NOTE 17 – BUSINESS COMBINATIONS AND ACQUISITIONS

The Company closed on the following acquisitions during the three months ended March 31, 2018:

Date

Property Name

Location

Property Type

Units/ Square Footage/ Acres

Acquisition Price

Prorata Acquisition Price

3/1/18

Thunder Creek Apartments

Fargo, ND

Apartment complex

57 units

4,460

(a)

Acquisition price does not include capitalized closing costs and adjustments of $119.

Total consideration given for acquisitions through March 31, 2018 was completed through issuing approximately 84,000 limited partnership units of the operating partnership valued at $18.50 per unit for an aggregate consideration of approximately $1,546, assumed liabilities of $54 and cash of $2,979. The value of units issued in exchange for property is determined through a value established annually by our Board of Trustees, and reflects the fair value at the time of issuance.

The Company closed on the following acquisitions during the three months ended March 31, 2017:

Date

Property Name

Location

Property Type

Units/ Square Footage/ Acres

Acquisition Price

Prorata Acquisition Price

1/10/17

Sargent Apartments

Fargo, ND

Apartment complex

36 units

1,710

1/11/17

Arrowhead Apartments

Grand Forks, ND

Apartment complex

82 units

5,494

1/17/17

West Oak Apartments

Fargo, ND

Apartment complex

18 units

777

1/17/17

Carr Apartments

Fargo, ND

Apartment complex

18 units

828

8,809

Total consideration given for acquisitions through March 31, 2017 was completed through issuing approximately 423,000 limited partnership units of the operating partnership valued at $16.00 per unit for an aggregate consideration of approximately $6,760, and cash of $2,049. The value of units issued in exchange for property is determined through a value established annually by our Board of Trustees, and reflects the fair value at the time of issuance.

The following table summarizes the acquisition date fair values, before prorations, the Company recorded in conjunction with the acquisitions discussed above:


	Three Months Ended
	March 31,
	2018		2017

Land, building, tenant improvements and FF&E	$	4,579	$	8,809
Other liabilities		(54)		-
Net assets acquired		4,525		8,809
Equity/limited partnership unit consideration		(1,546)		(6,760)

Net cash consideration	$	2,979	$	2,049

Estimated Value of Units/Shares

The Board of Trustees determined an estimate of fair value for the trust shares in the first three months of 2018 and 2017. In addition, the Board of Trustees, acting as general partner for the operating partnership, determined an estimate of fair value for the limited partnership units in the first three months of 2018 and 2017. In determining this value, the Board relied upon their experience with, and knowledge about, the Trust’s real estate portfolio and debt obligations. The Board typically determines the share price on an annual basis. The trustees determine the price in their discretion and use data points to guide their determination which is typically based on a consensus of opinion. In addition, the Board considers how the price chosen will affect existing share and unit values, redemption prices, dividend coverage ratios, yield percentages, dividend reinvestment factors, and future UPREIT transactions, among other considerations and information.

The Board determined the fair value of the shares and limited partnership units to be $16.50 per share/unit effective March 29, 2017. The Board determined the fair value of the shares and limited partnership units to be $18.50 per share/unit effective January 1, 2018.

Determination of price is a matter within the Board’s sole discretion. The Trust does not determine price based on any rote formula or specific factors. At this time, no shares are held in street name accounts and the Trust is not subject to FINRA’s specific pricing requirements set out in Rule 2340 or otherwise. Thus, the Trust does not employ any specific valuation methodology or formula. Rather, the Board looks to available data and information, which is often adjusted and weighted to comport more closely with the assets held by the Trust at the time of valuation. The principal valuation methodology utilized is the NAV calculation/direct capitalization method. The information made available to the Board is assembled by the Trust’s Advisor.

As with any valuation methodology, the methodologies utilized by the Board in reaching an estimate of the value of the shares and limited partnership units are based upon a number of estimates, assumptions, judgments or opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments, or opinions would likely have resulted in significantly different estimates of the value of the shares and limited partnership units. In addition, the Board’s estimate of share and limited partnership unit value is not based on the book values of our real estate, as determined by GAAP, as our book value for most real estate is based on the amortized cost of the property, subject to certain adjustments.

Furthermore, in reaching an estimate of the value of the shares and limited partnership units, the Board applied a liquidity discount to one valuation scenario in order to reflect the fact that the shares and limited partnership units are not currently traded on a national securities exchange and did not consider; a discount for debt that may include a prepayment obligation or a provision precluding assumption of the debt by a third party or the costs that are likely to be incurred in connection with an appropriate exit strategy, whether that strategy might be a listing of the limited partnership units or common shares on a national securities exchange or a merger or sale of our portfolio.