pines, Southview, Summit Park, Temple (includes 17 South Main Retail), Terrace Heights and Westridge.
(2)
$626,000 of the gain on sale was deferred. See Note 2 for additional information on the related mortgage note receivable.
(3)
These properties include: 2800 Medical, 2828 Chicago Avenue, Airport Medical, Billings 2300 Grand Road, Burnsville 303 Nicollet Medical, Burnsville 305 Nicollet Medical, Duluth Denfeld Clinic, Edina 6363 France Medical, Edina 6405 France Medical, Edina 6517 Drew Avenue, Edina 6525 France SMC II, Edina 6545 France SMC I, Gateway Clinic, High Pointe Health Campus, Lakeside Medical Plaza, Mariner Clinic, Minneapolis 701 25th Avenue Medical, Missoula 3050 Great Northern, Park Dental, Pavilion I, Pavilion II, PrairieCare Medical, St Michael Clinic, Trinity at Plaza 16 and Wells Clinic.
(4)
Sale price includes $2.6 million that was deposited into escrow pending the resolution of certain post-closing items. As of January 31, 2018, these items had not yet been resolved.

20

Nine Months Ended January 31, 2017
 
 
 
(in thousands)
Dispositions
Date
Disposed
 
Sale Price
 
Book Value
and Sale Cost
 
Gain/(Loss)
Other
 
 
 
 
 
 
 
195,075 sq ft Stone Container - Fargo, ND
July 25, 2016
 
$
13,400

 
$
4,418

 
$
8,982

189,244 sq ft 8 Idaho Spring Creek Senior Housing Properties (1)
October 31, 2016
 
43,900

 
37,397

 
6,503

28,528 sq ft Grand Forks Carmike - Grand Forks, ND
December 29, 2016
 
4,000

 
1,563

 
2,437

426,652 sq ft 5 Edgewood Vista Senior Housing Properties (2)
January 18, 2017
 
69,928

 
50,393

 
19,535

 
 
 
$
131,228

 
$
93,771

 
$
37,457

 
 
 
 
 
 
 
 
Unimproved Land
 
 
 
 
 
 
 
Georgetown Square Unimproved - Grand Chute, WI
May 6, 2016
 
$
250

 
$
274

 
$
(24
)
 
 
 
 
 
 
 
 
Total Property Dispositions
 
 
$
131,478

 
$
94,045

 
$
37,433

(1)
These properties include: Spring Creek American Falls, Spring Creek Boise, Spring Creek Eagle, Spring Creek Fruitland, Spring Creek Fruitland Unimproved, Spring Creek Meridian, Spring Creek Overland, Spring Creek Soda Springs and Spring Creek Ustick.
(2)
These properties include: Edgewood Vista Bismarck, Edgewood Vista Brainerd, Edgewood Vista East Grand Forks, Edgewood Vista Fargo and Edgewood Vista Spearfish.
NOTE 9 • DEBT
As of January 31, 2018, we owned 99 properties, of which 65 multifamily and other properties (with a carrying amount of $730.1 million ) served as collateral for mortgage loans and 34 multifamily and other properties were unencumbered by mortgages. Of the 65 properties that served as collateral for mortgage loans, the majority of these mortgages payable were non-recourse to us other than for standard carve-out obligations. As of January 31, 2018 , we believe that there are no material defaults or compliance issues with respect to any mortgages payable.
The aggregate amount of required future principal payments on mortgages payable as of January 31, 2018 , is as follows:
 
(in thousands)
Year Ended April 30,
Mortgage Loans
2018
$
2,718

2019
31,065

2020
146,792

2021
92,308

2022
72,799

Thereafter
210,193

Total payments
$
555,875

As noted above, as of January 31, 2018, we owned 34 multifamily and other properties that were not encumbered by mortgages, with 25 of those properties providing credit support for our unsecured borrowings. Our primary unsecured credit facility is a revolving, multi-bank line of credit, with the Bank of Montreal serving as administrative agent. Our line of credit has total commitments of $300.0 million , with borrowing capacity based on the value of properties contained in the unencumbered asset pool ("UAP"). Due to the recent disposition of our healthcare properties, the UAP currently provides for a borrowing capacity of $219.2 million , providing additional borrowing availability of $152.1 million beyond the $67.0 million drawn as of January 31, 2018. This credit facility matures on January 31, 2021, with one twelve-month option to extend the maturity date at our election.
During the three months ended January 31, 2018, we entered into a $70.0 million unsecured term loan, which matures on January 31, 2023. We have the option to further increase the credit capacity to $500 million (from current aggregate commitments totaling $370 million ) by either adding additional banks to the facility or obtaining agreements from the existing banks to increase their commitments.

21

The interest rates on the line of credit and term loan are based on the London Interbank Offered Rate ("LIBOR") plus a margin that ranges from 160-225 basis points based on our consolidated leverage. Our line of credit and term loan are subject to customary financial covenants and limitations. We believe that we are in compliance with all such financial covenants and limitations as of January 31, 2018.
Our remaining construction debt was paid off during the three months ended January 31, 2018. Construction debt at April 30, 2017, was $41.7 million , with a weighted average rate of interest of 3.27% .
The following table summarizes our indebtedness at January 31, 2018:
 
(in thousands)
 
 
January 31, 2018
April 30, 2017
Weighted Average Maturity in Years
Unsecured line of credit
$
67,000

$
57,050

3.0
Term loan
70,000

—

4.0
Unsecured debt
137,000

57,050

 
Mortgages payable - fixed (1)
494,874

629,535

6.3
Mortgages payable - variable (1)
61,000

57,708

3.3
Construction debt - variable
—

41,737

 
Total debt
$
692,874

$
786,030

 
Weighted average interest rate on unsecured line of credit
3.45
%
2.67
%
 
Weighted average interest rate on term loan (rate with swap)
4.01
%
—

 
Weighted average interest rate on mortgages payable (1)
4.63
%
4.71
%
 
Weighted average interest rate on construction debt
—

3.27
%
 
(1)
Includes mortgages payable related to assets held for sale and assets of discontinued operations at April 30, 2017 .
NOTE 10 • DERIVATIVE INSTRUMENT
Our objective in using an interest rate derivative is to hedge our exposure to the variability in cash flows of our floating-rate debt. To accomplish this objective, during the three months ended January 31, 2018, we entered into an interest rate swap contract to fix the variable interest rate on our term loan. The interest rate swap had a $70.0 million notional amount and qualified as a cash flow hedge.
Under ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities , which we adopted on November 1, 2017, the ineffective portion of a hedging instrument is no longer required to be recognized currently in earnings or disclosed. Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income for our interest rate swap will be reclassified to interest expense as interest payments are made on our term loan.
The gain recognized in other comprehensive income for the three months ended January 31, 2018, was $287,000 , and the amount reclassified from accumulated other comprehensive income into interest expense during this period was $72,000 . At January 31, 2018, the fair value of our interest rate swap included in other assets on our Condensed Consolidated Balance Sheets was $359,000 .
NOTE 11 • FAIR VALUE MEASUREMENTS
Cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are carried at amounts that reasonably approximate their fair value due to their short-term nature.  For variable rate debt that re-prices frequently, fair values are based on carrying values. The fair values of our financial instruments approximate their carrying amount in the consolidated financial statements except for fixed rate debt.
In determining the fair value of other financial instruments, we apply Financial Accounting Standard Board ASC 820, Fair Value Measurement and Disclosures , or ASC 820.  ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  Fair value hierarchy under ASC 820 distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entity’s own assumptions about market participant assumptions (Level 3). Fair value estimates may differ from the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities.

22

Fair Value Measurements on a Recurring Basis
During the three months ended January 31, 2018, we entered into an interest rate swap to manage our interest rate risk. The fair value of our interest rate swap is determined using the market standard methodology of netting discounted expected variable cash payments and receipts. The variable cash payments and receipts are based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves. We also consider both our own nonperformance risk and the counterparty's nonperformance risk in the fair value measurement. The fair value of the derivative by its level in the fair value hierarchy is as follows:
 
 
(in thousands)
 
Balance Sheet Location
Total

 
Level 1

 
Level 2

 
Level 3

January 31, 2018
 
 

 
 

 
 

 
 
Derivative instrument - interest rate swap
Other assets
$
359

 
—

 
$
359

 
—

Fair Value Measurements on a Nonrecurring Basis
There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at January 31, 2018 .  Non-financial assets measured at fair value on a nonrecurring basis at April 30, 2017 , consisted of real estate held for sale and real estate investments that were written-down to estimated fair value during fiscal year 2018 and 2017 . See Note 2 for additional information on impairment losses recognized during fiscal years 2018 and 2017 . The aggregate fair value of these assets by their levels in the fair value hierarchy is as follows:
 
(in thousands)
 
Total

 
Level 1

 
Level 2

 
Level 3

April 30, 2017
 

 
 

 
 

 
 
Real estate investments
$
506

 
—

 
—

 
$
506

Real estate held for sale (1)
$
10,891

 
—

 
—

 
$
10,891

(1)
Represents only the portion of real estate held for sale that was written-down to estimated fair value.
As of April 30, 2017 , we estimated the fair value of our real estate investments using market comparisons and a broker opinion of value, and we estimated the fair value of our real estate held for sale using an income approach (including management estimates and cash flow calculations), projected net operating income, and an estimated capitalization rate. The significant unobservable quantitative input used in determining the fair value was a capitalization rate of 7.0% based on the location, type and nature of the real estate held for sale, and current and anticipated market conditions.
Financial Assets and Liabilities Not Measured at Fair Value
The fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using relevant treasury interest rates plus credit spreads (Level 2). For mortgages payable, the fair value of fixed rate loans is estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates (Level 3).
The estimated fair values of our financial instruments as of January 31, 2018 , and April 30, 2017 , respectively, are as follows:
 
(in thousands)
 
January 31, 2018
 
April 30, 2017
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
FINANCIAL ASSETS
 

 
 

 
 

 
 

Cash and cash equivalents
$
22,666

 
$
22,666

 
$
28,819

 
$
28,819

FINANCIAL LIABILITIES
 

 
 

 
 

 
 

Other debt, including other debt related to assets held for sale
—

 
—

 
$
49,637

 
$
49,637

Revolving line of credit
$
67,000

 
$
67,000

 
$
57,050

 
$
57,050

Term loan (1)
$
70,000

 
$
70,000

 
—

 
—

Mortgages payable (2)
$
555,875

 
$
555,252

 
$
687,243

 
$
702,802

(1)
Excluding the effect of the interest rate swap agreement.
(2)
Includes mortgages payable related to assets held for sale and assets of discontinued operations at April 30, 2017.

23


NOTE 12 • REDEEMABLE NONCONTROLLING INTERESTS
Redeemable noncontrolling interests on our Condensed Consolidated Balance Sheets represent the noncontrolling interest in joint ventures in which our unaffiliated partner, at its election, could require us to buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price. Below is a table reflecting the activity of the redeemable noncontrolling interests.
 
(in thousands)
Balance at April 30, 2017
$
7,181

Net income
(537
)
Balance at January 31, 2018
$
6,644

NOTE 13 • SHARE-BASED COMPENSATION
Share-based awards are provided to officers, non-officer employees and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, which allows for awards in the form of cash, unrestricted and restricted common shares, and RSUs up to an aggregate of 4,250,000 shares, over the ten -year period in which the plan will be in effect. Under our 2015 Incentive Plan, officers and non-officer employees may earn share awards under a revised long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the revised program may vary from year to year.
Fiscal Year 2018 Executive LTIP Awards
Awards granted on May 1, 2017, consist of 16,447 time-based restricted shares that vest as to one-third of the shares on each of May 1, 2018, May 1, 2019, and May 1, 2020. We recognize compensation expense associated with the time-based restricted share awards ratably over the requisite service periods.
Awards granted on June 21, 2017, consist of time-based RSU awards, performance RSU awards based on leverage ratio, and performance RSU awards based on total shareholder return (“TSR”), each for 57,693 shares.  All of these awards are classified as equity awards. The time-based RSUs vest as to one-third of the shares on each of June 21, 2018, May 1, 2019, and May 1, 2020. The maximum number of leverage ratio RSUs eligible to be earned is 115,386 RSUs.
The TSR performance RSU awards are earned based on our TSR as compared to the MSCI US REIT Index over a forward looking three -year period. The maximum number of RSUs eligible to be earned is 115,386 RSUs. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the awards to vest. We recognize compensation expense ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless whether the market conditions are achieved and the awards ultimately vest. Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved. We based the expected volatility on the historical volatility of our daily closing share price, the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award. The assumptions used to value the performance RSU awards were an expected volatility of 27.3% , a risk-free interest rate of 1.48% and an expected life of 2.86 years . The share price at the grant date, June 21, 2017, was $6.15 per share.
Total Compensation Expense
Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $1.1 million and $1.4 million for the nine months ended January 31, 2018 and 2017 , respectively.
NOTE 14 • RELATED PARTY TRANSACTIONS  
Transactions with BMO Capital Markets
We have an historical and ongoing relationship with BMO Capital Markets (“BMO”). On July 17, 2017, we engaged BMO to provide financial advisory services in connection with the proposed disposition of our healthcare property portfolio. A family member of Mark O. Decker, Jr., our President and Chief Executive Officer, is an employee of BMO and could have an indirect material interest in any such engagement and related transaction(s). The Board pre-approved the engagement of BMO. During the quarter ended January 31, 2018, we completed the disposition of 27 of our 28 healthcare properties and paid BMO a transaction fee of $ 1.8 million in connection with this engagement.

24

NOTE 15 • SUBSEQUENT EVENTS  
Pending Acquisition. On February 23, 2018, we entered into a purchase agreement to acquire Westend, a 390 -unit multifamily apartment community located in downtown Denver, CO. In connection with this proposed acquisition, we have provided a $10 million non-refundable earnest money deposit to the seller. The parties currently anticipate closing the Westend acquisition during the fourth quarter of fiscal year 2018.
Completed Disposition . On March 7, 2018, we sold a commercial property and adjacent parcel of unimproved land in Bismarck, ND, for an aggregate sale price of $5.5 million .


25

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements included in this report, our audited financial statements for the fiscal year ended April 30, 2017, which are included in our Form 10-K filed with the SEC on June 28, 2017, and the risk factors in Item 1A. “Risk Factors,” of our Form 10-K for the year ended April 30, 2017.
We consider this and other sections of this Report to contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of those words and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements, as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.
The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:
•
economic conditions in the markets where we own properties or markets in which we may invest in the future;
•
rental conditions in our markets, including occupancy levels and rental rates, our potential inability to renew tenants or obtain new tenants upon expiration of existing leases, changes in tax and housing laws, or other factors;
•
adverse changes in real estate markets, including the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our inability to identify and consummate attractive acquisitions on favorable terms, our ability to consummate any planned dispositions in a timely manner, and our ability to reinvest sales proceeds successfully;
•
failure of new acquisitions to achieve anticipated results or be efficiently integrated;
•
inability to complete lease-up of our projects on schedule and on budget;
•
inability to sell our non-core properties on terms that are acceptable;
•
failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and tax protection payments;
•
the need to fund tenant improvements or other capital expenditures out of cash flow;
•
the need to reduce the dividends on our common shares;
•
financing risks, including our potential inability to obtain debt or equity financing on favorable terms, or at all;
•
level and volatility of interest or capitalization rates or capital market conditions;
•
changes in operating costs, including real estate taxes, utilities, and insurance costs;
•
the availability and cost of casualty insurance for losses;
•
a significant decline in the market value of real estate serving as collateral for mortgage obligations;
•
inability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, inability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, and the risk of changes in laws affecting REITs;
•
inability to attract and retain qualified personnel;
•
cyber liability or potential liability for breaches of our privacy or information security systems;
•
inability to comply with environmental laws and regulations; and
•
other risks identified in this Report, in other SEC reports, or in other documents that we publicly disseminate.
New factors may also arise from time to time that could have a material adverse effect on our business and results of operations.  Except as otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements to reflect events, circumstances, or changes in expectations after the date on which this Report is filed.  Readers also should review the risks and uncertainties detailed from time to time in our filings with the SEC, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017.

26
Table of Contents

Executive Summary
We own, manage, acquire, redevelop, and develop multifamily apartment communities.  We primarily focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for our apartment homes and retention of our residents.  As of January 31, 2018 , we owned interests in 89 multifamily properties consisting of 13,786 apartment homes. Property owned was $1.6 billion at January 31, 2018, compared to $1.4 billion at April 30, 2017.
Overview of the Three Months Ended January 31, 2018
For the three months ended January 31, 2018 , we generated revenues of $43.3 million , compared to $40.2 million for the three months ended January 31, 2017 .  Expenses increased to $41.4 million for the three months ended January 31, 2018 , compared to $33.6 million for the three months ended January 31, 2017 . The drivers of these changes are discussed in the “Results of Operations” section below.
Summarized below are significant transactions that occurred during the third quarter of our fiscal year 2018 :
•
Acquired a 274-unit multifamily property in Denver, CO, for a purchase price of $90.6 million.
•
Disposed of 27 healthcare properties, two multifamily properties, and two other properties for sales prices totaling $442.8 million.
•
Paid off $96.2 million of mortgage debt and incurred $6.4 million of prepayment penalties included in continuing and discontinued operations related to properties sold during the quarter.
•
Amended our line of credit to provide for a new term loan of up to $70 million and entered into a hedge instrument to hedge the risk of an increase in interest rates.
Subsequent to quarter-end, we engaged in the following transactions:
•
Entered into a purchase agreement to acquire Westend, a 390-unit multifamily apartment community located in downtown Denver, CO. In connection with this proposed acquisition, we have provided a $10 million non-refundable earnest money deposit to the seller. The parties currently anticipate closing the Westend acquisition during the fourth quarter of fiscal year 2018.
•
Sold a commercial property and adjacent parcel of unimproved land in Bismarck, ND, for an aggregate sale price of $5.5 million.


27
Table of Contents

RESULTS OF OPERATIONS
Consolidated Results of Operations for the Three and Nine Months Ended January 31, 2018 and 2017
The discussion that follows is based on our consolidated results of operations for the three and nine months ended January 31, 2018 and 2017 . Information about our same-store property results is contained in the Net Operating Income section below.
 
(in thousands, except percentages)
 
Three Months Ended
 
Nine Months Ended
 
January 31,
 
2018 vs. 2017
 
January 31,
 
2018 vs. 2017
 
2018
 
2017
 
$ Change
 
% Change
 
2018
 
2017
 
$ Change
 
% Change
Real estate rentals
$
42,858

 
$
39,390

 
$
3,468

 
8.8
 %
 
$
125,431

 
$
116,386

 
$
9,045

 
7.8
 %
Tenant reimbursement
396

 
838

 
(442
)
 
(52.7
)%
 
1,949

 
2,321

 
(372
)
 
(16.0
)%
TOTAL REVENUE
$
43,254

 
$
40,228

 
$
3,026

 
7.5
 %
 
$
127,380

 
$
118,707

 
$
8,673

 
7.3
 %
Property operating expenses, excluding real estate taxes
15,426

 
14,571

 
855

 
5.9
 %
 
47,018

 
41,391

 
5,627

 
13.6
 %
Real estate taxes
4,609

 
4,048

 
561

 
13.9
 %
 
13,872

 
12,179

 
1,693

 
13.9
 %
Depreciation and amortization
18,390

 
10,787

 
7,603

 
70.5
 %
 
60,998

 
33,193

 
27,805

 
83.8
 %
Impairment of real estate investments
—

 
—

 
—

 
n/a

 
256

 
54,153

 
(53,897
)
 
(99.5
)%
General and administrative expenses
3,011

 
4,172

 
(1,161
)
 
(27.8
)%
 
10,131

 
11,195

 
(1,064
)
 
(9.5
)%
TOTAL EXPENSES
$
41,436

 
$
33,578

 
$
7,858

 
23.4
 %
 
$
132,275

 
$
152,111

 
$
(19,836
)
 
(13.0
)%
Operating income (loss )
1,818

 
6,650

 
(4,832
)
 
(72.7
)%
 
(4,895
)
 
(33,404
)
 
28,509

 
(85.3
)%
Interest expense
(9,236
)
 
(8,832
)
 
(404
)
 
4.6
 %
 
(25,876
)
 
(26,033
)
 
157

 
(0.6
)%
Loss on extinguishment of debt
(285
)
 
(458
)
 
173

 
(37.8
)%
 
(818
)
 
(458
)
 
(360
)
 
78.6
 %
Interest income
408

 
272

 
136

 
50.0
 %
 
628

 
354

 
274

 
77.4
 %
Other income
25

 
155

 
(130
)
 
(83.9
)%
 
288

 
331

 
(43
)
 
(13.0
)%
Loss before gain on sale of real estate and other investments and income from discontinued operations
(7,270
)
 
(2,213
)
 
(5,057
)
 
228.5
 %
 
(30,673
)
 
(59,210
)
 
28,537

 
(48.2
)%
Gain on sale of real estate and other investments
12,387

 
2,437

 
9,950

 
408.3
 %
 
17,835

 
11,292

 
6,543

 
57.9
 %
Income (loss) from continuing operations
5,117

 
224

 
4,893

 
2,184.4
 %
 
(12,838
)
 
(47,918
)
 
35,080

 
(73.2
)%
Income from discontinued operations
146,811

 
24,965

 
121,846

 
488.1
 %
 
164,626

 
44,803

 
119,823

 
267.4
 %
NET INCOME (LOSS)
$
151,928

 
$
25,189

 
$
126,739

 
503.2
 %
 
$
151,788

 
$
(3,115
)
 
$
154,903

 
(4,972.8
)%
Net income attributable to noncontrolling interests – Operating Partnership
(16,236
)
 
(2,525
)
 
(13,711
)
 
543.0
 %
 
(15,365
)
 
(403
)
 
(14,962
)
 
3,712.7
 %
Net loss attributable to noncontrolling interests – consolidated real estate entities
413

 
446

 
(33
)
 
(7.4
)%
 
1,239

 
16,585

 
(15,346
)
 
(92.5
)%
Net income attributable to controlling interests
136,105

 
23,110

 
112,995

 
488.9
 %
 
137,662

 
13,067

 
124,595

 
953.5
 %
Dividends to preferred shareholders
(1,766
)
 
(2,503
)
 
737

 
(29.4
)%
 
(6,864
)
 
(8,260
)
 
1,396

 
(16.9
)%
Redemption of Preferred Shares
(8
)
 
(1,435
)
 
1,427

 
(99.4
)%
 
(3,657
)
 
(1,435
)
 
(2,222
)
 
154.8
 %
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
$
134,331

 
$
19,172

 
$
115,159

 
600.7
 %
 
$
127,141

 
$
3,372

 
$
123,769

 
3,670.5
 %

28
Table of Contents

Revenues.  Revenues for the three months ended January 31, 2018 , were $43.3 million compared to $40.2 million in the three months ended January 31, 2017 , an increase of $3.0 million or 7.5% . The increase in revenue for the three months ended January 31, 2018 , resulted primarily from properties acquired in fiscal year 2018 and same-store properties, as shown in the table below.
 
(in thousands)
Increase in Total Revenue
Three Months Ended
January 31, 2018
Increase in revenue from non-same-store multifamily properties
$
4,308

Increase in revenue from same-store multifamily properties
1,587

Decrease in revenue from multifamily properties sold in fiscal years 2018 and 2017
(787
)
Decrease in revenue from other properties and other properties sold in fiscal years 2018 and 2017
(2,082
)
Net increase in total revenue
$
3,026

Revenues for the nine months ended January 31, 2018 , were $127.4 million compared to $118.7 million for the nine months ended January 31, 2017 , an increase of $8.7 million or 7.3% . The increase in revenue for the nine months ended January 31, 2018 , resulted primarily from properties acquired or placed in service in fiscal years 2018 and 2017 and same-store properties, as shown in the table below.
 
(in thousands)
Increase in Total Revenue
Nine Months Ended
January 31, 2018
Increase in revenue from non-same-store multifamily properties
$
9,584

Increase in revenue from same-store multifamily properties
3,925

Decrease in revenue from multifamily properties sold in fiscal years 2018 and 2017
(1,465
)
Decrease in revenue from other properties and properties sold in fiscal years 2018 and 2017
(3,371
)
Net increase in total revenue
$
8,673

Property operating expenses, excluding real estate taxes .  Property operating expenses, excluding real estate taxes, increased by 5.9% to $15.4 million in the three months ended January 31, 2018, compared to $14.6 million in the same period of the prior fiscal year.  An increase of $554,000 was attributable to non-same-store properties, while expenses at same-store properties increased by $301,000. 
Property operating expenses, excluding real estate taxes, increased by 13.6% to $47.0 million in the nine months ended January 31, 2018, compared to $41.4 million in the same period of the prior fiscal year.  Of this increase, $1.9 million was attributable to non-same-store properties, and $3.7 million was attributable to same-store properties.
Real Estate Taxes.  Real estate taxes increased by 13.9% to $4.6 million in the three months ended January 31, 2018, compared to $4.0 million in the same period of the prior fiscal year.  An increase of $278,000 was attributable to non-same store properties, while same-store properties increased by $283,000.
Real estate taxes increased by 13.9% to $13.9 million in the nine months ended January 31, 2018, compared to $12.2 million in the same period of the prior fiscal year.  An increase of $826,000 was attributable to non-same-store properties, while same-store properties realized an increase of $867,000.
Depreciation and Amortization. Depreciation and amortization increased by 70.5% to $18.4 million in the three months ended January 31, 2018, compared to $10.8 million in the same period of the prior fiscal year. This increase was primarily due to a change in the estimated useful lives of our assets.  See Note 2 of the Notes to the Condensed Consolidated Financial Statements in this report for additional information.
Depreciation and amortization related to real estate investments increased by 83.8% to $61.0 million in the nine months ended January 31, 2018, compared to $33.2 million in the same period of the prior fiscal year. This increase was primarily due to a change in the estimated useful lives of our assets. See Note 2 of the Notes to the Condensed Consolidated Financial Statements in this report for additional information.

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Table of Contents

Impairment of Real Estate Investments.  We recognized no impairment in the three months ended January 31, 2018 and 2017. We recognized $256,000 and $54.2 million of impairment during the nine months ended January 31, 2018 and 2017, respectively. See Note 2 of the Notes to the Condensed Consolidated Financial Statements in this report for additional information.
General and Administrative Expenses.  General and administrative expenses decreased by 27.8% to $3.0 million in the three months ended January 31, 2018, compared to $4.2 million in the same period of the prior fiscal year, primarily due to decreased salary and benefit costs. General and administrative expenses decreased by 9.5% to $10.1 million in the nine months ended January 31, 2018, compared to $11.2 million in the same period of the prior fiscal year, primarily due to decreased salary and benefit costs of $1.6 million, but partially offset by transition costs of $650,000.
Interest Expense.  Interest expense increased by 4.6% to $9.2 million in the three months ended January 31, 2018, compared to $8.8 million in the same period of the prior fiscal year, due to an increase in the average balance of our outstanding indebtedness. Interest expense decreased by 0.6% to $25.9 million in the nine months ended January 31, 2018, compared to $26.0 million in the same period of the prior fiscal year.
Gain (Loss) on Sale of Real Estate and Other Investments. We recorded in continuing operations net gains of $12.4 million and $2.4 million in the three months ended January 31, 2018 and 2017, respectively. We recorded in continuing operations a net gain of $17.8 million in the nine months ended January 31, 2018, compared to $11.3 million in the same period of the prior fiscal year. Properties sold in the three and nine months ended January 31, 2018 and 2017, are detailed below in the section captioned “Property Acquisitions and Dispositions.”  
Income from Discontinued Operations.  We recorded income from discontinued operations of $146.8 million and $25.0 million , respectively, in the three months ended January 31, 2018 and 2017, and $164.6 million and $44.8 million in the nine months ended January 31, 2018 and 2017, respectively. See Note 7 of the Notes to the Condensed Consolidated Financial Statements in this report for further information on discontinued operations.
Net Operating Income
Net Operating Income (“NOI”) is a non-U.S. GAAP measure, which we define as total real estate revenues less property operating expenses and real estate tax expense. We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, and general and administrative expenses.  NOI does not represent cash generated by operating activities in accordance with U.S. GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
The following table shows real estate revenue, real estate operating expenses, and NOI for the three and nine months ended January 31, 2018 and 2017, respectively, for our multifamily operating segment.  For a reconciliation of NOI to net income as reported, see Note 5 of the Notes to the Condensed Consolidated Financial Statements in this report.
The table also shows NOI on a same-store property and non-same-store property basis. Information provided on a same-store properties basis includes the results of multifamily properties that we have owned and operated for the entirety of both periods being compared (except for properties classified as held for sale) and which, in the case of development properties, have achieved a stabilized level of occupancy, which is generally 90%.
For comparison of the three and nine months ended January 31, 2018 and 2017, 27 multifamily properties were non-same-store, of which 11 were held for investment and 16 were sold properties. Of the 11 non-same-store properties held for investment, seven were in-service development properties.
This comparison allows us to evaluate the performance of existing properties and their contribution to net income. Management believes that measuring performance on a same-store property basis is useful to investors because it enables evaluation of how our properties are performing year-over-year. Management uses this measure to assess whether or not it has been successful in increasing NOI and controlling operating costs. The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from same-store properties.

30
Table of Contents

 
(in thousands, except percentages)
 
Three Months Ended January 31,
 
Nine Months Ended January 31,
 
2018
 
2017
 
$ Change
 
% Change
 
2018
 
2017
 
$ Change
 
% Change
Multifamily
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
$
32,093

 
$
30,506

 
$
1,587

 
5.2
%
 
$
95,961

 
$
92,036

 
$
3,925

 
4.3
 %
Non-same-store
9,186

 
5,665

 
3,521

 
62.2
%
 
23,483

 
15,364

 
8,119

 
52.8
 %
Total
$
41,279

 
$
36,171

 
$
5,108

 
14.1
%
 
$
119,444

 
$
107,400

 
$
12,044

 
11.2
 %
Real estate expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
$
14,457

 
$
13,829

 
$
628

 
4.5
%
 
$
44,617

 
$
40,077

 
$
4,540

 
11.3
 %
Non-same-store
3,774

 
2,507

 
1,267

 
50.5
%
 
9,967

 
6,704

 
3,263

 
48.7
 %
Total
$
18,231

 
$
16,336

 
$
1,895

 
11.6
%
 
$
54,584

 
$
46,781

 
$
7,803

 
16.7
 %
Net operating income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
$
17,636

 
$
16,677

 
$
959

 
5.8
%
 
$
51,344

 
$
51,959

 
$
(615
)
 
(1.2
)%
Non-same-store
5,412

 
3,158

 
2,254

 
71.4
%
 
13,516

 
8,660

 
4,856

 
56.1
 %
Total
$
23,048

 
$
19,835

 
$
3,213

 
16.2
%
 
$
64,860

 
$
60,619

 
$
4,241

 
7.0
 %
Net operating income from other properties
1,426

 
3,057

 
 
 
 
 
5,834

 
8,520

 
 
 
 
Property management and casualty (1)
(1,255
)
 
(1,283
)
 
 
 
 
 
(4,204
)
 
(4,002
)
 
 
 
 
Depreciation/amortization
(18,390
)
 
(10,787
)
 
 
 
 
 
(60,998
)
 
(33,193
)
 
 
 
 
Impairment of real estate investments
—

 
—

 
 
 
 
 
(256
)
 
(54,153
)
 
 
 
 
General and administrative expenses
(3,011
)
 
(4,172
)
 
 
 
 
 
(10,131
)
 
(11,195
)
 
 
 
 
Interest expense
(9,236
)
 
(8,832
)
 
 
 
 
 
(25,876
)
 
(26,033
)
 
 
 
 
Loss on debt extinguishment
(285
)
 
(458
)
 
 
 
 
 
(818
)
 
(458
)
 
 
 
 
Interest and other income
433

 
427

 
 
 
 
 
916

 
685

 
 
 
 
Loss before gain on sale of real estate and other investments and income from discontinued operations
(7,270
)
 
(2,213
)
 
 
 
 
 
(30,673
)
 
(59,210
)
 
 
 
 
Gain on sale of real estate and other investments
12,387

 
2,437

 
 
 
 
 
17,835

 
11,292

 
 
 
 
Income (loss) from continuing operations
5,117

 
224

 
 
 
 
 
(12,838
)
 
(47,918
)
 
 
 
 
Income from discontinued operations
146,811

 
24,965

 
 
 
 
 
164,626

 
44,803

 
 
 
 
Net income (loss)
$
151,928

 
$
25,189

 
 
 
 
 
$
151,788

 
$
(3,115
)
 
 
 
 
(1) Consists of off-site costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.
Occupancy (2)
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
95.2
%
 
92.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Non-same-store
90.1
%
 
86.7
%
 
 
 
 
 
 
 
 
 
 
 
 
Total
94.3
%
 
91.5
%
 
 
 
 
 
 
 
 
 
 
 
 
(2) Occupancy represents the actual number of units leased divided by the total number of units at the end of the period.
Number of Units
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
11,320

 
11,321

 
 
 
 
 
 
 
 
 
 
 
 
Non-same-store
2,466

 
1,843

 
 
 
 
 
 
 
 
 
 
 
 
Total
13,786

 
13,164

 
 
 
 
 
 
 
 
 
 
 
 
Real estate revenue from same-store properties increased by 5.2% or $1.6 million in the three months ended January 31, 2018, compared to the same period in the prior fiscal year.  The increase was primarily attributable to a 0.8% increase in average rental rates and a 4.4% increase in occupancy.
Real estate revenue from same-store properties increased by 4.3% or $3.9 million in the nine months ended January 31, 2018, compared to the same period in the prior fiscal year.  The increase was primarily attributable to a 2.3% increase in average rental rates and a 1.9% increase in occupancy.

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Table of Contents

Real estate expenses at same-store properties increased by 4.5% or $628,000 in the three months ended January 31, 2018, compared to the same period in the prior fiscal year. The increase was primarily attributable to the previously disclosed change in our capitalization policies, additional costs related to increasing occupancy, real estate tax increases at stabilizing developments, and an increase in levy rates in select markets. The increase was partially offset by a decrease in snow removal costs, a reduction in accruals related to self-funded healthcare costs, and a reduction in the expected real estate tax assessments in North Dakota.
Real estate expenses at same-store properties increased by 11.3% or $4.5 million in the nine months ended January 31, 2018, compared to the same period in the prior fiscal year. The increase was primarily attributable to the previously disclosed change in our capitalization policies, additional costs related to increasing occupancy, real estate tax increases at stabilizing developments, and an increase in levy rates in select markets. The increase was partially offset by a decrease in snow removal costs.
PROPERTY ACQUISITIONS AND DISPOSITIONS
During the third quarter of fiscal year 2018, we acquired one multifamily property for a purchase price of $90.6 million. During the third quarter of fiscal year 2018, we sold two multifamily properties, 27 healthcare properties, and two other commercial properties for a total sale price of $442.8 million . See Note 8 of the Notes to Condensed Consolidated Financial Statements in this report for a table detailing our acquisitions and dispositions during the nine-month periods ended January 31, 2018 and 2017. Subsequent to quarter-end, we entered into a purchase agreement to acquire Westend, a 390-unit multifamily apartment community located in downtown Denver, CO, which is expected to close during the fourth quarter of fiscal 2018, and sold a commercial property and adjacent parcel of unimproved land in Bismarck, ND, for an aggregate sale price of $5.5 million. See Note 15 of the Notes to Condensed Consolidated Financial Statements.
FUNDS FROM OPERATIONS
We consider Funds from Operations (“FFO”) to be a useful measure of performance for an equity REIT. We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT currently defines FFO as net income or loss attributable to common shareholders computed in accordance with GAAP, adjusted for:
•
gains or losses on sales of previously depreciated operating properties;
•
cumulative effect of changes in accounting principles;
•
impairment write-downs of depreciable real estate assets;
•
write-downs of investments in affiliates due to a decrease in value of depreciable real estate assets held by affiliates;
•
depreciation of real estate assets; and
•
adjustments for unconsolidated partnerships and joint ventures.
Due to limitations of the FFO definition adopted by NAREIT, we have made certain interpretations in applying the definition. We believe all such interpretations not specifically provided for in the NAREIT definition are consistent with the definition. Effective for the third quarter of fiscal year 2018, we included impairment charges for nondepreciable assets in FFO.
We believe that FFO, which is a standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets, thereby providing an additional perspective on our operating results. We believe that GAAP historical cost depreciation of real estate assets generally is not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. The exclusion in NAREIT’s definition of FFO of impairment write-downs and gains and losses from the sale of previously depreciated operating real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods. FFO is also used by our management and investors to identify trends in occupancy rates, rental rates and operating costs.
While FFO is widely used by us as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with U.S. GAAP, and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions.

32
Table of Contents

FFO applicable to Common Shares and Units for the three months ended January 31, 2018, decreased to $ 5.8 million compared to $ 12.7 million for the comparable period ended January 31, 2017, a change of 54.2% , primarily due to prepayment penalties related to mortgages on disposed properties. FFO applicable to Common Shares and Units for the nine months ended January 31, 2018, decreased to $ 28.3 million compared to $ 45.0 million for the comparable period ended January 31, 2017, a change of 37.0% , primarily due to prepayment penalties related to mortgages on disposed properties and a reduction in NOI as a result of disposition activity.
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
INVESTORS REAL ESTATE TRUST TO FUNDS FROM OPERATIONS  
 
(in thousands, except per share and unit amounts)
Three Months Ended January 31,
2018
 
2017
 
Amount
 
Weighted Avg
Shares and
Units (1)
 
Per Share
and
Unit (2)
 
Amount
 
Weighted Avg
Shares and
Units (1)
 
Per Share
and
Unit (2)
Net income attributable to controlling interests
$
136,105

 
 

 

 
$
23,110

 
 

 
 

Less dividends to preferred shareholders
1,766

 
 

 
 
 
2,503

 
 

 
 

Less redemption of preferred shares
8

 
 

 
 
 
1,435

 
 

 
 

Net income available to common shareholders
134,331

 
119,741

 
$
1.12

 
19,172

 
121,255

 
$
0.16

Adjustments:
 

 
 

 
 
 
 

 
 

 
 

Noncontrolling interests – Operating Partnership
16,236

 
14,434

 
 
 
2,525

 
16,120

 
 

Depreciation and amortization
19,017

 
 

 
 
 
12,933

 
 

 
 

Gains on depreciable property sales attributable to controlling interests
(163,791
)
 
 

 
 
 
(21,972
)
 
 

 
 

Funds from operations applicable to common shares and Units
$
5,793

 
$
134,175

 
$
0.04

 
$
12,658

 
$
137,375

 
$
0.09

 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except per share and unit amounts)
Nine Months Ended January 31,
2018
 
2017
 
Amount
 
Weighted Avg
Shares and
Units (1)
 
Per Share
and
Unit (2)
 
Amount
 
Weighted Avg
Shares and
Units (1)
 
Per Share
and
Unit (2)
Net income attributable to controlling interests
$
137,662

 
 

 

 
$
13,067

 
 

 
 

Less dividends to preferred shareholders
6,864

 
 

 
 
 
8,260

 
 

 
 

Less redemption of preferred shares
3,657

 
 

 
 
 
1,435

 
 

 
 

Net income available to common shareholders
127,141

 
120,102

 
$
1.06

 
3,372

 
$
121,175

 
$
0.03

Adjustments:
 

 
 

 
 
 
 

 
 

 
 

Noncontrolling interests – Operating Partnership
15,365

 
14,768

 
 
 
403

 
16,229

 
 

Depreciation and amortization
67,030

 
 

 
 
 
39,341

 
 

 
 

Impairment of real estate attributable to controlling interests
256

 
 

 
 
 
39,190

 
 

 
 

Gains on depreciable property sales attributable to controlling interests
(181,477
)
 
 

 
 
 
(37,330
)
 
 

 
 

Funds from operations applicable to common shares and Units
$
28,315

 
$
134,870

 
$
0.21

 
$
44,976

 
$
137,404

 
$
0.33

(1)    Upon the exercise of Exchange Rights, Units of the Operating Partnership are exchangeable for cash or, at our discretion, for Common Shares on a one-for-one basis.
(2)
Net income attributable to Investors Real Estate Trust is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.
DISTRIBUTIONS
The following distributions per Common Share and Unit were paid during the nine months ended January 31, 2018 and 2017:
Month
Fiscal Year 2018

 
Fiscal Year 2017

 
July
$
0.07

 
$
0.13

 
October
$
0.07

 
$
0.13

 
January
$
0.07

 
$
0.13

(1)  
(1)    Includes a special distribution of $.06 per Common Share/Unit


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LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Financial Condition
We desire to create and maintain a strong balance sheet that offers financial flexibility and enables us to pursue and acquire properties that enhance our portfolio composition, operating metrics, and cash flow growth prospects. We intend to strengthen our capital and liquidity positions by continuing to focus on improving our core fundamentals, which include generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs.
Our primary sources of liquidity are cash and cash equivalents on hand and cash flows generated from operations. Other sources include availability under our unsecured line of credit, proceeds from property dispositions, offerings of preferred and common stock under our shelf registration statement, and other short-term unsecured borrowings or long-term secured mortgages.
Our primary liquidity demands are normally-recurring operating and overhead expenses, debt service and repayments, capital improvements to our properties, distributions to the holders of our preferred shares, Common Shares, and Units, value-add redevelopment, and acquisition of additional properties.
We believe that our financial condition and liquidity are sufficient to meet our reasonably anticipated liquidity demands during fiscal year 2018 and fiscal year 2019. Factors that could increase or decrease our future liquidity include, but are not limited to, volatility in capital and credit markets, our ability to access capital and credit markets, the minimum REIT dividend requirements, and our ability to complete asset purchases, sales, or developments.
Capital Resources and Cash Flows
As of January 31, 2018, we had total liquidity of approximately $174.9 million, which includes $152.2 million available on our line of credit and $22.7 million of cash and cash equivalents. As of April 30, 2017, we had total liquidity of approximately $177.7 million, which included $148.9 million on our line of credit and $28.8 million of cash and cash equivalents.
As of January 31, 2018, we also had restricted cash consisting of $116.8 million of net tax-deferred exchange proceeds remaining from the sale of our healthcare portfolio and $4.5 million of escrows held by lenders for real estate taxes, insurance, and capital additions. As of April 30, 2017, we had restricted cash consisting of $23.7 million of net tax-deferred exchange proceeds remaining from a portion of our senior housing sale, and $4.3 million of escrows held by lenders for real estate taxes, insurance and capital additions.
Our line of credit has total commitments of $300.0 million, with borrowing capacity based on the value of properties contained in an unencumbered asset pool (UAP). Due to the recent disposition of our healthcare properties, the UAP provided for a borrowing capacity of approximately $219.1 million at quarter-end, offering additional borrowing availability of $152.2 million beyond the $67.0 million drawn as of January 31, 2018. At April 30, 2017, the line of credit borrowing capacity was $206.0 million based on the UAP, of which $57.1 million was drawn on the line.
During the quarter ended January 31, 2018, we entered into a $70.0 million unsecured term loan that matures on January 31, 2023. We have the option to increase the credit capacity to $500.0 million (from current aggregate commitments totaling $370.0 million), either by adding additional banks to the facility or obtaining agreements from the existing banks to increase their commitments.
For information regarding our cash flows for the nine months ended January 31, 2018, and 2017, see the Condensed Consolidated Statements of Cash Flows in Part I, Item 1 above.
In addition to cash flow from operations, during the nine months ended January 31, 2018, we generated capital from various activities, including:
•
Disposing of 15 multifamily properties, 33 other properties, and one land parcel for total proceeds of approximately $509.6 million;
•
Issuing $103.0 million of 6.625% Series C Cumulative Redeemable Preferred Shares, with net proceeds of approximately $99.5 million; and
•
Closing a $70.0 million term loan that expires in 2023.

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Table of Contents

During the nine months ended January 31, 2018, we used capital for various activities, including:
•
Acquiring three apartment properties for approximately $244.4 million;
•
Redeeming the full outstanding balance of our 7.95% Series B Cumulative Redeemable Preferred Shares for approximately $115.0 million;
•
Repaying approximately $143.3 million of mortgage principal;
•
Repurchasing approximately 1.2 million Common Shares and redeeming approximately 1.4 million Units for an aggregate total cost of approximately $15.7 million;
•
Seller-financing associated with a disposition of approximately $11.0 million and funding a note receivable for a third-party apartment development of approximately $10.2 million; and
•
Funding multifamily capital expenditures of approximately $10.2 million.
Inflation
Substantially all of our apartment leases are for a term generally ranging from six to eighteen months. In an inflationary environment, we may realize increased rents at the commencement of new leases or upon the renewal of existing leases. We believe the short-term nature of our leases generally minimizes our risk from the adverse effects of inflation.
CRITICAL ACCOUNTING POLICIES
In preparing the condensed consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. A summary of our critical accounting policies is included in our Form 10-K for the fiscal year ended April 30, 2017, filed with the SEC on June 28, 2017, under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Effective May 1, 2017, we reviewed and changed the estimated useful lives of our real estate assets to better reflect the estimated periods during which these assets will be of economic benefit. Generally, the estimated lives of buildings and improvements that previously were 20-40 years have been decreased to 10-30 years, while those that were previously nine years were changed to 5-10 years. There have been no other significant changes to our critical accounting policies during the three or nine months ended January 31, 2018.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is primarily related to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations. We currently use an interest rate swap to offset the impact of interest rate fluctuations on our $70.0 million variable-rate term loan. The swap has a notional amount of $70.0 million, an average pay rate of 2.16%, and a fair value of $359,000. We do not enter into derivative instruments for trading or speculative purposes. The interest rate swap exposes us to credit risk in the event of non-performance by the counterparty under the terms of the agreement.
As of January 31, 2018, we had $61.0 million of variable-rate mortgage debt outstanding and $67.0 million of variable-rate borrowings under our line of credit. We estimate that an increase in 30-day LIBOR of 100 basis points with constant risk spreads would result in our net income being reduced by approximately $1.3 million on an annual basis. We estimate that a decrease in 30-day LIBOR of 100 basis points would increase the amount of net income by a similar amount.
Mortgage loan indebtedness decreased by $131.0 million as of January 31, 2018, compared to April 30, 2017, due to loan payoffs and property dispositions. As of January 31, 2018, 89.0% of our $555.9 million of mortgage debt was at fixed rates of interest, with staggered maturities, compared to 91.6% as of April 30, 2017. As of January 31, 2018, the weighted average rate of interest on our mortgage debt was 4.63%, compared to 4.71% on April 30, 2017. Even though our goal is to maintain a fairly low exposure to interest rate risk, we may become vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt and on future debt.
The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Average variable rates are based on rates in effect at the reporting date.

35
Table of Contents

 
(in thousands, except for interest rates)

Remaining
Fiscal 2018
 
Fiscal 2019
 
Fiscal 2020
 
Fiscal 2021
 
Fiscal 2022
 
Thereafter
 
Total
 
Fair Value
Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate
$
2,349

 
$
24,387

 
$
93,475

 
$
92,279

 
$
72,191

 
$
210,193

 
$
494,874

 
$
494,251

Average Interest Rate (1)
4.67
%
 
4.47
%
 
4.24
%
 
3.64
%
 
3.35
%
 
3.83
%
 
 
 
 
Variable Rate (2)
$
369

 
$
6,678

 
$
53,317

 
$
67,029

 
$
608

 
$
70,000

 
$
198,001

 
$
198,001

Average Interest Rate (1)
3.91
%
 
3.92
%
 
3.98
%
 
3.45
%
 
3.97
%
 
3.42
%
 
 
 
 
(1)
Interest rate is annualized.
(2)
Excludes the effect of the interest rate swap agreement.

36
Table of Contents

ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures :  
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of January 31, 2018, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting :  
There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

37
Table of Contents

PART II — OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
There have been no material changes to the Risk Factors previously disclosed in Item 1A in our Annual Report on Form 10-K for the year ended April 30, 2017.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  
Sales of Securities
During the third quarter of fiscal year 2018, we did not issue any unregistered Common Shares to limited partners of the Operating Partnership.
Item 3. Defaults Upon Senior Securities  
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
On January 2, 2018, we filed a Form 8-K to report the completion of the sale of 25 medical office buildings to Harrison Street Real Estate LLC (the "Purchaser"). These properties were sold pursuant to the terms of a Purchase and Sale Agreement, dated as of November 30, 2017, as subsequently amended, between IRET and the Purchaser, which transaction was reported on a Form 8-K dated November 30, 2017. Although the transactions were reported in a timely manner, we neglected to update the Date of Report (which is included on the cover page) of the Form 8-K that was filed on January 2, 2018. As a result, that cover page read "November 30, 2017" rather than "January 2, 2018."

38
Table of Contents

Item 6. Exhibits
The following exhibits are filed as part of this Report.
 
EXHIBIT INDEX
Exhibit No.
Description
1.1
3.1
 
3.2
10.1*
10.2*
31.1*
31.2*
32.1*
32.2*
101 INS**
INSTANCE DOCUMENT
101 SCH**
SCHEMA DOCUMENT
101 CAL**
CALCULATION LINKBASE DOCUMENT
101 LAB**
LABELS LINKBASE DOCUMENT
101 PRE**
PRESENTATION LINKBASE DOCUMENT
101 DEF**
DEFINITION LINKBASE DOCUMENT
*
Filed herewith
**
Submitted electronically herewith.  Attached as Exhibit 101 are the following materials from our Quarterly Report on Form 10-Q for the quarter ended January 31, 2018, formatted in eXtensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) notes to these condensed consolidated financial statements.

39
Table of Contents

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, thereunto duly authorized.
INVESTORS REAL ESTATE TRUST
(Registrant)
/s/ Mark O. Decker, Jr.
 
Mark O. Decker, Jr.
 
President and Chief Executive Officer
 
 
 
/s/ John A. Kirchmann
 
John A. Kirchmann
 
Executive Vice President and Chief Financial Officer
 
 
 
Date: March 12, 2018
 

40









PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP,
together with certain affiliates as more particularly set forth herein
AND
HARRISON STREET REAL ESTATE, LLC, A DELAWARE LIMITED LIABILITY COMPANY
DATED
NOVEMBER 30, 2017

EAST\148676904.7


Table of Contents
 
 
 
 
 
 
 
 
1.1
Affiliate
 
 
1.2
Agreement
 
 
1.3
Broker
 
 
1.4
Closing
 
 
1.5
Closing Date
 
 
1.6
Commitments
 
 
1.7
Contingency Date
 
 
1.8
Contracts
 
 
1.9
Due Diligence Period
 
 
1.10
Earnest Money
 
 
1.11
Ground Leased Sites
 
 
1.12
Ground Leases
 
 
1.13
Hazardous Materials
 
 
1.14
Hazardous Materials Laws
 
 
1.15
Improvements
 
 
1.16
Intangible Personal Property
 
 
1.17
Land
 
 
1.18
Leases
 
 
1.19
Licenses and Permits
 
 
1.20
Major Tenant
 
 
1.21
Non-Disclosure Agreement
 
 
1.22
Owned Sites
 
 
1.23
Permitted Exceptions
 
 
1.24
Personal Property
 
 
1.25
Properties
 
 
1.26
Purchase Price
 
 
1.27
Real Property
 
 
1.28
Retained Liabilities
 
 
1.29
Surveys
 
 
1.30
Tangible Personal Property
 
 
1.31
Title Company
 
 
1.32
Title Evidence
 
Article 2. Purchase and Sale
 
Article 3. Purchase Price
 
 
3.1
Amount
 
 
3.2
Manner of Payment
 
Article 4. Closing
 
 
4.1
Closing Date
 




 
4.2
Seller's Closing Documents
 
 
4.3
Notice to Tenants
 
 
4.4
Purchaser's Closing Documents
 
 
4.5
Purchaser's Closing Deliveries
 
 
4.6
Closing Escrow
 
 
4.7
Closing Adjustments
 
 
4.8
Possession
 
Article 5 Title Examination
 
 
5.1
Title Evidence
 
 
5.2
Purchaser's Objections and Requirements
 
 
5.3
Correction of Title
 
Article 6. Conditions Precedent
 
 
6.1
Conditions in Favor of Purchaser
 
 
6.2
Conditions inf Favor of Seller
 
Article 7. Representations and Warranties
 
 
7.1
Seller's Representations and Warranties
 
 
7.2
Purchaser's Representations and Warranties
 
Article 8. Inspection; Due Diligence Period; Condition of Property at Closing
 
 
8.1
Inspections; Right of Entry
 
 
8.2
Due Diligence
 
 
8.3
Conditions of Properties at Closing
 
 
8.4
Estoppel Certificates
 
 
8.5
Tenant Communications
 
 
8.6
Purchaser's Reliance on its Investigations; "As Is" Sale
 
Article 9. Operation Pending Closing
 
 
9.1
Existing Operations
 
 
9.2
New Contracts and Leases
 
 
9.3
Termination of Service Contracts
 
Article 10. Damage or Destruction
 
Article 11. Condemnation
 
Article 12. Brokers
 
Article 13. Default
 
 
13.1
Default by Purchaser
 
 
13.2
Default by Seller
 
Article 14. Termination
 
Article 15. Assignability
 
Article 16. Confidentiality
 
 
16.1
General
 
 
16.2
Permitted Disclosures
 
 
16.3
Representatives
 
 
16.4
Public Disclosures
 
 
16.5
Survival
 
Article 17. Notices
 





Article 18. Deferred Exchange
 
Article 19. Miscellaneous
 
 
19.1
Entire Agreement; Modification
 
 
19.2
Survival; No Merger
 
 
19.3
Governing Law
 
 
19.4
Severability
 
 
19.5
Time of Essence
 
 
19.6
Construction
 
 
19.7
Captions, Gender, Number and Language of Inclusion
 
 
19.8
Binding Effect
 
 
19.9
Counterparts
 
 
19.10
Limitation of Liability
 

Exhibits
Exhibit A :    Schedule of Properties and Allocated Values
Exhibit B :    Legal Descriptions of Land
Exhibit C :    Reserved
Exhibit D :    Primary Tenant Estoppel Certificates
Exhibit E :    Forms of Deeds
Exhibit F :    Form of Assignment of Ground Lease
Exhibit G :    Form of Quitclaim Bill of Sale
Exhibit H :
Form of Assignment and Assumption of Leases, Warranties and Contracts
Exhibit I :
Form of Tenant Notice
Exhibit J :
Form of Tenant Estoppel Certificate
Exhibit K :    Form of Ground Lease Estoppel Certificate
Exhibit L-1     Requested CC&R Estoppels
Exhibit L-2     Material Campus Declaration Estoppels
Exhibit M     Form of CC&R Estoppel
Exhibit N     Due Diligence Materials

Schedules
Schedule 7.1.2        Ground Leases
Schedule 7.1.3        Leases
Schedule 7.1.4        Contracts
Schedule 7.1.5        ROFOs, ROFRs, Purchase Options
Schedule 9.3        Pending Capital Improvement Projects






PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (“Agreement”) is made as of the 30th day of November, 2017 (“Effective Date”), by and between IRET Properties, a North Dakota limited partnership (“IRET Properties”), SMB Operating Company, LLC, a Delaware limited liability company (“SMB”), Missoula 3050 CBR, LLC, a North Dakota limited liability company (“IRET Missoula”), IRET - Billings 2300 CBR, LLC, a North Dakota limited liability company (“IRET Billings”), Minnesota Medical Investors, LLC, a Delaware limited liability company (“MN Medical”, and together with IRET Properties, SMB, IRET Missoula and IRET Billings, collectively, “Seller”), and Harrison Street Real Estate, LLC, a Delaware limited liability company (“Purchaser”).
Purchaser desires to purchase a portfolio of medical office building properties (collectively, the “Properties” or each a “Property”) both owned and ground leased by Seller (the applicable individual Seller for each Property being as listed on Exhibit A hereto), and Seller desires to sell all such owned Properties and assign Seller’s rights as lessee under all such ground leased Properties to Purchaser pursuant to the terms and conditions set forth in this Agreement.
Accordingly, Seller and Purchaser agree as follows:
Article 1. Definitions .
The following terms shall have the meanings set forth below:
1.1      Affiliate . With respect to any person or entity, any person or entity directly or indirectly controlling, controlled by, or under common control with such person or entity. Control for such purposes shall mean either the ownership of 50% or more of the direct or indirect beneficial interests in the subject entity or the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, by contract, or otherwise.
    
1.2      Agreement . This Agreement, including the following exhibits attached hereto and hereby made a part hereof:
Exhibit A :    Schedule of Properties and Allocated Values
Exhibit B :    Legal Descriptions of Land
Exhibit C :    Reserved
Exhibit D :    Primary Tenant Estoppel Certificates
Exhibit E :    Forms of Deed
Exhibit F :    Form of Assignment of Ground Lease

5


Exhibit G :    Form of Quitclaim Bill of Sale
Exhibit H :
Form of Assignment and Assumption of Leases, Warranties and Contracts
Exhibit I :
Form of Tenant Notice
Exhibit J :
Form of Tenant Estoppel Certificate
Exhibit K :
Form of Ground Lease Estoppel Certificate
Exhibit L-1
Requested CC&R Estoppels
Exhibit L-2
Material Campus Declaration Estoppels
Exhibit M
Form of CC&R Estoppel
Exhibit N
Due Diligence Materials
1.3      Broker . BMO Capital Markets and CBRE, Inc.
1.4      Closing . Concurrently, the transfer of title to the Owned Properties, and the assignment of leasehold title to the Ground Leased Properties, to Purchaser, the payment to Seller of the Purchase Price, and the performance by each party of the other obligations on its part then to be performed, all in accordance with Article 4 herein.
1.5      Closing Date . The date on which the Closing shall occur as provided in Section 4.1, subject to Section 5.3 and any other provision of this Agreement which provides for postponement of the Closing Date.
1.6      Commitments . The owner’s and leasehold title insurance commitments with respect to the Real Property delivered to Purchaser prior to the Effective Date and described in Section 5.1.1.
1.7      Contingency Date . December 22, 2017.
1.8      Contracts . Collectively, all service contracts, operating contracts and equipment leases, if any, in effect with respect to the Properties.

1.9      Due Diligence Period . The period between the Effective Date and the Contingency Date.
1.10      Earnest Money . The earnest money deposit, together with any interest earned thereon, paid by Purchaser and held by Title Company as described Section 3.2.1.
1.11      Ground Leased Sites . The Real Property for which Seller is ground lessee pursuant to applicable ground leases, as identified on attached Exhibit A .





1.12      Ground Leases . The ground leases in effect with respect to the Ground Lease Sites, including all amendments, modifications and supplements thereto.

1.13      Hazardous Materials . Any chemical, substance, waste, material, gas, microorganism or emission which is deemed hazardous, toxic, a pollutant or a contaminant under any Hazardous Materials Law (as hereinafter defined), or which has been shown to have significant adverse effects on human health or the environment. "Hazardous Materials" shall include, without limitation, petroleum and petroleum products, asbestos, chlorofluorocarbons, radon gas, polychlorinated biphenyls and stachybotrys.
1.14      Hazardous Materials Laws . All statutes, ordinances, bylaws, rules and regulations, executive orders and other administrative orders, judgments, decrees, injunctions or other judicial orders of or by any governmental authority, now or hereafter in effect, relating to pollution or protection of human health or the environment, including, without limitation, any of the foregoing relating to emissions, discharges, releases or threatened releases, manufacturing, processing, distribution, use, treatment, storage, disposal, transport or handling of materials or substances that may be harmful to human health, safety or the environment, including, without limitation, CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§9601 et seq., as amended by SARA (Superfund Amendment and Reauthorization Act of 1986) and as may be further amended from time to time), the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§6901 et seq.
1.15      Improvements . With respect to each parcel of Real Property, all buildings, structures, fixtures and other improvements located on the Land.
1.16      Intangible Personal Property . All of Seller’s right, title and interest, if any, in and to all of the following items, to the extent assignable and without representation or warranty from Seller except as expressly set forth herein: (A) all Licenses and Permits; (B) trade name of any of the Properties (if any) in connection with the Properties; (C) if still in effect, any warranties or guaranties received by Seller from any contractor, manufacturer or other person in connection with the construction and operation of the Properties; (D) all architectural drawings, plans, construction drawings, CAD files or other plans and drawings of the Improvements; and (E) all books, records, tenant files, vendor files and operating manuals pertaining to the Properties; but, Intangible Personal Property shall specifically exclude any and all trademarks, service marks and trade names (except as set forth in clause (B) above) of Seller and Seller’s Affiliates, and with reservation by Seller to use such names in connection with other property owned by Seller.

1.17      Land . The real property for each of the Properties, including both the Owned Sites and the Ground Leased Sites, as identified and legally described on attached Exhibit B .
1.18      Leases . The various tenant building leases, subleases, space licenses or other occupancy agreements in effect with respect to each of the Properties.
 





1.19      Licenses and Permits . All licenses and permits relating to the construction, development, occupancy and operation of the Properties
1.20      Major Tenant . A tenant that, together with its Affiliates, leases 5,000 square feet or more of gross leasable area pursuant to one or more Leases at any individual Property.

1.21      Non-Disclosure Agreement . That certain Non-Disclosure Agreement by and between Investors Real Estate Trust and Purchaser, dated August 23, 2017.
1.22      Owned Sites . The Real Property owned by Seller in fee simple, as identified on attached Exhibit A .
1.23      Permitted Exceptions . With respect to each Property, the matters affecting title to the Real Property that are determined to be Permitted Exceptions pursuant to Section 5.2.
1.24      Personal Property . Collectively, the Tangible Personal Property and the Intangible Personal Property.
1.25      Properties . The Real Property, the Personal Property, the Leases and the Contracts to be assumed by Purchaser in accordance with the terms hereof, collectively for each Property (including both the Owned Sites and the Ground Leased Sites), together with all right, title and interest of Seller in and to appurtenances of the Real Property, including easements or rights-of-way relating thereto, as identified and valued on attached Exhibit A .
1.26      Purchase Price . The purchase price for the Properties, as described in Article 3.
1.27      Real Property . Collectively, the Land and the Improvements for both the Owned Sites and the Ground Leased Sites.
1.28      Retained Liabilities . All liabilities with respect to the ownership and operation of the Properties arising out of matters occurring prior to the Closing Date, including, without limitation, the payment of state, local, or federal taxes and assessments except to the extent of any credit received by Purchaser at Closing with respect thereto, third-party claims or litigation related to the Properties and arising out of or pertaining to matters occurring prior to the Closing Date and liabilities pertaining to any employees of Seller or the Properties for the period prior to Closing.
1.29      Surveys . The existing, and, if applicable, updated surveys of the Real Property as described in Section 5.1.2.
1.30      Tangible Personal Property . The items of personal property for each of the Properties, including without limitation all fixtures, furniture, equipment, and other tangible personal property, if any, owned by Seller and presently located on the Land, but excluding any items of personal property owned by tenants, any managing agent, or unaffiliated third parties.

1.31      Title Company . First American Title Insurance Company.





1.32      Title Evidence . The title evidence with respect to each of the Properties as described, in Section 5.1 herein.
Article 2.      Purchase and Sale .
Seller hereby agrees to sell, and Purchaser hereby agrees to purchase, upon and subject to the terms and conditions hereinafter set forth, the Properties.
Article 3.      Purchase Price .
3.1      Amount . Purchaser shall pay to Seller as and for the Purchase Price for the Properties the sum of Four Hundred Seventeen Million Five Hundred Thousand and No/100s Dollars ($417,500,000.00).
3.2      Manner of Payment . The Purchase Price shall be payable as follows:
3.2.1      Four Million Five Hundred Thousand and No/100s Dollars ($4,500,000.00) as Earnest Money to be deposited with the Title Company within five (5) days of the Effective Date, the receipt of which is hereby acknowledged, and which shall be held and disbursed pursuant to the terms of this Agreement. The Title Company shall invest the Earnest Money in government insured, interest‑bearing accounts satisfactory to Purchaser and Seller, shall not commingle the Earnest Money with any funds of the Title Company or others. The Title Company shall promptly provide Purchaser and Seller with confirmation of the investments made. If the Closing under this Agreement occurs, the Title Company shall apply the Earnest Money to the Purchase Price at Closing and deliver it to Seller. Otherwise, the Earnest Money promptly shall be delivered to Seller or Purchaser in accordance with the provisions of this Agreement
3.2.2      The balance of the Purchase Price in cash or by wire transfer of immediately available funds on the Closing Date.
Article 4.      Closing .
4.1      Closing Date . The Closing shall occur on the earlier of (a) December 28, 2017, or (b) five (5) business days after the date when Purchaser shall notify Seller that all of the contingencies in Section 6.1 have been waived by Purchaser or satisfied, as such date may be adjourned in accordance with the express terms hereof. The Closing shall occur on the Closing Date at the offices of Title Company or at such other place, date and time as Seller and Purchaser may agree.
4.2      Seller’s Closing Documents . At or before Closing, Seller shall execute, acknowledge (where appropriate), and deliver to Purchaser the following, each dated as of the Closing Date.
4.2.1      The limited warranty deeds (collectively, “Deeds”), for each of the Owned Sites, utilizing the form are attached hereto as Exhibit E , conveying to Purchaser fee simple title to the Owned Sites, subject only to Permitted Exceptions.





4.2.2      The assignments of ground leases assigning to Purchaser all of Seller’s rights, and delegating to Purchaser all of Seller’s duties, under the ground leases for each of the Ground Leased Sites, in the form of attached Exhibit F (collectively, “Ground Lease Assignments”), and to the extent either required by the Title Company or requested by Purchaser and consistent with the means through which title thereto was vested in Seller, a supplemental quitclaim deed with respect to the improvements located on the Ground Leased Sites in the customary form used in the applicable jurisdiction.
4.2.3      A quitclaim bill of sale conveying to Purchaser the tangible items of Personal Property owned by Seller and located on each of the Properties in the form of attached Exhibit G .
4.2.4      An Assignment and Assumption of Leases, Warranties, Contracts and Intangible Personal Property assigning to Purchaser all of Seller’s right, title and interest in the Leases, warranties and Contracts and Intangible Personal Property with respect to the Properties in the form of attached Exhibit H (“Assignment and Assumption”).
4.2.5      An affidavit of Seller regarding liens, judgments, residence, tax liens, bankruptcies, parties in possession, survey and mechanics’ or materialmens’ liens and other matters affecting title to the Real Property in the form required by the Title Company, including without limitation, any “gap indemnity” required by the Title Company.
4.2.6      A Foreign Investment in Real Property Tax Act (“FIRPTA”) affidavit stating that Seller is not a “foreign person”, “foreign partnership”, “foreign trust” or “foreign estate” as those terms are defined in Section 1445 of the Internal Revenue Code.
4.2.7      All other documents and instruments which (a) Title Company may reasonably determine are necessary to evidence the authority of Seller to enter into and perform this Agreement and the documents and instruments required to be executed and delivered by Seller pursuant to this Agreement, or (b) may be required of Seller under applicable law, including any revenue or tax certificates or statements, or any affidavits, certifications or statements relating to the environmental condition of any of the Real Property, the presence (or absence) of wells about the Real Property, the presence (or absence) of storage tanks about the Real Property, or the extent of compliance of any of the Real Property with applicable law.
4.2.8      A settlement statement consistent with the terms of this Agreement.
4.2.9      The Ground Lease Estoppel Certificates, the Required Tenant Estoppel Certificates, the Material Declaration Estoppel Certificates and any Seller Estoppel Certificate, as provided in Section 8.4 herein.
4.2.10      A current rent roll for the Leases relating to each Property, certified by Seller to Purchaser to be true and correct as of the Closing Date (“Rent Roll”).





4.2.10    A “bring-down” certificate of Seller certifying that, except to the extent the express terms of this Agreement permit otherwise, the representations and warranties of Seller set forth herein are true and correct in all material respects as of the Closing Date.
4.3      Notice to Tenants . Immediately after Closing, Seller and Purchaser shall deliver to each tenant under the Leases a notice regarding the sale and the change in ownership in substantially the form of Exhibit I attached hereto, or such other form as may be required by applicable state law.
4.4      Purchaser’s Closing Documents . At Closing, Purchaser shall execute, acknowledge (where appropriate), and deliver to Seller the following, each dated as of the Closing Date:
4.4.1      The Assignment and Assumption.
4.4.2      The Ground Lease Assignments.
4.4.3      All documents and instruments, each executed and acknowledged (where appropriate) by Purchaser, which (a) Seller or Title Company may reasonably determine are necessary to evidence the authority of Purchaser to enter into and perform this Agreement and the documents and instruments required to be executed and delivered by Purchaser pursuant to this Agreement, or (b) may be required of Purchaser under applicable law, including any purchaser’s affidavits or revenue or tax certificates or statements.
4.4.4      A settlement statement consistent with the terms of this Agreement executed by Purchaser.
4.4.5      A “bring-down” certificate of Purchaser certifying that, except to the extent the express terms of this Agreement permit otherwise, the representations and warranties of Purchaser set forth herein are true and correct in all material respects as of the Closing Date.
4.5      Purchaser’s Closing Deliveries . At Closing, Purchaser shall cause the following to be delivered to Seller:
4.5.1      The Purchase Price, payable pursuant to Section 3.2.2, as adjusted pursuant to Section 4.7, by wire transfer of immediately available funds. The Earnest Money shall be applied to and credited against the Purchase Price and shall be disbursed to Seller by Title Company at closing.
4.6      Closing Escrow . Purchaser and Seller shall deposit their respective Closing deliveries described above with Title Company with appropriate instructions for recording and disbursement consistent with this Agreement prior to the Closing Date, except that Purchaser shall not be required to deliver the Purchase Price into escrow until the Closing Date.
4.7      Closing Adjustments . The following adjustments shall be made at Closing:





4.7.1      General real estate taxes applicable to any of the Real Property due and payable in the year of Closing, together with all special assessments payable therewith, shall be prorated between Seller and Purchaser on a daily basis as of the Closing Date based upon a calendar fiscal year, with Seller paying amounts allocable to the period on and prior to the Closing Date and Purchaser being responsible for amounts allocable subsequent thereto.
4.7.2      With respect to the Ground Leased Sites, any and all rents, additional rents, operating expenses, real estate taxes, and any other amounts owed or credited pursuant to the applicable ground leases for each of the Ground Leased Sites (collectively, the “Ground Leases”) shall be prorated between Seller and Purchaser on a daily basis as of the Closing Date, with Seller retaining the charges and credits allocable to the period on and prior to the Closing Date and Purchaser being responsible for the charges and credits allocable subsequent to the Closing Date.
4.7.3      Personal property taxes applicable to any of the Personal Property due and payable in the year of Closing shall be prorated between Seller and Purchaser on a daily basis as of the Closing Date based upon a calendar fiscal year, with Seller paying amounts allocable to the period on and prior to the Closing Date and Purchaser being responsible for amounts allocable subsequent to the Closing Date.
4.7.4      Purchaser shall assume all special assessments (and charges in the nature of or in lieu of such assessments) due and payable with respect to the period following the Closing Date with respect to any of the Real Property.
4.7.5      Purchaser shall pay all sales tax due regarding this transaction.
4.7.6      Seller shall pay all state deed tax or any transfer taxes or fees regarding the Deeds to be delivered by Seller to Purchaser or the conveyance of the Real Property to Purchaser at Closing. Purchaser shall pay any mortgage registry tax or any similar taxes or fees regarding any mortgage(s) given by Purchaser on the Real Property in connection with this transaction.
4.7.7      Purchaser shall pay the cost of recording all documents, including the Deeds and Ground Lease Assignments.
4.7.8      Seller will pay all costs associated with the issuance of the Commitments.
4.7.9      Seller shall pay all premiums required for a standard owner’s title insurance policies, and Purchaser shall pay all premiums required any mortgagee’s title insurance policies and any extended owner’s title insurance coverage, including any endorsements issued in connection with such policies.
4.7.10      Seller and Purchaser shall each pay one half (1/2) of any Closing fee payable to Title Company with respect to the transaction(s) contemplated by this Agreement.





4.7.11      All utility expenses, including water, fuel, gas, electricity, telephone, sewer, trash removal, heat and other services furnished to or provided for the each of the Properties paid by Seller shall be prorated between Seller and Purchaser on a daily basis as of the Closing Date, with Seller paying amounts allocable to the period on and prior to the Closing Date and Purchaser being responsible for amounts allocable subsequent to the Closing Date. Seller agrees to have all meters with respect to any such utilities read as of the Closing Date.
4.7.12      Seller shall be responsible for all leasing commission, tenant allowances, tenant improvement costs and free rent periods applicable to the Leases (collectively, “Leasing Costs”), if any, for any Leases (including amendments, extensions or renewals thereof) executed prior to the Effective Date, and Purchaser shall be responsible for all Leasing Costs for Leases executed on or after the Effective Date; provided that Purchaser shall be responsible for Leasing Costs payable in connection with an extension and amendment of the Fairview Health Services Leases executed prior to the Effective Date if Purchaser has provided its prior approval to the material terms thereof (including the amount of the commissions payable in connection therewith) prior to the Effective Date.
4.7.13      All other operating costs of the Properties shall be prorated between Seller and Purchaser on a daily basis as of the Closing Date, with Seller paying amounts allocable to the period on and prior to the Closing Date and Purchaser being responsible for amounts allocable subsequent to the Closing. To the extent any operating expenses of the Properties (including real estate taxes and special assessments) are reimbursable by tenants under the Leases, Purchaser shall pay to Seller the amount of such operating expenses actually paid by Seller and reimbursable by tenants under the Leases but not yet reimbursed as of the Closing Date as and when collected from the applicable tenants following Closing. To the extent any reconciliation of operating expenses and other amounts payable by tenants under their Leases for the period prior to Closing results in amounts being due, reimbursed or credited to such tenants, Seller shall reimburse Purchaser for such amounts within ten (10) business days of notice thereof from Purchaser. Notwithstanding the foregoing, to the extent Seller is aware as of the Closing Date of any overcharge to tenants for reimbursable expenses payable with respect to the period prior to Closing, Seller shall instead credit Purchaser for such amounts at Closing and Purchaser shall thereafter be responsible for reimbursing or crediting such amounts to the applicable tenants. Following Closing, Seller shall reasonably cooperate with Purchaser in the preparation of any required cost reconciliation with respect to the tenants under the Leases for periods prior to the Closing Date.
4.7.14      All rent and other charges payable by tenants under the Leases and collected by Seller shall be prorated between Seller and Purchaser on a daily basis as of the Closing Date, with Seller retaining the charges, payments and credits allocable to the period on and prior to the Closing Date and Purchaser receiving the charges, payments and credits allocable subsequent to the Closing Date. If at Closing a tenant is delinquent in any payment required under its Lease for period prior to the Closing Date, then, to the extent Purchaser receives rent amounts from such tenants after Closing, Purchaser shall pay such amounts in excess of the rent and other amounts then owing to Purchaser to Seller within ten (10) business days of receipt. Purchaser shall use reasonable efforts to collect any such delinquent amounts.





4.7.15      Seller shall pay to Purchaser all security deposits under the Leases to the extent collected or held by Seller.
4.7.16      Except as expressly provided herein, Seller and Purchaser shall each pay its own attorneys’ fees incurred in connection with this transaction.
4.7.17      Seller shall be responsible for all brokerage fees and commissions payable to BMO Capital Markets and/or CBRE arising out of this Agreement and the transactions contemplated herein.
4.7.18      Purchaser shall be responsible for making any deposits required with utility companies from and after Closing.
If any of the amounts under this Section 4.7 cannot be calculated with complete precision at Closing because the amount or amounts of one or more items included in such calculation are not then known, then such calculation shall be made on the basis of the reasonable estimates of Seller and Purchaser as soon as reasonably possible after the Closing but in no event later than ninety (90) days after Closing, subject to prompt adjustment (by additional payment or refund, as necessary) when the amount of any such item or items become known. This Section 4.7 shall survive Closing.
4.8      Possession . Seller shall deliver exclusive legal and actual possession of the Properties to Purchaser on the Closing Date, subject to the Leases.
Article 5.      Title Examination .
5.1      Title Evidence . As of the Effective Date, Seller shall have furnished access to the following title evidence to Purchaser by providing Purchaser with access to the transaction data room (collectively, the “Title Evidence”):
5.1.1      The Commitments, to insure title to the Real Property issued by Title Company. The Commitments shall (a) be in amounts allocated to each Property, which in the aggregate shall equal the Purchase Price, and (b) include copies of all documents, instruments and matters shown as exceptions or referenced therein.
5.1.2      The most current Surveys of the Properties, to the extent such surveys exist. Purchaser shall have the right to update any of the existing Surveys or to have new Surveys performed, at Purchaser’s expense, for any of the Properties.
5.2      Purchaser’s Objections and Requirements . Purchaser shall be allowed until and including December 15, 2017 to examine the Title Evidence and to make any objections to the condition of title to the Real Property (“Title Objections”). Purchaser shall not object to any of the Permitted Exceptions. “Permitted Exceptions” shall include: all zoning and building laws, ordinances, maps, resolutions, and regulations of all governmental authorities having jurisdiction which affect the Properties and the use, improvement or enjoyment thereof; the Leases; matters affecting title created by or with the prior written consent of Purchaser; and





liens to secure taxes and assessments not yet due and payable. Any title exceptions or encumbrances set forth in the Commitments and not objected to as Title Objections in accordance with the terms hereof, except for any Required Removal Exceptions, shall be deemed to be waived by Purchaser and automatically shall become Permitted Exceptions. From and after the Effective Date and prior to Closing, Seller shall not cause any new easement, lien or other encumbrance to be recorded against any Property without the prior written approval of Purchaser.
5.3      Correction of Title . Except as expressly provided in this Article 5, Seller shall have no obligation to cure any of Purchaser’s Title Objections. If Purchaser timely provides Seller with any Title Objections, Seller shall have until the earlier of (i) five (5) business days following receipt of the applicable Purchaser’s Title Objections and (ii) the Contingency Date to notify Purchaser that Seller: (a) will cause or (b) elects not to cause any or all of the Title Objections to be cured or removed by the Title Company at or prior to Closing (“Cure Notice”). Seller will be deemed not to have elected to cure or remove any of the Title Objections that Seller does not expressly agree to have cured or removed by providing the Cure Notice for the same to Purchaser within such five (5) business day period. If Seller makes the election in clause (a) above with respect to any Title Objections, Seller shall cause such Title Objections to be cured or removed by the Title Company at or prior to Closing. If Seller elects, or is deemed hereunder to have elected, not to cause certain of the Title Objections not to be removed or cured, Purchaser shall have the option to do either of the following:
5.3.1      Terminate this Agreement, by providing written notice of termination within five (5) business days of the date Seller elects, or is deemed to have elected, not to cure or remove any such Title Objection; or
5.3.2      Waive the applicable Title Objections and proceed to Closing.
5.4      Notwithstanding the foregoing, Seller shall be obligated to remove or cure on or prior to the Closing Date all of the following exceptions and encumbrances affecting the Properties, whether or not Purchaser issues a Title Objection with respect thereto (collectively, “Required Removal Exceptions”): (a) any mortgage, deed of trust, assignment of leases and rents or other lien securing debt encumbering all or any portion of the Real Property, (b) all liens for delinquent real estate taxes and assessments, (c) mechanics’ liens and other involuntary liens that can be cured and/or discharged by the payment of a monetary sum up to a maximum amount of $100,000.00 for each individual Property, and (d) any other lien or encumbrance or other title exception voluntarily created by or through Seller or a Seller Affiliate after the Effective Date unless Purchaser provides its prior written consent to the same.
5.5      It shall be a condition to Purchaser’s obligations at Closing that the Title Company shall be irrevocably committed, subject to the payment of applicable premiums therefor, to issue effective as of Closing in favor of Purchaser or its permitted assignee(s) owner’s policies of title insurance insuring fee and/or leasehold title to the Properties, as applicable, subject only to Permitted Exceptions.
Article 6.      Conditions Precedent .





6.1      Conditions in Favor of Purchaser . The obligations of Purchaser under this Agreement are contingent upon each of the following:
6.1.1      On or before the Contingency Date, Purchaser shall have determined that the matters and conditions disclosed by the reports, investigations and tests received or performed by Purchaser are acceptable to Purchaser in its sole discretion.
6.1.2      On the Closing Date, each of the representations and warranties of Seller in Section 7.1 shall be true and correct as if the same were made on the Closing Date.
6.1.3      On and as of the Closing Date, Seller shall have performed all of the obligations required to be performed by Seller under this Agreement as and when required under this Agreement, and no breach by Seller of its obligations hereunder shall remain outstanding following any applicable cure period expressly set forth in Section 13.2 below.
6.1.4      Seller shall have delivered on or prior to the Estoppel Delivery Deadline (hereafter defined) a written waiver in form and substance reasonably acceptable to Purchaser and the Title Company with respect to any right of first offer, right of first refusal or other option for a third party to purchase all or any portion of the Property that becomes operative as a result of the execution of this Agreement or consummation of the transactions contemplated herein, and a written instrument providing any consent to the transfer of any Property required under any Ground Lease, Lease or other agreement or instrument in effect with respect to the Property. If Seller is unable to provide Purchaser with a written waiver or consent required to satisfy the condition set forth in this Section 6.1.4 prior to the Estoppel Delivery Deadline, Seller shall have the right to adjourn the Closing Date one or more times by delivery of written notice to Purchaser on or prior to the Estoppel Delivery Deadline, but for not more than thirty (30) days in the aggregate, to satisfy this condition.
6.1.5      No Material Casualty or Material Condemnation (as defined in Articles 10 and 11 herein) shall have occurred as of the Closing Date.
6.1.6      No a material default, bankruptcy or insolvency of a Major Tenant shall have occurred after the expiration of the Due Diligence Period.
6.1.7      No litigation shall be pending or threatened challenging Purchaser’s right to acquire, or Seller’s right to sell, the Property.
6.1.8      Seller shall have delivered to Purchaser on or prior to the Estoppel Delivery Deadline (hereafter defined):
a.      A Ground Lease Estoppel in the form required hereunder with respect to each Ground Lease in effect with respect to the Properties pursuant to Section 8.4.1;
b.      The Required Tenant Estoppel Certificates in the form required hereunder pursuant to Section 8.4.2; and





c.      The Material Campus Declaration Estoppel Certificates in the form required hereunder pursuant to Section 8.4.3.
If any conditions in this Section 6.1 have not been satisfied on or before the applicable date set forth in this Section 6.1 with respect to each condition, then Purchaser may terminate this Agreement by providing written notice of termination to Seller on or before the applicable date, subject however to Section 13.2 with respect to a breach by Seller of its obligations hereunder, in which case the Earnest Money shall be returned to Purchaser. To the extent that any of the conditions in this Section 6.1 require the satisfaction of Purchaser, such satisfaction shall be determined by Purchaser in its sole and absolute discretion. The conditions in this Section 6.1 are specifically stated and for the sole benefit of Purchaser. Purchaser in its discretion may unilaterally waive (conditionally or absolutely) the fulfillment of any one or more of the conditions, or any part thereof, by written notice to Seller.
Notwithstanding the foregoing, if (i) the conditions set forth in Sections 6.1.3 are not satisfied with respect to any individual Property as the result of a voluntary material default by Seller of its obligations hereunder, or (ii) any of the conditions set forth in Sections 6.1.4- 6.1.7 are not satisfied with respect to any individual Property, taking into account any extension of the Closing Date and Estoppel Delivery Deadline pursuant to Sections 6.1.4 or 8.4 hereof, Purchaser, in its sole and absolute discretion, may elect to exclude any such Property from the Closing, and the applicable Purchase Price allocation for such Property, as set forth on attached Exhibit A shall be deducted from the Purchase Price.
6.2      Conditions in Favor of Seller . The obligations of Seller under this Agreement are contingent upon each of the following:
6.2.1      On the Closing Date, each of the representations and warranties of Purchaser in Section 7.2 shall be true and correct as if the same were made on the Closing Date.
6.2.2      On the Closing Date, Purchaser shall have performed all of the obligations required to be performed by Purchaser under this Agreement as and when required under this Agreement.
If any of the conditions in this Section have not been satisfied on or before the applicable date set forth in this Section 6.2 with respect to each condition, then Seller may terminate this Agreement by providing written notice of termination to Purchaser on or before the applicable date, subject however to Article 13. To the extent that any of the conditions in this Section 6.2 require the satisfaction of Seller, such satisfaction shall be determined by Seller in its sole and absolute discretion. The conditions in this Section 6.2 are specifically stated and for the sole benefit of Seller. Seller in its discretion may unilaterally waive any one or more of the conditions, or any part thereof, by written notice to Purchaser.
Article 7.      Representations and Warranties .





7.1      Seller’s Representations and Warranties . Seller represents and warrants to Purchaser as of the date of this Agreement as follows:
7.1.1      Seller has been duly formed under the laws of the State of North Dakota, and is in good standing under the laws of the jurisdictions in which the Properties are located, is duly qualified to transact business in the jurisdictions in which the Properties are located, and has the requisite power and authority to enter into and perform this Agreement and the documents and instruments required to be executed and delivered by Seller pursuant hereto. This Agreement has been duly executed and delivered by Seller and is a valid and binding obligation of Seller enforceable in accordance with its terms. This Agreement and the documents and instruments required to be executed and delivered by Seller pursuant hereto have each been duly authorized by all necessary action on the part of Seller and that such execution, delivery and performance does and will not conflict with or result in a violation of Seller’s partnership agreement or any judgment, order or decree of any court or arbiter to which Seller is a party, or any agreement to which Seller and/or any of the Property is bound or subject including the Ground Leases and the Leases.
7.1.2      The list of the Ground Leases set forth on Schedule 7.2.1 hereto is true and complete. Seller has provided full copies of the Ground Leases, and to Seller’s knowledge, the Ground Leases are in full force and effect, and neither Seller nor any of the lessors under the Ground Leases are in material default under the respective Ground Leases. The copies of such Ground Leases, including any amendments thereto, provided or made available to Purchaser in the Records are true and complete in all material respects.
7.1.3      The Rent Roll to be provided to Purchaser with respect to the Leases in the Records is, as of the Effective Date, and, as of the Closing Date will be, true, correct and complete in all material respects. The list of Leases affecting the Property set forth on Schedule 7.1.3 hereto is true and complete as of the Effective Date with respect to all Leases in excess of 2,000 rentable square feet and, to Seller’s knowledge, is true and complete with respect to all such other Leases, and there are no written or oral promises, understandings, agreements or commitments with tenants other than as set forth in such Leases. The copies of the Leases provided or made available to Purchaser in the Records are true and complete in all material respects with respect to all Leases in excess of 2,000 rentable square feet, and, to Seller’s knowledge, are true correct and complete with respect to all such other Leases. To Seller’s knowledge, neither Seller, nor any tenant, is in material default under any Lease. Notwithstanding anything to the contrary contained herein, Seller does not represent or warrant that any particular Lease will be in full force and effect as of the Closing or that any particular Lease will be free from default as of Closing.
7.1.4      To Seller’s knowledge, the list of Contracts affecting each of the Properties set forth on Schedule 7.1.4 hereto is true and complete in all material respects and the Records contain copies of all such Contracts that are true and complete in all material respects. Except for the Contracts set forth on Schedule 7.1.4 hereto, Seller has not entered into any contracts or other agreements that will be binding upon Purchaser after the Closing. To Seller’s knowledge, neither Seller, nor any other party, is in material default under any such Contract.





7.1.5      To Seller’s knowledge, except as disclosed in the environmental reports contained in the Records: (i) Hazardous Materials have not been used, generated, transported, treated, stored, released, discharged or disposed of in, onto, under or from any of the Properties in violation of any Hazardous Materials Laws by Seller, by any predecessor-in-title or agent of Seller, by any tenants, or by any other person at any time; (ii) except as disclosed in the environmental reports contained in the Records, there are no above-ground or underground tanks or any other underground storage facilities located on the Properties, and there have never been such tanks or facilities on the Properties; (iii) except as disclosed in the environmental reports contained in the Records, there are no wells or private sewage disposal or treatment facilities located on the Properties and there have never been such wells or private sewage disposal or treatment facilities located on the Properties, and (iv) for purposes of Minn. Stat. Sec. 115.55 with respect to the Properties located in the State of Minnesota, any sewage generated on any of the Property located in the State of Minnesota goes to a facility permitted by the Minnesota Pollution Control Agency. Seller has not received written notice of any violation of Hazardous Materials Law at the Properties that remains uncured or requires any remediation action pursuant to applicable laws and regulations.
7.1.6      To Seller’s knowledge, there has been no use or production of methamphetamine on the Properties and no disclosure statement is required under applicable law.
7.1.7      Seller: (a) is not in receivership or dissolution; (b) has not made any assignment for the benefit of creditors or admitted in writing its inability to pay its debts as they mature; (c) has not been adjudicated a bankrupt or filed a petition in voluntary bankruptcy or a petition or answer seeking reorganization or an arrangement with creditors under the federal bankruptcy law or any other similar law or statute of the United States or any jurisdiction and no such petition has been filed against Seller or any of its property or affiliates, if any; (d) has not suffered the attachment or other judicial seizure of all, or substantially all, of Seller’s assets, which remains pending as of such time; (e) has not made an offer of settlement, extension or composition to its creditors generally; and (f) none of the foregoing are pending or threatened.
7.1.8      Seller is not a “foreign person”, “foreign partnership”, “foreign trust” or “foreign estate” as those terms are defined in Section 1445 of the Internal Revenue Code.
7.1.9      Seller and the Properties are not subject to any pending litigation (or to Seller’s knowledge) any threatened litigation.
7.1.10      Seller has not received notice of any violation of applicable laws or regulations or any defaults under any applicable covenants, conditions or restrictions with respect to the Properties nor of any violation of other recorded instruments, any condemnation, rezoning or re-assessment affecting the Properties, and, to Seller’s knowledge, no material violation of the foregoing exists with respect to the Property.
7.1.11      To Seller’s knowledge, the operating statements provided in the Records furnished to Purchaser are true and complete in all material respects.





7.1.12      The Properties are not subject to any collective bargaining agreements, and all employment costs arising from the operation of the Property or accruing prior to the Closing Date have been and will be paid by Seller.
7.1.13      To Seller’s knowledge, Seller holds all required licenses and permits for the operation and occupancy of the Properties, which are in full force and effect without material violations.
7.1.14      The Records that have been or will be provided by Seller are true and complete copies of the applicable documents with respect to the Properties in Seller’s possession or control.
7.1.15      No right of first offer, right of first refusal or other option entitling a third party to purchase all or any portion of the Properties as a result of the execution of this Agreement or consummation of the transactions contemplated herein is in effect except as set forth on Schedule 7.1.15 hereto. No consent of any third party is required to effectuate the sale and conveyance of the Properties as contemplated herein pursuant to any Ground Lease, Lease or other agreement or instrument binding on the Properties except as set forth on Schedule 7.1.15 .
7.1.16      Neither Seller nor, to Seller’s knowledge, any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents, is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of OFAC (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action.
The representations of warranties of Seller set forth in this Section 7.1 shall survive Closing, subject to the terms of this paragraph. Seller shall have no liability with respect to any breach of a particular representation and warranty if (a) Purchaser has actual knowledge of the breach of such representation prior to the Closing Date and fails to notify Seller thereof and nevertheless proceeds to Closing, or (b) Purchaser does not commence an action against Seller with respect to the breach in question within twelve (12) months after the Closing. Further, in no event may Seller’s liability for a breach of any warranty under this Agreement with respect to any individual Property exceed the greater of (x) 1.5% of the allocated Purchase Price for such Property as set forth on attached Exhibit A and (y) $500,000.00. Wherever herein a representation is made based upon the knowledge of Seller, such knowledge is limited to the actual knowledge of Charles Greenberg and Anne Olson, without any duty of investigation or inquiry.
7.2      Purchaser’s Representations and Warranties . Purchaser represents and warrants to Seller as of the date of this Agreement as follows:
7.2.1      Purchaser has been duly formed under the laws of the State of Delaware, is, or will be as off the Closing Date, in good standing under the laws of the





jurisdictions in which the Properties are located to the extent required by applicable law, is duly qualified to transact business in the jurisdictions in which the Properties are located, and has the requisite power and authority to enter into and perform this Agreement and the documents and instruments required to be executed and delivered by Purchaser pursuant hereto. This Agreement has been duly executed and delivered by Purchaser and is a valid and binding obligation of Purchaser enforceable in accordance with its terms. This Agreement and the documents and instruments required to be executed and delivered by Purchaser pursuant hereto have each been duly authorized by all necessary action on the part of Purchaser and that such execution, delivery and performance does and will not conflict with or result in a violation of Purchaser’s organizational documents or any judgment, order or decree of any court or arbiter to which Purchaser is a party, or any agreement to which Purchaser and/or any of the Property is bound or subject.
7.2.2      Purchaser has not (i) made a general assignment for the benefit of creditors, (ii) filed any involuntary petition in bankruptcy or suffered the filing of any involuntary petition by Purchaser’s creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of Purchaser’s assets, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Purchaser’s assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or composition to its creditors generally.
7.2.3    Neither Purchaser, nor, to Purchaser’s knowledge, any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents, is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of OFAC (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action.
Purchaser shall have no liability with respect to any breach of a particular representation and warranty if (a) Seller has actual knowledge of the breach of such representation prior to the Closing Date and fails to notify Purchaser thereof and nevertheless proceeds to Closing, or (b) Seller does not commence an action against Purchaser with respect to the breach in question within twelve (12) months after the Closing. Further, in no event may Purchaser’s liability for a breach of any warranty under this Agreement with respect to any individual Property exceed the greater of (x) 1.5% of the allocated Purchase Price for such Property as set forth on attached Exhibit A and (y) $500,000.00.
Article 8.      Inspection; Due Diligence Period; Condition of Property at Closing .
8.1      Inspections; Right of Entry . During the Due Diligence Period, and subject to the conditions contained herein and the rights of tenants under the Leases, Purchaser and its employees, agents and independent contractors shall have the right to enter onto the Properties during normal business hours and, upon a minimum of one (1) business days’ prior written notice Seller, to inspect the same, perform surveys, non-invasive soil and other tests and assessments





and for other investigations and activities consistent with the purposes of this Agreement. Before any such entry, Purchaser shall provide Seller with a certificate of insurance naming Seller as an additional insured on its commercial general liability insurance with limits of no less than $2,000,000.00 in the aggregate and $1,000,000.00 per occurrence. Seller expressly reserves the right to have a representative of Seller present at all times while Seller or Seller’s representatives of consultants are located on a Property. Further, Purchaser may only perform invasive testing, including without limitation Phase II environmental testing, geotechnical borings and soil samples, on any Property only after obtaining Seller’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Seller will in good faith reasonably cooperate with Purchaser to accomplish such tests and investigations, and when entering a Property, Purchaser agrees not to disrupt any Seller or tenant business operations on the Properties. Purchaser shall restore any damage to or disruption of the Properties caused by such inspections to the same or better condition as existed before the inspection or test and shall defend, indemnify and hold Seller harmless from any and all liabilities incurred by Seller and any of Seller’s officers, employees, representatives, agents and consultants arising out of any such entries; provided that Purchaser shall not indemnify Seller or the above listed parties for any gross negligence or willful misconduct of such parties, nor for the mere discovery of any condition at the Properties, and in no event for any consequential, punitive or speculative damages. The foregoing indemnity and defense obligations shall survive termination of this Agreement. Purchaser shall deliver to Seller copies of any reports Purchaser obtains in connection with such investigations and inspections within five (5) business days after the same are received by Purchaser.
8.2      Due Diligence . On or before the Effective Date, and subject to the terms and conditions of the Non-Disclosure Agreement, Seller shall have given Purchaser access to the transaction data room, which will contain all relevant and material documents and records with respect to the Properties, including all Leases and amendments thereto, Ground Leases, Contracts, Licenses and Permits and other materials pertaining to the Property set forth on Exhibit N hereto in Seller’s possession or control (collectively, the “Records”). During the Due Diligence Period, and subject to the confidentiality and non-disclosure obligations contained herein and in the Non-Disclosure Agreement, Purchaser shall make a complete review of the Records as well as the physical, legal, economic and environmental condition of the Properties, including the Ground Leases and the Leases. Purchaser may terminate this Agreement by providing written notice of termination to Seller on or before the expiration of the Due Diligence Period, and upon delivery of such notice, this Agreement shall terminate, and the Earnest Money shall be refunded to Purchaser. If Purchaser delivers to Seller an affirmative notice electing to waive due diligence and proceed to Closing on or before the expiration of the Due Diligence Period, the Earnest Money immediately shall become non-refundable to Buyer, except as expressly provided to the contrary herein. If Purchaser does not provide an affirmative notice to proceed or a termination notice on or prior to the expiration of the Due Diligence Period, Purchaser will be deemed to have elected to terminate this Agreement as set forth above.
8.3      Condition of Properties at Closing . Except for the express representations and warranties of Seller hereunder and the Retained Liabilities, Purchaser, for Purchaser and Purchaser’s successors and assigns, releases Seller from, and waives all claims and liability





against Seller for, any structural, physical or environmental conditions at the Properties arising or discovered after Closing and further releases Seller from, and waives all liability against Seller attributable to, the structural, physical and environmental condition of the Properties arising or discovered after Closing, including without limitation the presence, discovery or removal of any lead, asbestos containing materials or any other Hazardous Materials in, at, about or under the Properties, or for, connected with or arising out of any and all claims or causes of action based upon any Hazardous Materials Laws. Except as set forth in Section 7.1.5, Seller makes no representations or warranties whatsoever to Purchaser regarding the presence or absence of any Hazardous Materials. Purchaser hereby acknowledges and agrees that it shall rely solely on the express representations, warranties and covenants of Seller hereunder and the investigations, information, studies and reports prepared by or through Purchaser, at its sole cost and expense, with regard to Hazardous Materials. Purchaser may make such studies and investigations, conduct such tests and surveys, and engage such specialists as Purchaser deems appropriate to evaluate the Properties and their risks from a Hazardous Materials standpoint.
8.4      Estoppel Certificates .
8.4.1      Following the Effective Date, Seller shall request and shall exercise commercially reasonable efforts to obtain and deliver to Purchaser on or prior to December 21, 2017 (as may be extended in accordance with the terms hereof, the “Estoppel Delivery Deadline”), Ground Lease Estoppel Certificates substantially in the form of Exhibit K from each ground lessor under the Ground Leases (“Ground Lease Estoppel Certificates”).
8.4.1.1      If Seller is unable to provide Purchaser with Ground Lease Estoppel Certificates in the form required hereunder for each of the Ground Leases on or before the Estoppel Delivery Deadline, Seller shall have the right to adjourn the Closing Date one or more times by delivery of written notice to Purchaser on or prior to the Estoppel Delivery Deadline, but for not more than thirty (30) days in the aggregate, to satisfy this condition. If Seller does not deliver the Ground Lease Estoppel Certificates for one or more Ground Lease Sites on or prior to the Estoppel Delivery Deadline, as may be extended in accordance with the terms hereof, Purchaser shall have the remedies described in Section 6.1 above.
8.4.1.2      Purchaser hereby acknowledges and agrees that the failure of Seller to deliver any Ground Lease Estoppel Certificate(s) shall not be a default hereunder nor shall it give rise to any remedy of any kind against Seller other than Purchaser’s rights set forth in Section 6.1 above.
8.4.2      Following the Effective Date, Seller shall request and shall exercise commercially reasonable efforts to obtain and deliver to Purchaser on or prior to the Estoppel Delivery Deadline, estoppel certificates substantially in the form of attached Exhibit J from each tenant under the Leases (each, a “Tenant Estoppel Certificate”).
8.4.2.1      It shall be a condition to Purchaser’s obligations to close the transactions contemplated herein on the Closing Date that Seller shall have provided Purchaser with Tenant Estoppel Certificates in the form required hereunder on or prior to the Estoppel Delivery Deadline with respect to (a) each of the Leases for the tenants specifically identified on attached Exhibit D (collectively, the “Primary Tenants”), and (b) for Leases





covering at least 85% of the leased square footage for the Properties in the aggregate and at least 50% of the leased square footage for each individual Property (collectively, the Required Tenant Estoppel Certificates”). If Seller does not deliver the Required Tenant Estoppel Certificates to Purchaser on or before the Estoppel Delivery Deadline, Seller shall have the right to adjourn the Closing Date one or more times by delivery of written notice to Purchaser on or prior to the Estoppel Delivery Deadline, but for not more than thirty (30) days in the aggregate, to satisfy this condition. If Seller does not deliver the Required Tenant Estoppel Certificates on or prior to the Estoppel Delivery Deadline, as may be extended in accordance with the terms hereof, Purchaser shall have the remedies described in Section 6.1 above. In lieu of a Required Tenant Estoppel Certificate, Seller may provide one or more Seller estoppel certificates in the form attached as Exhibit J hereto (“Seller Estoppel Certificate”); provided that Seller may not provide a Seller Estoppel Certificate with respect to (x) any Primary Tenant Lease, or (y) Leases in excess of 7.5% of the total leased square footage of the Properties in the aggregate, or more than 30% of the total leased square footage for any individual Property. Seller’s liability with respect to any Seller Estoppel Certificate shall not be subject to the limitations set forth in Section 7.1 hereof; provided that Seller shall be relieved of liability with respect to any Seller Estoppel Certificate for which Seller delivers on or prior to the date 30 days following the Closing Date a Required Tenant Estoppel Certificate in the form required hereunder signed by the tenant under the applicable Lease.
8.4.2.2      Purchaser hereby acknowledges and agrees that the failure of Seller to deliver any Tenant Estoppel Certificate(s) shall not be a default hereunder nor shall it give rise to any remedy of any kind against Seller other than Purchaser’s rights set forth in Section 6.1 above.
8.4.3      During the period commencing on the Effective Date and ending on the Closing Date, Seller shall request and shall exercise commercially reasonable efforts to obtain estoppel certificates from each declarant (or similarly situated beneficiary) under the declarations, or conditions, covenants and restrictions identified on attached Exhibit L-1 (collectively, the “CC&Rs”) substantially in the form of Exhibit M hereto (each, a “Declarant Estoppel Certificate”). Purchaser hereby acknowledges and agrees that, except as set forth below with respect to the Material Campus Declaration Estoppel Certificates, Seller shall have no obligation whatsoever to deliver any Declarant Estoppel Certificate with respect to any CC&R and Purchaser’s receipt of the same shall not be a condition to Closing. Notwithstanding the foregoing, it shall be a condition to Purchaser’s obligations to close the transactions contemplated herein on the Closing Date that Seller shall have provided Purchaser with Declarant Estoppel Certificates in the form required hereunder with respect to the material campus CC&Rs listed on Exhibit L-2 hereto (the “Material Campus Declaration Estoppel Certificates”) on or prior to the Estoppel Delivery Deadline.
8.4.3.1      Purchaser specifically acknowledges and agrees that the failure of Seller to deliver any Declarant Estoppel Certificate(s) shall not be a default hereunder nor shall it give rise to any termination rights with respect to any Properties or any other remedy of any kind against Seller except for Purchaser’s rights set forth in Section 6.1 above with respect





to the failure to deliver any Material Campus Declaration Estoppel Certificate on or prior to the Estoppel Delivery Deadline, as may be extended in accordance with the terms hereof.
8.4.3.2      If Seller does not deliver the Material Campus Declaration Estoppel Certificates to Purchaser on or before the Estoppel Delivery Deadline, Seller shall have the right to adjourn the Closing Date one or more times by delivery of written notice to Purchaser on or prior to the Estoppel Delivery Deadline, but for not more than thirty (30) days in the aggregate, to satisfy this condition. If Seller does not deliver the Material Campus Declaration Estoppel Certificates on or prior to the Estoppel Delivery Deadline, Purchaser shall have the remedies described in Section 6.1 above.
8.4.4      Notwithstanding anything to the contrary contained herein, if any Ground Lease Estoppel Certificate, Required Tenant Estoppel Certificate or Material Campus Declaration Estoppel Certificate required to be delivered hereunder by Fairview Health Systems or its Affiliates or subsidiaries is not delivered to Purchaser on or prior to the Estoppel Delivery Deadline, Purchaser may adjourn the Closing Date from time to time for a period of up to thirty (30) days in the aggregate upon written notice to Seller delivered on or prior to the Estoppel Delivery Deadline to facilitate delivery of such required estoppel certificates.
8.4.5      Purchaser shall not be required to accept any estoppel certificate referenced above that indicates that any default exists with respect to the applicable agreement or making any other material change to the applicable form contemplated herein, and any such estoppel certificate shall not satisfy the delivery conditions set forth above. The Seller rights to extend the Closing Date described in this Section 8.4 and in Section 6.1.4 above shall run concurrently such that Seller may only adjourn the Closing Date up to 30 days in the aggregate. Upon any Closing Date extension pursuant to this Section 8.4 or section 6.1.4 above, the Estoppel Delivery Deadline shall be concurrently adjourned to the date three (3) business days prior to the extended Closing Date. Seller shall deliver to Purchaser any signed estoppel certificate, or any comments from the counterparty thereto received by Seller.
8.5      Tenant Communications . Upon providing Seller a minimum of one (1) business day’s prior written notice, Purchaser may communicate with and interview tenants under Leases, (a) with a Major Tenant, and (b) for Leases with 2,500 square feet or more of gross leasable area and with lease terms of three (3) years or fewer, provided that Seller shall have the right to have a representative of Seller present at all times during all such interviews and communications.
8.6      Purchaser’s Reliance on its Investigations; “As Is” Sale . To the maximum extent permitted by applicable law and except for Seller’s express representations and warranties and covenants herein and in any Closing document delivered by Seller (“Seller’s Warranties”), this sale is made and will be made without representation or warranty of any kind (whether express or implied) by Seller. Purchaser agrees to accept the Properties on an “As is” and “Where is” basis, with all faults and any and all latent and patent defects, and without any representation or warranty, all of which Seller hereby disclaims, except for Seller’s Warranties. Except for Seller’s Warranties, no warranty or representation is made by Seller as to (a) fitness for any particular purpose, (b) merchantability, (c) design, (d) quality, (e) condition, (f) operation





or income, (g) compliance with drawings or specifications, (h) absence of defects, (i) absence of hazardous or toxic substances, (j) absence of faults, (k) flooding, or (l) compliance with laws and regulations including, without limitation, those relating to health, safety, and the environment. Purchaser acknowledges that Purchaser has entered into this Agreement with the intention of making and relying upon its own investigation of the physical, environmental, economic use, compliance, and legal condition of the Property and that Purchaser has not been induced by and has not relied upon any disclosures, representations or warranties (in each case whether express or implied or oral or written) made by Seller, Seller’s affiliates, or any other person or entity purporting to represent Seller with respect to the Properties or any other matter affecting or relating to the transactions contemplated hereby, except for Seller’s Warranties. In addition, Purchaser expressly acknowledges that from and after the Effective Date, Purchaser has not been and will not be induced by and has not relied and will not rely upon any disclosures, representations or warranties (in each case whether express or implied or oral or written) made by Seller, Seller’s affiliates, or any other person or entity purporting to represent Seller with respect to the Property or any other matter affecting or relating to the transactions contemplated hereby, except for Seller’s Warranties.
CONSISTENT WITH THE FOREGOING AND SUBJECT SOLELY TO CLAIMS AGAINST SELLER ON THE SELLER’S WARRANTIES AND THE RETAINED LIABILITIES, EFFECTIVE AS OF THE CLOSING DATE FOR THE PROPERTIES, PURCHASER, FOR ITSELF AND ITS AGENTS, AFFILIATES, SUCCESSORS AND ASSIGNS, HEREBY ACQUIRES THE PROPERTIES SUBJECT TO (AND AGREES TO ASSUME THE RISK THEREOF, IN FULL RELIANCE UPON ITS OWN INVESTIGATIONS) AND RELEASES AND FOREVER DISCHARGES, WAIVES AND EXONERATES SELLER, SELLER’S AFFILIATES, AND THE AGENTS, AFFILIATES, MEMBERS, PARTNERS, OFFICERS, DIRECTORS, MANAGERS, TRUSTEES, SUBSIDIARIES, PRINCIPALS, OWNERS, GENERAL PARTNERS, LIMITED PARTNERS, AS WELL AS THE SUCCESSORS AND ASSIGNS OF EACH OF PERSONS (COLLECTIVELY THE “RELEASEES”) FROM ANY AND ALL LIABILITIES, OBLIGATIONS, RIGHTS, CLAIMS, CAUSES OF ACTION AND DEMANDS AT LAW OR IN EQUITY, CONTROVERSIES, DAMAGE, COSTS, LOSSES AND EXPENSES WHETHER KNOWN OR UNKNOWN AT THE TIME OF THIS AGREEMENT, WHICH PURCHASER HAS OR MAY HAVE IN THE FUTURE, ARISING OUT OF THE PROPERTIES OR RELATING TO THE PROPERTIES, THE PHYSICAL, ENVIRONMENTAL, ECONOMIC OR LEGAL CONDITION OF THE PROPERTIES AND THE PROSPECTS, FINANCIAL CONDITION, OPERATION OR RESULTS OF OPERATIONS OF THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, ALL CLAIMS IN TORT OR CONTRACT, ALL CLAIMS UNDER A WARRANTY OF ANY KIND (WHETHER EXPRESS OR IMPLIED) AND INCLUDING ANY WARRANTY OF MERCHANTABILITY, HABITABILITY OR WARRANTIES OF FITNESS FOR USE OR ACCEPTABILITY FOR THE PURPOSE INTENDED (COLLECTIVELY, THE “CLAIMS”); PROVIDED THAT PURCHASER DOES NOT RELEASE OR WAIVE ANY CLAIM AGAINST SELLER ARISING OUT OF THE FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER OR SELLER’S AFFILIATES OR FOR ANY RETAINED LIABILITY OR BREACH BY SELLER OF ITS OBGLITIONS UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, SELLER’S WARRANTIES.





PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED, EXONERATED, RELINQUISHED AND RELEASED SELLER AND ALL OTHER RELEASEES FROM AND AGAINST ANY AND ALL MATTERS AFFECTING PURCHASER AND/OR THE PROPERTY, OTHER THAN SELLER’S WARRANTIES, THE RETAINED LIABILITIES OR ANY CLAIMS ARISING OUT OF THE BREACH BY SELLER OF ITS OBLIGATIONS UNDER THIS AGREEMENT. IN THIS CONNECTION AND TO THE GREATEST EXTENT PERMITTED BY LAW, PURCHASER HEREBY AGREES, REPRESENTS AND WARRANTS THAT PURCHASER REALIZES AND ACKNOWLEDGES THAT FACTUAL MATTERS NOW KNOWN OR UNKNOWN TO IT MAY HAVE GIVEN OR MAY HEREAFTER GIVE RISE TO CLAIMS WHICH ARE PRESENTLY UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND PURCHASER FURTHER AGREES, REPRESENTS AND WARRANTS THAT THE WAIVERS AND RELEASES HEREIN AND THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN NEGOTIATED AND AGREED UPON IN LIGHT OF THAT REALIZATION AND THAT PURCHASER NEVERTHELESS HEREBY INTENDS TO RELEASE, DISCHARGE AND ACQUIT SELLER FROM ANY SUCH UNKNOWN CLAIMS (OTHER THAN CLAIMS ARISING FROM THE BREACH BY ONE OR MORE SELLER’S WARRANTIES, THE RETAINED LIABILITIES OR ANY BREACH BY SELLER OF ITS OBLIGATIONS HEREUNDER).  SELLER HAS GIVEN PURCHASER MATERIAL CONCESSIONS REGARDING THIS TRANSACTION IN EXCHANGE FOR PURCHASER AGREEING TO THE PROVISIONS OF THIS PARAGRAPH.
The provisions of this Paragraph 8.6 shall survive the Closing or termination of this Agreement and shall not be merged into the Closing documents.
Article 9.      Operation Pending Closing .
9.1      Existing Operations . Until the Closing Date, Seller shall operate, maintain and manage each of the Properties in a manner substantially consistent with Seller’s past practices.
9.2      New Contracts and Leases . Prior to the date that is two (2) business days prior to the expiration of the Due Diligence Period, Seller may sign or amend any Lease and may enter into any service contracts without the prior consent of Purchaser, provided, however, that Seller shall provide Purchaser no less than three (3) business days’ notice prior to execution of any new Lease, Lease amendment or Contract. After the expiration of the Due Diligence Period, Seller will not, without the prior consent of Purchaser (which shall not be unreasonably withheld or delayed), enter into any Lease, Lease amendment or any other Contract relating to the operation of the Property that will be an obligation affecting the Property subsequent to the Closing or modify, extend or terminate any existing Lease or issue any material waiver or consent with respect to any of the foregoing, except for service contracts entered into in the ordinary course of business that are terminable without cause or payment of any fee or penalty on 30-days’ notice. Seller shall not terminate any Lease prior to Closing without obtaining Purchaser’s prior written consent. Seller shall not amend, modify, supplement or terminate any Ground Lease prior to Closing without the prior written consent of Purchaser.





9.3     Termination of Service Contracts . During the Due Diligence Period, Purchaser shall notify Seller which Contracts Purchaser desires to assume at Closing. Failure to timely deliver such notice for any service contract shall constitute Purchaser’s binding election to assume each such service contract. Purchaser shall pay any transfer or assignment fees or charges due in connection with the assumption of any Contracts Purchaser elects to assume hereunder. Seller shall cause all Contracts that Purchaser elects not to assume to be terminated effective on or prior to the Closing Date and Seller shall be responsible for any termination fee or penalty payable in connection therewith.
9.3      Capital Improvements . All ongoing capital improvements being performed by Landlord at the Properties are described on Schedule 9.3 hereto. Seller shall continue to perform such projects in the ordinary course and with commercially reasonable diligence from and after the Effective Date through Closing. Purchaser shall be entitled to a credit at Closing for the outstanding amount of any such capital improvement project not completed and paid in full as of the Closing Date.
9.4      Management Agreements; Leasing and Brokerage Agreements . Seller shall cause any and all property management agreements and leasing and brokerage agreements in effect with respect to the Properties to be terminated effective on or prior to the Closing Date at Seller’s sole cost and expense.
9.5      Employees . Purchaser shall not be required to hire at or following Closing (i) any employee of Seller or Seller’s Affiliates, or (ii) any other employee that is employed at the Properties prior to Closing. All obligations and liabilities related to (x) any employee of Seller or Seller’s Affiliates, or (y) any other employee that is employed at the Properties prior to Closing and arising out of the Closing or matters occurring prior to Closing, shall, in each case, constitute Retained Liabilities of Seller hereunder. This Section 9.5 shall survive Closing.
Article 10.      Damage or Destruction .
Prior to Closing, if any portion of any Property is damaged or destroyed by fire or other casualty, Seller shall immediately give notice thereof to Purchaser, and unless such casualty constitutes a Material Casualty (hereafter defined), Purchaser, with respect to each such instance, shall proceed to Closing and receive at Closing an assignment of all amounts recovered or recoverable by Seller on account of insurance on the effected Property (“Insurance Assignment”). In such instance, the obligation to effectuate such Insurance Assignment and deliver the proceeds thereof to Purchaser shall survive the Closing and Seller shall reasonably cooperate with Purchaser in connection therewith. Notwithstanding the foregoing, if either (i) more than 20% of the square footage of the improvements on an individual Property is destroyed by a casualty prior to Closing, or (ii) any Major Tenant at the affected Property has the right to terminate its Lease or abate rent payable thereunder as a result of such casualty (collectively, a “Material Casualty”), instead of accepting the Insurance Assignment, Purchaser may elect not to close on such effected Property, in which case the applicable Purchase Price allocation for such Property shall be deducted from the Purchase Price.





Article 11.      Condemnation .
Prior to Closing, if eminent domain proceedings are commenced against any portion of any Property, Seller shall immediately give notice thereof to Purchaser, and unless such proceedings constitute a Material Condemnation (as hereafter defined), Purchaser shall, with respect to each such instance, proceed to Closing, and receive at Closing all condemnation awards received by Seller with respect thereto and an assignment of Seller’s eminent domain rights with respect to the effected Property. Notwithstanding the foregoing, if either (i) more than 20% of the square footage of the improvements on an individual Property are subject to any eminent domain proceeding prior to Closing, (ii) any Major Tenant at the affected Property has the right to terminate its Lease or abate rent payable thereunder as a result thereof, (iii) such eminent domain proceedings would have a material adverse effect on access to or parking at the affected individual Property, or result in the affected individual Property no longer complying with applicable laws and regulations (collectively, a “Material Casualty”), instead of accepting the Condemnation Proceeds, Purchaser may elect not to close on such effected Property, in which case the applicable Purchase Price allocation for such Property shall be deducted from the Purchase Price.
Article 12.      Brokers .
Except for the fees and commissions payable to BMO Capital Markets and CBRE in connection with the transactions hereunder, which shall be paid by Seller, each of the parties represents to the other that such party has not incurred any brokerage commission or finder’s fee as a result of this transactions, and each party agrees to hold the other harmless from all liabilities incurred by the other relating to such brokerage commission or finder’s fee incurred as a result of the actions of such party. The provisions of this Article 12 shall survive termination of this Agreement.
Article 13.      Default .
13.1      Default by Purchaser . If Purchaser (a) defaults in its obligation to purchase the Property from Seller and close pursuant to this Agreement or (b) defaults in another material obligation hereunder other than its obligations to be performed on the Closing Date hereunder, and such default is not cured within ten (10) days after Purchaser receives written notice of default from Seller, but in no event later than the scheduled Closing Date, Seller shall have the right in either case to immediately terminate this Agreement upon written notice to Purchaser and retain the Earnest Money as liquidated damages to recompense Seller for time spent, labor and services performed, and the loss of its bargain. Purchaser and Seller agree that it would be impracticable or extremely difficult to affix damages if Purchaser so defaults and that the Earnest Money represents a reasonable estimate of Seller’s damages. If Purchaser does so default and Seller elects to terminate, this Agreement shall be terminated and Purchaser shall have no further right, title, or interest in or to the Property. Nothing in this Paragraph 13.2 shall be deemed to limit or prevent Seller from exercising any right of termination expressly provided elsewhere in this Agreement.





13.2      Default by Seller . If either (i) Seller defaults in its obligations to be performed hereunder prior to the Closing Date and such default is not cured within the ten (10) business days after Seller receives written notice of default from Purchaser, but in no event later than the scheduled Closing Date, or (ii) Seller defaults in its obligations to sell and convey the Property to Purchaser pursuant to this Agreement or its other obligations to be performed on the Closing Date, Purchaser’s sole remedy shall be: (a) to terminate this Agreement, in which event Purchaser shall be entitled to a refund of the Earnest Money; or (b) to bring legal action for specific performance, provided that any suit for specific performance must be brought within ninety (90) days of the scheduled Closing Date. If Purchaser terminates this Agreement pursuant to this paragraph, Seller also shall be required to reimburse Purchaser for its out-of-pocket, third party costs and expenses incurred in connection with the transactions contemplated herein up to a maximum amount of $1,000,000.00. Purchaser hereby waives any other rights or remedies as a result of a Seller default described in this Section 13.2, provided, however, that nothing in this Paragraph 13.2 shall be deemed to limit or prevent Purchaser from exercising any right of termination expressly provided elsewhere in this Agreement.
In any action or proceeding to enforce this Agreement or any term hereof, the prevailing party shall be entitled to recover its reasonable costs and attorneys’ fees.
Article 14.      Termination .
Except as expressly provided in this Agreement to the contrary, if this Agreement is terminated by Purchaser prior to the Due Diligence Date or otherwise pursuant to the terms hereof, the Earnest Money shall be returned to Purchaser, and upon such termination, the respective rights of Seller and Purchaser arising out of this Agreement shall immediately cease except for the rights and obligations that are specifically provided to survive herein. Purchaser agrees to execute, acknowledge, and deliver to Seller within three (3) business days after any termination of this Agreement in accordance with the terms hereof a termination of this Agreement in recordable form to remove the cloud of this Agreement from each of the Properties, but Purchaser’s failure to give such termination(s) shall not affect the termination of this Agreement in accordance with its terms. Purchaser’s failure to terminate this Agreement before the expiration of the Due Diligence Period (including any deemed termination in accordance with the terms hereof) shall be deemed the complete and irrevocable waiver of Purchaser’s rights to terminate this Agreement pursuant to Section 8.2.
Article 15.      Assignability .
Purchaser may not assign its rights under this Agreement without the consent of Seller, which consent may be given or withheld by Seller in Seller’s sole and absolute discretion. Notwithstanding the foregoing, Purchaser may assign, in whole or in part, its rights under this Agreement to affiliated Purchaser entities; provided, however, that Purchaser shall not be relieved of any obligations under this Agreement as a result of any such assignment(s).
Article 16.      Confidentiality





16.1      General . Purchaser acknowledges that any documents, instruments, records or other information delivered by Seller to Purchaser pursuant to the provisions of this Agreement, including, without limitation, the Records pursuant to Section 8.2 of this Agreement (collectively, the “Information”), shall, at all times prior to the Closing, be kept confidential by Purchaser, will not be used for any purpose other than in connection with Purchaser’s due diligence (the “Evaluation”) of the Premises pursuant to the terms of this Agreement, and, except as provided in Section 16.2 of this Agreement, Purchaser shall neither disclose nor allow the disclosure of the Information to anyone other than such of Purchaser’s, directors, officers, lenders, employees, agents, counsel, consultants, or representatives (collectively, “Purchaser’s Representatives”) as are appropriate in order to conduct such Evaluation. Purchaser shall (a) inform each of Purchaser’s Representatives receiving Information of the confidential nature of the Information and (b) direct Purchaser’s Representatives to treat the Information confidentially and not to use it other than in connection with such Evaluation. Purchaser shall not circulate, and will not permit to be circulated, the terms of, nor the existence of, any Information other than to Purchaser’s Representatives as provided in this Section 16.1.
16.2      Permitted Disclosures . Notwithstanding the provisions of Section 16.1 above, Purchaser shall be permitted to disclose Information: (a) to any governmental authority, if required by any law, rule, or regulation, or any subpoena, interrogatory, civil investigation, demand, or similar process applicable to Seller; or (b) pursuant to the order of any court of competent jurisdiction requiring such disclosure. In any of the foregoing instances, Purchaser shall promptly notify Seller of such required disclosure to permit Seller to seek a protective order or to take other appropriate action to waive Purchaser’s compliance with the provisions of this Section 16. Purchaser shall also, if so requested, cooperate (at no material cost or expense to Purchaser) in Seller’s efforts to obtain a protective order or other reasonable assurance that confidential treatment will be accorded the Information.
16.3      Representatives . Any Information furnished to Purchaser or any of Purchaser’s Representatives by Seller or any direct or indirect member, manager, partner, officer, director, employee, contractor, attorney, asset manager, management company, appraiser, engineer, advisor or agent of Seller (each a “Seller’s Representative”) will be deemed for the purposes of this Agreement to have been furnished by Seller. Purchaser shall, as soon as reasonably possible upon Seller’s request following the termination of this Agreement, return to Seller all written Information and any other written material containing or reflecting any of the Information that has been provided to Purchaser and will not retain any copies, extracts, or other reproductions, in whole or in part, of such written Information or materials. Purchaser acknowledges that (a) except as expressly set forth in this Agreement, neither Seller nor any Seller’s Representatives makes any representation or warranty as to the accuracy or completeness of any such information, (b) Purchaser is not relying on any express, implied, or statutory representations or representations by operation of law, (c) except as expressly set forth in this Agreement, Seller and Seller’s Representatives expressly disclaim making any such representations, and (d) except as expressly set forth in this Agreement, neither Seller nor any Seller Representative will have any liability to Purchaser or Purchaser’s Representatives resulting from the use of the Information by Purchaser or Purchaser’s Representatives. Without the prior written consent of Seller, neither Purchaser nor any of Purchaser’s Representatives shall communicate (regarding the Premises) with any lender of Seller (or any loan





participant of any such lender). Purchaser shall have the right to communicate with tenants, subtenants and other occupants at the Premises upon reasonable advance notice to Seller and provided that Purchaser shall allow a representative of Seller to be present.
16.4      Public Disclosures . From and after the Effective Date and prior to the Closing, neither Purchaser nor Seller shall make any public disclosure of the terms or existence of this transaction except (a) Seller may issue a press release any time after the Effective Date, which may include only information that otherwise would be contained in Seller’s securities filings; and (b) Seller or Purchaser may make public disclosures with respect to this transaction to the extent such party reasonably believes the same to be required by the Securities and Exchange Commission or under applicable securities laws. Following the Closing, each of Seller and Purchaser may issue such other mutually approved press releases or other statements regarding the sale of the Property as such party desires in its sole discretion; provided that in issuing such press releases or other statements, neither party shall mention by name the other party hereto except to the extent the issuing party reasonably believes that the naming of the other party hereto to be required under applicable securities laws. In addition, nothing shall prevent either party from disclosing any information with respect to the transaction contemplated herein, any matters set forth in this Agreement, or any of the terms and provisions of this Agreement if and to the extent that such disclosure is required by applicable law or a court or other binding order or by applicable administrative rule or regulation or order of any regulatory or supervisory agency or authority with competent jurisdiction over such matter.
16.5      Survival . The provisions of this Section 16 shall survive the Closing or any earlier termination of this Agreement.
Article 17.      Notices .
All notices required or permitted hereunder shall be in writing and shall be served on the parties at the addresses set forth below. Any such notices must be (a) sent by overnight delivery using a nationally recognized overnight courier, in which case notice shall be deemed delivered one business day after deposit with such courier, (b) sent by e-mail, with written confirmation delivered no later than the following business day by overnight delivery using a nationally recognized overnight courier, in which case notice shall be deemed delivered upon transmission of such email, or (c) sent by personal delivery, in which case notice shall be deemed delivered upon receipt. Any notice sent by email or personal delivery and delivered after 11:59 p.m., Minneapolis, Minnesota time, shall be deemed received on the next business day. Attorneys for each party shall be authorized to give notices for such party. A party’s address may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of such notice. Copies of notices are for informational purposes only, and a failure to give or receive copies of any notice shall not be deemed a failure to give notice.
If to Seller:
IRET Properties
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Grant Campbell





Telephone: 952-401-4816
Email: gcampbell@iret.com

with copy to:
IRET Properties
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Anne Olson
Telephone: 952-401-4811
Email: aolson@iret.com
and
Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
Attn: Laura Graf and Marcus Mollison
Telephone: 612-492-6878
Email: graf.laura@dorsey.com
mollison.marcus@dorsey.com

If to Purchaser:
Harrison Street Real Estate, LLC    
444 West Lake Street, Suite 2100
Chicago, IL 60606
Attn: Mark Burkemper; Stephen Gordon; Michael Gershowitz
Email: MBurkemper@harrisonst.com      sgordon@harrisonst.com
MGershowitz@harrisonst.com

with copy to:
DLA Piper LLP (US)
444 West Lake Street, Suite 900
Chicago, IL 60606
Attn: David Sickle
Email: david.sickle@dlapiper.com
    





If to Title Company:
First American Title Insurance Company
801 Nicollet Mall, Suite 1900
Minneapolis, MN 55402
Attn: Kristi Broderick
Telephone: 612-305-2005
Email: kbroderick@firstam.com     
Article 18.      Tax Deferred Exchange .
The parties acknowledge that Seller may elect to sell, and Purchaser may elect to buy, any or all of the Real Property in connection with the completion of a tax-deferred exchange under Section 1031 of the Internal Revenue Code of 1986. Each party hereby agrees to take such reasonable steps, at no cost to such party, as the other may require in order to complete such tax-deferred exchange, including paying or accepting all or a portion of the Purchase Price to or from a third party.
Article 19.      Miscellaneous .
19.1      Entire Agreement; Modification . This Agreement embodies the entire agreement and understanding between Seller and Purchaser, and supersedes any prior oral or written agreements, relating to this transaction. This Agreement may not be amended, modified or supplemented except in a writing executed by both Seller and Purchaser. No term of this Agreement shall be waived unless done so in writing by the party benefited by such term.
19.2      Survival; No Merger . The terms of this Agreement shall survive and be enforceable after the Closing and shall not be merged therein.
19.3      Governing Law . This Agreement shall be construed under and governed by the laws of the State of Minnesota.
19.4      Severability . If any term of this Agreement or any application thereof shall be invalid or unenforceable, the remainder of this Agreement and any other application of such term shall not be affected thereby.
19.5      Time of the Essence . Time is of the essence under this Agreement.
19.6      Construction . The rule of strict construction shall not apply to this Agreement. This Agreement shall not be interpreted in favor of or against either Seller or Purchaser merely because of their respective efforts in preparing it.
19.7      Captions, Gender, Number and Language of Inclusion . The article and section headings in this Agreement are for convenience of reference only and shall not define, limit or prescribe the scope or intent of any term of this Agreement. As used in this Agreement, the singular shall include the plural and vice versa, the masculine, feminine and neuter adjectives shall include one another, and the following words and phrases shall have the following meanings: (i) “including” shall mean “including but not limited to”, (ii) “terms” shall mean





“terms, provisions, duties, covenants, conditions, representations, warranties and indemnities”, (iii) “any of the Property” or “any of the Real Property” shall mean “the Property or any part thereof or interest therein” or “the Real Property or any part thereof or interest therein”, as the case may be, (iv) “rights” shall mean “rights, duties and obligations”, (v) “liabilities” shall mean “liabilities, obligations, damages, fines, penalties, claims, demands, costs, charges, judgments and expenses, including reasonable attorneys’ fees”, (vi) “incurred by” shall mean “imposed upon or suffered or incurred or paid by or asserted against”, (vii) “applicable law” shall mean “all applicable Federal, state, county, municipal, local or other laws, statutes, codes, ordinances, rules and regulations”, (viii) “about the Property” or “about the Real Property” shall mean “in , on, under or about the Property” or “in, on under or about the Real Property”, as the case may be, (ix) “operation” shall mean “use, non-use, possession, occupancy, condition, operation, maintenance or management”, and (x) “this transaction” shall mean “the purchase, sale and related transactions contemplated by this Agreement”.
19.8      Binding Effect . This Agreement shall inure to the benefit of and shall bind the respective heirs, executors, administrators, successors and assigns of Seller and Purchaser.
19.9      Counterparts . This Agreement may be executed and delivered in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. To facilitate execution of this Agreement, the parties may execute and exchange by email counterparts of the signature pages.
19.10      Limitation of Liability . Notice is hereby given that all persons dealing with Seller shall look to the assets of Seller for the enforcement of any claim against Seller. None of the officers, directors, employees, owners or partners of Seller shall have any personal liability for any of the liability or obligations of Seller.
19.11      Joint and Several . To the extent either the Seller or Purchaser hereunder are comprised of more than one person or entity, the liability and obligations hereunder of all such parties comprising Seller or Purchaser, as applicable, shall be joint and several. This Section 19.11 shall survive the Closing.
19.12      Rentable Square Footage . If a tenant or its Affiliates occupy space in a particular Property pursuant to multiple Leases, the rentable square footage under all such Leases shall be aggregated hereunder when calculating the rentable square footage occupied by such tenant pursuant to its Lease.
 

END OF ARTICLE








SIGNATURE PAGE

FOR

PURCHASE AGREEMENT

BY AND BETWEEN

IRET PROPERTIES

AND

HARRISON STREET REAL ESTATE, LLC
Seller and Purchaser have caused this Agreement to be executed and delivered as of the date first above written.
SELLER:


IRET PROPERTIES,
a North Dakota Limited Partnership

By:    IRET, Inc., a North Dakota corporation
Its:     General Partner

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker , Jr.
Title: Chief Executive Officer


By: /s/ Anne Olson
Name: Anne Olson
Title: Executive Vice President




Signature Page to Purchase and Sale Agreement


IRET - BILLINGS 2300 CBR, LLC, a North Dakota limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President


MINNESOTA MEDICAL INVESTORS, LLC, a Delaware limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President


SMB OPERATING COMPANY, LLC, a Delaware limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President


MISSOULA 3050 CBR, LLC, a North Dakota limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President





Dated as of: November 30, 2017
PURCHASER:

HARRISON STREET REAL ESTATE, LLC,
a Delaware limited liability company

By:     /s/ Stephen Gordon
    Name: Stephen Gordon
Title: General Counsel & Senior Managing Director






JOINDER OF TITLE COMPANY
The undersigned hereby agrees to act as Title Company under the foregoing Purchase Agreement and to hold and disburse the Earnest Money in accordance with the terms thereof.
Dated: November 30, 2017.
FIRST AMERICAN TITLE INSURANCE COMPANY
By /s/ Jodi Tagessen ____________

Its Senior Escrow Officer, Counsel    


39
EAST\148676904.7


EXHIBIT A

Schedule of Properties and Allocated Purchase Price


OWNED SITES

Seller
Name
Address
City
State
Allocated PP
IRET Properties
Burnsville 303 Nicollet Medical
303 East Nicollet Boulevard
Burnsville
MN
$20,400,000.00
IRET Properties
Burnsville 305 Nicollet Medical
305 East Nicollet Boulevard
Burnsville
MN
$12,800,000.00
IRET Properties
Pavilion II
1001 East Superior Street
Duluth
MN
$22,100,000.00
IRET Properties
Ritchie Medical Plaza
310 North Smith Avenue
St. Paul
MN
$16,500,000.00
MN Medical
Edina 6517 Drew Avenue
6517 Drew Avenue South
Edina
MN
$3,000,000.00
SMB
6545 France SMC I
6545 France Avenue South
Edina
MN
$55,300,000.00
SMB
Edina 6525 France SMC II
6525 France Avenue South
Edina
MN
$22,800,000.00
SMB
6565 France SMC III
   *included Ground Leased Parking Ramp
6565 France Avenue South
Edina
MN
$24,900,000.00
IRET Properties
2800 Medical Building
2800 Chicago Ave South
Minneapolis
MN
$12,500,000.00
IRET Properties
2828 Midtown Medical & Parking Ramp
2828 Chicago Ave South
Minneapolis
MN
$29,000,000.00
IRET Billings
Billings 2300 Grant Road
2300 Grant Road
Billings
MT
$5,500,000.00
IRET Properties
Bismarck 715 East Broadway (incl. vacant land at 700 E. Main)
715 East Broadway Ave and 700 East Main Ave
Bismarck
ND
$5,400,000.00
IRET Properties
Park Dental
6437 Brooklyn Boulevard
Brooklyn Center
MN
$3,400,000.00
IRET Properties
Prairie Care Medical
9400 Zane Avenue North
Brooklyn Park
MN
$41,900,000.00
IRET Properties
Duluth Denfeld Clinic
4702 Grand Avenue
Duluth
MN
$4,000,000.00
IRET Properties
Fresenius
4700 Mike Colalillo Drive
Duluth
MN
$1,900,000.00
IRET Properties
Wells Clinic
1120 East 34th Street
Hibbing
MN
$3,700,000.00
IRET Properties
High Pointe Health Campus
8650 Hudson Boulevard
Lake Elmo
MN
$9,000,000.00

EAST\148676904. 7     A-2



IRET Properties
Plaza - Trinity
2815 16th Street Southwest
Minot
ND
$10,000,000.00
IRET Missoula
Missoula 3050 Great Northern Ave
3050 Great Northern Avenue
Missoula
MT
$5,500,000.00
IRET Properties
Lakeside Medical Plaza
17001 Lakeside Hills Plaza
Omaha
NE
$6,600,000.00
IRET Properties
Gateway Clinic - Sandstone
204 Lundorff Drive
Sandstone
MN
$300,000.00
IRET Properties
St. Michael Clinic
4300 Edgewood Drive NE
St. Michael
MN
$3,000,000.00

GROUND LEASED SITES

Seller
Name
Address
City
State
Allocated PP
IRET Properties
Pavilion I
920 East First Street
Duluth
MN
$15,600,000.00
IRET Properties
Edina 6363 France Medical
6363 France Ave South
Edina
MN
$23,100,000.00
IRET Properties
Edina 6405 France Medical
6405 France Avenue South
Edina
MN
$23,300,000.00
IRET Properties
Minneapolis 701 25th Avenue Medical
701 25th Avenue South
Minneapolis
MN
$15,700,000.00
IRET Properties
Gardenview Medical Building
    *Includes Gardenview Condominiums
347 Smith Avenue North
St. Paul
MN
$14,000,000.00
IRET Properties
Airport Medical Building
7550 34th Avenue South
Minneapolis
MN
$2,500,000.00
IRET Properties
Mariner Clinic
109 North 28th Street East
Superior
WI
$3,800,000.00






EXHIBIT B

Legal Descriptions of Land

2800 Medical Building
The land is situated in the City of Minneapolis, County of Hennepin, State of Minnesota, and is described as follows:
Parcel 1:
Unit Nos. 1 and 2, CIC No. 1848, IRET-Chicago Avenue Medical Condominium, a condominium located in the County of Hennepin.  
 
(Torrens property, Certificate of Title No. 1316315)  
 
Parcel 2:
Non-exclusive pedestrian easement for access purposes, as set forth in the Declaration of Easement for Access Purposes, dated December 28, 2009, recorded December 29, 2009, as Document No. T4716756, in the Office of the Hennepin County Registrar of Titles.


2828 Midtown Medical & Parking Ramp
The land is situated in the City of Minneapolis, County of Hennepin, State of Minnesota, and is described as follows:
Parcel 1:
Unit No. 3, CIC No. 1848, IRET-Chicago Avenue Medical Condominium, a condominium located in the County of Hennepin.  
 
(Torrens property, Certificate of Title No. 1316315)  
 
Parcel 2:
Non-exclusive pedestrian easement for access purposes, as set forth in the Declaration of Easement for Access Purposes, dated December 28, 2009, recorded December 29, 2009, as Document No. T4716756, in the Office of the Hennepin County Registrar of Titles.


B-1
EAST\148676904.7


Airport Medical Building

Real property in the City of Met Airport, County of Hennepin, State of Minnesota, described as follows: 
 
Parcel 1:
That part of the Southwest Quarter of Section 31, Township 28, Range 23, Hennepin County, Minnesota, described as commencing at the Southwest corner of said Section 31; thence on an assumed bearing of North 0 degrees 55 minutes 24 seconds West, along the West line of said Section 31, a distance of 757.50 feet; thence North 89 degrees 07 minutes 06 seconds East a distance of 979.47 feet; thence North 0 degrees 56 minutes 48 seconds West a distance of 262.45 feet, along a line hereinafter referred to as Line "A", to the point of beginning of the parcel to be described; thence South 89 degrees 03 minutes 12 seconds West a distance of 1.04 feet; thence Westerly a distance of 136.75 feet along a tangential curve concave to the South having a radius of 400.00 feet and a central angle of 19 degrees 35 minutes 19 seconds; thence South 69 degrees 27 minutes 53 seconds West, tangent to said curve, a distance of 7.76 feet; thence Northerly a distance of 57.31 feet along a tangential curve concave to the Northeast having a radius of 30.00 feet and a central angle of 109 degrees 27 minutes 15 seconds; thence North 01 degree 04 minutes 52 seconds West, tangent to last described curve, a distance of 674.26 feet; thence Northerly a distance of 7.22 feet along a tangential curve concave to the East having a radius of 27.00 feet and a central angle of 15 degrees 19 minutes 48 seconds; thence North 89 degrees 13 minutes 22 seconds East, not tangent to last described curve, a distance of 173.63 feet; thence South 00 degrees 56 minutes 48 seconds East a distance of 36.98 feet; thence North 89 degrees 13 minutes 22 seconds East a distance of 27.58 feet to a point hereinafter referred to as Point "A"; thence South 00 degrees 56 minutes 48 seconds East a distance of 438.08 feet; thence South 89 degrees 03 minutes 24 seconds West a distance of 18.00 feet to the Northerly extension of said Line "A"; thence South 00 degrees 56 minutes 48 seconds East, along said Northerly extension, a distance of 208.19 feet to the point of beginning.  
 
Parcel 2:
Non-exclusive easements for access and utilities as contained in Amended Memorandum of Sublease dated March 16, 2001, filed May 22, 2001 as Document No. 7475237.

Billings 2300 Grant Road
The land is situated in the City of Billings, County of Yellowstone, State of Montana, and is described as follows:
LOT 1-A, BLOCK 3, OF AMENDED LOT 1, BLOCK 3, HOGAN HOMESTEAD SUBDIVISION, IN THE CITY OF BILLINGS, YELLOWSTONE COUNTY, MONTANA, ACCORDING TO THE OFFICIAL PLAT ON FILE IN THE OFFICE OF THE CLERK AND RECORDER OF SAID COUNTY, UNDER DOCUMENT #3100012. 






Bismarck 700 East Main (Vacant Land) & Bismarck 715 East Broadway
The Land is described as follows:
Real property in the City of Bismarck, County of Burleigh, State of North Dakota, described as follows:
 
PARCEL 1:  
 
LOTS 15 AND 16, BLOCK 42, ORIGINAL PLAT TO THE CITY OF BISMARCK, BURLEIGH COUNTY, NORTH DAKOTA  
 
PARCEL 2:  
 
LOTS 17 AND 18, BLOCK 42, ORIGINAL PLAT TO THE CITY OF BISMARCK, BURLEIGH COUNTY, NORTH DAKOTA  
 
PARCEL 3:  
 
SOUTH 66 FEET OF LOTS 7 AND 8, BLOCK 42, ORIGINAL PLAT TO THE CITY OF BISMARCK, BURLEIGH COUNTY, NORTH DAKOTA
 
PARCEL 4:  
 
LOTS 11, 12, 13 AND 14, BLOCK 42, ORIGINAL PLAT TO THE CITY OF BISMARCK, BURLEIGH COUNTY, NORTH DAKOTA  
 
PARCEL 5:  
 
NORTH 64 FEET OF LOTS 7 AND 8, BLOCK 42, ORIGINAL PLAT TO THE CITY OF BISMARCK, BURLEIGH COUNTY, NORTH DAKOTA

PARCEL 6:  
 
LOTS 9 AND 10, BLOCK 42, ORIGINAL PLAT TO THE CITY OF BISMARCK, BURLEIGH COUNTY, NORTH DAKOTA  
 
PARCEL 7:  
 
A PARCEL OF LAND COMPRISING ALL THOSE PARTS OF BLOCK 40 AND 42 AND OF THE VACATED INTERVENING ALLEY AND OF THAT PART OF VACATED 8TH STREET, ALL IN THE ORIGINAL PLAT OF THE CITY OF BISMARCK, BURLEIGH COUNTY, NORTH DAKOTA, ACCORDING TO THE RECORDED PLAT THEREOF ON FILE AND OF RECORD IN THE OFFICE OF THE REGISTER OF DEEDS IN AND FOR BURLEIGH COUNTY, NORTH DAKOTA, BOUNDED AND DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWEST CORNER OF LOT 19 IN SAID BLOCK 42; THENCE NORTH ALONG THE WEST LINE OF BLOCK 42 OF THE NORTHWEST CORNER THEREOF; THENCE EAST ALONG THE NORTH LINE OF SAID BLOCK 42 AND ITS EAST EXTENSION ACROSS SAID VACATED ALLEY AND SAID VACATED 8TH STREET AND CONTINUING ALONG THE NORTH LINE OF SAID BLOCK 40 A DISTANCE OF 428 FEET; THENCE SOUTH TO A POINT IN THE SOUTH LINE OF LOT 19 IN SAID BLOCK 40 A DISTANCE OF 428 FEET EAST OF THE POINT OF BEGINNING; THENCE WEST TO THE POINT OF BEGINNING.   





Burnsville 303 Nicollet Medical
The land is situated in the City of Burnsville, County of Dakota, State of Minnesota, and is described as follows:
Parcel 1:
Tract B, REGISTERED LAND SURVEY NUMBER 53, files of Registrar of Titles, County of Dakota.  
 
Torrens Property-Certificate of Title No. 144444  
 
Parcel 2:
Non-exclusive easements created by Pedestrian Link Reciprocal Easement and Operating Agreement recorded February 12, 1988 as Document No. 198594; amended by Document Nos. 244186, 251108 and 416404.  
 
Parcel 3:
Non-exclusive easements as contained in Cross Utility Easement Agreement recorded February 17, 2000 as Document No. 416405; amended by Document No. 460372.

Burnsville 305 Nicollet Medical
The land is situated in the City of Burnsville, County of Dakota, State of Minnesota, and is described as follows:
Parcel 1:
Tract C, REGISTERED LAND SURVEY NUMBER 53, files of Registrar of Titles, County of Dakota.  
 
Torrens Property-Certificate of Title No. 144443  
 
Parcel 2:
Non-exclusive easements as contained in Parking Agreement recorded December 31, 1986 as Document No. 179500, as amended by Document Nos. 198597, 237321, 244187, 321188, 416403 and 624034.  
Parcel 3:
Non-exclusive easements created by Pedestrian Link Reciprocal Easement and Operating Agreement recorded February 12, 1988 as Document No. 198594; amended by Document Nos. 244186, 251108 and 416404.  
 
Parcel 4:
Non-exclusive easements as contained in Cross Utility Easement Agreement recorded February 17, 2000 as Document No. 416405; amended by Document No. 460372.






Duluth Denfeld Clinic
The land is situated in the City of Duluth, County of ST. LOUIS, State of Minnesota, and is described as follows:  
That part of Block 67, Addition to Oneota and Block 67, Oneota, and the adjacent vacated streets and alleys according to the recorded plat thereof described as follows:
Commencing at the most westerly corner of Block 66, Addition to Oneota; thence Southeasterly along the southwesterly line of said Block 66, a distance of 111.42 feet to the northwesterly right-of-way line of Burlington Northern, Inc., formerly the Northern Pacific Railroad Company; thence continue southeasterly along the southwesterly line of said Block 66 a distance of 168.58 feet to the most southerly corner of said Block 66; thence northeasterly along the southeasterly line of said Block 66, Addition to Oneota and said Block 67, Oneota, a distance of 480.00 feet to the most southerly corner of said Block 67, Oneota; thence continuing northeasterly along the southeasterly line of said Block 67, Oneota, a distance of 128.00 feet to the POINT OF BEGINNING; thence continuing along the southeasterly line of said Block 67, Oneota, a distance of 312.00 feet; thence northwesterly parallel with the northeasterly line of said Block 67 a distance of 280.00 feet to the southeasterly right-of-way of Grand Avenue; thence southwesterly along the northwesterly line of said Block 67 (also being the southeasterly right-of-way of Grand Avenue) a distance of 269.67 feet; thence southeasterly parallel with the northeasterly line of said Block 67, Oneota, a distance of 113.45 feet to the northwesterly right-of-way line of said Burlington Northern, Inc., then southwesterly along the northwesterly right-of-way line of said Burlington Northern, Inc., a distance of 27.33 feet; thence southeasterly along a line parallel with the southwesterly line of Block 67 a distance of 126.88 feet; thence southwesterly parallel with the southeasterly line of said Block 67 a distance of 15.00 feet; thence southeasterly parallel with the southwesterly line of Block 67 a distance of 40.00 feet to the POINT OF BEGINNING, and there terminating,

Together with the adjacent vacated north half of Traverse Street (now Second Street).  
 
(Abstract and Torrens Property)  
 
The Torrens portion of the property described above is described as follows:  
 
That part of Lot 4 Block 67 ADDITION TO ONEOTA and Lot 4 Block 67 ONEOTA lying northeasterly of a line parallel with and distant 29 feet, 8 inches from the northeasterly line of Lot 4, Block 67, Oneota.  
 
(Certificate of Title No. 299522)






Edina 6363 France Medical

Real property in the City of Edina, County of Hennepin, State of Minnesota, described as follows:
  
PARCEL 1:
Lot 2, Block 1, Fairview Southdale Addition, according to the recorded plat thereof, Hennepin County, Minnesota.
TORRENS PROPERTY: Certificate of Title No. 1068533.  
 
PARCEL 2:
Non-exclusive easements for access, tunnel, utility, and parking purposes contained and described in the Declaration of Easements and Covenants recorded as Document No. 2000007, in the Supplement and Amendment to Declaration of Easements and Covenants recorded as Document No. 2110251, and in the Second Supplement and Amendment to Declaration of Easements and Covenants recorded as Document No. T05340942, all in the records of the Registrar of Titles, Hennepin County, Minnesota.  
 
PARCEL 3:
Non-exclusive easements for access, utility, structural support and encroachment purposes contained and described in the Declaration of Easements and Covenants recorded as Document No. 3435498, in the Amendment to Declaration of Easements and Covenants recorded as Document No. T4775649, and in the Second Amendment to Declaration of Easements and Covenants recorded as Document No. T05340941, all in the records of the Registrar of Titles, Hennepin County, Minnesota.
 

Edina 6405 France Medical
The land is situated in the City of Edina, County of Hennepin, State of Minnesota, and is described as follows:
Parcel 1:  
 
Tract B, Registered Land Survey No. 1716, Hennepin County, Minnesota.  
 
(Torrens property, Certificate of Title No. 1068531)  
 
Tract C, Registered Land Survey No. 1716, Hennepin County, Minnesota.  
 
(Torrens property, Certificate of Title No. 1068532)  
 
Parcel 2:  
 
Non-exclusive easements as set forth in the Declaration of Easements and Covenants dated June 29, 2001, recorded September 24, 2001, as Document No. 3435498, in the Office of the Hennepin County Registrar of Titles. Amended by Amendment to Declaration of Easements and Covenants dated July 2, 2010, recorded August 3, 2010, as Document No. T4775649, in the Office of the Hennepin County Registrar of Titles. Further amended by Second Amendment to Declaration of Easements and Covenants dated April 12, 2016, recorded April 19, 2016, as Document No. T05340941, in the Office of the Hennepin County Registrar of Titles.






Edina 6517 Drew Avenue
The land is situated in the City of Edina, County of Hennepin, State of Minnesota, and is described as follows:
All of Lot 3, Block 4, Southdale Acres, Hennepin County, Minnesota, except the North 157.39 feet thereof as measured along the East and West lines thereof and except that part thereof lying South of the Easterly extension of the North line of Lot 2 said Block 4.  
 
Property is Torrens;
Certificate of Title No. 1094622.

Edina 6525 France
The land is situated in the City of Edina, County of Hennepin, State of Minnesota, and is described as follows:
PARCEL 1:
Tract B, Registered Land Survey No. 1728, Hennepin County, Minnesota.
TORRENS PROPERTY: Certificate of Title No. 1332648.  
 
PARCEL 2:
Non-exclusive easement for pedestrian tunnel purposes contained and described in the Tunnel Agreement recorded as Document No. 1203328 in the records of the Registrar of Titles, Hennepin County, Minnesota.  


Fresenius
The land is situated in the City of Duluth, County of St. Louis, State of Minnesota, and is described as follows:
That part of Lots 3, 4, 5 and 6, Block 3, Oneota Industrial Park First Addition, lying Southwesterly of a line drawn parallel to and 241.76 feet Southwesterly of the Southwest line of Lot 2, Block 3, of Oneota Industrial Park First Addition, extended, described as follows: Beginning at the intersection of a line drawn parallel to and 241.76 feet Southwesterly of the Southwest line of said Lot 2, Block 3 and the Easterly right of way line of Colalillo Drive; thence Southeasterly parallel with the Southwesterly line of said Lot 2, Block 3 a distance of 418.00 feet; thence deflecting to the right 90 degrees for a distance of 120.25 feet; thence deflecting to the right 90 degrees for a distance of 118.00 feet; thence deflecting to the left 55 degrees 06 minutes 28 seconds a distance of 72.99 feet to the Easterly right of way line of Colalillo Drive; thence Northwesterly along the Easterly right of way of Colalillo Drive a distance of 314.86 feet to the point of beginning.  
 
EXCEPT minerals.  
 
(Part of the land on Certificate of Title No. 338790)







Gardenview Medical Building
The land is situated in the City of St Paul, County of Ramsey, State of Minnesota, and is described as follows:
Unit Nos. 5001 and 6001, Common Interest Community No. 385, Garden View Medical Building Condominium, Ramsey County, Minnesota.  
 
(Torrens Property-Certificate of Title Nos. 513966 and 513967)

Gateway Clinic – Sandstone
The land is situated in the City of Sandstone, County of Pine, State of Minnesota, and is described as follows:
Lot 1, Block 1, Gateway, Pine County, Minnesota.  
 
Property is Abstract.

High Pointe Health Campus
The land is situated in the City of Lake Elmo, County of Washington, State of Minnesota, and is described as follows:

Parcel A (Certificate of Title No. 60591):  
 
All that part of the Southeast Quarter of the Southeast Quarter of Section 33, Township 29 North, Range 21 West, Washington County, Minnesota, described as follows:
Commence at the southeast corner of said Southeast Quarter; thence North 00 degrees 00 minutes 40 seconds West, along the east line of said Southeast Quarter, a distance of 435.61 feet to the point of beginning; continue thence North 00 degrees 00 minutes 40 seconds West, along said east line, a distance of 483.26 feet; thence North 90 degrees 00 minutes 00 seconds West a distance of 683.24 feet; thence South 00 degrees 00 minutes 00 seconds East a distance of 423.69 feet; thence westerly 123.88 feet along the arc of non-tangential curve concave to the south whose radius is 230.00 feet and whose chord bears South 83 degrees 51 minutes 07 seconds West; thence South 68 degrees 24 minutes 49 seconds West a distance of 102.81 feet to a point on the northerly right of way line of Hudson Blvd.; thence southeasterly, along said northerly right of way, a distance of 421.73 feet along the arc of a non-tangential curve concave to the northeast whose radius is 768.51 feet and whose chord bears South 52 degrees 53 minutes 56 seconds East; thence North 00 degrees 00 minutes 40 seconds West a distance of 176.36 feet; thence North 89 degrees 35 minutes 53 seconds East a distance of 175.00 feet; thence South 00 degrees 00 minutes 40 seconds East a distance of 223.25 feet to a point on the northerly right of way line of Hudson Blvd.; thence southeasterly, along said northerly right of way line a distance of 53.13 feet along the arc of a non-tangential curve concave to the north, whose radius is 768.51 feet and whose chord bears South 84 degrees 06 minutes 58 seconds East; continue thence South 86 degrees 05 minutes 47 seconds East a distance of 141.01 feet; thence North 00 degrees 00 minutes 40 seconds West a distance of 301.88 feet; thence North 89 degrees 35 minutes 53 seconds East a distance of 200.00 feet to the point of beginning and there terminating.  


Parcel B:  
 
Non-exclusive easement for access purposes as contained in the Easement and Agreement, dated August 30, 2004, recorded October 6, 2004, in the office of the Registrar of Titles as Doc. No. 1150352.






Lakeside Medical Plaza

The land referred to is situated in the State of Nebraska, County of Douglas and is described as follows:
 
PARCEL 1: LOT 3, LAKESIDE HILLS REPLAT 4, AN ADDITION TO THE CITY OF OMAHA, DOUGLAS COUNTY, NEBRASKA.  
 
PARCEL 2: TOGETHER WITH THOSE EASEMENT RIGHTS ARISING PURSUANT TO THE DECLARATION OF RESTRICTIONS AND GRANT OF EASEMENTS RECORDED JANUARY 12, 2000 IN MISCELLANEOUS BOOK 1323, PAGE 259 IN THE OFFICE OF THE REGISTER OF DEEDS OF DOUGLAS COUNTY, NEBRASKA.  
 
PARCEL 3: TOGETHER WITH THOSE INGRESS AND EGRESS EASEMENT RIGHTS ARISING PURSUANT TO THE PLAT AND DEDICATION RECORDED DECEMBER 29, 1999, IN DEED BOOK 2141, PAGE 27 IN THE OFFICE OF THE REGISTER OF DEEDS OF DOUGLAS COUNTY, NEBRASKA.

Mariner Clinic

A parcel of land located in the Southeast Quarter of the Southwest Quarter (SE ¼ of SW ¼) of Section Twenty-four (24), Township Forty-nine (49) North, Range Fourteen (14) West, in the City of Superior, Douglas County, Wisconsin, described as follows:  
 
Lot 1, Douglas County Certified Survey Map No. 678 recorded October 5, 1998 in Volume 5, Pages 42-43, as Document No. 702814. more particularly described as follows:  
 
Commencing at the Southwest corner of said Section Twenty-four (24); thence North along the West line of said Section 24 on a bearing of N 00°04’42” West a distance of 80.00 feet; thence East on a bearing of S 89°40’12” East along the North right of way line of North 28th Street, a distance of 1745.00 feet; thence North 00°04’42” West a distance of 21.50 feet to the point of beginning; thence continuing North 00°04’42” West a distance of 283.92 feet; thence North 89°42’12” West a distance of 34.18 feet; thence South 00°04’42” East a distance of 38.00 feet; thence North 89°42’12” West a distance of 104.65 feet; thence South 00°04’42” East a distance of 63.66 feet; thence North 89°42’12” West a distance of 41.60 feet; thence South 00°04’42” East a distance of 48.34 feet; thence South 89°42’12” East a distance of 41.60 feet; thence South 00°04’42” East a distance of 133.92 feet; thence South 89°42’12” East a distance of 138.83 feet to the point of beginning and there terminating.  
 
Tax Parcel No. 02-802-07098-15







Minneapolis 701 25th Avenue Medical
The land is situated in the City of Minneapolis, County of Hennepin, State of Minnesota, and is described as follows:
Parcel A (Abstract property):  
 
The west 147.00 feet of Lots 12, 13 and 14, Block 14, Murphy's Addition to Minneapolis, lying northerly of the following described line: Commencing at the northwest corner of said Lot 14; thence on an assumed bearing of South 00 degrees 02 minutes 20 seconds West along the west line of said Lots 12, 13 and 14 a distance of 164.74 feet to the point of beginning of the line to be described; thence North 89 degrees 59 minutes 14 seconds East a distance of 36.25 feet; thence South 00 degrees 00 minutes 46 seconds East a distance of 1.40 feet; thence North 89 degrees 59 minutes 14 seconds East a distance of 110.75 feet to the east line of the west 147.00 feet of said Lots 12, 13 and 14 and said line there terminating.  
 
Parcel B:  
 
Non-exclusive easements for tunnel purposes as contained in the Easement Agreement, dated March 26, 1984, recorded September 10, 1984, in the office of the County Recorder as Doc. No. 4923703.  
 
Parcel C:
Non-exclusive easements for canopy encroachment and vehicular access purposes as contained in the Easement Agreement, dated March 26, 1984, recorded September 10, 1984, in the office of the County Recorder as Doc. No. 4923704.  
 
Parcel D:  
 
Non-exclusive easements for parking and for ingress and egress purposes as contained in the Parking Easement Agreement, dated January 23, 1991, recorded January 25, 1991, in the office of the County Recorder as Doc. No. 5744650.

Missoula 3050 Great Northern Ave
The land is situated in the City of Missoula, County of Missoula, State of Montana, and is described as follows:
LOT 9 OF RESERVE STREET INDUSTRIAL CENTER - PHASE I, A PLATTED SUBDIVISION IN THE CITY OF MISSOULA, MISSOULA COUNTY, MONTANA, ACCORDING TO THE OFFICIAL RECORDED PLAT THEREOF.  
 
COMMONLY KNOWN AS: 3050 GREAT NORTHERN AVENUE, MISSOULA, MT 59808 






Park Dental
The land is situated in the City of Brooklyn Center, County of Hennepin, State of Minnesota, and is described as follows:
Parcel 1:  
 
Lot 1, Block 1, Dental Center 2nd Addition, Hennepin County, Minnesota.  
 
Property is Abstract.  
 
Parcel 2:  
 
Non-exclusive easements for parking and ingress and egress purposes, as reserved in Document No. 4472887 and amended by Document No. 7347537.






Pavilion I

Real property in the City of Duluth, County of ST. LOUIS, State of Minnesota, described as follows:
  
Parcel A:  
 
Lots 7 and 8, Block 20, PORTLAND DIVISION, including all that portion of said lots lying within 15 feet of the center line of the alley in the rear of said lots; and Lot 9, Block 20, PORTLAND DIVISION.  
 
St. Louis County, Minnesota.
Torrens Property-Certificate of Title No. 298948.0  
 
Parcel B:  
 
The land included within the following boundaries, to-wit: The center line of the alley between Block 13 and Block 20, in PORTLAND DIVISION OF DULUTH, the rear or Southerly line of Lots 10 and 11 in said Block 20, as shown on said plat, and the Westerly side line of said Lot 10 and the Easterly side line of said Lot 11 both side lines produced to the said center line of said alley.
and
Lots 10 and 11, Block 20, PORTLAND DIVISION OF DULUTH.  
 
St. Louis County, Minnesota.
Torrens Property-Certificate of Title No. 270028.0  
 
Parcel C:  
 
That tract of land lying and being in Block 20 in PORTLAND DIVISION
OF DULUTH, lying within the following boundary lines to-wit: The
center line of the alley in the rear of said Block; the center line
of First Street in the front of said Block; the extended Easterly and
Westerly lines of Lot 13 in said Block.
and
Lot 12, Block 20, PORTLAND DIVISION OF DULUTH, including that portion
of the vacated alley adjacent thereto.  
 
St. Louis County, Minnesota.
Torrens Property-Certificate of Title No. 264755.0  

Parcel D:  
 
The following described land situated in PORTLAND DIVISION OF DULUTH:
Land included within the following described boundaries:
a. Center line of East First Street;
b. Extended dividing line between Lots numbered 14 and 13; in Block
numbered 20
c. Center line of the alley between Blocks numbered 20 and 13;
d. Center line of Tenth Avenue East.  
 
St. Louis County, Minnesota.
Torrens Property-Certificate of Title No. 210348.0 (Certificate contains additional land)






Pavilion II
The land is situated in the City of Duluth, County of St. Louis, State of Minnesota, and is described as follows:
Lots One (1) to Twelve (12), inclusive, and the West 10 feet of Lot Thirteen (13), Block Sixteen (16), Portland Division of Duluth, including that portion of the alley which attached to said lots at the time of the vacation thereof.  
 
(Abstract and Torrens Property-Torrens Certificate No. 298846.0)

Plaza – Trinty
Real property in the City of Minot, County of Ward, State of North Dakota, described as follows:
 
LOT 2, BLOCK 1, IRET SECOND ADDITION TO THE CITY OF MINOT, WARD COUNTY, NORTH DAKOTA. 

Prairie Care Medical
The land is situated in the City of Brooklyn Park, County of Hennepin, State of Minnesota, and is described as follows:
Parcel 1:  
 
Lot 1, Block 1, Astra Village 2nd Addition, according to the recorded plat thereof, Hennepin County, Minnesota.  
 
(Abstract property)  
 
Parcel 2:  
 
Non-exclusive easements for drainage, utility and ingress, egress and roadway as contained in the Easement Agreement (For Ingress, Egress, Roadway, Utility and Temporary Construction Purposes) recorded June 6, 2014 as Document No. 10085016.






Ritchie Medical Plaza

Real property in the City of St Paul, County of Ramsey, State of Minnesota, described as follows:
  
Parcel 1:
Units 2, 3, 4, 8, 9, 10 and 11, Condominium Number 290, Sherman Street Medical Condominium, Ramsey County, Minnesota.  
 
Parcel 2:
Non-exclusive easements contained in that certain Declaration of Skyway and Tunnel Easements dated August 16, 1993, filed October 27, 1993, as Document No. 1032578.  
 
Parcel 3:
Non-exclusive easements contained in that certain Declaration of Covenants and Easements dated August 16, 1993, filed October 27, 1993, as Document No. 1032577.  
 
Parcel 4:
Non-exclusive easements contained in that certain Sherman Street Medical Condominium Declaration for Condominium dated August 16, 1993, filed December 2, 1993, as Document No. 1036884, as amended by First Amendment to Sherman Street Medical Condominium Declaration for Condominium dated December 18, 2003, filed May 24, 2004, as Document No. 1818313.  
 
Torrens Property-Certificate of Title No. 552173.

St. Michael Clinic
The land is situated in the City of St Michael, County of Wright, State of Minnesota, and is described as follows:
Lot 1, Block 2, Town Center of St. Michael 2nd Addition, Wright County, Minnesota, according to the recorded plat thereof.  
 
(Abstract Property)






Wells Clinic
The land is situated in the City of Hibbing, County of St. Louis, State of Minnesota, and is described as follows:
Parcel A (Abstract property):  
 
That part of the Southeast Quarter of the Northwest Quarter of Section 19, Township 57 North, Range 20 West of the 4th Principal Meridian, described as follows:  
 
Commencing at a point of the south line 845.17 feet West of the southeast corner of said Southeast Quarter of the Northwest Quarter, and assuming said south line to bear West; thence North 1301.97 feet to a point on the north line of said Southeast Quarter of the Northwest Quarter; thence North 89 degrees 22 minutes 43 seconds East along said north line 150.07 feet to the point of beginning of the parcel to be described; thence continue North 89 degrees 22 minutes 43 seconds East 615.47 feet to the northwest corner of Lot 12 of A.R.W. Addition to Hibbing; thence Southerly 312.44 feet along a non-tangential curve, the center of circle bears North 89 degrees 59 minutes 30 seconds West, with a radius of 5454.58 feet and a central angle of 03 degrees 16 minutes 56 seconds; thence West 556.42 feet; thence Northwesterly 78.54 feet along a tangential curve concave to the Northeast with a radius of 50.00 feet and a central angle of 90 degrees 00 minutes 00 seconds; thence North 255.35 feet to the point of beginning.  

 
Parcel B:
Non-exclusive easement for utility purposes, as contained in the Easement, dated October 27, 1998, recorded November 10, 1998, in the office of the County Recorder as Doc. No. 734816.  

 
Parcel C:  
 
Non-exclusive easement for ingress and egress purposes, as contained in the Easement, dated October 27, 1998, recorded November 10, 1998, in the office of the County Recorder as Doc. No. 734817.







EXHIBIT C
Reserved



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EXHIBIT D
Primary Tenant Estoppel Certificates
 
Building
Tenant
Suite No.
2800 Medical
Allina Health Systems
Suite 101
2800 Medical
Allina Health Systems
Suite 400
2800 Medical
Allina/Abbott Northwestern General Medicine Associates
Suite 210A and 114
2800 Medical
Allina/Sister Kenny
Suite 102
 
 
 
Burnsville 303
Fairview Breast Center
Suite 220
Burnsville 303
Fairview Health Services
Suite 100 & 140
Burnsville 303
Fairview Health Services
Suite 120, 160 & 180
Burnsville 303
Fairview Pediatric
Suite 372
Burnsville 303
Fairview Surgical
Suite 300 & 310
Burnsville 303
FHS Maternal Fetal Clinic
Suite 363
Burnsville 303
FHS Ridges Clinic
Suite 200
Burnsville 303
FHS Ridgeview Pharmacy
Suite 161
Burnsville 305
Fairview Pain Management
Suite 377
 
 
 
Edina 6363
Fairview Cardiology
Suite 100
Edina 6363
Fairview Community Pharmacy
Suite 214
Edina 6363
Fairview Health Services
Suite 500
Edina 6363
Fairview Sleep Center
Suite 105
Edina 6363
FHS Southdale Cancer Center
Suite 600
 
 
 
Edina 6405
Fairview MN Heart
Suite W240
Edina 6405
Fairview Surgical
Suite W440
Edina 6405
Fairview Vascular
Suite W340
 
 
 
Edina 6517
Children’s Hospital
 
 
 
 
Edina 6525
Allina/MN Perinatal
Suite 205
Edina 6525
Fairview Health Services
Suite 100
Edina 6525
Fairview-Vein Solutions
Suite 275 & 255
 
 
 
Edina 6545
Fairview Breast Center
Suite 250
Edina 6545
Fairview Crosstown Clinic
Suite 150
Edina 6545
Fairview Crosstown Pharmacy
Suite 100
Edina 6545
Fairview Health Services
Suite 510

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Edina 6545
Fairview Wound
Suite 586
Edina 6545
FHS - Inst. for Athletic
Suite 450
 
 
 
Gardenview
Childrens
Suite 501
Gardenview
Childrens
Suite 503
Gardenview
Childrens
Suite 600 & 601
Gardenview
Childrens
Suite 603
 
 
 
Minneapolis 701 25th
Fairview Health Services
Suite 500 & 201B
Minneapolis 701 25th
Fairview Health Services Sports Surgery
Suite 101
Minneapolis 701 25th
Fairview Ophthalmology
Suite 302
 
 
 
Ritchie Medical Plaza
Allina Health / Breast
Suite 300
Ritchie Medical Plaza
Allina Health Systems
Suite 330
Ritchie Medical Plaza
Childrens Health Care
Suite 400 & 480
Ritchie Medical Plaza
Childrens Respiratory & Critical Care
Suite 460
 
 
 
St. Michael Clinic
Allina Health Systems
 






EXHIBIT E
Form of Deeds

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MINNESOTA LIMITED WARRANTY DEED

(Top 3 inches reserved for recording data)
LIMITED WARRANTY DEED
Business Entity to Business Entity

eCRV number: _______________

DEED TAX DUE: $ _____________
DATE: [month/day/year]
FOR VALUABLE CONSIDERATION, [INSERT IRET ENTITY], a ________________ under the laws of the State of _______________ (“ Grantor ”), hereby conveys and quitclaims to ____________________________ , a ________________ under the laws of the State of ________________ (“ Grantee ”), real property in __________ County, Minnesota, legally described as follows: See Exhibit A.

Check here if all or part of the described real property is Registered (Torrens)

together with all hereditaments and appurtenances belonging thereto.

This Deed conveys after-acquired title. Grantor warrants that Grantor has not done or suffered anything to encumber the property, EXCEPT:


Check applicable box:
    The Seller certifies that the Seller does not know of any wells on the described real property.
    A well disclosure certificate accompanies this document or has been electronically filed. (If electronically filed, insert WDC number: […] .)
    I am familiar with the property described in this instrument and I certify that the status and number of wells on the described real property have not changed since the last previously filed well disclosure certificate.
 

Grantor

IRET ENTITY

  By:                   
  Name:                
  Its:                   
  
  By:                   
  Name:                
  Its:                   




E-2
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State of Minnesota, County of __________________

This instrument was acknowledged before me on [month/day/year] , by _______________ as ______________ and by _______________ as ______________of IRET Properties, a North Dakota limited partnership .


(Stamp)
 

                   
(signature of notarial officer)

Title (and Rank):             

My commission expires:          
         (month/day/year)


THIS INSTRUMENT WAS DRAFTED BY:


 
TAX STATEMENTS FOR THE REAL PROPERTY DESCRIBED IN THIS INSTRUMENT SHOULD BE SENT TO:





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IRETMOBFORMPURCHASEAG_IMAGE1.JPG

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NEBRASKA SPECIAL WARRANTY DEED


Return to:

SPECIAL WARRANTY DEED

KNOW ALL MEN BY THESE PRESENTS, that [IRET ENTITY] , a _________________ (“Grantor”) in consideration of One Dollar in hand paid by ________________, (“Grantee”) of ________ County and State of __________, does hereby grant, bargain, sell and convey unto the said Grantee, the following described premises situated in the County of ___________ and State of Nebraska, to-wit: See Exhibit A.    

Together with all the tenements, hereditaments, and appurtenances thereunto belonging, and all the estate, right, title, interest, claim or demand whatsoever of the said _________ (Grantor) of, in, or to the same, or any part thereof:

TO HAVE AND TO HOLD the above described premises unto the said grantees and to their heirs forever; and the said Grantor hereby covenants that Grantor is lawfully seized of such premises, said premises are free and clear of all liens and encumbrances, except those easements, restrictions and covenants of record, Grantor has legal power and lawful authority to convey the premises, and it does hereby covenant to WARRANT AND DEFEND the said premises against the lawful claims and demands of all persons claiming by, through, or under it, and against no other claims or demands.

IN WITNESS WHEREOF we have hereunto set our hand this ___ day of ______, 20__.


Grantor:

IRET ENTITY


By:_______________________________
                                        
STATE OF _____________)
)ss.
COUNTY OF ____________)

The foregoing instrument was acknowledged before me on ___________ __, 20__ by _____________________, known to be the identical person whose name is affixed to the foregoing instrument and acknowledged the execution thereof to be his voluntary act and deed on behalf of said __________________.



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______________________________
Notary Public
My commission expires________________

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NORTH DAKOTA LIMITED WARRANTY DEED


This indenture, made this ______ day of _________________________, 201___ between [ IRET ENTITY] , party of the first part, and ________________________ party of the second part, whose post office address is ____________________________________________________________________ .

WITNESSETH: That said party of the first part in consideration of the sum of One Dollar ($1.00) to and in hand and paid by the party of the second part, receipt of which is hereby acknowledged, does hereby GRANT unto the said party of the second part, all that tract or parcel of land lying and being in the County of ______________ and State of North Dakota, described as follows, to-wit:

See Exhibit A.

The legal description was obtained from a previously recorded instrument.

SUBJECT TO ALL covenants, restrictions, reservations, easements, conditions and rights appearing of record; and SUBJECT to any state of facts an accurate survey would show.

AND the said party of the first part, for its successors and assigns, does/do hereby covenant with the party of the second part, to warrant and defend the title to the property hereby conveyed against the claim of every person whatsoever claiming by, through or under the party of the first part.


I certify that the full consideration paid for the property described in this deed as required under NDCC 11-18-02.2 (1) (c) is $______________________.


    
Grantee or Grantee’s Agent

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WITNESS, the hands of the Grantor .

[IRET ENTITY]

    


STATE OF________________________

COUNTY OF______________________

On this ______ day of _________________________, 2016, before me personally appeared ____________________________, known to me to be the person who is described in, and who executed the within and foregoing instrument and severally acknowledged that she executed the same.


 
   
Notary Public
My Commission expires:





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MONTANA SPECIAL WARRANTY DEED

THIS INSTRUMENT WAS PREPARED BY




AND WHEN RECORDED SHOULD BE RETURNED TO:





SPECIAL WARRANTY DEED

FOR VALUABLE CONSIDERATION, in money or money's worth, the receipt and sufficiency of which is hereby acknowledged, executed this ____day of ____________, 201__ (the “ Effective Date ”), [IRET ENTITY], a _____________________ (“ Grantor ”), grants to _______________________, a _________________ (“ Grantee ”), whose address is ______________________________, and to its successors and assigns, forever, real property situated in _______________ County, Montana, as more particularly described on Exhibit A attached hereto and incorporated in this Special Warranty Deed by this reference.

TO HAVE AND TO HOLD, with all the rights, privileges and appurtenances thereto belonging or in anywise appertaining, unto the Grantee and its successors and assigns, forever; and the Grantor, its successors and assigns does hereby covenant with the Grantee and its successors and assigns, to warrant and defend the title to said property conveyed against the claim of every person whatsoever, claiming by, through or under the Grantor, SUBJECT TO the Permitted Encumbrances set forth on Exhibit B of this Special Warranty Deed.
[SIGNATURE ON FOLLOWING PAGE]

EAST\148676904. 7 E-9



IN WITNESS WHEREOF, Grantor has executed this Special Warranty Deed as of the Effective Date.

GRANTOR:

[IRET ENTITY]
By:                         
Name:     
Title:     
By:                         
Name:     
Title:     



STATE OF                 )
) ss.
COUNTY OF    __________        )
On this ___ day of ________________, 201__, before me personally appeared _______________ and ____________________ to me known to be the __________________ and __________________ of the _________________that executed the within and foregoing instrument, and acknowledged said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that he or she was authorized to execute said instrument and that the seal affixed is the corporate seal of said _________________.
    
Notary Public
My Commission Expires:     






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EXHIBIT F
Form of Assignment of Ground Lease

ASSIGNMENT AND ASSUMPTION OF GROUND LEASES

This Assignment and Assumption of Ground Leases (this “ Agreement ”) is made and entered into as of ______________________, 2017 (the “ Effective Date ”), by and between [IRET ENTITY], a _________________ (“ Assignor ”), and ______________________________, a ___________________ (“ Assignee ”).

RECITALS
Assignor is the tenant under those certain ground leases set forth on Exhibit A attached hereto and made a part hereof (collectively, the “ Ground Leases ”).
Assignor desires to assign all of Assignor’s rights and interest under the Ground Leases to Assignee, and Assignee desires to accept such assignment and assume and agree to perform all obligations of Assignor under the Ground Leases arising from and after the Effective Date.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor and Assignee hereby agree as follows:
1.      Recitals . The foregoing recitals are correct and are incorporated herein.
2.      Assignment of Ground Leases . Assignor hereby transfers, assigns and conveys to Assignee, from and after the Effective Date, all of Assignor’s right, title and interest in, to and under the Ground Leases.
3.      Assumption of Ground Leases . Assignee hereby accepts the assignment of Assignor’s right, title and interest in, to and under the Ground Leases, and hereby assumes all of the obligations of Assignor under the Ground Leases first arising from and after the Effective Date and agrees, for the benefit of Assignor, to perform and comply with all the terms and agreements contained in the Ground Leases on the part of the tenant or lessee thereunder to be performed and complied with from and after the Effective Date.
4.      Miscellaneous . This Agreement shall inure to the benefit of and be binding upon Assignor and Assignee and their respective successors and assigns. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and together which shall constitute one and the same Agreement.
[Remainder of the page intentionally left blank; signature pages follow]

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IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this Agreement as of the ___ day of ________________, 2017, which instrument is effective this date.
ASSIGNOR:

[IRET ENTITY]

By:                         
Name:                         
Title:                         



ASSIGNEE:

______________________________________

By:                         
Name:                         
Title:                         




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EXHIBIT A

Ground Leases





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EXHIBIT G

Form of Bill of Sale
BILL OF SALE
[IRET ENTITY], a __________________ (“ Seller ”), in consideration of the sum of One Dollar ($1.00) and other good and valuable consideration to it in hand paid by _______________________ (“ Purchaser ”), the receipt and sufficiency of which are hereby acknowledged, does hereby quitclaim and convey unto Purchaser all of Seller’s right, title and interest in and to the tangible personal property owned by Seller and presently located on the Real Property described on attached Schedule 1 , excluding, however, any fixtures, furniture, equipment and personal property owned by tenants under the existing leases, any managing agent, or others.

TO HAVE AND TO HOLD THE SAME unto Purchaser, its successors and assigns forever.

Said conveyance and quit claim hereunder is "as-is, where is, and with all faults," without any representation or warranty of any kind, express or implied, including, without limitation, any representation or warranty as to physical condition, including any latent or patent defects, quality of construction, workmanship, merchantability, fitness for any particular purpose, title, or any other matter concerning said personal property, and with no recourse to Seller for any reason whatsoever except for any express representation and warranty of Seller set forth in that certain Purchase and Sale Agreement, dated ______________ __, 2017, between Seller and Purchaser.

Dated: _____________ ___, 2017    
[IRET ENTITY]
By                         
Name:
Title:     

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SCHEDULE 1

Legal Description



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EXHIBIT H
Form of Assignment and Assumption of Leases, Warranties and Contracts


ASSIGNMENT AND ASSUMPTION
OF LEASES, WARRANTIES, AND CONTRACTS

This Assignment and Assumption of Leases, Warranties, and Contracts (this “ Agreement ”) is made and entered into as of ______________________, 2017 (the “ Effective Date ”), by and between [IRET ENTITY], a _________________ (“ Assignor ”), and ______________________________, a ___________________ (“ Assignee ”).

RECITALS
On even date herewith Assignor has conveyed to Assignee the real property legally described on Exhibit A attached hereto and made a part hereof (the “ Real Property ”).
B.    The Real Property is subject to those certain leases set forth on Exhibit B attached hereto and made a part hereof, together with any guaranties of any of said leases (collectively, the “ Leases ”).
C.    Assignor desires to assign all of Assignor’s right, title and interest in, to and under the Leases to Assignee, and Assignee desires to accept such assignment and assume and agree to perform all obligations of Assignor under the Leases arising from and after the Effective Date.
D.    Assignor also desires to assign to Assignee all of Assignor’s right, title and interest in any and all contracts, permits, records, plans, warranties, and intangible personal property owned by Assignor and used in connection with the Real Property, and Assignee desires to accept such assignment and assume such obligations of Assignor first arising under such assignment from and after the date hereof.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Recitals . The foregoing recitals are correct and are incorporated herein.
2. Leases . Assignor represents and warrants that (i)  Exhibit B attached hereto is a current, true and complete list of all leases, licenses and occupancy agreements regarding all or any part of the Real Property, (ii) Assignor has the right, power and authority to assign the Leases to Assignee, and (iii) Assignor is the sole holder and owner of the landlord’s interests in the Leases, free and clear of any liens or encumbrances.

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3. Assignment of Leases . Assignor hereby transfers, assigns and conveys to Assignee, from and after the Effective Date, all of Assignor’s right, title and interest in, to and under the Leases. Assignor also transfers, assigns and conveys to Assignee any security or damage deposits listed on Exhibit B hereto, a credit for which Assignee received on the settlement statement in connection with Assignee’s acquisition of the Real Property from Assignor.
4. Assignment of Contracts, Permits, Records, Plans, Warranties, and Intangible Personal Property . Assignor hereby conveys, assigns, transfers, and sets over unto Assignee, all Assignor’s right, title and interest, to the extent assignable, in and to any and all intangible property owned by Assignor and used in connection with the Real Property and the buildings and improvements located thereon (the “ Property ”), including without limitation the contracts listed on Exhibit C hereto, and all licenses, permits, warranties, plans, records, and “Intangible Personal Property” as that term is defined in the Purchase Agreement (collectively, the “ Intangibles ”), but excluding cash on hand and in bank and escrow accounts, whether held by utility companies, local governmental units, mortgage lenders or Assignor, if any, all trademarks, service marks and trade names of Assignor and Assignor’s Affiliates, and with reservation by Assignor to use such names in connection with other property owned by Assignor, and further excluding any furniture, furnishings, fixtures, business equipment or articles of personal property belonging to any tenant occupying the Property or otherwise excluded pursuant to that certain Purchase and Sale Agreement between Assignor, as seller, and Assignee as purchaser, dated ______________ ____, 2017, for the sale and purchase of the Property (the “ Purchase Agreement ”).
5. Assumption of Leases . Assignee hereby accepts the assignment of Assignor’s right, title and interest in, to and under the Leases, and hereby assumes all of the obligations of Assignor under the Leases first arising from and after the Effective Date and agrees, for the benefit of Assignor, to perform and comply with all the terms and agreements contained in the Leases on the part of the landlord or lessor thereunder to be performed and complied with from and after the Effective Date.
6. Assumption of Contracts, Permits, Records, Plans, Warranties, and Intangible Personal Property . Assignee does hereby accept the assignment of the above-described Intangibles subject to the terms and conditions herein contained, and does hereby assume as of the date hereof and become responsible for and agree to perform, discharge, fulfill and observe all obligations, covenants, conditions and provisions first accruing from and after the date hereof with respect to the Intangibles.
7. Miscellaneous . This Agreement shall inure to the benefit of and be binding upon Assignor and Assignee and their respective successors and assigns. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and together which shall constitute one and the same Agreement.
[Remainder of the page intentionally left blank; signature pages follow]

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IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this Agreement as of the ___ day of ________________, 2017, which instrument is effective this date.
ASSIGNOR:

[IRET ENTITY]

By:                         
Name:                         
Title:                         



ASSIGNEE:

______________________________________

By:                         
Name:                         
Title:                         




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EXHIBIT A

Legal Description



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EXHIBIT B

Leases

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EXHIBIT C

Contracts





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EXHIBIT I
Form of Tenant Notices

To be agreed upon by Seller and Purchaser prior to expiration of the Due Diligence Period

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EXHIBIT J
Form of Tenant Estoppel Certificate
________________ ____, 2017
TO:

Harrison Street Real Estate, LLC
[ADDRESS]

IRET Properties, a North Dakota Limited Partnership
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Anne Olson
        
RE:
___________________________
___________________________
(“Property”)

To Whom It May Concern:

Reference is made to that certain Lease between Landlord, and the undersigned, as Tenant, together with all amendments thereto (collectively, the “Lease”), demising the Premises. Capitalized terms such as Lease, Landlord, Tenant, and Premises are defined in the Schedule(s) attached hereto and made a part hereof, and capitalized terms not defined herein shall have the meaning ascribed in the Lease. Tenant hereby represents to the Benefited Parties (as herein defined) that the following statements are true and correct as of the date hereof:

1. Schedule(s) includes a true and correct description of the Lease, including the date of the Lease and a list of all amendments to the Lease with their respective dates.

2. The Lease has been properly executed by Tenant, is in full force and effect and has not been amended, modified, supplemented or superseded except as indicated in Schedule(s) . The Lease is the entire agreement between Landlord (or any affiliated party) and Tenant (or any affiliated party) pertaining to the Premises.

3. To the knowledge of the undersigned, Landlord is not in default in the performance of the terms and provisions of the Lease, nor does any state of facts or condition exist which, with the giving of notice or the passage of time, or both, would result in such a default. All improvements to be constructed in the Premises by Landlord have been completed to the satisfaction of Tenant and accepted by Tenant and any improvement allowance to be paid or provided by Landlord has been paid in full.


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[Building] – [Tenant]
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4. To the knowledge of the undersigned, there currently is no defense, offset, lien, claim or counterclaim by or in favor of Tenant against Landlord under the Lease or against the obligations of Tenant under the Lease (including, without limitation, any rentals or other charges due or to become due under the Lease) and Tenant is not currently contesting any such obligations, rentals or charges. All obligations of Landlord under the Lease have been performed. There are no pending free periods of rent, tenant improvements, contributions or other concessions granted to Tenant. There are no unpaid rent concessions or other sums to Tenant under the terms of the Lease.

5. Tenant is not in any respect in default in the performance of the terms and provisions of the Lease nor does any state of facts or condition exist which, with the giving of notice or the passage of time, or both, would result in such a default.

6. No Rent, other than for the current month, has been paid in advance, except as otherwise expressly provided in the Lease. The Tenant has accepted possession of and now occupies the Premises.

7. Tenant has no option or right to purchase the property of which the Premises are a part, or any part thereof except as identified in the Schedule(s) .

8. Tenant has no rights of first offer or rights of first refusal to lease additional space in the property of which the Premises are a part except as identified in the Schedule(s).

9. Tenant has not assigned, sublet, or transferred its interest in the Lease and/or the Premises, or any part thereof except as follows (if none, so state): [NONE.]

10. Neither the Lease nor any obligations of Tenant thereunder have been guaranteed by any person or entity, except as described in the Schedule(s) .

11. Tenant is not insolvent and is able to pay its debts as they mature. Tenant has not filed, and is not currently the subject of any filing, voluntary or involuntary, for bankruptcy or reorganization under any applicable bankruptcy or creditors rights laws.

12. The undersigned represents and warrants that it is authorized to execute this Estoppel Certificate and it is binding upon the Tenant and Guarantor, if any.

13. The Guaranty, if any, has been properly executed by Guarantor and is in full force and effect. Guarantor has no defense or counterclaim by or in favor of Guarantor against Landlord.


[Signature Page Follows]

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[Building] – [Tenant]
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The above certifications are made to the Benefited Parties knowing that the Benefited Parties will rely thereon in making an investment in the Premises. For purposes hereof, the term “ Benefited Parties ” means the addressees of this letter together with its/their successors, assigns and lenders.

THIS DOCUMENT MUST BE DATED WHEN SIGNED AND ALL BLANK LINES MUST BE COMPLETED.


DATED this ______ day of ___________________, 2017.


Very truly yours,

TENANT AS DEFINED IN THE SCHEDULE(S) :

                    

By:________________________________
                    
Name:______________________________

Title:_______________________________
1)     

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[Building] – [Tenant]
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GUARANTOR :

                    

By:________________________________
                    
Name:______________________________

Title:_______________________________


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[Building] – [Tenant]
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SCHEDULE 1


1.1
Lease: ___________________ dated as of ___________

1.2
Amendment(s): _______________________

1.3
Landlord: __________________________

1.4
Tenant: ____________________________

1.5
Premises: _______________________________ (including the rentable square footage)

1.6
Security Deposit. Tenant has paid to Landlord a security deposit in the amount of $________________. Landlord has no obligation to segregate the Security Deposit or pay interest thereon.

1.7
Term. The Term of the Lease commenced on _______________, and expires on _______________________, subject Tenant’s right to extend the Term as follows: _______________ (if none, so state).

1.8
Rent, Operating Costs. The Base Rent presently payable under the Lease is $_____________ per month. The amount of Tenant's Proportionate Share of Operating Costs presently payable under the Lease is $_____________ per month. All Rent payable on the part of the undersigned has been paid through and including _______________.

1.9
Guaranty (if none, so state): _____________________________

1.10
Options/Right to Purchase the Property (if none, so state): _____________________

1.11
Rights of First Offer or First Refusal for Additional Leasehold Space (if none, so state): _____________________

1.12
Tenant’s Proportionate Share of Operating Costs. Tenant’s Proportionate Share of Operating Costs is _____%.








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EXHIBIT K
Form of Ground Lease Estoppel Certificate
GROUND LEASE ESTOPPEL CERTIFICATE
________________ ____, 2017
TO:

Harrison Street Real Estate, LLC (and its affiliates, “HSRE”)
444 West Lake Street, Suite 2100
Chicago, Illinois 60606
Attn: Mark Burkemper

IRET Properties, a North Dakota Limited Partnership
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Anne Olson
        
RE:
___________________________
___________________________

To Whom It May Concern:

Reference is made to that certain Ground Lease between Lessee, and the undersigned, as Lessor, together with all amendments thereto (collectively, the “Ground Lease”). The real property (the “Property”) which is the subject of the Ground Lease is described in Schedule 1 attached hereto and made a part hereof. Capitalized terms such as Ground Lease, Lessor, and Lessee are defined in Schedule 1 , and capitalized terms not defined herein shall have the meaning ascribed in the Ground Lease. Lessee hereby represents to the Benefitted Parties (as defined below) that the following statements are true and correct as of the date hereof:

1. Schedule 1 includes a true and correct description of the Ground Lease and a list of all amendments to the Ground Lease, and attached hereto as Exhibit A is a true, correct and complete copy of the Ground Lease and all amendments.

2. The Ground Lease has been properly executed by Lessor, is in full force and effect and has not been amended, modified, supplemented or superseded except as indicated in Schedule 1 and shown in Exhibit A . The Ground Lease is the entire agreement between Lessor (or any affiliated party) and Lessee (or any affiliated party) pertaining to the Premises.

3. Lessee is not in default in the performance of the terms and provisions of the Ground Lease, nor does any state of facts or condition exist which, with the giving of notice or the passage of time, or both, would result in such a default.


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4. There currently is no defense, offset, lien, claim or counterclaim by or in favor of Lessor against Lessee under the Ground Lease or against the obligations of Lessor under the Ground Lease.

5. All obligations of Lessor under the Ground Lease have been performed. Lessor is not in any respect in default in the performance of the terms and provisions of the Ground Lease nor does any state of facts or condition exist which, with the giving of notice or the passage of time, or both, would result in such a default.

6. [Other than the annual base rent, no amounts are payable as rent to Lessor.]

7. Lessor has not received any written notice of any present violation of any federal, state, county or municipal laws, regulations, ordinances, orders, or directives relating to use, operation or condition of the Property that remains uncured.

8. Lessor has no current right to terminate the Ground Lease based on any acts or omissions of Lessee as of the date hereof.

9. Lessor hereby consents to the transfer of Lessee’s interest under the Ground Lease to HSRE and has waived any rights of first refusal, purchase options or rights of first offer with respect to such transfer (if any).

10. The undersigned represents and warrants that it is authorized to execute this Estoppel Certificate and it is binding upon the Lessor.

[Signature Page to Follow]

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The above certifications are made to the Benefited Parties knowing that the Benefited Parties will rely thereon. For purposes hereof, the term " Benefited Parties " means the addressees of this letter, their investors and affiliates together with its/their successors, assigns, lenders and title insurance companies.


DATED this ______ day of ___________________, 2017.


Very truly yours,

LESSOR :

______________________________

By:________________________________
Name:______________________________
Title:_______________________________

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SCHEDULE 1



1.13
Ground Lease: ___________________ dated as of ___________

1.14
Amendment(s):                         

1.15
Lessor:                         

1.16
Lessee:                         

1.17
Legal Description of Property:                         

1.18
Term. The Term of the Ground Lease commenced on _______________, and expires on _______________________, subject Lessee’s right to extend the Term as follows: _______________ (if none, so state).

1.19
Rent. The Rent presently payable under the Ground Lease is $____________ per month. All Rent payable on the part of the Lessee has been paid through and including _______________.

1.20
Security Deposit: (if none, so state): ___________________

1.21
Options/Right to Purchase the Property (if none, so state): ___________________

1.22
Rights of First Offer or First Refusal (if none, so state): ___________________



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EXHIBIT L-1
Requested CC&R Estoppels
Edina 6545 France SMC I
1. Amended and Restated Declaration of Reciprocal Easements and Covenants, dated August 5, 2014, recorded September 4, 2014 as Document No. T05197278; and the Declaration of Reciprocal Easements and Covenants, recorded October 16, 2002 as Document No. 3616233;

2. Declaration, and the terms, conditions, covenants, restrictions and obligations set forth therein, dated May 30, 2014, recorded June 11, 2014 as Document No. T05176793.

Edina 6363 France Medical
1. Declaration of Easements and Covenants, and the terms, conditions, covenants, restrictions, easements and obligations set forth therein, dated February 28, 1989, recorded March 15, 1989 as Document No. 2000007, and as affected by the Supplement and Amendment to Declaration of Easements and Covenants dated May 1, 1990, recorded July 16, 1990 as Document No. 2110251, and also the Second Supplement and Amendment to Declaration of Easements and Covenants dated April 12, 2016, recorded April 19, 2016 as Document o. T05340942;

2. Declaration of Easements and Covenants, and the terms, conditions, covenants, restrictions, easements and obligations set forth therein, dated June 29, 2001, recorded September 24, 2001 as Document No. 3435498, and as affected by the Amendment to Declaration of Easements and Covenants dated July 2, 2010, recorded August 3, 2010 as Document No. T4775649, and also the Second Amendment to Declaration of Easements and Covenants dated April 12, 2016, recorded April 19, 2016 as Document No. T05340941.

Edina 6525 France SMC II
1. Declaration, and the terms, conditions, covenants, restrictions and obligations set forth therein,
dated May 30, 2014, recorded June 11, 2014 as Document No. T05176793; 2. Declaration, and the terms, conditions, covenants, restrictions and obligations set forth therein,
dated October 16, 2002, recorded January 21, 2003 as Document No. 3668160.
Edina 6565 France SMC III
1. Declaration, and the terms, conditions, covenants, restrictions and obligations set forth therein,
dated May 30, 2014, recorded June 11, 2014 as Document No. T05176793.

Edina 6405 France Medical
1. Tunnel Agreement dated December 16, 1976, recorded December 22, 1976, as Document No. 1203328, by and between Dayton Development Company, a Minnesota corporation, and Fairview Community Hospitals, a Minnesota non-profit corporation;

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2. Assignment of Parking Revenues dated December 13, 2001, recorded January 3, 2002, as Document No. 3480640, by France Avenue Medical Building LLP, a Minnesota limited liability partnership, for the benefit of Teachers Insurance and Annuity Association of America, a New York corporation;

3. Declaration dated February 10, 2006, recorded February 14, 2006, as Document No. 4226059;

4. Declaration of Easements and Covenants dated June 29, 2001, recorded September 24, 2001, as Document No. 3435498. Amended by Amendment to Declaration of Easements and Covenants dated July 2, 2010, recorded August 3, 2010, as Document No. T4775649. Further amended by Second Amendment to Declaration of Easements and Covenants dated April 12, 2016, recorded April 19, 2016, as Document No. T05340941.

Edina 6517 Drew Avenue South
Minneapolis 701 25th Ave Med
1. Easement Agreement – Doc. 4923704; 2. Parking Easement Agreement – Doc. 5744650.

Burnsville 303 Nicollet Med
1. Declaration – Doc. 76207 (First Amendment to Declaration – Doc. 137231, Memo of Second Amendment to Declaration – Doc. 250655, Amended and Restated Declaration – Doc. 597871;

2. Memo of Restrictive Covenants – Doc. 179498 (Amendment to Memo of Restrictive Covenants – Doc. 198596, Amended and Restated Restrictive Covenants – Doc. 419428);

3. Parking Agreement – Doc. 179500 (Amendment – Doc. 198597, Second Amendment – Doc. 237321, Third Amendment – Doc. 244187, Fourth Amendment – Doc. 321188, Fifth Amendment – Doc. 416403, Sixth Amendment – Doc. 624034);

4. Pedestrian Link Reciprocal Easement and Operating Agreement – Doc. 198594 (First Amendment – Doc. 244186, Second Amendment – Doc. 251108, Third Amendment – Doc. 416404).

Burnsville 305 Nicollet Med
1. Declaration – Doc. 76207 (First Amendment to Declaration – Doc. 137231, Memo of Second Amendment to Declaration – Doc. 250655, Amended and Restated Declaration – Doc. 597871);

2. Parking Agreement – Doc. 179500 (Amendment – Doc. 198597, Second Amendment – Doc. 237321, Third Amendment – Doc. 244187, Fourth Amendment – Doc. 321188, Fifth Amendment – Doc. 416403, Sixth Amendment – Doc. 624034);


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3. Pedestrian Link Reciprocal Easement and Operating Agreement – Doc. 198594 (First Amendment – Doc. 244186, Second Amendment – Doc. 251108, Third Amendment – Doc. 416404);

4. Memo of Restrictive Covenants, Option and Special Conditions – Doc. 244190 (Amendment to Restrictive Covenants, Option and Special Conditions – Doc. 419925).

Pavilion I
1. Parking Easement Agreement – Doc. 731535.

PrairieCare Medical
1. Tunnel Easement Agreement dated September 20, 1988, recorded November 9, 1988 as Document Number 1972869;

2. Declaration for Common Interest Community No. 1848, IRET-Chicago Avenue Medical Condominium dated December 28, 2009, recorded December 29, 2009 as Document Number T4716754;

3. Restrictions Agreement dated September 20, 1988, recorded November 9, 1988 as Document Number 1972873.

2828 Midtown Medical
1. Tunnel Easement Agreement dated September 20, 1988, recorded November 9, 1988 as Document Number 1972869;

2. Declaration for Common Interest Community No. 1848, IRET-Chicago Avenue Medical Condominium dated December 28, 2009, recorded December 29, 2009 as Document Number T4716754 ;

3. Restrictions Agreement dated September 20, 1988, recorded November 9, 1988 as Document Number 1972873.

2800 Medical Building
1. Tunnel Easement Agreement dated September 20, 1988, recorded November 9, 1988 as Document Number 1972869;

2. Declaration for Common Interest Community No. 1848, IRET-Chicago Avenue Medical Condominium dated December 28, 2009, recorded December 29, 2009 as Document Number T4716754 ;


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3. Restrictions Agreement dated September 20, 1988, recorded November 9, 1988 as Document Number 1972873.

Ritchie Medical Plaza
1. Condominium Number 290 Sherman Street Medical Condominium Declaration for Condominium dated August 16, 1993, recorded December 2, 1993 as Document Number 1036884; as amended by First Amendment to Sherman Street Medical Condominium Declaration for Condominium dated December 18, 2003 and recorded May 24, 2004 as Document Number 1818313;

2. Declaration of Skyway and Tunnel Easements dated August 16, 1993, recorded October 27, 1993 as Document Number 1032578.

Gardenview Medical Building
1. Declaration of Common Interest Community No. 385, Garden View Medical Building Condominium recorded December 30, 1999 as Document No. 1587038.
Lakeside Medical Plaza
1. Declaration of Covenants, Conditions and Restrictions dated December 12, 1994 and filed December 13, 1994, in Miscellaneous Book 1136, Page 1 in the Office of the Register of Deeds Douglas County, Nebraska, as amended by Amendment No. 1 to Declaration dated July 18, 1996 and filed July 22, 1996 in Miscellaneous Book 1182, Page 617; Amendment No. 2 to Declaration dated June 30, 1997 and filed October 7, 1997 in Miscellaneous Book 1224, Page 508; and Amendment No. 3 to Declaration dated July 13, 2000 and filed December 13, 2000 in Miscellaneous Book 1361, Page 599; 2. Declaration of Restrictions and Grant of Easements dated January 4, 2000 and filed January 12, 2000 in Miscellaneous Book 1323, Page 259 in the Office of the Register of Deeds Douglas County, Nebraska.

Denfeld Clinic
1. Reciprocal Access Easement Agreement dated September 29, 2015, recorded October 26, 2015 as Document No. 963867 in the Office of the Registrar of Titles and as Document No. 1272573 in the Office of the County Recorder.

Wells Clinic
1. Access Easement dated October 27, 1998, recorded November 10, 1998 as Document Number 734817.

St. Michael Clinic
1. Subdivision and Planned Unit Development Agreement, dated July 30, 2004, recorded July 22, 2004, as Document No. A919753; as amended by Resolution No. 01-10-06-05 Approving an

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Amendment to the Town Center Development Standards, recorded June 12, 2006, as Document No. A1013432;

2. Declaration of Covenants, Conditions, Restrictions and Easements dated July 5, 2006, recorded July 27, 2006, as Document No. A1019004.

High Pointe Health Campus
1. Declaration of Protective Covenants, dated December 1, 1997, recorded December 31, 1997, as Doc. No. 1065503;

2. Easement Agreement, dated December 10, 1997, recorded December 31, 1997, as Doc. No. 1065505; 3.East Metro Healthcare Center Cooperation Agreement, between LaSalle Construction Company, and East Metro Specialists LLC, dated December 2, 1997, recorded December 31, 1997, as Doc. No. 1065506; as affected by Memorandum of Cooperation Agreement, dated December 10, 1997, recorded December 31, 1997, as Doc. No. 1065507.

Billings 2300 Grant Rd
1. Covenants, Conditions and Restrictions recorded May 3, 1983, in Book/Roll 1247, Page 406,
under Document #1263548, Amendment to said Covenants recorded July, 13, 1983, Book/Roll 1250, Page 190, under Document #1272299. Amendment to said Covenants recorded December 6, 1983, Book/Roll 1255, Page 3377, under Document #1288933. Amendment to said Covenants recorded July 16, 1984, Book/Roll 1264, Page 1066, under Document #1315860. Amendment to said Covenants recorded December 12, 1985, Book/Roll 1284, Page 2066, under Document #1375127. Amendment to said Covenants recorded December 31, 1987, Book/Roll 1316, Page 810, under Document #1468908. Amendment to said Covenants recorded December 31, 1987, Book/Roll 1316, Page 2996, under Document #1468966. Amendment to said Covenants recorded June 17, 1988, Book/Roll 1323, Page 125, under Document #1488076. Amendment to said Covenants recorded August 24, 1988, Book/Roll 1325, Page 4078, under Document #1495658. Amendment to said Covenants recorded October 6, 1988, Book/Roll 1327, Page 1895, under Document #1500128. Amendment to said Covenants recorded October 17, 1988, Book/Roll 1327, Page 3523, under Document #1500956. Amendment to said Covenants recorded November 26, 1991, Book/Roll 1367, Page 3520 under Document #1615675. Amendment to said Covenants recorded February 25, 1999, under Document #3040319. Amendment to said Covenants recorded February 25, 1999, under Document #3040320. Amendment to said Covenants recorded March 10, 1999, under Document #3041940. Amendment to said Covenants recorded August 18, 2000, under Document #3100015. Amendment to said Covenants recorded August 2, 2012, under Document #3632814; 2. Covenants, Conditions and Restrictions recorded October 16, 1985, in Book/Roll 1281, Page 4936, under Document #1368725.

Missoula 3050 Great Northern

L-5
EAST\148676904.7


1. Covenants, Conditions and Restrictions recorded in Book 334 of Micro Records, Page 2053, as amended by Amendment to said Covenants recorded in Book 364 of Micro Records, Page 1369. Amendment to said Covenants recorded in Book 494 of Micro Records, Page 1111.



L-6
EAST\148676904.7


Exhibit L-2
Material Campus Declaration Estoppels

2800 Medical, and 2828 Medical :
•
Declaration for Common Interest Community No. 1848, IRET-Chicago Avenue Medical Condominium recorded December 29, 2009 as Document No. T4716754 *  

Gardenview :
•
Declaration of Common Interest Community No. 385, Garden View Medical Building Condominium recorded December 30, 1999 as Document No. 1587038 *  

Lakeside Medical Plaza :
•
Declaration of Covenants, Conditions and Restrictions by and between THC, Inc., a Nebraska nonprofit corporation, and Lakeside Hills Association, Inc., a Nebraska nonprofit corporation, dated December 12, 1994 – recorded December 13, 1994 in Miscellaneous Book 1136, Page 1 in the Office of the Register of Deeds Douglas County, Nebraska, as amended
 
Edina 6363, Edina 6405 :
•
Declaration of Easements and Covenants dated June 29, 2001, recorded September 24, 2001, as Document No. 3435498, as amended
•
Declaration of Easements and Covenants dated February 28, 1989, as amended;

Burnsville 303 and Burnsville 305 :
•
Amended and Restated Declaration – Doc. No. 597871
•
Memorandum of Restrictive Covenants, Option and Special Conditions – Doc. No. 179498, as amended
•
Memorandum of Restrictive Covenants, Option and Special Conditions – Doc. No. 244190, as amended

Ritchie Medical Plaza
•
Declaration of Covenants and Easements dated August 16, 1993
•
Declaration for Condominium dated August 16, 1993, as amended *  


* Estoppels with respect to condominium declarations to be in form and substance reasonably acceptable to Purchaser


L-1
EAST\148676904.7


Exhibit M
Form of CC&R Estoppel

Date: ______ ___, 2017
TO:     
Harrison Street Real Estate
444 West Lake Street, Suite 900
Chicago, Illinois


RE:
<DOCUMENT NAME> dated <DATE>, recorded <DATE> as Document Number <NUMBER> (the “ Declaration ”)

Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Declaration.

The undersigned, as <NAME OF DECLARANT> (the “ Certifying Party ”) hereby certifies, as of the date hereof, to Harrison Street Real Estate (“Buyer”), with respect to the purchase of the property commonly known as <PROPERTY ADDRESS> (the “Property”), as follows:

1.
that the Declaration is unmodified and in force and effect;
2.
that there is no currently-existing default under the Declaration by the Property owner in the payment of any sum of money owing to the Certifying Party, and, to the Certifying Party’s actual knowledge, there is no currently-existing default by the Property owner under the Declaration, and, to the Certifying Party’s actual knowledge, no other event has occurred which with the giving of notice by the Certifying Party or the passage of time, or both, would become a default under the Declaration;
3.
that the amount paid in 2016 was $_______________ and the amount assessed for 2017 is $_______________;
4.
that the Certifying Party has not performed or caused to be performed, and is not currently performing or causing to be performed, any maintenance or other work or service not in the normal course of operation, the cost of which the Certifying Party is or will be entitled to charge in whole or in part to the Property owner which has not yet been charged to such Property owner; and
5.
that there are no set-offs, defenses or counterclaims currently being asserted or otherwise known by the Certifying Party against enforcement of any obligations under the Declaration which are to be performed by the Certifying Party.
The Certifying Party acknowledges and agrees that the statements set forth herein shall be binding, and may be relied upon by and shall inure to the benefit of Buyer or its designee or assigns.


[Signature page follows]


M-1
EAST\148676904.7


Exhibit N

Due Diligence Materials
 
 
 
 
 
#
Item / Task
1
Environmental - Phase I report
2
Property Condition Reports
 
 
#
Item / Task
1
Site Plan & Floor Plans
2
Personal Property Inventory
3
Governmental Notices
4
Notice of any Litigation, Liens & Threatened Claims
5
Maintenance Log
6
Existing Property Brochures
7
Operating Licenses
8
Service Contracts
9
All Warranties (roof, mechanicals, elevator, generator etc., including underlying manufacturer warranties)
10
Equipment Leases
11
Utilities Will-Serve Letters
12
Accounts Receivable & Payable
13
Resident/Tenant Security Deposits
14
Safety Programs
15
Evacuation Plans
16
Certificate of Occupancy
 
 
#
Item / Task
1
Current Year Operating Budget
2
Current Rent Roll
3
Y-T-D Income Statement
4
Historical Income Statement
5
Occupancy History
6
Capital Expenditure Projections
7
Historical Capital Expenditures
8
Lease Correspondence
9
Leasing Activity Reports / Lease-up Schedule
10
Staffing Plan/Payroll Schedule

N-1
EAST\148676904.7


11
Current Tax Bill & Personal Property Taxes
12
Historical Tax Bills
13
List of RE Tax special assessments
14
List of Applicable Franchise Taxes
15
Schedule of all tenant improvements being amortized and reimbursed by tenants, including interest
 
 
#
Item/ Task
1
Renderings, Site Plans, and Floor Plans
2
Existing Entitlements
3
Plans & Specifications
4
Building Permits & Licenses
5
General Contractor Agreements
6
Architectural Agreements
7
Bonding Information
 
 
#
Item / Task
1
Tenant Leases & Sub-Leases
2
Tenant Estoppels
3
Ground Leases
4
Title Documents
5
Surveys
6
Condominium Association Documents
7
Notices of building, zoning, health, fire etc., code violations and corrective plan
 
 
#
Item / Task
1
Property Insurance Policies
2
Tenant Insurance Policies





N-2
EAST\148676904.7


Schedule 7.1.2

        
Ground Leases


To be delivered by Seller within 5 business days of the Effective Date

Schedule 7.1.2-1
EAST\148676904.7

Schedule 7.1.3

Leases


To be delivered by Seller within 5 business days of the Effective Date



Schedule 7.1.4

Contracts

To be delivered by Seller within 5 business days of the Effective Date

Schedule 7.1.4-1
EAST\148676904.7


Schedule 7.1.5

ROFOs, ROFRs, Purchase Options



Schedule 7.1.5-1
EAST\148676904.7


Ground Leases
Property
Description
Lessor
Lessor Options
Edina 6363
Ground Lease
Fairview Health Services
Right of First Refusal:  Lessor shall have the right to purchase the leasehold estate of Lessee created hereby for the same price and on the same terms and conditions as contained in the purchase agreement. Lessor shall have until fifteen (15) days from Lessor's receipt of a copy of the purchase agreement in which to notify Lessee of its election to purchase.
Edina 6405
Air Rights Lease
Fairview Health Services
Right of First Negotiation:  If Lessee desires to sell the Leasehold Interest, Lessee shall promptly notify Lessor in writing of the price at which Lessee is willing to sell the Leasehold Interest. Lessor and Lessee shall have 30 days thereafter to negotiate a sale and purchase of the Leasehold Interest. If Lessor does not elect to purchase the Leasehold Interest, Lessee shall have nine (9) months thereafter to sell the Leasehold Interest for not less than 95% of the proposed purchase price.  

Purchase Option: In 2021 and every 10 years thereafter, Lessor may purchase the Leasehold Interest by giving Lessee at least twelve (12) months' prior written notice. The purchase price shall be the fair market value of the Leasehold Interest as of the later of the date Lessor exercises its option to purchase or the date twelve (12) months prior to the closing date.
Tenant Rights
Property
Description
Tenant
Tenant Options
High Pointe
Lease Agreement
Twin Cities Orthopedics, P.A.
Tenant has the right of first offer to purchase the property pursuant to Section 9 of the First Amendment to Lease Agreement
St. Michael
Lease Agreement
Allina Health System
Pursuant to Section 34 of the Lease, Tenant shall have the option to purchase the Premises at the end of the Initial Term of the Lease and at the end of each Renewal Term of the Lease
Airport Medical
Lease Agreement
Park Nicollet Health Services
Pursuant to Section 36 of the Lease, prior to Landlord entering into any binding agreement (other than a Mortgage) to sell, convey, or otherwise transfer Landlord’s interest in the Premises with a third party, Landlord will give Tenant written notice. Tenant shall have 30 days to exercise its right to acquire Landlord’s interest in the Premises
Declarant Rights  
Property
Description
Declarant
Declarant Options
Gardenview
CIC Declaration
Children's Health Clinic and Allina Health System
Declarants have the right of first refusal to purchase on the same terms as any bona fide offer
Burnsville 305 Nicollet Ave
CCR
Fairview Health Services
Pursuant to Section 3.3 Grantor has the right of first refusal to purchase on the same terms as any bona fide offer
Burnsville 303 Nicollet Ave
CCR
Fairview Health Services
Pursuant to Section 3.3 Grantor has the right of first refusal to purchase on the same terms as any bona fide offer


Schedule 7.1.5-2
EAST\148676904.7


Schedule 9.3

Pending Capital Improvement Projects

None

Schedule 9.3-1
EAST\148676904.7


FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (“ First Amendment ”) is made and dated as of this December 22, 2017, by and among IRET Properties, a North Dakota limited partnership (“ IRET Properties ”), SMB Operating Company, LLC, a Delaware limited liability company (“ SMB ”), Missoula 3050 CBR, LLC, a North Dakota limited liability company (“ IRET Missoula ”), IRET - Billings 2300 CBR, LLC, a North Dakota limited liability company (“ IRET Billings ”), Minnesota Medical Investors, LLC, a Delaware limited liability company (“ MN Medical ”, and together with IRET Properties, SMB, IRET Missoula and IRET Billings, collectively, “ Seller ”), and Harrison Street Real Estate, LLC, a Delaware limited liability company (“ Purchaser ”).
RECITALS:
A. Seller and Purchaser are parties to that certain Purchase and Sale Agreement dated November 30, 2017 (“ Agreement ”) concerning the purchase a portfolio of medical office building properties (collectively, the “ Properties ” or each a “ Property ”) both owned and ground leased by Seller, as more particularly described therein.
B. Seller and Purchaser desire to amend the Agreement on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the promises and the mutual covenants of the parties hereinafter expressed, it is hereby agreed as follows:
1.
Recitals; Defined Terms . The foregoing Recitals are true and correct and are incorporated herein as part of this First Amendment. Unless otherwise defined herein, capitalized terms have the meanings ascribed to them in the Agreement.
2.
Fresenius Property .
(a)
The following provision is hereby added to the Agreement as Section 1.33:
“1.33     Fresenius Property . The Owned Site located at 4700 Mike Colalillo Drive, Duluth, Minnesota, including the Land described under the heading “ Fresenius ” on Exhibit A-1 attached hereto and the Real Property, the Personal Property, Leases and the Contracts associated therewith.”
(b)
Seller and Purchaser agree that notwithstanding anything to the contrary set forth in the Agreement, the Closing with respect to the Fresenius Property shall not occur on the originally scheduled Closing Date, and the Closing Date for the Fresenius Property shall be extended to the date ten (10) Business Days following satisfaction of the Fresenius Closing Conditions described below, but in no event later than June



29, 2018. It shall be a condition to the Purchaser’s obligation to purchase the Fresenius Property pursuant to the Agreement that (collectively, the “ Fresenius Closing Conditions ”):
(i)
the Torrens registration with the St. Louis County Examiner of Titles for the registration Fresenius Property is complete and (ii) the St. Louis County Examiner of Title has issued a Certificate of Title to the Fresenius Property to Seller as fee owner of the Fresenius Property such that Seller may cause to be duly recorded with the St. Louis County Examiner of Titles a Deed in the form required hereunder conveying marketable title to the Fresenius Property to Purchaser.
(ii)
Seller shall have delivered to Purchaser a Tenant Estoppel Certificate with respect to the Lease with Bio-Medical Applications of Minnesota, Inc. at the Fresenius Property dated no more than 30 days prior to the Closing of the Fresenius Property.
(iii)
Within forty-five (45) days of the initial scheduled Closing Date, Purchaser may perform such additional inspection of onsite environmental conditions at the Fresenius Property as Purchaser deems necessary in its reasonable discretion (subject to the terms of the Agreement with respect to any intrusive testing). Purchaser shall identify to Seller in writing as soon as reasonably practicable following review and evaluation of the results of such inspections any environmental conditions present at the Fresenius Property that are not satisfactory to Purchaser based on such inspections, including, without limitation, indoor air quality. It shall be a Fresenius Closing Condition that Seller shall have remedied such conditions to Purchaser’s satisfaction and at Seller’s cost and expense, which may include, without limitation, upgrading the active vapor mitigation, obtaining a No Association Determination Letter from the Minnesota Pollution Control Agency (“ MCPA ”) and/or taking other remedial actions required at the Fresenius Property as required by the MCPA. If Seller satisfies the conditions set forth in clauses (i) and (ii) above prior the completion of the foregoing, Seller and Purchaser shall have agreed on a form of holdback escrow agreement to be delivered at the Closing for the Fresenius Property pursuant to which funds in an agreed amount will be held in escrow to secure the completion of the outstanding work required to satisfy such conditions.
(c)
A portion of the Earnest Money equal to $100,000.00 shall be allocated to the Fresenius Property and shall remain in escrow with the Title Company pending the Closing with respect to the Fresenius Property in accordance with the terms hereof. If Seller does not satisfy the Fresenius Closing Conditions on or before the date ten (10) Business Days prior to June 29, 2018, Purchaser, in its sole and absolute discretion, will have the option to terminate this Agreement with respect to the



EAST\149645359.3

Fresenius Property at any time until and including June 29, 2018 by providing written notice of such termination to Seller, in which case the Earnest Money allocated to the Fresenius Property shall be returned to Purchaser. If the Closing with respect to the Fresenius Property has not occurred in accordance with the terms hereof on or prior to 5:00 PM CT on June 29, 2018, this Agreement shall automatically terminate with respect to the Fresenius Property and the Earnest Money allocated thereto shall be returned to Purchaser.
(d)
Purchaser hereby waives the due diligence conditions set forth in Section 8.2 of the Agreement with respect to the Fresenius Property and shall have no further right to terminate the Agreement with respect to the Fresenius Property pursuant to Section 8.2 thereof.
(e)
Except as expressly provided to the contrary in this First Amendment, all of the terms and conditions contained in the Agreement shall survive the Closing with respect to the Fresenius Property.
3.
Purchase Price . Section 3.1 of the Agreement hereby is deleted in its entirety and replaced with the following:
“3.1     Amount . Purchaser shall pay to Seller as and for the Purchase Price for the Properties the sum of Four Hundred Two Million Six Hundred Sixty-Seven Thousand Five Hundred and Five and No/100s Dollars and No/100s ($402,667,505.00).
4.
Closing Date . The first sentence of Section 4.1 of the Agreement is hereby deleted in its entirety and replaced with the following:
“The Closing shall occur on December 29, 2017, as such date may be adjourned with respect to one or more Properties in accordance with the express terms hereof.”
5.
Escrow; Payment at Closing .
(a)
Section 3.2.2 of the Agreement hereby is deleted in its entirety and replaced with the following:
“3.2.2 The balance of the Purchase Price payable at the applicable Closing in cash or by wire transfer of immediately available funds on the Closing Date. The Purchase Price payable on the initial scheduled Closing Date hereunder shall be reduced by the allocated Purchase Price set forth on Exhibit A hereto for any individual Property with respect to which the Closing hereunder is separately adjourned in accordance with the express terms hereof.”
(b)
The following is hereby added as Section 3.3 of the Agreement:
“3.3     Holdback Escrow .



EAST\149645359.3

3.3.1    At Closing, a portion of the Purchase Price equal to One Million Nine Hundred Thousand and 00/100 Dollars ($1,900,000.00) (the “ 701 Escrow ”) shall be retained by the Title Company and placed into escrow pursuant to a an escrow agreement in the form attached hereto as Exhibit C-1 (“ 701 Holdback Escrow Agreement ”), for the purpose of reimbursing Purchaser for the out of pocket costs incurred following Closing to inspect, repair and restore water intrusion and the resulting damage to the building located at 701 25 th Avenue South, Minneapolis, Minnesota (“ 701 Property ”) as more particularly set forth in the Holdback Escrow Agreement.
3.3.2    At Closing, a portion of the Purchase Price equal to Six Hundred Thousand and 00/100 Dollars ($600,000.00) (the “ Environmental Condition Escrow ”) shall be retained by the Title Company and placed into escrow pursuant to an escrow agreement in the form attached hereto as Exhibit C-2 (“ Environmental Holdback Escrow Agreement ”, and together with the 701 Holdback Escrow Agreement, collectively, “ Holdback Escrow Agreement ”) for the purpose of reimbursing Purchaser for the out of pocket costs incurred following Closing with respect to the investigation and remediation, including any repairs required in connection therewith, arising out of certain environmental conditions at the Properties located at 4702 Grand Ave., Duluth, MN (“ Denfeld Property ”) and 1001 E. Superior Street, Duluth, MN (“” Pavilion II Property ”), in each case, as more particularly set forth in the Holdback Escrow Agreement.
3.3.3    At Closing, Purchaser, Seller and Title Company shall execute the Holdback Escrow Agreement, and the Holdback Escrow Agreement shall be added as a Seller Closing Document (pursuant to Section 4.2 of the Agreement) and as a Purchaser Closing Document (pursuant to Section 4.4 of the Agreement). The terms of the Holdback Escrow Agreement shall survive the Closing and Seller’s delivery of the Deed for the 701 Property, Denfeld Property and Pavilion II Property.”
6.
Bismarck Property . Seller and Purchaser agree that this Agreement is hereby terminated with respect to the Property located at 700 E. Main Street and 715 E. Broadway Avenue, Bismarck, ND and all references thereto in the Agreement are hereby deleted. Exhibit B to the Agreement is hereby modified to delete therefrom the legal description of the Property labeled “ Bismarck 700 East Main (Vacant Land) & Bismarck 715 East Broadway” .
7.
Ground Lease and Condominium Estoppel Conditions . Seller acknowledges that as of the date hereof, it has not delivered the following required estoppel certificates prior to the Estoppel Delivery Deadline, in each case, in the form required pursuant to the Agreement and reviewed and approved by Purchaser prior to the date hereof: (i) Ground Lease Estoppel with respect to the Ground Lease between Arthur G.W. Posingies and Walter M. Posingies, successors to Michael Posingies, and SMB Operating Company, LLC, successor to Lake Cornelia Company, dated as of October 26, 1955, as amended (the “ Edina Parking Ramp Ground Lease ”), (ii) Ground Lease Estoppel Certificate for the Gardenview Property (the “ Gardenview Ground Lease Estoppel ”), (iii) the Material Campus Declaration Estoppel Certificate with respect to the Gardenview Property (the “ Gardenview Condominium Estoppel ”), and (iv) the Material Campus Declaration Estoppel Certificate with respect to the Ritchie Medical Property (the “ Ritchie Condominium Estoppel ”). By electing to waive



EAST\149645359.3

the due diligence condition pursuant to Section 8.2 of the Agreement, Purchaser shall not waive its right to receive the above-referenced estoppel certificates as a condition to Closing, and instead, the following terms shall apply:
(a)
If the executed Ground Lease Estoppel Certificate referenced in clause (i) above is not delivered to Purchaser prior to 9:00 AM CT on the Closing Date, Seller shall deliver in favor of Purchaser at Closing a Seller Estoppel Certificate with respect to the Edina Parking Ramp Ground Lease in the form of Exhibit K to the Agreement, and a portion of the Purchase Price equal to $150,000.00 shall be retained in an escrow account with the Title Company pursuant to an escrow agreement in form and substance reasonably acceptable to Seller and Purchaser, to be released to Seller upon the delivery of the Ground Lease Estoppel Certificate duly executed by all persons or entities comprising the ground lessor under the Edina Parking Ramp Ground Lease.
(b)
If the executed Gardenview Ground Lease Estoppel in the form attached as Exhibit D-1 hereto and/or the Gardenview Condominium Estoppel in the form attached as Exhibit D-2 hereto are not delivered to Purchaser prior to 5:00 PM CT on December 27, 2017, Purchaser may elect to adjourn the Closing with respect to the Gardenview Property until the dated that is five (5) Business Days following delivery of both the Gardenview Ground Lease Estoppel and the Gardenview Condominium Estoppel in the forms required above, but in no event later than February 28, 2018. In such instance, a portion of the Earnest Money equal to $150,000.00 shall be allocated to the Gardenview Property and retained by the Title Company to be applied in accordance with the terms hereof, and all applicable terms and conditions of the Agreement related to the Gardenview Property shall survive the initial Closing and continue to apply with respect thereto. If the executed Gardenview Ground Lease Estoppel and the Gardenview Condominium Estoppel in the required forms are not delivered to Purchaser on or prior to January 24, 2018, Purchaser shall be entitled to terminate this Agreement with respect to the Gardenview Property, and the portion of the Earnest Money allocated thereto shall be returned to Purchaser.
(c)
If the executed Ritchie Condominium Estoppel in the form attached as Exhibit D-3 hereto is not delivered to Purchaser prior to 5:00 PM CT on December 27, 2017, Purchaser may elect to adjourn the Closing with respect to the Ritchie Medical Property until the dated that is five (5) Business Days following delivery of the Ritchie Condominium Estoppel in the form required above, but in no event later than February 28, 2018. In such instance, a portion of the Earnest Money equal to $150,000.00 shall be allocated to the Ritchie Medical Property and retained by the Title Company to be applied in accordance with the terms hereof, and all applicable terms and conditions of the Agreement related to the Ritchie Medical Property shall survive the initial Closing and continue to apply with respect thereto. If the executed Ritchie Condominium Estoppel in the required form is not delivered to Purchaser on or prior to January 24, 2018, Purchaser shall be entitled to terminate



EAST\149645359.3

this Agreement with respect to the Ritchie Medical Property, and the portion of the Earnest Money allocated thereto shall be returned to Purchaser.
As used above, the “ Gardenview Property ” shall mean the Property located at 333 Smith Ave. North, St. Paul, MN and the “ Ritchie Medical Property ” shall mean the Property located at 310 Smith Ave. North, St. Paul, MN.
8.
Conditions Precedent . The following is hereby added to Section 6.1 of the Agreement:
“6.1.9    Seller shall have delivered with respect to the Property known as St. Michael Clinic located at 4300 Edgewood Dr. NE, St Michael, MN an instrument in form reasonably acceptable to Purchaser and the Title Company duly executed by the City of St. Michael terminating and releasing its right of reverter with respect to such Property.
6.1.10     The Title Company shall have irrevocably committed to issue to Purchaser at Closing an owner’s policy of title insurance with respect to the Property known as Plaza Trinity located at 2815 SW 16th Street, Minot, ND omitting from the exceptions to coverage thereto that certain Right of Way Easement recorded 12/16/80 as document no. 594206 in favor of Verendrye Electric Cooperative, Inc.
6.1.11    The Title Company shall have irrevocably committed to issue to Purchaser at Closing an owner’s policy of title insurance with respect to the Property known as Brookpark Dental Center located at 6437 Brooklyn Blvd., Brooklyn Center, MN omitting from the exceptions to coverage thereto the terms, conditions, restrictions and provisions of the unrecorded Development Agreement dated December 14, 1999, as amended.
If any of the conditions set forth in Sections 6.1.9-6.1.11 are not satisfied with respect to the applicable Individual Property as of the scheduled Closing Date, Purchaser may adjourn the Closing with respect to the affected Propert(ies) until the dated that is five (5) Business Days following satisfaction of the applicable condition set forth above, but in no event later than February 28, 2018. If any such condition set forth in Sections 6.1.9-6.1.11 is not satisfied on or before February 28, 2018 with respect to the applicable Individual Property, Purchaser, in its sole and absolute discretion, may elect to exclude any such Property from the Closing, and the applicable Purchase Price allocation for such Property, as set forth on the attached Exhibit A shall be deducted from the Purchase Price.”
9.
Additional Deliveries .
(a)
At Closing, Seller shall execute and deliver a Seller Estoppel Certificate in the form attached as Exhibit E hereto.
(b)
With respect to the Ground Leased Sites, if the applicable recorder’s office will not accept the recording of the applicable Ground Lease Assignment without an original and/or notarized ground lessor consent, and the consent delivered to Purchaser prior to the date hereof is not accepted by the recorder for such purposes, Seller shall request and use commercially reasonable and diligent efforts to obtain



EAST\149645359.3

the ground lessor consent in the format required by the applicable recorder’s office as soon as reasonably practicable following such request. This clause (b) shall survive Closing.
(c)
Notwithstanding anything to the contrary set forth in Section 8.4.2 of the Agreement, if Trinity Health, the tenant at the Property located at 2815 16th Street SW, Minot, ND, has not delivered a Tenant Estoppel Certificate in the form required pursuant to the Agreement prior to Closing, as a condition thereto, Seller shall deliver a Seller Estoppel Certificate with respect to the applicable Lease at Closing.
10.
Due Diligence Period . This Amendment shall constitute Purchaser’s affirmative election to waive the Due Diligence Period and proceed to Closing in accordance with Section 8.2 of the Agreement, as modified by the terms of this Amendment, and subject to all applicable terms and conditions set forth herein and in the Agreement.
11.
Exhibits .
(a)
Exhibit A to the Agreement (Schedule of Properties and Allocated Purchase Price) hereby is deleted in its entirety and replaced with attached Exhibit A-1 to this First Amendment. All references in the Agreement to Exhibit A hereafter shall be deemed to refer to Exhibit A-1 of this First Amendment.
(b)
Attached Exhibit C (Holdback Escrow Agreement) hereby is added to the Agreement, is incorporated herein by reference, and is added to the Table of Contents and to Section 1.2 of the Agreement.
12.
Miscellaneous
(a)
Except as amended by this First Amendment, the Agreement remains effective in accordance with its terms. The terms of this First Amendment will control over any conflicts between it and the terms of the Agreement.
(b)
This First Amendment may be executed in two or more identical counterparts, and an electronic transmission shall be binding on the party or parties whose signatures appear thereon. If so executed, each of such counterparts is to be deemed an original for all purposes, and all such counterparts shall, collectively, constitute one amendment, but in making proof of this First Amendment, it shall not be necessary to produce or account for more than one such counterpart.

END OF ARTICLE




EAST\149645359.3

SIGNATURE PAGE

FOR

PURCHASE AGREEMENT

BY AND BETWEEN

IRET PROPERTIES

AND

HARRISON STREET REAL ESTATE, LLC

Seller and Purchaser have caused this First Amendment to be executed and delivered as of the date first above written.
SELLER:


IRET PROPERTIES,
a North Dakota Limited Partnership

By:    IRET, Inc., a North Dakota corporation
Its:     General Partner

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker , Jr.
Title: Chief Executive Officer


By: /s/ Anne Olson
Name: Anne Olson
Title: Executive Vice President








IRET - BILLINGS 2300 CBR, LLC, a North Dakota limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President


MINNESOTA MEDICAL INVESTORS, LLC, a Delaware limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President


SMB OPERATING COMPANY, LLC, a Delaware limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President


MISSOULA 3050 CBR, LLC, a North Dakota limited liability company

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: President

By: /s/ Anne Olson
Name: Anne Olson
Title: Vice President

Dated as of: December 22, 2017




PURCHASER:

HARRISON STREET REAL ESTATE, LLC,
a Delaware limited liability company

By:     /s/ Stephen Gordon    
    Name: Stephen Gordon
Title: General Counsel & Senior Managing Director

Dated as of: December 22, 2017







EXHIBIT A-1

Schedule of Properties and Allocated Purchase Price

OWNED SITES

Seller
Name
Address
City
State
Allocated PP
IRET
Properties
Burnsville 303 Nicollet Medical
303 East Nicollet Boulevard
Burnsville
MN
$20,400,000.00
IRET
Properties
Burnsville 305 Nicollet Medical
305 East Nicollet Boulevard
Burnsville
MN
$12,725,000.00
IRET
Properties
Pavilion II
1001 East Superior Street
Duluth
MN
$22,100,000.00
IRET
Properties
Ritchie Medical Plaza
310 North Smith Avenue
St. Paul
MN
$16,500,000.00
MN Medical
Edina 6517 Drew Avenue
6517 Drew Avenue South
Edina
MN
$3,000,000.00
SMB
6545 France SMC I
6545 France Avenue South
Edina
MN
$54,850,000.00
SMB
Edina 6525 France SMC II
6525 France Avenue South
Edina
MN
$22,800,000.00
SMB
6565 France SMC III
*included Ground Leased Parking Ramp
6565 France Avenue South
Edina
MN
$24,713,000.00
IRET
Properties
2800 Medical Building
2800 Chicago Ave South
Minneapolis
MN
$12,227,000.00
IRET
Properties
2828 Midtown Medical & Parking Ramp
2828 Chicago Ave South
Minneapolis
MN
$28,800,000.00
IRET
Billings
Billings 2300 Grant Road
2300 Grant Road
Billings
MT
$5,500,000.00
IRET
Properties
Park Dental
6437 Brooklyn Boulevard
Brooklyn Center
MN
$3,400,000.00
IRET
Properties
Prairie Care Medical
9400 Zane Avenue North
Brooklyn Park
MN
$41,900,000.00
IRET
Properties
Duluth Denfeld Clinic
4702 Grand Avenue
Duluth
MN
$4,000,000.00
IRET
Properties
Fresenius
4700 Mike Colalillo Drive
Duluth
MN
$1,900,000.00

A-4
EAST\149645359.3


IRET
Properties
Wells Clinic
1120 East 34th Street
Hibbing
MN
$3,700,000.00
IRET
Properties
High Pointe Health Campus
8650 Hudson Boulevard
Lake Elmo
MN
$8,805,000.00
IRET
Properties
Plaza - Trinity
2815 16th
Street Southwest
Minot
ND
$10,000,000.00
IRET
Missoula
Missoula 3050 Great Northern Ave
3050 Great Northern Avenue
Missoula
MT
$5,500,000.00
IRET
Properties
Lakeside Medical Plaza
17001 Lakeside Hills Plaza
Omaha
NE
$6,600,000.00
IRET
Properties
Gateway Clinic - Sandstone
204 Lundorff Drive
Sandstone
MN
$300,000.00
IRET
Properties
St. Michael Clinic
4300 Edgewood Drive NE
St. Michael
MN
$3,000,000.00

GROUND LEASED SITES
Seller
Name
Address
City
State
Allocated PP
IRET
Properties
Pavilion I
920 East First Street
Duluth
MN
$15,600,000.00
IRET
Properties
Edina 6363 France Medical
6363 France Ave South
Edina
MN
$19,710,814.00
IRET
Properties
Edina 6405 France Medical
6405 France Avenue South
Edina
MN
$18,636,691.00
IRET
Properties
Minneapolis 701 25th Avenue Medical
701 25th
Avenue South
Minneapolis
MN
$15,700,000.00
IRET
Properties
Gardenview Medical Building
*Includes Gardenview Condominiums
347 Smith Avenue North
St. Paul
MN
$14,000,000.00
IRET
Properties
Airport Medical Building
7550 34th
Avenue South
Minneapolis
MN
$2,500,000.00
IRET
Properties
Mariner Clinic
109 North 28th Street East
Superior
WI
$3,800,000.00



A-5
EAST\149645359.3


EXHIBIT B


Intentionally Omitted




EAST\149645359.3


EXHIBIT C-1
701 Holdback Escrow Agreement


ESCROW AGREEMENT
(701 25th Ave. South)

This Escrow Agreement (“ Escrow Agreement ”) is entered into as of December 22, 2017 (the “ Effective Date ”) by and among First American Title Insurance Company, a Nebraska corporation (“ Escrow Agent ”), IRET Properties, a North Dakota limited partnership (“ Seller ”), and HSRE-MN 701 25th Avenue, LLC, a Delaware limited liability company (“ Purchaser ”).

RECITALS

A. Seller, Buyer and certain of their respective affiliates are parties to that certain Purchase and Sale Agreement dated November 30, 2017, as amended by that certain First Amendment to Purchase Agreement, dated December 22, 2017 (collectively, the “ Agreement ”) concerning the purchase a portfolio of medical office building properties (collectively, the “ Properties ” or each a “ Property ”) both owned and ground leased by Seller and its affiliates, as more particularly described therein.

B. Pursuant to the Agreement, at Closing, a designated amount (enumerated below) (“ Escrow Funds ”) will be withheld from the Purchase Price and will be deposited with Escrow Agent for the purpose of reimbursing Purchaser for certain out of pocket expenses related to inspection, repairs and/or remediation to be made to that certain property located at 701 25th Avenue South, Minneapolis, MN (the “ Project ”).    

C. Seller and Purchaser desire that Escrow Agent disburse these Escrow Funds in accordance with the Agreement, and Escrow Agent is willing to do so on the terms set forth herein.

AGREEMENT

NOW THEREFORE, for good and valuable consideration, the receipt and the sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Recitals; Defined Terms . The foregoing Recitals are incorporated herein as part of this Escrow Agreement. Unless otherwise defined herein, capitalized terms have the meanings ascribed to them in the Agreement.
2. Deposit of Escrow Funds . Simultaneously with the execution of this Escrow Agreement, Escrow Agent has withheld from the Purchase Price the Escrow Funds in the amount of One Million Nine Hundred Thousand and 00/100 Dollars ($1,900,000.00) for the purpose of reimbursing Purchaser for the out of pocket costs and expenses incurred by Purchaser in connection





with the Project. Following Closing, Seller shall not have any additional liability to Purchaser or any other person or entity with respect to the Project in excess of the Escrow Funds; provided, however, the foregoing will not be construed to limit Seller’s express representations and warranties set forth in the Agreement.
3. Inspection and Scope of Work . Purchaser has received certain reports indicating potential damage and/or structural issues with the façade, walls and other structural portions of the Property, including, without limitation, possible moisture intrusion. Within forty-five (45) days following the Closing, Purchaser shall cause to be performed such additional inspections and testing at the Project as Purchaser deems necessary or advisable to evaluate the nature and scope of any damage or conditions requiring remediation or repair to the Property related thereto. Purchaser will provide Seller at least one (1) Business Day prior notice of any such inspection or testing and Seller may, at Seller’s cost, have a representative present for any such inspection. Purchaser shall provide Seller with a copy of any final report issued by Purchaser’s consultant’s arising therefrom. Purchaser shall determine the scope of work and/or remediation activities required at the Property based on its evaluation of such inspections and guidance from its consultants and shall advise Seller of the same in writing (the “ Scope ”). Notwithstanding the foregoing, if in the course of performing the work required to complete the Scope of the Project, Purchaser’s contractors or consultants discover additional adverse conditions at the Property related to the matters described above that were not observed as part of the initial inspections, Purchaser may update the Scope of the Project upon notice to Seller along with reasonable documentation of the need for such modifications to the Scope.
4. Project Bidding . Upon determination of the Scope as provided in Section 3 above, Purchaser shall obtain two (2) separate bids from qualified contractors selected by Purchaser to perform the Scope for the Project. Purchaser shall select and negotiate a contract for the Project with the lower of the two qualified bidders.
5. Escrow Funds Disbursement . Escrow Agent shall hold the Escrow Funds in trust until disbursement, as set forth in this Escrow Agreement. Purchaser may, from time to time, withdraw Escrow Funds to pay directly and/or reimburse Purchaser for the out of pocket costs incurred in connection with the Project, including, without limitation, the testing and inspection performed in accordance with Section 2 above, upon delivery to Escrow Agent and Seller of invoices, receipts or other evidence of such out of pocket costs incurred reasonably acceptable to Seller and Purchaser. Escrow Agent promptly shall disburse that portion of the Escrow Funds necessary to pay or reimburse Purchaser for such out of pocket costs incurred. Upon Purchaser’s notice of completion in full of the Project along with proof of payment for all outstanding costs related thereto, the remaining balance of the Escrow Funds, if any, shall be released to Seller.
6. Project Completion Deadline . Purchaser agrees to use commercially reasonable and diligent efforts to cause the work for the Project to be performed as soon as reasonably practicable following determination of the Scope and selection of a contractor in accordance with the terms hereof. Purchaser shall achieve final completion of the Project on or before the one year anniversary of the date hereof; provided that if the work required for the Project is not completed in full as of such date, but Purchaser is diligently pursuing completion of the same, the deadline shall be extended




to such date as is reasonably required to complete the Scope of the Project work using commercially reasonable efforts (“ Project Completion Deadline ”). Upon the Project Completion Deadline, if not earlier disbursed pursuant to Section 5 above, Escrow Funds in the amount of all outstanding and unpaid out of pocket expenses paid or incurred by Purchaser in connection with the Project shall be released to Purchaser, and all remaining Escrow Funds after the payment of the verified Project costs incurred through the Project Completion Deadline shall be released to Seller, less any Escrow Agent fees.
7. Documentation . If any documentation provided by Purchaser to Escrow Agent or Seller is insufficient or missing, Escrow Agent (or Seller, as applicable) will advise Purchaser within five (5) business days of receiving the documentation, and Purchaser shall promptly submit the missing documentation.
8. Interest . Escrow Agent shall not be liable to pay interest on the Escrow Funds.
9. Liens . No liability is assumed by Escrow Agent to Purchaser, Seller or any other party for protection against mechanic’s liens.
10. Escrow Agent Duties . The functions and duties assumed by Escrow Agent include only those described in this Agreement, and Escrow Agent is not obligated to act except in accordance with the terms and conditions of this Agreement. Escrow Agent does not insure that the Project will be completed, nor that any element of the Project will be in accordance with the approved Scope, nor that sufficient funds will be available for the completion of Project. Escrow Agent may conclusively rely upon any document believed by Escrow Agent to be genuine and to have been signed or presented by the proper parties, consistent with reasonable due diligence on Escrow Agent’s part. Escrow Agent shall not be responsible for any losses of documents or funds while such documents or funds are not in its custody. Documents or funds which are deposited in the United States mail shall not be construed as being in the custody of Escrow Agent.
11. Escrow Agent Fees . Any reasonable and customary escrow fees payable to the Escrow Agent with respect to this Agreement shall be paid from the Escrow Funds.
12. Successors . This Escrow Agreement shall be binding upon the parties hereto and their respective successors and assigns.
13. Amendment . This Escrow Agreement can be amended or modified only by a written amendment signed by the parties hereto.
14. Counterparts . This Escrow Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same instrument. Signatures of this Escrow Agreement which are transmitted by either or both electronic or telephonic means (including, without limitation, facsimile and email) are valid for all purposes. Any party shall, however, deliver an original signature of this Escrow Agreement to the other party upon request.




15. Title Insurance . It is expressly understood by Purchaser that no title insurance or mechanic’s lien coverage is being provided by Escrow Agent in conjunction with this Escrow Agreement and that by entering into this Escrow Agreement, Escrow Agent is in no way agreeing to, modifying, expanding or extending any coverage(s) previously provided, if any.
16. Notice . All notices, requests, or documents to be given hereunder by a party hereto shall be in writing delivered to the following addresses and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date received if sent by email; or (d) on date received by certified or registered mail, return receipt requested, postage prepaid:

If to Seller:

IRET Properties
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Grant Campbell
Telephone: 952-401-4816
Email: gcampbell@iret.com

With a copy to:

Marcus A. Mollison
Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
Email: Mollison.marcus@dorsey.com

If to Purchaser:

Harrison Street Real Estate, LLC    
444 West Lake Street, Suite 2100
Chicago, IL 60606
Attn: Mark Burkemper; Stephen Gordon; Michael Gershowitz
Email: MBurkemper@harrisonst.com     
sgordon@harrisonst.com
MGershowitz@harrisonst.com

With a copy to:

DLA Piper LLP (US)
444 West Lake Street, Suite 900
Chicago, IL 60606




Attn: David Sickle
Email: david.sickle@dlapiper.com

If to Escrow Agent:

FIRST AMERICAN TITLE INSURANCE COMPANY
First American Title Insurance Company
801 Nicollet Mall, Suite 1900
Minneapolis MN 55402
(612) 305-2043
Attn: Alison Cole
Email: Disbursing.mn@firstam.com


END OF ARTICLE






SIGNATURE PAGE

FOR

ESCROW AGREEMENT


Seller and Purchaser have caused this Escrow Agreement to be executed and delivered as of the date first above written.
SELLER:


IRET PROPERTIES,
a North Dakota Limited Partnership

By:    IRET, Inc., a North Dakota corporation
Its:     General Partner

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: Chief Executive Officer


By: /s/ Anne Olson
Name: Anne Olson
Title: Executive Vice President



Dated as of: December 22, 2017






PURCHASER:

HSRE-MN 701 25th Avenue, LLC,
a Delaware limited liability company

By:     /s/ Stephen Gordon    
    Name: Stephen Gordon
Title: Authorized Signatory

Dated as of: December 22, 2017







EXHIBIT C-2
Environmental Holdback Escrow Agreement

ESCROW AGREEMENT
(Denfeld Clinic and Pavilion II)


This Escrow Agreement (“ Escrow Agreement ”) is entered into as of December 22, 2017 (the “ Effective Date ”) by and among First American Title Insurance Company, a Nebraska corporation (“ Escrow Agent ”), IRET Properties, a North Dakota limited partnership (“ Seller ”), and HSRE-MN Denfeld, LLC, a Delaware limited liability company (“ HSRE Denfeld ”) and HSRE-MN Pavilion II, LLC (“ HSRE Pavilion II ”, and together with HSRE Denfeld, collectively, “ Purchaser ”).

RECITALS

A. Seller, Buyer and certain of their respective affiliates are parties to that certain Purchase and Sale Agreement dated November 30, 2017, as amended by that certain First Amendment to Purchase Agreement, dated December 22, 2017 (collectively, the “ Agreement ”) concerning the purchase a portfolio of medical office building properties both owned and ground leased by Seller and its affiliates, as more particularly described therein.

B. On the date hereof pursuant to the Agreement, HSRE Denfeld is to acquire the Property located at located at 4702 Grand Ave., Duluth, MN (the “ Denfeld Property ”) and HSRE Pavilion II is to acquire the Property located at 1001 E. Superior Street, Duluth, MN (the “ Pavilion II Property ” and together with the Denfeld Property, collectively, the “ Property ”).

C.    Pursuant to the Agreement, at Closing, a designated amount (enumerated below) (“ Escrow Funds ”) will be withheld from the Purchase Price and will be deposited with Escrow Agent for the purpose of reimbursing Purchaser for certain out of pocket expenses related to inspection, repairs and/or remediation to be made to the Denfeld Property and the Pavilion II Property (the “ Project ”).    

D. Seller and Purchaser desire that Escrow Agent disburse these Escrow Funds in accordance with the Agreement, and Escrow Agent is willing to do so on the terms set forth herein.

AGREEMENT

NOW THEREFORE, for good and valuable consideration, the receipt and the sufficiency of which are hereby acknowledged, the parties hereby agree as follows:






1.
Recitals; Defined Terms . The foregoing Recitals are incorporated herein as part of this Escrow Agreement. Unless otherwise defined herein, capitalized terms have the meanings ascribed to them in the Agreement.
2. Deposit of Escrow Funds . Simultaneously with the execution of this Escrow Agreement, Escrow Agent has withheld from the Purchase Price the Escrow Funds in the amount of Six Hundred Thousand and 00/100 Dollars ($600,000.00) for the purpose of reimbursing Purchaser for the out of pocket costs and expenses incurred by Purchaser in connection with the Project. Following Closing, Seller shall not have any additional liability to Purchaser or any other person or entity with respect to the Project in excess of the Escrow Funds; provided, however, the foregoing will not be construed to limit Seller’s express representations and warranties set forth in the Agreement.
3. Inspection and Scope of Work . Purchaser has received certain reports indicating potential environmental site conditions at the Property, including, without limitation, possible vapor intrusion and ground soil contamination. Within forty-five (45) days following the Closing, Purchaser shall cause to be performed such additional inspections and testing at the Property as Purchaser deems necessary or advisable to evaluate the nature and scope of any damage or conditions requiring remediation or repair to the Property related thereto. Purchaser will provide Seller at least one (1) Business Day prior notice of any such inspection or testing and Seller may, at Seller’s cost, have a representative present for any such inspection. Purchaser shall provide Seller with a copy of any final report issued by Purchaser’s consultant’s arising therefrom. Purchaser shall determine the scope of work and/or remediation activities required at the Property based on its evaluation of such inspections and guidance from its consultants, and, if applicable, the requirements of the Minnesota Pollution Control Agency (“ MCPA ”). Based on the foregoing, Purchaser shall advise Seller of the scope of the necessary repairs, remediation and/or mitigation in writing, which may include, without limitation, without limitation, upgrading the active vapor mitigation systems, obtaining a No Association Determination Letter from the MCPA and/or taking other remedial actions required at the Property as required by the MCPA (the “ Scope ”). Notwithstanding the foregoing, if in the course of performing the work required to complete the Scope of the Project, Purchaser’s contractors or consultants discover additional adverse conditions at the Property related to the matters described above that were not observed as part of the initial inspections, or if the MCPA imposes additional conditions or requirements, Purchaser may update the Scope of the Project upon notice to Seller along with reasonable documentation of the need for such modifications to the Scope.
4. Project Bidding . Upon determination of the Scope as provided in Section 3 above, Purchaser shall obtain two (2) separate bids from qualified contractors selected by Purchaser to perform the Scope for the Project. Purchaser shall select and negotiate a contract for the Project with the lower of the two qualified bidders.
5. Escrow Funds Disbursement . Escrow Agent shall hold the Escrow Funds in trust until disbursement, as set forth in this Escrow Agreement. Purchaser may, from time to time, withdraw Escrow Funds to pay directly and/or reimburse Purchaser for the out of pocket costs incurred in connection with the Project, including, without limitation, the testing and inspection





performed in accordance with Section 2 above, upon delivery to Escrow Agent and Seller of invoices, receipts or other evidence of such out of pocket costs incurred reasonably acceptable to Seller and Purchaser. Escrow Agent promptly shall disburse that portion of the Escrow Funds necessary to pay or reimburse Purchaser for such out of pocket costs incurred. Upon Purchaser’s notice of completion in full of the Project along with proof of payment for all outstanding costs related thereto, the remaining balance of the Escrow Funds, if any, shall be released to Seller.
6. Project Completion Deadline . Purchaser agrees to use commercially reasonable and diligent efforts to cause the work for the Project to be performed as soon as reasonably practicable following determination of the Scope and selection of a contractor in accordance with the terms hereof. Purchaser shall achieve final completion of the Project on or before the two year anniversary of the date hereof; provided that if the work required for the Project is not completed in full as of such date, but Purchaser is diligently pursuing completion of the same, the deadline shall be extended to such date as is reasonably required to complete the Scope of the Project work using commercially reasonable efforts (“ Project Completion Deadline ”). Upon the Project Completion Deadline, if not earlier disbursed pursuant to Section 5 above, Escrow Funds in the amount of all outstanding and unpaid out of pocket expenses paid or incurred by Purchaser in connection with the Project shall be released to Purchaser, and all remaining Escrow Funds after the payment of the verified Project costs incurred through the Project Completion Deadline shall be released to Seller, less any Escrow Agent fees.
7. Documentation . If any documentation provided by Purchaser to Escrow Agent or Seller is insufficient or missing, Escrow Agent (or Seller, as applicable) will advise Purchaser within five (5) business days of receiving the documentation, and Purchaser shall promptly submit the missing documentation.
8. Interest . Escrow Agent shall not be liable to pay interest on the Escrow Funds.
9. Liens . No liability is assumed by Escrow Agent to Purchaser, Seller or any other party for protection against mechanic’s liens.
10. Escrow Agent Duties . The functions and duties assumed by Escrow Agent include only those described in this Agreement, and Escrow Agent is not obligated to act except in accordance with the terms and conditions of this Agreement. Escrow Agent does not insure that the Project will be completed, nor that any element of the Project will be in accordance with the approved Scope, nor that sufficient funds will be available for the completion of Project. Escrow Agent may conclusively rely upon any document believed by Escrow Agent to be genuine and to have been signed or presented by the proper parties, consistent with reasonable due diligence on Escrow Agent’s part. Escrow Agent shall not be responsible for any losses of documents or funds while such documents or funds are not in its custody. Documents or funds which are deposited in the United States mail shall not be construed as being in the custody of Escrow Agent.
11. Escrow Agent Fees . Any reasonable and customary escrow fees payable to the Escrow Agent with respect to this Agreement shall be paid from the Escrow Funds.





12. Successors . This Escrow Agreement shall be binding upon the parties hereto and their respective successors and assigns.
13. Amendment . This Escrow Agreement can be amended or modified only by a written amendment signed by the parties hereto.
14. Counterparts . This Escrow Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same instrument. Signatures of this Escrow Agreement which are transmitted by either or both electronic or telephonic means (including, without limitation, facsimile and email) are valid for all purposes. Any party shall, however, deliver an original signature of this Escrow Agreement to the other party upon request.
15. Title Insurance. It is expressly understood by Purchaser that no title insurance or mechanic’s lien coverage is being provided by Escrow Agent in conjunction with this Escrow Agreement and that by entering into this Escrow Agreement, Escrow Agent is in no way agreeing to, modifying, expanding or extending any coverage(s) previously provided, if any.
16. Notice . All notices, requests, or documents to be given hereunder by a party hereto shall be in writing delivered to the following addresses and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date received if sent by email; or (d) on date received by certified or registered mail, return receipt requested, postage prepaid:

If to Seller:

IRET Properties
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Grant Campbell
Telephone: 952-401-4816
Email: gcampbell@iret.com

With a copy to:

Marcus A. Mollison
Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, MN 55402
Email: Mollison.marcus@dorsey.com

If to Purchaser:






Harrison Street Real Estate, LLC    
444 West Lake Street, Suite 2100
Chicago, IL 60606
Attn: Mark Burkemper; Stephen Gordon; Michael Gershowitz
Email: MBurkemper@harrisonst.com     
sgordon@harrisonst.com
MGershowitz@harrisonst.com

With a copy to:

DLA Piper LLP (US)
444 West Lake Street, Suite 900
Chicago, IL 60606
Attn: David Sickle
Email: david.sickle@dlapiper.com

If to Escrow Agent:

FIRST AMERICAN TITLE INSURANCE COMPANY
First American Title Insurance Company
801 Nicollet Mall, Suite 1900
Minneapolis MN 55402
(612) 305-2043
Attn: Alison Cole
Email: Disbursing.mn@firstam.com


END OF ARTICLE








SIGNATURE PAGE

FOR

ESCROW AGREEMENT


Seller and Purchaser have caused this Escrow Agreement to be executed and delivered as of the date first above written.
SELLER:


IRET PROPERTIES,
a North Dakota Limited Partnership

By:    IRET, Inc., a North Dakota corporation
Its:     General Partner

By: /s/ Mark O. Decker, Jr.
Name: Mark O. Decker, Jr.
Title: Chief Executive Officer


By: /s/ Anne Olson
Name: Anne Olson
Title: Executive Vice President



Dated as of: December 22, 2017





PURCHASER:

HSRE-MN Pavilion II, LLC,
a Delaware limited liability company

By:     /s/ Stephen Gordon    
    Name: Stephen Gordon
Title: Authorized Signatory

HSRE-MN Denfeld, LLC,
a Delaware limited liability company

By:     /s/ Stephen Gordon    
    Name: Stephen Gordon
Title: Authorized Signatory


Dated as of: December 22, 2017







EXHIBIT D-1

Form of Gardenview Ground Lease Estoppel

GROUND LEASE ESTOPPEL CERTIFICATE


Harrison Street Real Estate, LLC (and its affiliates, “HSRE”)
444 West Lake Street, Suite 2100
Chicago, Illinois 60606
Attn: Mark Burkemper

IRET Properties, a North Dakota Limited Partnership
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Anne Olson
        
RE:
Garden View Medical Building, St. Paul, Minnesota (“Property”)

To Whom It May Concern:

Reference is made to that certain Ground Lease between Lessee, and the undersigned, as Lessor, together with all amendments thereto (collectively, the “Ground Lease”). The real property (the “Property”) which is the subject of the Ground Lease is described in Schedule 1 attached hereto and made a part hereof. Capitalized terms such as Ground Lease, Lessor, and Lessee are defined in Schedule 1 , and capitalized terms not defined herein shall have the meaning ascribed in the Ground Lease. Lessee hereby represents to the Benefitted Parties (as defined below) that the following statements are true and correct as of the date hereof:

1. Schedule 1 includes a true and correct description of the Ground Lease and a list of all amendments to the Ground Lease, and attached hereto as Exhibit A is a true, correct and complete copy of the Ground Lease and all amendments.

2. The Ground Lease has been properly executed by Lessor, is in full force and effect and has not been amended, modified, supplemented or superseded except as indicated in Schedule 1 and shown in Exhibit A . The Ground Lease is the entire agreement between Lessor (or any affiliated party) and Lessee (or any affiliated party) pertaining to the Premises.

3. Lessee is not in default in the performance of the terms and provisions of the Ground Lease, nor does any state of facts or condition exist which, with the giving of notice or the passage of time, or both, would result in such a default.






4. There currently is no defense, offset, lien, claim or counterclaim by or in favor of Lessor against Lessee under the Ground Lease or against the obligations of Lessor under the Ground Lease.

5. All obligations of Lessor under the Ground Lease have been performed. Lessor is not in any respect in default in the performance of the terms and provisions of the Ground Lease nor does any state of facts or condition exist which, with the giving of notice or the passage of time, or both, would result in such a default.

6. Other than the annual base rent, no amounts are payable as rent to Lessor.

7. Lessor has not received any written notice of any present violation of any federal, state, county or municipal laws, regulations, ordinances, orders, or directives relating to use, operation or condition of the Property that remains uncured.

8. Lessor has no current right to terminate the Ground Lease based on any acts or omissions of Lessee as of the date hereof.

9. Lessor hereby consents to the transfer of Lessee’s interest under the Ground Lease to HSRE and has waived any rights of first refusal, purchase options or rights of first offer with respect to such transfer (if any).

10. The undersigned represents and warrants that it is authorized to execute this Estoppel Certificate and it is binding upon the Lessor.

[Signature Page to Follow]





The above certifications are made to the Benefited Parties knowing that the Benefited Parties will rely thereon. For purposes hereof, the term " Benefited Parties " means the addressees of this letter, their investors and affiliates together with its/their successors, assigns, lenders and title insurance companies.


DATED this ______ day of ___________________, 2017.


Very truly yours,


LESSOR :

Children’s Health Care, a Minnesota non-profit corporation

By:________________________________
Name:______________________________
Title:_______________________________


Allina Health System, d/b/a United Hospital, a Minnesota non-profit corporation

By:________________________________
Name:______________________________
Title:_______________________________












SCHEDULE 1
1.1
Ground Lease: Ground Lease between Children’s Health Care, a Minnesota non-profit corporation and Allina Health System, d/b/a United Hospital, a Minnesota non-profit corporation as Lessors and Garden View Medical Building Condominium Association, a Minnesota non-profit corporation as Lessee dated September 13, 1999.

1.2
Amendment(s): None.

1.3
Lessors: Children’s Health Care, a Minnesota non-profit corporation (“ Children’s ) and Allina Health System, d/b/a United Hospital, a Minnesota non-profit corporation (“Allina”).

1.4
Lessee: Garden View Medical Building Condominium Association, a Minnesota non-profit corporation

1.5
Legal Description of the Property: See Exhibit A-1

1.6
Term. The Term of the Ground Lease commenced on October 1, 1999, and expires on September 30, 2049, subject Lessee’s right to extend the Term as follows: Lessee as two (2) additional terms of ten (10) years each.

1.7
Rent. The Basic Rent presently payable under the Ground Lease is $1.00 per year payable on September 1 of each year. In addition to Basic Rent, Lessee is responsible for the payment of taxes, special assessments, operating costs, both capital and non-capital, ordinary and extraordinary, foreseen or unforseen. All Rent payable on the part of the Lessee has been paid through and including August 31, 2018.
1.8
Security Deposit: None.

1.9
Options/Right to Purchase the Property : See 1.10 below.

1.10
Rights of First Offer or First Refusal : Pursuant to Section 17 of the Ground Lease, Allina has the right of first refusal if Children’s desires to sell its interest in the Property. Pursuant to Section 18 of the Ground Lease, Children’s has the right of first refusal if Allina desires to sell its interest in the Property.







Exhibit A
Ground Lease







Exhibit A-1
Legal Description
All that part of Lot 1, Lot 2, and Lot 3 in Block 1, Health One Children's Addition, and of Lot 2, Lot 3, and Lot 4 in Block 68, Dayton and Irvine's Addition to St. Paul, and of vacated Thompson Avenue abutting the foregoing, Ramsey County, Minnesota, being more particularly described as follows:
Beginning at the most westerly corner of Lot 21, Block 1, said Health One Children's Addition, being also an interior corner of said Lot 3, Block l, Health One Children's Addition; thence, along northeasterly lines of Lots 3, 1 and 2, being also southwesterly lines of Lots 21, 16, 14, 15, 6, 7, and 8, all in said Block 1, Health One Children's Addition, South 46 degrees 23 minutes 09 seconds East, assumed basis of bearings, a distance of 77.06 feet to the southwesterly corner of said Lot 8, being an interior corner of said Lot 2; thence, along the line dividing said Lot 8 and said Lot 2, North 88 degrees 36 minutes 51 seconds East 53.7l feet; thence South 01 degree 23 minutes 09 seconds East 9.74 feet; thence South 88 degrees 37 minutes 11 seconds West 34.89 feet to a point of curvature; thence along a curve, concave southerly and having a radius of 17.25 feet and a central angle of 60 degrees 00 minutes 00 seconds, an arc distance of 18.06 feet to a point of tangency; thence South 28 degrees 37 minutes l 1 seconds West 68.7l feet; thence South 01 degree 21 minutes 37 seconds East 75.47 feet; thence South 88 degrees 38 minutes 23 seconds West 26.09 feet; thence North 01 degree 21 minutes 37 seconds West 13.99 feet; thence South 88 degrees 38 minutes 23 seconds West 49.00 feet; thence South 00 degrees 35 minutes 52 seconds West 7.00 feet; thence North 89 degrees 15 minutes 27 seconds West 8.81 feet; thence North 00 degrees 35 minutes 52 seconds East 24.02 feet; thence North 89 degrees 04 minutes 5l seconds West 39.33 feet; thence South 00 degrees 35 minutes 52 seconds West 24.14 feet; thence North 89 degrees 15 minutes 27 seconds West 61.22 feet; thence North 58 degrees 50 minutes 11 seconds West 14.35 feet; thence North 46 degrees 27 minutes 59 seconds West 32.71 feet to the southeasterly right-of-way line of Thompson Avenue, being also the southeasterly frontage road of Interstate Highway 35E; thence along said right-of-way line and along a nontangential curve, concave southeasterly and having a radius of 5999.09 feet, a central angle of l degree 34 minutes 11 seconds, and a chord 164.34 feet in length bearing North 44 degrees 17 minutes 20 seconds East, an arc distance of 164.35 feet to a point of nontangency; thence along said right-of-way line and along a curve, concave southeasterly and having a radius of 40.50 feet, a central angle of 16 degrees 33 minutes 06 seconds, and a chord 11.66 feet in length bearing North 34 degrees 48 minutes 44 seconds East, an arc distance of l l.70 feet to a point of tangency; thence, along said right-of-way line, North 43 degrees 05 minutes 17 seconds East 79.99 feet to the intersection thereof with a line drawn through the point of beginning and bearing North 46 degrees 23 minutes 09 seconds West; thence, along the last mentioned line, South 46 degrees 23 minutes 09 seconds East 21.78 feet to the point of beginning.






EXHIBIT D-2

Form of Gardenview Condominium Estoppel

ESTOPPEL

DECLARATION OF COMMON INTEREST COMMUNITY


TO:     
Harrison Street Real Estate, LLC
444 West Lake Street, Suite 900
Chicago, Illinois


RE:
Declaration for Common Interest Community No. 385, Garden View Medical Building Condominium dated October 1, 1999, recorded December 30, 1999 as Document Number 1587038 (the “ Declaration ”)

Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Declaration.

The undersigned, Children’s Health Care, a Minnesota non-profit corporation doing business as Children’s Hospitals (“ Children’s ”) and Clinics of Minnesota and Allina Health System, a Minnesota non-profit corporation (“ Allina ”), as Declarants and Unit Owners, and Gardenview Medical Building Condominium Association, a Minnesota non-for-profit corporation ( “ Association ”) (the “ Certifying Parties ”) hereby certify, as of the date hereof, to Harrison Street Real Estate, LLC (“Buyer”), with respect to the purchase of Unit Nos. 5001 and 6001 in the building commonly known as the Garden View Medical Building, St. Paul, Minnesota (the “ Property ”), as follows:

1.
Children’s is a Declarant pursuant to the Declaration and is the owner of Units [____________] in the condominium. Allina is a Declarant pursuant to the Declaration and is the owner of Units [___________] in the condominium.
2.
that the Declaration and the other Condominium documents set forth on Exhibit A hereto (collectively, the “ Condominium Documents ”) are unmodified and in full force and effect. No modification to any Condominium Document has been proposed by any Declarant, unit owner or is currently pending before the Association or the Board of Directors;
3.
that there is no currently-existing default under the Condominium Documents by the Property owner in the payment of any sum of money owing pursuant to the Condominium Documents, and, to the Certifying Parties’ actual knowledge, there is no currently-existing default by the Property owner under the Condominium Documents and no other event has occurred which with the giving of notice or the passage of time, or both, would become a default under the Condominium Documents by the Property owner;
4.
neither the Association, nor any other unit owner in the Condominium is currently entitled to any lien on the Property;
5.
that the amount paid for all assessments for the Property under the Condominium Documents in 2016 was $362,671.56 and the amount assessed for the Property for 2017 is $362,671.56. All such amounts have been paid in full by the owner of the Property. No special assessments were levied by the Association for calendar year 2017 and no special assessments are anticipated to be assessed for calendar year 2018.
6.
the Board of Directors is currently comprised of 3 Directors.





7.
there are no outstanding judgments or pending litigation or other disputes against the Association or, to the Certifying Parties’ knowledge, against the Property owner or between the unit owners with respect to the Condominium
8.
that the Certifying Parties has not performed or caused to be performed, and is not currently performing or causing to be performed, any maintenance or other work or service not in the normal course of operation, the cost of which the Certifying Parties is or will be entitled to charge in whole or in part to the Property owner which has not yet been charged to such Property owner; and
9.
that there are no set-offs, defenses or counterclaims currently being asserted or otherwise known by the Certifying Parties against enforcement of any obligations under the Declaration which are to be performed by the Certifying Parties.
10.
By signing this Estoppel, Certifying Parties, in their capacity as Declarant and Unit Owners of all of the Units in the condominium other than the Property hereby waive their right of first refusal and first offer with respect to the transfer of IRET Properties, a North Dakota Limited Partnership’s interest in the Property to Harrison Street Real Estate, LLC or its affiliates.
The Certifying Parties acknowledge and agree that the statements set forth herein shall be binding, and may be relied upon by and shall inure to the benefit of Buyer or its designee or assigns.


[Signature page follows]














Executed as of December ____, 2017.
CHILDREN’S HEALTH CARE, a Minnesota non-profit corporation doing business as Children’s Hospitals and Clinics of Minnesota


By:                     
Name: ______________________________
Its: _________________________________

                    
ALLINA HEALTH SYSTEM , a Minnesota non-profit corporation


By:                     
Name: ______________________________
Its: _________________________________


GARDEN VIEW MEDICAL BUILDING CONDOMINIUM ASSOCIATION , a Minnesota non-for-profit corporation


By:                     
Name: ______________________________
Its: _________________________________








Exhibit A

Additional Condominium Documents


1.
Articles of Incorporation of Garden View Medical Building Condominium Association dated September 3, 1999
2.
Bylaws of Garden View Medical Building Condominium Association dated September 13, 1999
3.
Community in Interest Number 385 for Garden View Medical Building Condominium dated October 28, 1999







EXHIBIT D-3

Form of Ritchie Condominium Estoppel

ESTOPPEL

DECLARATION FOR CONDOMINIUM

TO:     
Harrison Street Real Estate, LLC
444 West Lake Street, Suite 900
Chicago, Illinois


RE:
Condominium Number 290 Sherman Street Medical Condominium Declaration for Condominium dated August 16, 1993, recorded December 2, 1993 as Document Number 1036884, as amended by the First Amendment to Sherman Street Medical Condominium Declaration for Condominium dated December 18, 2003, recorded May 24, 2004 as Document Number 1818313 (the “ Declaration ”).

Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Declaration.

The undersigned, as Sherman Street Medical Condominium Association, Inc., a Minnesota non-profit corporation (the “ Association ”) hereby certifies, as of the date hereof, to Harrison Street Real Estate, LLC (“ Buyer ”), with respect to the purchase of the property commonly known as Units 2, 3, 4, 8, 9, 10 & 11 in the Sherman Street Medical Condominium (the “ Condominium ”) located at 310 Smith Avenue North, St. Paul, Minnesota (the “ Property ”), as follows:

1.
that the Declaration and the other Condominium documents set forth on Exhibit A hereto (collectively, the “ Condominium Documents ”) are unmodified and in full force and effect. No modification to any Condominium Document has been proposed by any unit owner or is currently pending before the Association or the Board of Directors.     
2.
that there is no currently-existing default under the Condominium Documents by the Property owner in the payment of any sum of money owing pursuant to the Condominium Documents, and, to the Association’s actual knowledge, there is no currently-existing default by the Property owner under the Condominium Documents and no other event has occurred which with the giving of notice or the passage of time, or both, would become a default under the Condominium Documents by the Property owner;
3.
neither the Association, nor, to the Association’s knowledge, any other unit owner in the Condominium, is currently entitled to any lien on the Property;
4.
that the amount paid for all assessments for the Property under the Condominium Documents in 2016 was $659,138.28 and the amount assessed for the Property in 2017 is $659,138.28. All such amounts have been paid in full by the owner of the Property. No special assessments were levied by the Association for calendar year 2017 and no special assessments are anticipated to be assessed for calendar year 2018.
5.
the Association is not responsible for the operation and maintenance of the adjacent skyway and tunnel easements, similarly there are no amounts charged to the Association, or by the Association to the unit owners, for such operation and maintenance.





6.
no condominium unit is owned by the Association. The Board of Directors of the Association is currently comprised of 4 Directors.
7.
there are no outstanding judgments or pending litigation or other disputes against the Association or, to the Association’s knowledge, against the Property owner or between the unit owners with respect to the Condominium.
8.
that the Association has not performed or caused to be performed, and is not currently performing or causing to be performed, any maintenance or other work or service not in the normal course of operation, the cost of which the Association is or will be entitled to charge in whole or in part to the Property owner which has not yet been charged to such Property owner. No capital improvement projects are proposed or contemplated by the Association for calendar year 2018.
9.
that there are no set-offs, defenses or counterclaims currently being asserted or otherwise known by the Association against enforcement of any obligations under the Declaration which are to be performed by the Association.
The Association acknowledges and agrees that the statements set forth herein shall be binding, and may be relied upon by and shall inure to the benefit of Buyer or its designee or assigns.


[Signature page follows]











Executed as of December ___, 2017.
SHERMAN STREET MEDICAL CONDOMINIUM
ASSOCIATION, INC.,
a Minnesota non-profit corporation.



By:                     
Name: ______________________________
Its: _________________________________





Exhibit A

Additional Condominium Documents

1.
Articles of Incorporation of Sherman Street Medical Condominium Association, Inc., dated August 6, 1993
2.
Bylaws of Sherman Street Medical Condominium Association, Inc., executed August 16, 1993
3.
Condominium Number 290 Sherman Street Medical Condominium Site Plan and Ground Level Plan, executed November 17, 1993 and filed December 2, 1993






EXHIBIT E

Form of Seller Estoppel Certificate

SELLER ESTOPPEL CERTIFICATE

_____________ ____, 2017

TO:

Harrison Street Real Estate, LLC
444 West Lake Street, Suite 2100
Chicago, IL 60606
Attn:  Mark Burkemper

IRET Properties, a North Dakota Limited Partnership
800 LaSalle Avenue, Suite 1600
Minneapolis, MN 55402
Attn: Anne Olson
        
RE:
920 East First Street, Duluth, MN (“ Pavilion I ”); 4702 Grand Avenue, Duluth, MN (“ Denfeld Clinic ”); 109 North 28 th Street East, Superior, WI (“ Mariner Clinic ”); 8650 Hudson Boulevard, Lake Elmo, MN (“ High Pointe Health Campus ”); 9400 Zane Avenue North, Brooklyn Park, MN (“ Prairie Care Medical ”); 4300 Edgewood Drive NE, St. Michael, MN (“ St. Michael Clinic ”); (collectively, the “ Properties ”); capitalized terms not defined herein shall have the meaning ascribed in the respective lease agreement.

To Whom It May Concern:
The undersigned, as IRET Properties, a North Dakota Limited Partnership (“ Seller ”) hereby certifies to Harrison Street Real Estate, LLC, its successors and assigns (“ Buyer ”) that the following statements regarding the leases referenced herein for the following Properties are true and correct as of the date hereof:
Pavilion I:
Regarding the Lease Agreement dated as of October 20, 2014, as amended by the Amendment to Lease dated April 19, 2016, by and between Seller, as Landlord, and St. Luke’s Hospital of Duluth, Inc., a Minnesota nonprofit corporation, as Tenant:
1.
As of the date hereof, the balance of the Replacement Reserve held by Landlord in accordance with the terms of the Lease is $____________.
2.
Tenant has not submitted any draw requests for disbursements from the Replacement Reserve to Landlord that remain outstanding, except for _________________________.





Denfeld Clinic:
Regarding the Lease Agreement dated February 19, 2016, by and between Seller, as Landlord, and St. Luke’s Hospital of Duluth, Inc., a Minnesota nonprofit corporation, as Tenant:
1.
As of the date hereof, the balance of the Replacement Reserve held by Landlord in accordance with the terms of the Lease is $____________.
2.
Tenant has not submitted any draw requests for disbursements from the Replacement Reserve to Landlord that remain outstanding, except for _________________________.
Mariner Clinic:
Regarding the Lease Agreement dated as of August 24, 2015, as amended by the Amendment to Lease dated April 13, 2016, by and between Seller, as Landlord, and St. Luke’s Hospital of Duluth, Inc., a Minnesota nonprofit corporation, as Tenant:
1.
As of the date hereof, the balance of the Replacement Reserve held by Landlord in accordance with the terms of the Lease is $____________.
2.
Tenant has not submitted any draw requests for disbursements from the Replacement Reserve to Landlord that remain outstanding, except for _________________________.
High Pointe Health Campus:
Regarding the Office Lease Agreement dated as of November 24, 1997, as amended by the First Supplement to Office Lease Agreement dated as of February 9, 1999, the First Amendment to Lease dated as of June 25, 2001, the Letter Adjusting Rentable Area dated as of January 31, 2002, the Second Amendment to Lease dated as of October 1, 2008, the Third Amendment to Lease Agreement dated as of October 26, 2009, the Fourth Amendment to Lease Agreement dated as of April 5, 2010, the Fifth Amendment to Lease Agreement dated as of April 11, 2011, the Sixth Amendment to Lease Agreement dated as of May 16, 2011, and the Seventh Amendment to Lease Agreement dated as of November 10, 2011, by and between Seller, as Landlord, and East Metro ASC, LLC, a Minnesota limited liability company, as Tenant:
1.
Tenant [ is / is not ] currently providing its own cleaning services in the leased premises pursuant to the Fifth Amendment to Lease Agreement.
2.
The amount of the annual credit to which Tenant is currently entitled for the cost of cleaning services provided directly by Tenant is $_____________.
Prairie Care Medical:
Regarding the New Building Lease Agreement dated as of June 2, 2014, as amended by the Preliminary Agreement Regarding Proposed Build-to-Suite Lease for PrairieCare, Brooklyn Park, MN dated as of November 12, 2013, the Limited Guaranty of Lease dated as of June 12, 2014, the First Amendment to New Building Lease Agreement dated as of September 8, 2015, the Lease





Commencement Certificate dated as of September 8, 2015, the Amended and Restated First Amendment to New Building Lease Agreement dated as of October 15, 2015, the Amended and Restated Lease Commencement Certificate dated as of October 15, 2015, the Second Amendment to New Building Lease Agreement dated as of May 26, 2016, and the Third Amendment to New Building Lease Agreement dated as of August 15, 2017, by and between Seller, as Landlord, and PrairieCare, LLC, a Minnesota limited liability company, as Tenant:
1.
Tenant has not exercised its expansion right pursuant to Section 13 of the Lease as of the date hereof. Seller, as Landlord, has not received any notice of exercise and Tenant has not submitted any plans to Landlord for Landlord’s review.
St. Michael Clinic:
Regarding the Lease Agreement dated as of June 30, 2006, as amended by the Memorandum of Lease dated as of June 30, 2006, Amendment 1 to Lease Agreement dated as of August 14, 2006, Amendment 2 to Lease Agreement dated as of August 29, 2007, the Notice of Renewal dated as of May 7, 2017, and Amendment 3 to Lease Agreement dated as of June 5, 2017, by and between Seller, as Landlord, and Allina Health System, a Minnesota non-profit corporation, as Tenant:
1.
Tenant has not exercised its expansion right pursuant to Section 35 of the Lease Agreement. Seller, as Landlord, has not received any notice of exercise and Tenant has not submitted any plans to Landlord for Landlord’s review.

The above certifications are made to Buyer knowing that Buyer will rely thereon in making an investment in the Properties.
[ Signature page follows. ]






SELLER:
IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

By: IRET, Inc.,
a North Dakota corporation
Its: General Partner

By:                     
Name:
Its:

By:                     
Name:
Its:




 






Exhibit 31.1
Certifications
I, Mark O.  Decker, Jr., certify that:
1
I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
2
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
 
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)
 
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)
 
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)
 
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 12, 2018
By:
/s/ Mark O.  Decker, Jr.
 
 
Mark O.  Decker, Jr.,  President and Chief Executive Officer
 




Exhibit 31.2
Certifications
I, John A.  Kirchmann, certify that:
1
I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
2
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
 
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)
 
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)
 
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)
 
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 12, 2018
By:
/s/ John A.  Kirchmann
 
 
John A.  Kirchmann, Executive Vice President and Chief Financial Officer
 
 
 
 





Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Investors Real Estate Trust (the “Company”) on Form 10-Q for the quarter ended January 31, 2018, as filed with the Securities and Exchange Commission on the date hereof, (the “Report”), I, Mark O.  Decker, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Mark O.  Decker, Jr.
 
Mark O.  Decker, Jr.
 
President and Chief Executive Officer
 
March 12, 2018
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification is furnished, and shall not be deemed filed, as provided by Rule 13a-14(b) promulgated under the Securities Act of 1934 and Item 601(b) (32) (ii) of Regulation S-K.




Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Investors Real Estate Trust (the “Company”) on Form 10-Q for the quarter ended January 31, 2018, as filed with the Securities and Exchange Commission on the date hereof, (the “Report”), I, John A.  Kirchmann, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ John A.  Kirchmann
 
John A.  Kirchmann
 
Executive Vice President and Chief Financial Officer
 
March 12, 2018
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification is furnished, and shall not be deemed filed, as provided by Rule 13a-14(b) promulgated under the Securities Act of 1934 and Item 601(b) (32) (ii) of Regulation S-K.