TARRAGON REALTY INVESTORS INC, 424B3, 1998-10-01

TARRAGON REALTY INVESTORS INC
424B3, 1998-10-01
REAL ESTATE

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<PAGE> 1
Pursuant to Rule 424(b)(3)
Registration No. 333-60527

TARRAGON REALTY INVESTORS, INC.
3100 Monticello Avenue, Suite 200
Dallas, Texas 75205
(214) 599-2200

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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

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To the Stockholders of Tarragon Realty Investors, Inc.:

PLEASE TAKE NOTICE that a special meeting of stockholders (the "TRII
Special Meeting") of Tarragon Realty Investors, Inc., a Nevada corporation
("TRII"), has been called by the Board of Directors of TRII and will be held at
280 Park Avenue, East Building, 20th Floor, New York, New York 10017 at 2:00
p.m., local New York City time on Tuesday, October 20, 1998, to consider and
vote upon the following matters described in the accompanying Joint Proxy
Statement/Prospectus:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger dated as of June 5, 1998 (the "Merger Agreement")
among TRII and National Income Realty (the "Trust" or "NIRT") and the
transactions contemplated by the Merger Agreement, including the issuance of
shares of common stock, par value $0.01 per share of TRII (the "TRII Common
Stock") pursuant to the Merger Agreement and the conversion of the shares of
the successor to NIRT into the right to receive 1.97 shares of TRII Common
Stock pursuant to the Merger Agreement.

2. To consider and take action upon such other business as may
properly come before the TRII Special Meeting or any adjournments or
postponements thereof.

Notwithstanding stockholder approval of the foregoing proposal, TRII
reserves the right to abandon the merger of National Income Realty Corporation
(the "California Corporation") as the successor to NIRT by virtue of the
"Incorporation Procedure" with and into TRII (the "Merger") at any time prior
to consummation of the Merger, subject to the terms and conditions of the
Merger Agreement.

Holders of TRII Common Stock will not be entitled to appraisal rights
in connection with the Merger.

TRII has fixed the close of business on Friday, September 4, 1998 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the TRII Special Meeting, and only stockholders of record at such
time will be entitled to notice of, and to vote at, the TRII Special Meeting.

Approval and adoption of the Merger Agreement and approval of the
transactions contemplated thereby, including the issuance of shares of TRII
Common Stock pursuant to the Merger Agreement, requires the affirmative vote of
a majority of the votes cast at the TRII Special Meeting.

A form of proxy and a Joint Proxy Statement/Prospectus containing more
detailed information with respect to the matters to be considered at the TRII
Special Meeting (including the Merger Agreement attached as Appendix "A"
thereto) accompany and form a part of this notice.

Regardless of whether you plan to be present at the TRII Special
Meeting, please promptly date, mark, sign and mail the enclosed proxy ballot
card to American Stock Transfer and Trust Company in the envelope provided.
Any stockholder who executes and delivers the enclosed proxy may revoke the
authority granted thereunder at any time prior to its use by giving written
notice of such revocation to American Stock Transfer and Trust Company, 40 Wall
Street, 46th Floor, New York, New York 10005, or by executing and delivering a
proxy bearing a later date. A STOCKHOLDER MAY ALSO REVOKE A PROXY BY ATTENDING
AND VOTING AT THE TRII SPECIAL MEETING. Your vote is important, regardless of
the number of shares you own.

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<PAGE> 2

THE BOARD OF DIRECTORS OF TRII RECOMMEND THAT STOCKHOLDERS VOTE IN
FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF SHARES OF TRII
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.

BY ORDER OF THE BOARD OF DIRECTORS
OF TARRAGON REALTY INVESTORS, INC.

William S. Friedman, President

IMPORTANT

YOU CAN HELP TRII AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY BALLOT
CARD. IF YOU ARE UNABLE TO ATTEND THE TRII SPECIAL MEETING, PLEASE MARK, DATE,
SIGN AND RETURN THE ENCLOSED PROXY BALLOT CARD SO THAT THE NECESSARY QUORUM MAY
BE REPRESENTED AT THE TRII SPECIAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.

FAILURE TO VOTE MAY SUBJECT TRII TO FURTHER EXPENSE

If your shares are held in the name of a brokerage firm, nominee or other
institution, only it can vote your shares. Please contact promptly the
person responsible for your account and give instructions for your shares
to be voted.

THIS JOINT PROXY STATEMENT/PROSPECTUS IS A PROSPECTUS OFFERING TRII
COMMON STOCK AS A RESULT OF THE PROPOSED MERGER AGREEMENT TO BE VOTED UPON BY
STOCKHOLDERS OF TRII AND SHAREHOLDERS OF NATIONAL INCOME REALTY TRUST.

THE COMMON STOCK OF TRII TO BE ISSUED IN CONNECTION WITH THE MERGER
AGREEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

----------

The date of this Joint Proxy Statement/Prospectus is September 10, 1998.

<PAGE> 3
Pursuant to Rule 424(b)(3)
Registration No. 333-60527

NATIONAL INCOME REALTY TRUST
280 Park Avenue
East Building, 20th Floor
New York, New York 10017
(212) 949-5000

----------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

----------

To the Shareholders of National Income Realty Trust:

PLEASE TAKE NOTICE that a special meeting of shareholders (the "NIRT
Special Meeting") of National Income Realty Trust, a California business trust
(the "Trust" or "NIRT"), has been called by the Board of Trustees of NIRT and
will be held at 280 Park Avenue, East Building, 20th Floor, New York, New York
10017 at 1:00 p.m., local New York City time on Tuesday, October 20, 1998, to
consider and vote upon the following matters described in the accompanying Joint
Proxy Statement/Prospectus:

1. To consider and vote upon a proposal to incorporate the Trust
into a California corporation through the "Incorporation Procedure" described
in the accompanying Proxy Statement/Prospectus and to approve and adopt an
Agreement and Plan of Merger dated as of June 5, 1998 (the "Merger Agreement")
among Tarragon Realty Investors, Inc., a Nevada corporation ("TRII"), and
National Income Realty Corporation (the "California Corporation") as the
successor to NIRT by virtue of the Incorporation Procedure and the transactions
contemplated by the Merger Agreement, including the conversion of the shares of
the California Corporation (represented by the Shares of NIRT) into the right
to receive 1.97 shares of common stock, par value $0.01 per share of TRII (the
"TRII Common Stock") pursuant to the Merger Agreement.

2. To consider and take action upon such other business as may
properly come before the NIRT Special Meeting or any adjournments or
postponements thereof.

Holders of shares of beneficial interest of NIRT will not be entitled
to appraisal rights in connection with the Incorporation Procedure and the
Merger.

NIRT has fixed the close of business on Friday, September 4, 1998 as
the record date for determination of shareholders entitled to notice of, and to
vote at, the NIRT Special Meeting and only shareholders of record at such time
will be entitled to notice of, and to vote at, the NIRT Special Meeting.

THE INCORPORATION PROCEDURE AND MERGER IS PRESENTED AS A SINGLE
UNIFIED PROPOSAL TO BE APPROVED OR REJECTED BY SHAREHOLDERS IN ITS ENTIRETY.
APPROVAL OF THE INCORPORATION PROCEDURE AND MERGER WILL CONSTITUTE APPROVAL OF
EACH OF THE COMPONENTS (I) TO (III) BELOW INCLUDING (I) THE FILING OF ARTICLES
OF INCORPORATION WITH THE SECRETARY OF STATE OF CALIFORNIA TO CONVERT THE TRUST
FROM A CALIFORNIA BUSINESS TRUST INTO THE CALIFORNIA CORPORATION, (II) ADOPTION
OF THE AGREEMENT AND PLAN OF MERGER, AND (III) APPROVAL AND RATIFICATION OF ANY
AND ALL OF THE STEPS OF THE INCORPORATION PROCEDURE AND MERGER AND ANY AND ALL
FURTHER STEPS NECESSARY OR APPROPRIATE IN THE JUDGMENT OF MANAGEMENT TO
EFFECTUATE SUCH PROCEDURES INCLUDING ANY AMENDMENTS TO NIRT'S DECLARATION OF
TRUST NECESSARY TO ALLOW NIRT TO CONSUMMATE THE MERGER.

The principal components of the Incorporation Procedure and Merger
are:

(i) the filing of Articles of Incorporation with the
Secretary of State of California, converting the Trust from a
California business trust into the California Corporation and
converting shares of the Trust into Shares of the California
Corporation on a one-for-one basis;

(ii) the execution of the Agreement and Plan of Merger
between the California Corporation (as the successor to the Trust) and
TRII that provides, among other things, for (a) the merger of the
California Corporation with and into TRII such that the California
Corporation shall cease to exist and TRII shall be the surviving
corporation (the "Merger"), (b) the issuance by TRII of 1.97 shares of
TRII Common Stock in exchange for each share of common stock of the
California Corporation (represented by the Shares of NIRT outstanding)
with the effect that the shareholders of the California Corporation
would become stockholders of TRII and TRII would succeed to all of the
rights and properties, and be subject to all of the obligations and
liabilities, of the Trust incorporated as the California Corporation;
and
<PAGE> 4
(iii) the filing of Articles of Merger with the Secretary
of State of Nevada and the Secretary of State of California to effect
the Merger.

Approval and adoption of the Incorporation Procedure and Merger and
the transactions contemplated thereby requires, under the NIRT amended
Declaration of Trust, the affirmative vote of two-thirds of the Trustees of
NIRT (but under the Modification of the Stipulation of Settlement entered into
in the Olive case require unanimous approval of the Trustees of NIRT) together
with the approval of the holders of a majority of the Shares at the NIRT
Special Meeting.

A form of Proxy and Joint Proxy Statement/Prospectus containing more
detailed information with respect to the matters to be considered at the NIRT
Special Meeting (including the Merger Agreement attached as Appendix "A"
thereto) accompany and form a part of this notice.

Regardless of whether you plan to be present at the NIRT Special
Meeting, please promptly date, mark, sign and mail the enclosed proxy ballot
card to American Stock Transfer and Trust Company in the envelope provided.
Any shareholder who executes and delivers the enclosed proxy may revoke the
authority granted thereunder at any time prior to its use by giving written
notice of such revocation to American Stock Transfer and Trust Company, 40 Wall
Street, 46th Floor, New York, New York 10005, or by executing and delivering a
proxy bearing a later date. A SHAREHOLDER MAY ALSO REVOKE A PROXY BY ATTENDING
AND VOTING AT THE NIRT SPECIAL MEETING. Your vote is important regardless of
the number of shares you own.

----------

THE BOARD OF TRUSTEES RECOMMEND THAT SHAREHOLDERS VOTE IN FAVOR OF THE
APPROVAL OF THE INCORPORATION PROCEDURE AND MERGER AND THE TRANSACTIONS
CONTEMPLATED THEREBY.

BY ORDER OF THE BOARD OF TRUSTEES
OF NATIONAL INCOME REALTY TRUST

William S. Friedman, President

IMPORTANT

YOU CAN HELP NIRT AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY BALLOT
CARD. IF YOU ARE UNABLE TO ATTEND THE NIRT SPECIAL MEETING, PLEASE MARK, DATE,
SIGN AND RETURN THE ENCLOSED PROXY BALLOT CARD SO THAT THE NECESSARY QUORUM MAY
BE REPRESENTED AT THE NIRT SPECIAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.

FAILURE TO VOTE MAY SUBJECT NIRT TO FURTHER EXPENSE

If your shares are held in the name of a brokerage firm, nominee or
other institution, only it can vote your shares. Please contact
promptly the person responsible for your account and give instructions
for your shares to be voted.

THIS JOINT PROXY STATEMENT/PROSPECTUS IS A PROSPECTUS OFFERING TRII
COMMON STOCK AS A RESULT OF THE PROPOSED MERGER AGREEMENT TO BE VOTED UPON BY
STOCKHOLDERS OF TRII AND SHAREHOLDERS OF NIRT.

YOU SHOULD NOT RETURN CERTIFICATES FOR SHARES OF BENEFICIAL INTEREST
OF NATIONAL INCOME REALTY TRUST WITH THE ENCLOSED PROXY BALLOT CARD. YOU
SHOULD NOT FORWARD YOUR SHARE CERTIFICATES UNTIL YOU HAVE RECEIVED A LETTER OF
TRANSMITTAL FROM THE TRANSFER AGENT.

------------

The date of this Joint Proxy Statement/Prospectus is September 10, 1998.

<PAGE> 5
TARRAGON REALTY NATIONAL INCOME
INVESTORS, INC. REALTY TRUST

JOINT PROXY STATEMENT
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TARRAGON REALTY INVESTORS, INC.
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PROSPECTUS

This Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") is being furnished to the stockholders of Tarragon
Realty Investors, Inc., a Nevada corporation ("TRII"), in connection with the
solicitation of proxies by the TRII Board of Directors from holders of
outstanding shares of common stock, par value $0.01 per share, of TRII ("TRII
Common Stock") for use at a special meeting of stockholders of TRII to be held
on October 20, 1998 and at any adjournments or postponements thereof ("TRII
Special Meeting"). This Joint Proxy Statement/Prospectus is also being
furnished to the shareholders of National Income Realty Trust, a California
real estate investment trust (the "Trust" or "NIRT"), in connection with the
solicitation of proxies by the NIRT Board of Trustees from holders of
outstanding shares of beneficial interest, no par value per share, of NIRT
("NIRT Shares") for use at a special meeting of shareholders of NIRT to be held
on October 20, 1998 and at any adjournments or postponements thereof (the
"NIRT Special Meeting" and, together with the TRII Special Meeting, the
"Special Meetings"). Neither TRII nor NIRT currently intends to seek an
adjournment of its respective Special Meeting.

At the Special Meetings, stockholders of TRII and shareholders of NIRT
will be asked to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger dated June 5, 1998 among TRII and NIRT (as it may
be amended, supplemented or otherwise modified from time to time, the "Merger
Agreement") which is attached as Appendix "A" to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference and to approve the
transactions contemplated by the Merger Agreement including, in the case of
TRII, the issuance of shares of TRII Common Stock pursuant to the Merger
Agreement and in the case of NIRT, the "Incorporation Procedure." The
principal components of the Incorporation Procedure are the filing of Articles
of Incorporation with the Secretary of State of California, converting NIRT
from a California business trust into National Income Realty Corporation, a
California corporation (the "California Corporation"), which will then be the
successor-in-interest by incorporation to NIRT with the Shares of NIRT to
represent, following the incorporation of the California Corporation,
equivalent Shares on a one-for-one basis of the California Corporation. The
Merger Agreement provides for the merger of the California Corporation with and
into TRII (the "Merger"), with TRII being the corporation surviving the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"). Upon the
Merger becoming effective, each Share of the California Corporation (the Shares
of NIRT) issued and outstanding immediately prior to such time (other than
Shares owned by NIRT) will be converted into the right to receive and become
exchangeable for 1.97 shares of TRII Common Stock. See "The Merger
Agreement-Terms of the Merger" and "Description of TRII Capital Stock."

Assuming the approval and implementation of the Merger Agreement, TRII
will acquire all of the issued and outstanding shares of common stock of its
contractual advisor, Tarragon Realty Advisors, Inc. ("Tarragon" or the
"Advisor"), in exchange for the issuance by TRII of 100,000 shares of TRII
Common Stock and certain options to purchase 350,000 shares of TRII Common
Stock at varying prices ranging from $13 per share to $16 per share. See
"Acquisition of Advisor."

TRII has filed a Registration Statement on Form S-4 (including
exhibits and amendments thereto, the "Registration Statement") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), covering the shares
of TRII Common Stock issuable in the Merger. This Joint Proxy
Statement/Prospectus constitutes the respective Proxy Statements of TRII and
NIRT relating to the solicitation of proxies for use at their respective
Special Meetings and the Prospectus of TRII filed as a part of the Registration
Statement. This Joint Proxy Statement/Prospectus and the proxies are first
being provided to stockholders of TRII and shareholders of NIRT on or about
September 4, 1998.

On September 4, 1998, the closing prices of TRII Common Stock and NIRT
Shares as reported on the NASDAQ SmallCap Market and NASDAQ National Market
were $12 and $23 1/2, respectively.

i
<PAGE> 6

AVAILABLE INFORMATION

Each of TRII and NIRT is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith is required to file periodic reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed by
TRII and NIRT with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission in Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the public
reference facilities in the Commission's regional offices which are identified
and located at: Northeast Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048, and Midwest Regional Office, Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained from the Commission at prescribed rates by
addressing written requests for such copies to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 200549 and at the
EDGAR Database of Corporate Information, at the Commission's worldwide web site
at: http://www.sec.gov/edgarhp.htm.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED IN OR DELIVERED WITH THIS JOINT PROXY
STATEMENT/PROSPECTUS. THOSE DOCUMENTS (OTHER THAN EXHIBITS TO THE DOCUMENTS,
UNLESS EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE, UPON
WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, BY FIRST-CLASS MAIL OR OTHER EQUALLY
PROMPT MEANS, TO ANY PERSON INCLUDING ANY BENEFICIAL OWNER OF TRII COMMON STOCK
OR SHARES OF NIRT TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED.
REQUEST FOR COPIES SHOULD BE DIRECTED TO: TARRAGON REALTY INVESTORS, INC., 3100
MONTICELLO, SUITE 200, DALLAS, TEXAS 75205. IN ORDER TO ENSURE DELIVERY OF THE
REQUESTED DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY REQUEST SHOULD BE MADE
PRIOR TO SEPTEMBER 23, 1998.

The following documents filed with the Commission by TRII (file No.
0-8003) are incorporated by reference in this Joint Proxy Statement/Prospectus:

(a) TRII Current Report on Form 8-K dated July 10, 1997,

(b) TRII's Registration Statement on Form 8-B dated August 19,
1997.

(d) TRII's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.

(e) TRII's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.

The following documents filed with the Commission by NIRT (file No.
0-9211) are incorporated herein by reference:

(a) NIRT's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.

(b) NIRT's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.

All documents filed by either TRII or NIRT pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of such filing. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed
to be modified or superseded for purposes hereof to the extent that a statement
contained herein or in any other subsequently filed document which also is, or
is deemed to be, incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.

ii
<PAGE> 7
FORWARD LOOKING STATEMENTS

This Joint Proxy Statement/Prospectus may include and incorporate by
reference forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1994 relating to, among other matters,
analyses, including opinions from independent financial advisors to the TRII
Board of Directors and the NIRT Board of Trustees as to the fairness from a
financial point of view of the exchange ratio to the stockholders of TRII and
shareholders of NIRT, respectively, based on forecasts of future results and
estimates of amounts not yet determinable. Such forward looking statements
also relate to TRII's and NIRT's future prospects, developments and business
strategies for their operations and synergies that are possible from the
Merger. These forward looking statements are identified by their use of terms
and phrases such as "expect," "estimate," "project," "believe" and similar
terms and phrases. Such forwarding-looking statements are contained in
sections entitled "Summary," "The Merger," "Certain U.S. Federal Income Tax
Consequences" and other sections of this Joint Proxy Statement/Prospectus and
in the documents incorporated herein by reference. These statements involve
risks and uncertainties that may cause actual future activities and results of
operations to be materially different from that suggested or described in this
Joint Proxy Statement/Prospectus. These risks include changes in market
conditions in the real estate industry, ability of TRII and NIRT to integrate
and realize anticipated synergies relating to the combination of TRII and NIRT,
dependence on current management, the ability of TRII to achieve and execute
internal business plans, the impact of any economic downturns and inflation and
other market factors affecting the demand and supply of the real estate
industry and services relating thereto. These risks are more specifically
described in the Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q, which are incorporated herein by reference. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary from those expected, estimated or projected.

----------

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR IN
THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE
SOLICITATION AND OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TRII OR
NIRT. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
JOINT PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY FROM ANY
PERSON, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES MADE
UNDER THIS JOINT PROXY STATEMENT/PROSPECTUS HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF TRII OR NIRT SINCE THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS
OR THAT THE INFORMATION IN IT IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

iii
<PAGE> 8
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquisition of the Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certain Effects of the Merger on the Rights of
Holders of NIRT Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Comparative Market Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selected Historical and Pro Forma Combined
Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
No Operating History as a Combined Entity;
No Assurance of Integration of Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Limited Relevance of Historical Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Market for Surviving Corporation Common
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Pro Forma Dilution Compared with TRII
Earnings and Book Equity Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Fixed Exchange Ratio Despite Possible Change
in Relative Market Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Concentration of Ownership and Voting Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Interests of Certain Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Shares Available for Future Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dependence on Key Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Potential Changes in Distributions to
NIRT Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Effect of Certain Super Majority Voting Provisions
of TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Elimination of Limitation on Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Anti-Takeover Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Authorization to Issue Special Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Market Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Certain Risk Factors Associated with Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Potential Increase in Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
UNAUDITED PRO FORMA FINANCIAL
INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Tarragon Realty Investors, Inc. Pro Forma
Consolidated Balance Sheet March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Tarragon Realty Investors, Inc. Pro Forma
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Tarragon Realty Investors, Inc. Pro Forma
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SELECTED FINANCIAL DATA OF TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SELECTED FINANCIAL DATA OF NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
THE SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Date, Place and Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Votes Required for Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Reasons for the Merger; Recommendations of
the Boards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Representations and Warranties of NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Representations and Warranties of TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Additional Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Interest of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ACQUISITION OF THE ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Additional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Termination and Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Reasons for Structure of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
General-Incorporation Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Assumptions-Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Tax Consequences to NIRT Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Consequences to NIRT, TRII and Holders
of TRII Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
MARKET PRICES; DISTRIBUTIONS AND
RELATED SHAREHOLDERS MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
TRII Common Stock History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
DESCRIPTION OF TRII CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Rights on Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
COMPARISON OF CERTAIN RIGHTS OF
STOCKHOLDERS OF TRII AND
SHAREHOLDERS OF NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Size and Classification of the Board of Directors;
Director Designees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Management Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Shareholder Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
The Restrictions on Related-Party Transactions
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Stockholder Management Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Establishment of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Amendment Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
TRII Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Trustees of NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Litigation and Claims involving Mr. Friedman
Related to Southmark Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Executive Officers of TRII and NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Certain Relationships and Related
Transactions - TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Certain Relationships and Related
Transactions - NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
The Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Property Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Real Estate Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
INFORMATION ABOUT TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Business Description and Investment Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Management and Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
RELATIONSHIPS WITH INDEPENDENT
PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
FUTURE PROPOSALS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Agreement and Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Fairness Opinion of Duff & Phelps LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Fairness Opinion of Gilford Securities, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
</TABLE>

<PAGE> 9
SUMMARY

THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED IN
THIS JOINT PROXY STATEMENT/PROSPECTUS, DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION CONTAINED
THEREIN. THIS BRIEF SUMMARY IS INTENDED MERELY TO HIGHLIGHT CERTAIN
INFORMATION TO ASSIST SHAREHOLDERS. A THOROUGH READING OF THE ENTIRE JOINT
PROXY STATEMENT/PROSPECTUS, AS WELL AS CONSULTATION WITH QUALIFIED ADVISORS, IS
RECOMMENDED.

THE ENTITIES

TRII

TRII, which was incorporated on April 2, 1997, is a Nevada
corporation. TRII is the ultimate successor-in- interest to Vinland Property
Trust, a California business trust that invested in mortgage loans and in
equity interests in real estate until its incorporation in California under the
name Vinland Property Corporation on July 22, 1997 and the merger of that
entity into TRII on July 25, 1997 with TRII being the survivor to such merger.
In fiscal 1996, TRII's predecessor had operating revenues of $9,464,000 and net
income of $853,000. In fiscal 1997, TRII had operating revenues of $9,711,000
and net income of $296,000. TRII's primary business and only industry segment
is investing in income-producing real estate. TRII's real estate investments
are located principally in Texas, California, Oklahoma and Florida.

The mailing address of TRII's principal executive offices is 3100
Monticello, Suite 200, Dallas, Texas 75205 and its telephone number is (214)
599-2200.

NIRT

NIRT is a California business trust organized in 1978 pursuant to a
Declaration of Trust that has been subsequently amended. For the fiscal year
ended December 31, 1997, NIRT had operating revenues of approximately
$52,017,000 and net income of approximately $5,592,000. NIRT's primary
business and only industry segment is investing in and developing
income-producing real estate directly and through partnerships and joint
ventures. NIRT's real estate portfolio consists of 64 properties including 43
multifamily properties, 14 shopping centers, three office buildings, three
parcels of land and one single family residence located throughout the
continental United States, with concentrations in Florida, Texas, California
and Colorado. NIRT also holds investments in ten real estate joint ventures or
partnerships reported on the equity method (which own three office buildings
and 11 apartment complexes, 4 of which are under construction).

The mailing address of NIRT's principal executive offices is 280 Park
Avenue, East Building, 20th Floor, New York, New York 10017 and its telephone
number is (212) 949-5000.

California Corporation

Assuming the approval of the Merger by the TRII Stockholders and
assuming the approval of the Incorporation Procedure and Merger by the
Shareholders of NIRT, the California Corporation will be incorporated in
California pursuant to Section 200.5 of the California Corporation Code as the
immediate successor to NIRT and will then be merged with and into TRII with
TRII being the survivor to such Merger. The California Corporation will have
no purpose other than effectuating the Merger.

Tarragon

Tarragon is a New York corporation incorporated on September 18, 1990
and is the contractual advisor to both TRII and NIRT under separate written
advisory agreements. Tarragon is owned by William S. Friedman and Lucy N.
Friedman. Assuming the approval of the Merger Agreement, TRII will acquire all
of the issued and outstanding shares of common stock of Tarragon from Mr. and
Mrs. Friedman resulting in Tarragon becoming a wholly-owned subsidiary of TRII
and TRII becoming self-managed.

1
<PAGE> 10
THE SPECIAL MEETINGS

TRII

The TRII Special Meeting to consider and vote upon approval and
adoption of the Merger Agreement and approval of the transactions contemplated
thereby, including the issuance of shares of TRII Common Stock pursuant to the
Merger Agreement, will be held on October 20, 1998 at 2:00 p.m. local New
York City time at 280 Park Avenue, East Building, 20th Floor, New York, New
York 10017. Only holders of record of TRII Common Stock at the close of
business on September 4, 1998 (the "TRII Record Date") will be entitled to vote
at the TRII Special Meeting. At September 4, 1998, there were 1,272,180 shares
of TRII Common Stock outstanding and entitled to vote. Each share of TRII
Common Stock is entitled to one vote.

The affirmative vote of a majority of the votes cast at the TRII
Special Meeting is necessary for the approval and adoption of the Merger
Agreement and approval of the transactions contemplated thereby, including the
issuance of shares of TRII Common Stock pursuant thereto.

As of September 4, 1998, directors and executive officers of TRII and
their affiliates beneficially owned an aggregate of 390,303 shares of TRII
Common Stock (including shares which may be acquired within 60 days upon the
exercise of stock options) or approximately 31% of the shares of TRII Common
Stock outstanding on such date. The directors and officers of TRII have
indicated their intention to vote their shares of TRII Common Stock in favor of
approval and adoption of the Merger Agreement and approval of the transactions
contemplated thereby, including the issuance of the shares of TRII Common Stock
pursuant to the Merger Agreement.

NIRT

The NIRT Special Meeting to consider and vote upon the unified
proposal consisting of the Incorporation Procedure and the Merger Agreement and
approval of the transactions contemplated thereby (including any necessary
amendments to the NIRT Declaration of Trust) will be held on October 20, 1998
at 1:00 p.m., local New York City time, at 280 Park Avenue, East Building, 20th
Floor, New York, New York 10017. Only holders of record of Shares of NIRT at
the close of business on September 4, 1998 (the "NIRT Record Date") will be
entitled to vote at the NIRT Special Meeting. At September 4, 1998, there were
3,787,171 shares of NIRT issued and outstanding and entitled to vote. Each
Share of NIRT is entitled to one vote.

Section 3.5 of the Declaration of Trust of NIRT provides that upon a
vote of two-thirds of the Trustees with the approval of the holders of a
majority of the Shares, the Trustees shall have the power to cause the
conversion of NIRT to a corporation. Section 200.5 of the California General
Corporation Law requires an affirmative vote of the holders of a majority of
the outstanding Shares to approve the Incorporation Procedure which will also
be deemed to be approval of the Merger of the California Corporation into TRII.
Section 8.3 of the NIRT Declaration of Trust provides that the Declaration may
be amended by the vote of a majority of the outstanding NIRT Shares entitled to
vote thereon.

As of September 4, 1998, Trustees and executive officers of NIRT and
their affiliates beneficially owned an aggregate of 1,312,879 Shares of NIRT
(including Shares which may be acquired within 60 days upon exercise of stock
options) or approximately 35.1% of the Shares of NIRT outstanding on such date.
The Trustees and executive officers of NIRT have indicated their intention to
vote all of their Shares of NIRT in favor of approval and adoption of the
Incorporation Procedure and the Merger Agreement and approval of the
transactions contemplated thereby.

For additional information relating to the Special Meetings, see "The
Special Meetings."

THE MERGER

The Merger Agreement provides for a business combination between TRII
and NIRT in which, subject to the satisfaction of certain conditions, NIRT will
be consolidated with and into TRII and the holders of NIRT Shares will be
issued TRII Common Stock in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), for federal income tax purposes. In the
Merger, each outstanding NIRT Share will be converted into the right to
receive, and become exchangeable for, 1.97 shares of TRII Common Stock (the
"Exchange Ratio"). Such ratio is a fixed ratio and the Merger Agreement does
not contemplate any increase or

2
<PAGE> 11
decrease in that ratio of 1 for 1.97 shares. The Merger will be accounted for
as a reverse acquisition of TRII by NIRT using the purchase method of
accounting.

Because no explicit statutory authority permits a California business
trust to merge directly with and into a Nevada corporation, in order to
effectuate the combination of TRII and NIRT under the Merger Agreement, NIRT
will first be incorporated in California as the California Corporation pursuant
to Section 200.5 of the California Corporations Code and the California
Corporation (as the immediate successor to NIRT) will then be merged with and
into TRII. This procedure may be commonly referred to as the "Incorporation
Procedure" which will be immediately followed by the Merger. The principal
components of the Incorporation Procedure are the filing of Articles of
Incorporation with the Secretary of State of California, converting NIRT from a
California business trust into the California Corporation with the Shares of
NIRT to represent, following the incorporation of the California Corporation,
equivalent shares on a one-for-one basis of the California Corporation. The
Merger Agreement then provides for the Merger of the California Corporation
with and into TRII with TRII being the corporation surviving the Merger. Upon
the Merger becoming effective by the filing of Articles of Merger with the
Secretary of State of Nevada (the "Effective Time"), each share of the
California Corporation (the Shares of NIRT) issued and outstanding immediately
prior to that time will be converted into the right to receive and become
exchangeable for 1.97 shares of TRII Common Stock (other than any shares of
TRII Common Stock owned by NIRT). See "The Merger Agreement-Terms of the
Merger."

No fractional shares of TRII Common Stock will be issued in the
Merger. Instead, the Merger Agreement provides that each holder of NIRT Shares
who would otherwise be entitled to receive a fractional share of TRII Common
Stock will be entitled to receive, in lieu thereof, cash (without interest)
representing such holder's proportionate interest in a share of TRII Common
Stock based upon the closing price of a Share of TRII Common Stock on the last
trading day immediately prior to the Effective Time of the Merger. See "The
Merger Agreement-Terms of the Merger."

Reasons for the Merger; Recommendations of Boards

TRII

The TRII Board of Directors (the "TRII Board") has determined by vote
of all directors (William S. Friedman having abstained from such
recommendation) that the Merger Agreement and the transactions contemplated
thereby are fair to, and in the best interest of, TRII's stockholders.
Accordingly, the TRII Board has unanimously approved the Merger Agreement and
recommends that the stockholders of TRII vote FOR approval and adoption of the
Merger Agreement and approval of the transactions contemplated thereby,
including the issuance of shares of TRII Common Stock pursuant to the Merger
Agreement. The recommendation of the TRII Board is based on a number of
strategic, operating and financial factors as described in "The
Merger-Recommendations of the Governing Boards-TRII."

NIRT

The NIRT Board of Trustees (the "NIRT Board") has determined by vote
of all trustees (William S. Friedman having abstained from such recommendation)
that the terms of the Incorporation Procedure and the Merger Agreement and the
transactions contemplated thereby are fair to, and in the best interest of,
NIRT's Shareholders. Accordingly, the NIRT Board has unanimously approved the
Incorporation Procedure and the Merger Agreement and recommends that the
Shareholders of NIRT vote FOR approval and adoption of the Incorporation
Procedure and the Merger Agreement and approval of the transactions
contemplated thereby. The recommendation of the NIRT Board is based on a
number of strategic, operating and financial factors as described in "The
Merger-Recommendations of the Governing Boards-NIRT."

3
<PAGE> 12
Opinions of Financial Advisors

TRII

Duff & Phelps, LLC ("Duff & Phelps") has delivered its written opinion
dated as of May 21, 1998 to the TRII Board, to the effect that as of such date
the Exchange Ratio is fair to TRII from a financial point of view. See "The
Merger-Opinions of Financial Advisors-TRII." A copy of the opinion of Duff &
Phelps dated as of the date hereof, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the scope of the
review by Duff & Phelps in rendering its opinion, is attached as Appendix C to
this Joint Proxy Statement/Prospectus. HOLDERS OF TRII COMMON STOCK ARE URGED
TO READ DUFF & PHELPS' OPINION IN ITS ENTIRETY.

NIRT

Gilford Securities, Incorporated ("Gilford") has delivered a written
opinion, dated as of May 21, 1998 to the NIRT Board to the effect that, as of
such date the Exchange Ratio was fair to the holders of Shares of NIRT from a
financial point of view. See "The Merger-Opinions of Financial Advisors-NIRT."
A copy of the opinion of Gilford, dated as of the date hereof, which sets forth
the assumptions made, procedures followed, matters considered and limitations
on the scope of the review by Gilford in rendering its opinion, is attached as
Appendix D to this Joint Proxy Statement/Prospectus. HOLDERS OF NIRT SHARES
ARE URGED TO READ GILFORD'S OPINION IN ITS ENTIRETY.

Interests of Certain Persons in the Merger

In considering the recommendations of the TRII Board and the NIRT
Board, all shareholders should be aware that certain members of management of
TRII and NIRT have certain interests in the Merger that are in addition to the
interests of shareholders generally. See "The Merger-Interests of Certain
Persons in the Merger").

Director and Officer Indemnification

Pursuant to the Merger Agreement, from and after the Effective Time,
TRII as the surviving corporation will provide exculpation and indemnification
for each person who has at any time prior thereto been an officer or trustee of
NIRT to the same extent as the exculpation and indemnification was provided to
those persons by NIRT immediately prior to the Effective Time in its
Declaration of Trust and Trustee's Regulations. Such exculpation and
indemnification is to cover actions on or prior to the Effective Time including
all transactions contemplated by the Merger Agreement. TRII as the surviving
corporation is not obligated to provide directors and officers liability
insurance except that TRII is to obtain, at its expense, so-called "tail
insurance" providing for the extension of the directors and officers liability
insurance maintained by NIRT for a period of six years after the date of the
closing of the Merger Agreement (the "Closing Date") if such insurance is
available at commercially reasonable rates. In the event TRII consolidates or
merges with any other entity and is not the continuing or surviving entity in
such consolidation or merger or transfers substantially all of its properties
or assets to any other entity, then in each case the successors and assigns of
TRII must assume the obligations of this portion of the Merger Agreement.
After the Effective Time, the Directors and officers of TRII will continue to
have available to them the indemnification provisions of the Articles of
Incorporation and Bylaws of TRII. See "Comparison of Certain Rights of
Stockholders of TRII and Shareholders of NIRT-Management Liability."

Board of Directors; Management

Pursuant to the Merger Agreement, TRII has agreed to increase the size
of the TRII Board at the Effective Time of the Merger in order to add five out
of the seven NIRT independent Trustees to the TRII Board (the "Director
Designees") and the TRII Board will appoint each of the Director Designees to
the TRII Board as of the Effective Time. As of the date hereof, the TRII Board
is composed of four directors and the NIRT Board is composed of eight Trustees;
William S. Friedman is a director of TRII and a Trustee of NIRT. The executive
officers of TRII and NIRT are the same and there is not expected to be any
change in the executive officers of the Surviving Corporation following the
Merger.

For more complete information concerning the interests of executives
and directors and/or trustees in the Merger, shareholders should review the
information set forth under "The Merger-Interests of Certain Persons in the
Merger."

4
<PAGE> 13
Appraisal Rights

The Merger Agreement provides that in accordance with Section 92A.390
of the Nevada Revised Statutes ("NRS"), no appraisal rights will be available
to holders of TRII Common Stock in connection with the Merger. Holders of
Shares of NIRT will not be entitled to any dissenter's or appraisal rights
under Sections 1300 and 1301 of the California Corporation Code as a result of
the matters to be voted upon at the NIRT Special Meeting.

ACQUISITION OF THE ADVISOR

Assuming the approval and implementation of the Merger, at the same
time as the filing of Articles of Merger with the Secretary of State of Nevada,
TRII will acquire all of the issued and outstanding shares of common stock of
its contractual advisor, Tarragon. All of the issued and outstanding common
stock of Tarragon is owned by William S. and Lucy N. Friedman. At the time of
execution of the Merger Agreement, TRII also entered into a Stock Purchase
Agreement dated the same date (the "Advisor Acquisition Agreement") among TRII,
Tarragon and William S. Friedman and Lucy Friedman. Pursuant to the Advisor
Acquisition Agreement, TRII will acquire all of the issued and outstanding
shares of common stock of Tarragon from Mr. and Mrs. Friedman in exchange for
the issuance to Mr. and Mrs. Friedman of an aggregate of 100,000 shares of TRII
Common Stock and options to purchase 350,000 shares of TRII Common Stock
pursuant to Stock Option Agreements covering shares for a period of ten years
at varying exercise prices ranging from $13 per share to $16 per share.
Assuming the approval and implementation of the Merger, at the time of
consummation of the Advisor Acquisition Agreement, Tarragon will become a
wholly owned subsidiary of TRII and TRII will assume indebtedness of up to
$1,000,000 of Tarragon. See "Acquisition of the Advisor."

Under the terms of the Advisor Acquisition Agreement, William S.
Friedman is also to enter into an employment agreement with Tarragon for a term
of four years at a salary of $300,000 per year with a broad covenant by Mr.
Friedman not to compete with TRII or Tarragon and a right of first refusal in
favor of TRII and Tarragon with regard to any real estate investment
opportunity which might come to Mr. Friedman's attention. Under the Employment
Agreement, Mr. Friedman is to work substantially full time for TRII and TRII
is to grant to Mr. Friedman options to purchase 650,000 shares of TRII Common
Stock for a term of ten years at varying exercise prices ranging from $12 per
share to $18 per share. If for any reason the Merger Agreement is not
consummated, the Advisor Acquisition Agreement will also not be consummated.
See "Acquisition of the Advisor."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Incorporation Procedure will constitute a reorganization within
the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended (the "Code") and upon consummation of the Incorporation Procedure, the
California Corporation will be treated as the same taxpayer as NIRT for federal
income tax purposes. The Merger is intended to qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code. Assuming the Merger so qualifies as a reorganization within the meaning
of Section 368(a) of the Code, in general, no gain or loss will be recognized
by holders of NIRT Shares with respect thereto on the surrender of their NIRT
Shares in exchange for TRII Common Stock, except with respect to cash received
in lieu of fractional shares, and no gain or loss will be recognized by TRII or
NIRT or the California Corporation. Under the Merger Agreement, it is a
condition precedent to the respective obligations of TRII and the California
Corporation to consummate the Merger that each of TRII and the California
Corporation (as the immediate successor to NIRT) will have received an opinion
of its respective counsel dated the date of the closing of the Merger to the
effect that the Incorporation Procedure and Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that each
of NIRT, TRII and the California Corporation will be party to the
reorganization within the meaning of Section 368(b) of the Code. The
operations of TRII and NIRT will be combined for purposes of determining
whether TRII, after giving effect to the Merger, qualifies as a real estate
investment trust for the tax year in which the Merger is consummated. For a
further discussion of the federal income tax consequences of the Merger, see
"Certain Federal Income Tax Consequences of the Merger." Each NIRT Shareholder
and each holder of TRII Common Stock should consult his own selection of
personal tax advisor concerning the applicability to, and affect upon him of
federal income tax laws and the applicability to and affect upon him of any
state, local or foreign tax laws and their administration.

5
<PAGE> 14
CERTAIN EFFECTS OF THE MERGER ON THE RIGHTS OF HOLDERS OF NIRT SHARES

Upon consummation of the Merger, holders of Shares of NIRT will become
stockholders of TRII. The internal affairs of TRII are governed by the NRS,
TRII's Articles of Incorporation (the "TRII Articles") and Bylaws (the "TRII
Bylaws"). The Merger will result in certain differences in the rights of
holders of NIRT Shares. See "Description of TRII Capital Stock" and
"Comparison of Certain Rights of Stockholders of TRII and Shareholders of
NIRT."

COMPARATIVE MARKET PRICES

The TRII Common Stock is listed on the NASDAQ SmallCap Market under
the symbol "VIPT." The NIRT Shares are listed on the NASDAQ National Market
under the symbol "NIRTS." The following table sets forth, for the periods
indicated, the high and low bid quotations of the NIRT Shares and the TRII
Common Stock (including its predecessors) as reported by the NASDAQ system for
the periods indicated, which consist of the last three full fiscal years and
the quarters ending in the current year. Over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commissions,
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
TRII Common Stock (a) NIRT Shares (b)
----------------------------- ------------------------------
Quarter High Low High Low
--------------------------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1995
First Quarter $ 5 $ 4 3/8 $ 8 7/8 $ 8 3/4
Second Quarter 5 5/8 5 8 7/8 8 5/8
Third Quarter 5 5/8 5 8 7/8 7 1/4
Fourth Quarter 5 5/8 5 9 1/8 8 7/8

1996
First Quarter $ 6 1/2 $ 5 $ 11 $ 9 1/8
Second Quarter 6 1/2 5 11 5/8 11
Third Quarter 7 7/8 5 11 5/8 11 1/8
Fourth Quarter 7 1/2 7 11 1/4 10 7/8

1997
First Quarter $ 7 $ 7 $ 13 7/8 $ 11 1/8
Second Quarter 9 8 14 1/2 13 7/8
Third Quarter 10 3/4 9 15 5/8 14 1/8
Fourth Quarter 10 10 17 15 1/4

1998
First Quarter $ 10 3/8 $ 9 1/2 $ 18 $ 15 3/4
Second Quarter 10 3/8 10 21 7/8 18
Third Quarter 13 3/4 10 1/4 27 5/8 21
(through September 4, 1998)
</TABLE>

- ----------

(a) Retroactive effect has been given to the merger effective July 25,
1997 which resulted in the conversion of Vinland Property Trust ("VPT") into
TRII and a December 1995 reverse share split on the basis of one-for-five
shares of VPT.

(b) Retroactive effect has been given to 10% share distributions in
September 1995, September 1996 and September 1997.

On September 4, 1998, the closing bid price of the NIRT Shares on the
NASDAQ National Market was $24 1/2 per share and such NIRT Shares were held by
approximately 6,100 holders of record and by approximately 10,100 beneficial
owners including those shares held in street name.

On September 4, 1998, the closing bid price of the TRII Common Stock on
the NASDAQ SmallCap Market was $12 per share and such shares were held by
approximately 3,000 holders of record and approximately 4,500 beneficial owners
including those shares held in street name.

6
<PAGE> 15
Each holder is urged to obtain current quotations for the market
prices of TRII Common Stock and NIRT Shares.

No assurance can be given as to the market prices of TRII Common Stock
or NIRT Shares at the Effective Time. Because the Exchange Ratio is fixed in
the Merger Agreement and neither TRII nor NIRT has the right to terminate the
Merger Agreement based on changes in the market price of TRII's Common Stock,
the market value of the shares of TRII Common Stock that holders of NIRT Shares
will receive upon consummation of the Merger may vary significantly from the
market value of the shares of TRII Common Stock that holders of NIRT Shares
would receive if the Merger were consummated on the date of this Joint Proxy
Statement/Prospectus. Following the consummation of the Merger, TRII's Common
Stock will continue to be traded on the NASDAQ SmallCap Market. Following the
consummation of the Merger, NIRT's shares will be de-listed from the NASDAQ
National Market.

SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA

The following table presents selected historical financial data of
TRII and NIRT and selected unaudited pro forma combined financial data after
giving effect to the Merger. TRII and NIRT selected historical data for each
of the five years in the period ended December 31, 1997 have been derived from
audited financial statements filed with the Commission and the selected
historical data for the three months ended March 31, 1998 have been derived
from unaudited financial statements. The pro forma combined financial data are
presented for illustrative purposes only and are not necessarily indicative of
the financial position or operating results that would have occurred had the
Merger occurred at certain prior dates by combining those results or that will
occur upon the consummation of the Merger. The pro forma combined financial
data do not give effect to any cost savings which may result from the
integration of TRII's and NIRT's operations. Additionally, the pro forma
combined financial data do not include any transaction costs relating to the
Merger, nor do they consider any reorganization costs that might occur as a
result of the Merger nor do they consider the acquisition of the contractual
advisor. Differences in accounting policies do not have a material effect on
either the pro forma financial position or pro forma results of operations and
have not been reflected in the unaudited pro forma combined financial data.
The following selected financial data should be read in conjunction with the
related historical financial statements and notes thereto incorporated by
reference and the pro forma financial information included herein. See
"Available Information," "Incorporation of Certain Documents by Reference" and
"Unaudited Pro Forma Financial Information." The fiscal years in 1993 through
1996 for TRII were December through November. All other fiscal years for TRII
and NIRT for which data is presented below were January through December.

7
<PAGE> 16
<TABLE>
<CAPTION>
For the
Three
Months
Ended As of Year-End or
Mar. 31 For The Twelve Month Period Ended In
--------- ------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
(unaudited) (dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
TRII HISTORICAL
Operating Revenues .................. $ 2,464 $ 9,711 $ 9,464 $ 8,437 $ 6,846 $ 6,042
Net Income (loss) ................... $ 252 $ 296 $ 853 $ 27 $ (429) $ (607)
Net Income (loss) per share -
basic and diluted ................ $ 0.19 $ 0.22 $ 0.63 $ 0.02 $ (0.31) $ (0.51)
Total Assets ........................ $ 37,271 $ 37,477 $ 28,757 $ 36,978 $ 22,738 $ 23,478
Notes, debentures and interest
payable .......................... $ 26,316 $ 26,416 $ 17,516 $ 26,491 $ 12,442 $ 13,058
Stockholders' Equity ................ $ 9,687 $ 9,770 $ 9,869 $ 9,256 $ 9,229 $ 8,932
Book Value per share ................ $ 7.54 $ 7.41 $ 7.34 $ 6.65 $ 6.63 $ 7.42
Cash Dividends per share ............ $ 0.10 $ -- $ -- $ -- $ -- $ 1.25

NIRT HISTORICAL
Operating Revenues .................. $ 14,256 $ 52,017 $ 49,962 $ 45,240 $ 40,135 $ 36,357
Net Income (loss) ................... $ (131) $ 5,592 $ 4,937 $ 708 $ (254) $ 5,820
Net Income (loss) per share -
basic ............................ $ (0.03) $ 1.46 $ 1.21 $ 0.17 $ (0.06) $ 1.30
Net income (loss) per share -
diluted .......................... $ (0.03) $ 1.44 $ 1.21 $ 0.17 $ (0.06) $ 1.30
Total Assets ........................ $ 270,023 $ 265,640 $ 211,341 $ 222,038 $ 217,040 $ 199,486
Notes, debentures and interest
payable .......................... $ 189,938 $ 184,126 $ 134,270 $ 144,497 $ 138,316 $ 114,351
Shareholders' Equity ................ $ 69,910 $ 71,091 $ 69,063 $ 69,627 $ 73,360 $ 78,174
Book Value per share ................ $ 18.33 $ 18.65 $ 19.60 $ 20.53 $ 22.81 $ 22.94
Cash Distributions per share ........ $ 0.20 $ 0.74 $ 0.69 $ 0.62 $ 0.47 $ 0.14

PRO FORMA COMBINED
(UNAUDITED)
Operating revenues .................. $ 16,720 $ 61,728
Income from continuing
operations ....................... $ 353 $ 5,707
Income from continuing
operations per share .............. $ 0.04 $ 0.65
Total Assets ........................ $ 311,410 $ 303,117
Notes, debentures and interest
payable .......................... $ 216,254 $ 210,542
Stockholders' Equity ................ $ 83,713 $ 80,861
Book Value per share ................ $ 9.51 $ 9.14
</TABLE>

8
<PAGE> 17
RISK FACTORS

THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED BY ALL SHAREHOLDERS
TOGETHER WITH THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN
THIS JOINT PROXY STATEMENT/PROSPECTUS IN EVALUATING WHETHER TO ADOPT THE MERGER
AGREEMENT AND APPROVE THE MERGER. SEE "AVAILABLE INFORMATION."

NO OPERATING HISTORY AS A COMBINED ENTITY; NO ASSURANCE OF INTEGRATION OF
BUSINESSES

Prior to consummation of the Merger, TRII and NIRT have each been
operated as separate, independent entities. While TRII and NIRT are engaged in
similar businesses, and each is currently advised by Tarragon, there can be no
assurance that management of TRII, after giving effect to the Merger, will be
able to integrate the two businesses to obtain economies of scale or be able to
oversee and implement the business strategy of the combined entity. The
combined financial statements and other financial data presented in this Joint
Proxy Statement/Prospectus have been obtained by combining the financial data
of TRII and NIRT and are not necessarily indicative of what the historical
financial performance of TRII would have been, or what the future financial
performance of TRII will be, after the Merger or as a combined entity.

LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION

The historical financial information of TRII in this Joint Proxy
Statement/Prospectus relates to periods when the predecessor of TRII operated
on a different fiscal year than a year ended December 31. Additionally,
although TRII and NIRT have the same contractual Advisor, by virtue of the
financial condition of TRII and its predecessor, TRII and its predecessor may
not have been able to take advantage of certain investment opportunities which
the combined entity may have been able to. Accordingly, the historical
financial statements may have limited historical relevance and are not
necessarily indicative of what the actual results of operations of the combined
entity would have been or what the future results of operations of the combined
entity would be. See "Unaudited Pro Forma Financial Information."

MARKET FOR SURVIVING CORPORATION COMMON STOCK

After giving effect to the Merger, TRII will consist of its prior
operations and the operations of NIRT. There is no historical basis for
predicting the prices at which the TRII Common Stock will trade or how actively
it will be traded in the future. The prices at which the TRII Common Stock
trades in the future will be determined by the market place and may be
influenced by many factors including, among others, TRII's performance and
prospects, liquidity, investor perception of TRII in the real estate industry,
and TRII's dividend policy, general financial and other market conditions, and
the United States economic conditions generally.

PRO FORMA DILUTION COMPARED WITH TRII EARNINGS AND BOOK EQUITY VALUE

On a pro forma basis, without taking into account any cost savings or
revenue benefits which might result from the Merger, TRII, as the surviving
corporation, would have had income from continuing operations per share of
approximately $0.65 for its fiscal year ended in 1997 compared with NIRT's
earnings per share of $1.46 in the year ended December 31, 1997 and TRII would
have had income from continuing operations per share of $0.04 in the first
three months of its 1998 fiscal year, compared with NIRT's earnings per share
of $(0.03) in the three months ended March 31, 1998. Also, the pro forma book
value per share of TRII at the end of its 1997 fiscal year would have been
$9.14, compared with NIRT's 1997 fiscal year-end book value per share of
$18.65. See "Unaudited Pro Forma Financial Information." Whether the Merger
will in fact be accretive or dilutive to current holders of TRII Common Stock
and the NIRT Shareholders with respect to earnings per share will depend on the
actual results achieved by TRII in the future as compared to results which
might have been achieved by NIRT on a stand-alone basis.

FIXED EXCHANGE RATIO DESPITE POSSIBLE CHANGE IN RELATIVE MARKET PRICES

The Exchange Ratio is a fixed ratio and will not be adjusted in the
event of any increase or decrease in the price of either TRII Common Stock or
NIRT Shares. The Exchange Ratio was based on a number of factors and was not
directly related to the market value of the TRII Common Stock or the NIRT
Shares. See "The Merger-Reasons for the Merger; Recommendations of the Boards.
The price of TRII Common Stock at the Effective Time may be higher or lower
than its price at the date of this Joint Proxy Statement/Prospectus or at the
date of the Special Meetings. Such variations may be the result of changes in
the business, operations or prospects of TRII or NIRT, market assessments of
the likelihood that the

9
<PAGE> 18
Merger will be consummated and the timing hereof, regulatory considerations,
general market and economic conditions or other factors. Because the Effective
Time will occur on a date later than the Special Meetings, there can be no
assurance that the price of TRII Common Stock on the date of the Special
Meetings will be indicative of its price at the Effective Time. The Effective
Time will occur as soon as practicable following the Special Meetings and the
satisfaction or waiver (where permissible) of the other conditions set forth in
the Merger Agreement. Stockholders of TRII and Shareholders of NIRT are urged
to obtain current market quotations for TRII Common Stock and NIRT Shares.

CONCENTRATION OF OWNERSHIP AND VOTING POWER

Immediately after the consummation of the Merger, the principal
stockholders and management will own approximately 35% of TRII Common Stock.
Included in that amount is 2,853,410 shares of TRII Common Stock to be owned by
Lucy N. Friedman and William S. Friedman (President and Chief Executive
Officer) and their family, representing approximately 34.4% of the voting power
of the TRII Common Stock. Accordingly, William S. Friedman and his family may
elect a number of the members of the Board of Directors of TRII and will
continue to have substantial influence over its management operations and
affairs as they have had in the past.

INTERESTS OF CERTAIN PERSONS

In considering the proposed Merger, Shareholders should be aware that
certain of TRII's and NIRT's executive officers have interests that may present
them with conflicts of interest in connection with the Merger. The Articles of
Incorporation of TRII permit it to engage in a larger class of transactions
with related parties than is permitted by the existing Declaration of Trust of
NIRT. Pursuant to the proposed Merger, the Articles of Incorporation of TRII
will be the Articles of Incorporation of the surviving entity, which may, among
other things, have the effect of making it more difficult for Shareholders to
remove incumbent management. The Articles of Incorporation of TRII also limit
the liability of directors to a greater degree than the NIRT Declaration of
Trust.

SHARES AVAILABLE FOR FUTURE SALE

Upon consummation of the Merger, there will be approximately 8,832,907
outstanding shares of Common Stock of TRII. All of the shares of TRII Common
Stock held by the former NIRT Shareholders (estimated to be 7,460,727 shares)
and the current TRII Shareholders (1,272,180 shares as of September 4, 1998)
will be freely transferable, except that shares held by persons who are deemed
to be affiliates of TRII and/or NIRT prior to the Merger will be deemed
"restricted shares" and may be resold only in transactions permitted by Rules
144 and/or 145 under the Securities Act or otherwise permitted under the
Securities Act. Depending upon market conditions and other factors, sales of a
substantial number of shares of TRII Common Stock or the perception that such
sales could occur, could adversely affect prevailing market prices of the TRII
Common Stock.

DEPENDENCE ON KEY PERSONNEL

The success of TRII after the Merger depends to a significant degree
on the efforts of the TRII senior management, especially its Chief Executive
Officer and other officers. TRII's operations may be adversely affected if one
or more members of its senior management cease to be active in TRII.

POTENTIAL CHANGES IN DISTRIBUTIONS TO NIRT SHAREHOLDERS

The effect of the Merger on distributions to NIRT Shareholders will
depend upon the extent to which TRII is ultimately able to realize cash flow
from its investments, the amount (if any) of economic and operating
efficiencies resulting from the Merger and the general or local economic
conditions of the real estate markets in which TRII then owns the properties.
If the Merger achieves the desired results, shareholders could, over time,
receive a greater return on their investment than under the present historical
NIRT distributions. However, the success of the Merger is dependent, in part,
on factors beyond management's control and there can be no assurance that the
Merger will achieve the desired result. Shareholders should recognize that a
combination of expected increased costs to renovate and improve properties,
additional operating expenses for operating TRII for a potentially longer
period of time and the potentially slower rate of sales of NIRT assets may
reduce the amount of cash available in the short term for distribution to
shareholders. The minimum amount of distributions will continue to be
determined by the amount required to qualify for taxation as a real estate
investment trust under the Code, which requires distribution of at least 95% of
TRII's taxable income (excluding any net capital gain).

10
<PAGE> 19
EFFECT OF CERTAIN SUPER MAJORITY VOTING PROVISIONS OF TRII

Shareholders should note that affiliates of Tarragon will effectively
have veto power over a limited number of corporate actions requiring the vote
of stockholders under the super-majority provisions (i.e., provisions requiring
more than a simple majority vote) presently contained in the Articles of
Incorporation of TRII.

ELIMINATION OF LIMITATION ON OPERATING EXPENSES

Under certain provisions of the NIRT Declaration of Trust, Operating
Expenses of the Trust for any fiscal year must not exceed the lesser of (a)
1.5% of the average of the Book Values of Invested Assets (as defined in the
Declaration of Trust) of NIRT at the end of each calendar month of such fiscal
year, or (b) the greater of 1.5% of the average of the Net Asset Value (as
defined in the NIRT Declaration of Trust) of NIRT at the end of each calendar
month of such fiscal year or 25% of NIRT's Taxable Income (as defined in the
NIRT Declaration of Trust). The NIRT Declaration of Trust also provides that
any advisory agreement must specifically provide for a refund to NIRT of the
amount, if any, by which the operating expenses exceed the applicable amount,
provided that the maximum amount of such refund shall not exceed the amount of
the advisory fees paid to the advisor with respect to such fiscal year. In
accordance with such provisions, the current Advisory Agreement with Tarragon
specifically provides for a refund to NIRT of the amount by which the Operating
Expenses of NIRT for any fiscal year exceed the limitations set forth in the
aforementioned provisions of the NIRT Declaration of Trust "or any similar
limitation (if contained) in a successor Declaration of Trust or Articles of
Incorporation . . ." Although the Articles of Incorporation of TRII place no
such limit on TRII's operating expenses, the aforementioned limitation on
operating expenses, assuming shareholders approve the Merger, could continue to
be included contractually in any advisory agreement of TRII, but assuming
approval of the Merger and the acquisition by TRII of Tarragon, TRII will
terminate the Advisory Agreement and such concept will be inapplicable. The
NIRT Declaration of Trust provides that any contract with an advisor must
provide for annual renewal or extension after an initial term of no more than
two years, subject to approval by the shareholders of NIRT. The Articles of
Incorporation of TRII contain no such requirement. The various fees payable to
Tarragon under the Advisory Agreement and the means by which such fees are
calculated are discussed under "The Advisor."

CERTAIN ANTI-TAKEOVER EFFECTS

Shareholders should recognize that certain provisions contained in the
Articles of Incorporation could have the effect of rendering more difficult or
discouraging a future attempt to acquire control of TRII by a merger, tender
offer, proxy contest, or removal of incumbent management without the approval
of the Board of Directors, even if certain stockholders of TRII might desire
such a change in control in the future and even if such change in control might
be deemed beneficial to stockholders generally. As a result, stockholders
might be deprived of an opportunity to receive a premium for their shares over
prevailing market prices and the Merger, therefore, might be viewed as limiting
NIRT's shareholder rights. The safeguards against acquisition of TRII include:
(i) the requirement of an 80% vote to make, adopt, alter, amend, change or
repeal (a) TRII's Bylaws or (b) certain key provisions of TRII's Articles of
Incorporation that embody, among other things, the aforementioned
acquisition-related safeguards, (ii) the requirement of a two-thirds
super-majority vote for (a) the removal of a director from the Board of
Directors and (b) certain extraordinary corporate transactions, and (iii) the
inability generally of stockholders to call a meeting of stockholders. These
acquisition-related safeguards and the collective beneficial ownership of
approximately 35% of TRII shares (after giving effect to the Merger) by members
of the Board of Directors and executive officers and entities with which they
are affiliated, could help entrench the Board of Directors and may effectively
give TRII management the power to block certain extraordinary corporate
transactions.

AUTHORIZATION TO ISSUE SPECIAL STOCK

The Articles of Incorporation of TRII authorize the issuance of up to
10,000,000 shares of special stock by action of the Board of Directors without
stockholder approval, which special stock may be issued in one or more series
with such preferences, limitations and rights as shall be determined by the
Board of Directors of TRII. Although no special stock has been issued or is
being designated as a part of the Merger, and the Board of Directors has no
present intention of issuing any special stock, such stock could be issued as a
safeguard against the acquisition of TRII to dilute the stock ownership and
voting power of a person or entity seeking to acquire control of TRII by (i)
privately placing such special stock with purchasers not hostile to the TRII
Board of Directors to oppose an unsolicited takeover bid or (ii) authorizing
holders of a series of special stock to vote as a class, either separately or
with holders of the TRII Common Stock, on any merger, sale or exchange of
assets or any other extraordinary corporate transaction involving TRII.

11
<PAGE> 20
Following the Merger, TRII's more flexible articles of incorporation
will govern related party transactions, although certain limitations on such
transactions could continue to the extent that TRII as the surviving
corporation of the Merger becomes subject to the settlement agreement entered
into in connection with the Olive litigation.

MARKET COMPETITION

The real estate business is highly competitive and TRII competes, and
will continue after the Merger to compete, with numerous entities engaged in
real estate activities which are larger, have greater financial resources and
are better known than TRII. Other entities with which TRII competes and will
compete may have investment objectives similar to those of TRII and may compete
with TRII in acquiring, leasing, selling and financing real estate. Assuming
the approval of the Merger and the acquisition by TRII of Tarragon, Tarragon
will not serve as a contractual advisor to any entity other than TRII.

CERTAIN RISK FACTORS ASSOCIATED WITH REAL ESTATE

TRII is, and after the Merger will be, subject to all the risks
incident to ownership of real estate and interests therein, many of which
relate to the general illiquidity of real estate investments. These risks
include, but are not limited to: (i) changes in general or local economic
conditions; (ii) changes in interest rates and availability of permanent
mortgage financing that may render the sale or refinancing and the acquisition
of a property difficult or unattractive and that may make debt service more
burdensome; (iii) changes in real estate and zoning laws; (iv) increases in
real estate taxes; (v) federal or local economic or rent controls, and (vi)
floods, earthquakes and other similar acts. The illiquidity of real estate
investments generally may impair the ability of TRII to respond promptly to
changing circumstances. TRII's management believes that such risks are
partially mitigated by the diversification by geographical region and property
type of TRII's real estate portfolio. TRII has acquired properties subject to
or assumed existing debt and has mortgaged, pledged or otherwise obtained
financing for its properties. Such borrowings increase TRII's risk of loss
because they represent a prior claim on TRII's assets and require fixed
payments regardless of profitability. If TRII defaults on secured
indebtedness, the lender may foreclose and TRII could lose its investment in
the property. In the opinion of TRII's management, the real property owned by
TRII and NIRT is adequately covered by insurance; however, certain types of
losses (generally of a catastrophic nature) may be uninsurable or not
economically insurable. Such excluded risks generally include war,
earthquakes, floods, environmental liabilities and punitive damage judgments.
If such losses occur and are not covered by insurance, TRII might suffer a loss
of capital invested in, and any profits that might be anticipated from, the
property.

POTENTIAL INCREASE IN OPERATING EXPENSES

The current Advisory Agreements for NIRT and TRII provide for fees
based in part on successful investment and management of assets. To the extent
overhead assumed by TRII upon the acquisition of Tarragon, including salaries,
rent and other general and administrative expenses, exceeds the advisory fees
that would have been paid under the current arrangement, TRII's operating
expenses may be higher after the Merger. In addition, operating expenses may
increase due to the elimination of the limitation on operating expenses
presently contained in NIRT's Declaration of Trust as described above.

12
<PAGE> 21
TRANSACTIONS WITH RELATED PARTIES

TRII has engaged, and may continue to engage, in transactions with
certain related parties, as discussed more fully below under "Certain
Relationships and Related Transactions -- TRII." TRII's Articles of
Incorporation generally permit related party transactions if approved by a
majority of the independent directors, whereas the existing NIRT Declaration of
Trust absolutely prohibits certain transactions between NIRT and certain
related parties, regardless of the fairness of the terms of such transactions
and whether such transactions are authorized by a majority of unaffiliated
Trustees or approved by the Shareholders. TRII's more flexible articles of
incorporation will govern related party transactions, although certain
limitations on such transactions could continue to the extent that TRII, as the
surviving corporation of the Merger, becomes subject to the settlement
agreement entered into in connection with the Olive case. The Board of
Directors of TRII believes that the restrictions in TRII's Articles of
Incorporation and those under Chapter 78 of the Nevada Revised Statutes offer
adequate protection to ensure the fairness and propriety of transactions
between TRII and related parties.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following tables set forth certain condensed financial information
for TRII and NIRT on an unaudited pro forma combined basis giving effect to the
Merger as if the Merger had become effective (i) as of March 31, 1998 in the
case of the balance sheet information presented and (ii) as of January 1, 1998
and 1997 in the case of the income statement information presented. These
tables should be read in conjunction with and are qualified in their entirety
by the historical financial statements, including the notes thereto, of TRII
and its predecessor and NIRT incorporated by reference herein. See
"Incorporation of Certain Documents by Reference." The pro forma financial
information set forth in the following tables does not reflect merger expenses
and/or any restructuring charges anticipated to be incurred by TRII, as the
case may be, or any expected cost savings and revenue enhancement opportunities
that could result from the Merger. The unaudited pro forma combined financial
information is presented for informational purposes only and is not necessarily
indicative of the combined financial position or the results of operations that
would have occurred if the Merger had been consummated on January 1, 1997,
January 1, 1998, or March 31, 1998 or which may be achieved in the future.

13
<PAGE> 22
TARRAGON REALTY INVESTORS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1998
(unaudited)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------- -------------------------------------------------------
COMBINING ADJ-ACQ MERGER/ACQ
ASSETS TRII NIRT ADJUSTMENTS COMBINED OF TARRAGON OF TARRAGON
--------- --------- ----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate held for sale (net of
accumulated depreciation) ................ $ 4,319 $ 5,129 $ 535(a) $ 9,983 $ 9,983

Less - allowance for estimated losses ....... (241) (1,194) 241(a) (1,194) (1,194)
--------- --------- --------- --------- --------- ---------
4,078 3,935 776 8,789 8,789

Real estate held for investment (net
of accumulated depreciation) ............. 27,777 230,528 3,340(a) 261,645 261,645
Investments in and advances
to partnerships .......................... 2,796 19,941 22,737 22,737
Cash and cash equivalents ................... 272 1,421 1,693 104(b) 1,797
Restricted cash ............................. 607 4,958 5,565 5,565
Other assets, net ........................... 1,741 9,240 10,981 2,984(b) 13,965
--------- --------- --------- --------- --------- ---------
$ 37,271 $ 270,023 $ 4,116 $ 311,410 $ 3,088 $ 314,498
========= ========= ========= ========= ========= =========

Liabilities and Shareholders' Equity

Liabilities
Notes, debentures and interest payable ...... $ 26,316 $ 189,938 $ 216,254 $ 1,000(b) $ 217,254
Other liabilities ........................... 1,268 10,175 11,443 36(b) 11,479
--------- --------- --------- --------- ---------
27,584 200,113 227,697 1,036 228,733
Commitments and contingencies ...............

Shareholders' Equity
NIRT shares of beneficial interest, no
par value, unlimited shares
authorized 3,814,670 shares
outstanding .............................. -- 11,453 (11,453)(a) --

NIRT paid-in capital ........................ -- 281,670 (281,670) --
NIRT accumulated distributions in
excess of accumulated earnings ........... -- (223,196) (223,196) (223,196)
TRII Common stock, $0.01 par value
20,000,000 shares authorized,
1,284,897 shares issued and
outstanding .............................. 13 -- 75(a) 88 1(b) 89
TRII Paid-in capital ........................ 45,361 -- 261,477(a) 306,838 2,051(b) 308,889
TRII Accumulated distributions in
excess of accumulated earnings .......... (35,687) -- 35,687(a) --
Accumulated other
Comprehensive income .................... -- (17) (17) (17)
--------- --------- --------- --------- --------- -------
9,687 69,910 4,116 83,713 2,052 85,765
--------- --------- --------- --------- --------- ---------
$ 37,271 $ 270,023 $ 4,116 $ 311,410 $ 3,088 $ 314,498
========= ========= ========= ========= ========= =========

</TABLE>

See Notes to Pro Forma Financial Information

<PAGE> 23
TARRAGON REALTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1998
(unaudited)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------------------------------------
COMBINING ADJ-ACQ MERGER/ACQ
TRII NIRT ADJUSTMENTS COMBINED OF TARRAGON OF TARRAGON
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rentals ............................ $ 2,482 $ 13,861 $ 16,343 16,343
Interest ........................... 14 215 229 229
Equity in income (loss)
of partnerships ................. (32) 180 148 148
Other income ....................... 172(b) 172
----------- ----------- ----------- ----------- ----------- -----------
2,464 14,256 16,720 172 16,892

Expenses
Property operations ................ 1,441 7,406 8,847 (611)(c) 8,236
Interest ........................... 616 3,732 4,348 19 (d) 4,367
Depreciation and
amortization .................... 218 2,100 30(a) 2,348 68 (e) 2,416
Advisory fee to affiliate .......... 53 432 485 (485)(f)
General and administrative ......... 148 572 720 1,292 (g) 2,012
----------- ----------- ----------- ----------- ----------- -----------
2,476 14,242 30 16,748 283 17,031
----------- ----------- ----------- ----------- ----------- -----------

Income (loss) before gain on sale
of investments and extraordinary
loss ............................... (12) 14 (30) (28) (111) (139)
Gain on sale of investments ........... 264 117 381 381
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations ......................... $ 252 $ 131 $ (30) $ 353 $ (111) $ 242
=========== =========== =========== =========== =========== ===========

Earnings per share - basic and
diluted-Income (loss) from
continuing operations .............. $ 0.19 $ 0.03 $ (0.18) $ 0.04 $ (0.01) $ 0.03

Weighted average shares ............... 1,304,430 3,820,556 3,640,171 8,765,157 100,000 8,865,157

Weighted average shares -
assuming dilution .................. 1,319,206 3,876,723 3,584,004 8,779,933 100,000 8,879,933
</TABLE>

See Notes to Pro Forma Financial Information

15
<PAGE> 24
TARRAGON REALTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(unaudited)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -------------------------------------------------------------
COMBINING ADJ-ACQ MERGER/ACQ
TRII NIRT ADJUSTMENTS COMBINED OF TARRAGON OF TARRAGON
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rentals ........................... $ 9,525 $ 50,745 $ 60,270 $ 60,270
Interest .......................... 147 629 776 776
Equity in income (loss)
of partnerships ................ 39 643 682 682
Other income ...................... 344(b) 344
----------- ----------- ----------- ----------- ----------- -----------
9,711 52,017 61,728 344 62,072

Expenses
Property operations ............... 5,747 28,596 34,343 (1,954)(c) 32,389
Interest .......................... 2,135 12,602 14,737 77(d) 14,814
Depreciation and amortization ..... 816 7,022 120(a) 7,958 273(e) 8,231
Advisory fee to affiliate ......... 232 1,438 1,670 (1,670)(f)
General and administrative ........ 485 2,091 2,576 4,220(g) 6,796
----------- ----------- ----------- ----------- ----------- -----------
9,415 51,749 120 61,284 946 62,230
----------- ----------- ----------- ----------- ----------- -----------

Income (loss) before gain on sale
of real estate and investments
and extraordinary items ........... 296 268 (120) 444 (602) (158)
Gain on sale of real estate .......... 4,350 4,350 4,350
Gain on sale of investments .......... 913 913 913
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations ........................ $ 296 $ 5,531 $ (120) $ 5,707 $ (602) $ 5,105
=========== =========== =========== =========== =========== ===========

Earnings per share
Income (loss) from continuing
operations ........................ $ 0.22 $ 1.44 $ (1.01) $ 0.65 $ (0.08) $ 0.57

Weighted average shares .............. 1,331,314 3,832,535 3,628,192 8,792,041 100,000 8,892,041

Earnings per share-assuming
dilution-Income (loss) from
continuing operations ............. $ 0.22 $ 1.43 $ (1.00) $ 0.65 $ (0.08) $ 0.57
Weighted average shares -
assuming dilution ................. 1,343,583 3,871,248 3,589,479 8,804,310 100,000 8,904,310
</TABLE>

See Notes to Pro Forma Financial Information.

16
<PAGE> 25
NOTE 1 BASIS OF PRESENTATION. On June 5, 1998, TRII and NIRT executed the
Merger Agreement. The Merger will be accounted for as a reverse acquisition of
TRII by NIRT using the purchase method of accounting. Each share of beneficial
interest of NIRT will be converted into 1.97 shares of TRII Common Stock.

On June 5, 1998, TRII, the Advisor, William S. Friedman and Lucy N. Friedman
executed the Stock Purchase Agreement pursuant to which TRII will acquire the
Advisor for 100,000 shares of its common stock, options to purchase 150,000
shares for ten years at an exercise price of $13 per share, options to purchase
100,000 shares for ten years at an exercise price of $15 per share, options to
purchase 100,000 shares for ten years at an exercise price of $16 per share,
and the assumption of indebtedness of $1,000,000. The acquisition of the
Advisor will be accounted for using the purchase method of accounting.

NOTE 2 PRO FORMA ADJUSTMENTS - AS OF MARCH 31, 1998. The accompanying
unaudited pro forma consolidated balance sheet as of March 31, 1998 has been
prepared as if the Merger and the acquisition of the Advisor had occurred on
March 31, 1998 and reflects the following adjustments:

(a) Merger Pro Forma Adjustment
To allocate the purchase price to the assets of TRII based on relative
fair values. The purchase price is determined as follows (dollars in
thousands):

<TABLE>
<S> <C>
Estimated fair value (at $21.375 per share) of
645,777 shares of beneficial interest of NIRT
issued at the exchange ratio of 1.97 shares of
TRII Common Stock for each share of beneficial
interest of NIRT. $13,803
</TABLE>

Although the purchase price is determined as if NIRT shares are issued
in exchange for TRII shares because the Merger will be accounted for as a
reverse acquisition, there will actually be 7,362,227 shares of TRII Common
Stock issued in exchange for 3,737,171 shares of beneficial interest of NIRT
outstanding.

The preliminary allocation of the purchase price included in the
unaudited pro forma consolidated balance sheet is summarized as follows
(dollars in thousands):

<TABLE>
<S> <C>
Real estate held for sale $ 4,854
Real estate held for investment 31,117
Investments in and advances to partnerships 2,796
Cash and cash equivalents 272
Restricted cash 607
Other assets 1,741
Notes, debentures, and interest payable (26,316)
Other liabilities (1,268)
-------
$13,803
=======
</TABLE>
(b) Acquisition of Advisor Pro Forma Adjustment
To allocate the purchase price to the assets of the Advisor based on
relative fair values. The purchase price is determined as follows
(dollars in thousands):

<TABLE>
<S> <C>
Fair value (at $10.50 per share) of 100,000 shares of TRII Common Stock $ 1,050
Estimated fair value of stock options 1,002
Debt assumed 1,000
Other liabilities assumed 36
-------
$ 3,088
=======
</TABLE>

The preliminary allocation of the purchase price included in the
unaudited pro forma consolidated balance sheet is summarized as
follows (dollars in thousands):

<TABLE>
<S> <C>
Cash and cash equivalents $ 104
Accounts receivable, prepaid expenses and other assets 254
Goodwill 2,730
-------
$ 3,088
=======
</TABLE>

17
<PAGE> 26
NOTE 3 PRO FORMA ADJUSTMENTS-THREE MONTHS ENDED MARCH 31, 1998. The
accompanying unaudited pro forma consolidated statement of operations for the
three months ended March 31, 1998 has been prepared as if the Merger and the
acquisition of the Advisor had occurred on January 1, 1998 and reflects the
following adjustments:

(a) Merger Pro Forma Adjustment
To record the estimated adjustment to depreciation expense
attributable to the allocation of the purchase price using the
straight-line method and the remaining depreciable lives of TRII's
properties, which range from 28 to 39 years.

(b) Acquisition of Advisor Pro Forma Adjustment
To record management fee and acquisition fee income from
unconsolidated partnerships.

(c) Acquisition of Advisor Pro Forma Adjustment
To reduce management fee expense by the amount paid to the Advisor and
its affiliates.

(d) Acquisition of Advisor Pro Forma Adjustment
To record interest expense associated with the $1,000,000 debt
assumed.

(e) Acquisition of Advisor Pro Forma Adjustment
To record the estimated adjustment to amortization expense
attributable to the portion of the purchase price allocated to
goodwill using a life of ten years.

(f) Acquisition of Advisor Pro Forma Adjustment
To eliminate advisory fees paid to the Advisor.

(g) Acquisition of Advisor Pro forma Adjustment
To record the additional general and administrative expenses,
including salaries and other overhead, borne by the Advisor.

NOTE 4 PRO FORMA ADJUSTMENTS - YEAR ENDED DECEMBER 31, 1997. The
accompanying unaudited pro forma consolidated statement of operations for the
year ended December 31, 1997 has been prepared as if the Merger and the
acquisition of the Advisor had occurred on January 1, 1997 and reflects the
following adjustments:

(a) Merger Pro forma Adjustment
To record the estimated adjustment to depreciation expense
attributable to the allocation of the purchase price using the
straight-line method and the remaining depreciable lives of TRII's
properties, which range from 28 to 39 years.

(b) Acquisition of Advisor Pro Forma Adjustment
To record management fee and acquisition fee income from
unconsolidated partnerships.

(c) Acquisition of Advisor Pro Forma Adjustment
To reduce management fee expense by the amount paid to the Advisor and
its affiliates.

(d) Acquisition of Advisor Pro Forma Adjustment
To record interest expense associated with the $1,000,000 debt
assumed.

(f) Acquisition of Advisor Pro Forma Adjustment
To eliminate advisory fees paid to the Advisor.

(g) Acquisition of Advisor Pro Forma Adjustment
To record the additional general and administrative expenses,
including salaries and other overhead, borne by the Advisor.

18
<PAGE> 27
SELECTED FINANCIAL DATA OF TRII

The following table summarizes selected historical consolidated
financial information of TRII (and its predecessor VPT) for the last five years
ended November 30, 1996 and the one-month period ended December 31, 1996 and
the year ended December 31, 1997 and the three- month periods ended March 31,
1998 and February 28, 1997. TRII, by operation of law, succeeded to all the
rights and properties, and became subject to all the obligations and
liabilities, of VPT. Thus, for accounting purposes, the assets, liabilities
and stockholder's equity of TRII are accounted for, on a carry-over basis, as
the continuing entity which is the successor to VPT. The historical
consolidated financial information is not necessarily indicative of TRII's
future results of operations or financial condition. The information set forth
below should be read in conjunction with the TRII Consolidated Financial
Statements and notes thereto appearing under "Index to Financial Statements."
Dollar amounts are in thousands, except per share amounts.

<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR FOR THE MONTH
MONTHS ENDED ENDED DEC 31, ENDED DEC 31,
--------------------------- ------------- -------------
MAR. 31 FEB. 28
----------- -----------
1998 1997 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING DATA
Income ......................................... $ 2,464 $ 2,173 $ 9,711 $ 697
Expenses ....................................... 2,476 2,224 9,415 716
----------- ----------- ----------- -----------
Income (loss) before net gain on sale
of real estate, gain on sale of
investments, and extraordinary
gain ........................................... (12) (51) 296 (19)
Net gain on sale of real estate ................ -- -- -- --
Gain on sale of investments .................... 264 -- -- --
----------- ----------- ----------- -----------
Income (loss) from continuing
operations .................................... 252 (51) 296 (19)
Extraordinary Gain ............................. -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) .............................. $ 252 $ (51) $ 296 $ (19)
=========== =========== =========== ===========
PER SHARE DATA(1)
Earnings per share - basic and diluted
Income (loss) from continuing
operations .................................... $ 0.19 $ (0.04) $ 0.22 $ (0.01)
Extraordinary gain ............................. -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) .............................. $ 0.19 $ (0.04) $ 0.22 $ (0.01)
=========== =========== =========== ===========

Weighted average shares(2) ..................... 1,304,430 1,343,867 1,331,314 1,344,576

Weighted average shares assuming dilution(3) ... 1,319,206 1,351,149 1,343,583 1,350,122

Cash dividends(4) .............................. $ 0.10 $ -- $ -- $ --

FOR THE FISCAL YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1996 1995 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING DATA
Income ......................................... $ 9,464 $ 8,437 $ 6,846 $ 6,042
Expenses ....................................... 9,537 8,410 7,275 6,649
----------- ----------- ----------- -----------
Income (loss) before net gain on sale
of real estate, gain on sale of
investments, and extraordinary
gain ........................................... (73) 27 (429) (607)
Net gain on sale of real estate ................ 673 -- -- --
Gain on sale of investments .................... -- -- -- --
----------- ----------- ----------- -----------
Income (loss) from continuing
operations .................................... 600 27 (429) (607)
Extraordinary Gain ............................. 253 -- -- --
----------- ----------- ----------- -----------
Net income (loss) .............................. $ 853 $ 27 $ (429) $ (607)
=========== =========== =========== ===========
PER SHARE DATA(1)
Earnings per share - basic and diluted
Income (loss) from continuing
operations .................................... $ 0.44 $ 0.02 $ (0.31) $ (0.51)
Extraordinary gain ............................. 0.19 -- -- --
----------- ----------- ----------- -----------
Net income (loss) .............................. $ 0.63 $ 0.02 $ (0.31) $ (0.51)
=========== =========== =========== ===========

Weighted average shares(2) ..................... 1,354,415 1,392,006 1,368,527 1,193,572

Weighted average shares assuming dilution(3) ... 1,356,520 1,392,006 1,368,527 1,193,572

Cash dividends(4) .............................. $ -- $ -- $ -- $ 1.25
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 30,
MAR. 31 DEC. 31 -------------------------------------------
BALANCE SHEET DATA 1998 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Real estate ............................... $31,855 $31,873 $22,248 $31,686 $20,362 $20,438
Total assets .............................. 37,271 37,477 28,757 36,978 22,738 23,478
Notes, debentures, and interest payable ... 26,316 26,416 17,516 26,491 12,442 13,058
Stockholders' equity ...................... 9,687 9,770 9,869 9,256 9,229 8,932
Book value per share(1) ................... $ 7.54 $ 7.41 $ 7.34 $ 6.65 $ 6.63 $ 7.42
</TABLE>

- ----------

(1) All share and per share data for the year ended November 30, 1995 and
earlier periods and as of November 30, 1995, 1994, and 1993 have been
restated to give effect to the one-for-five reverse split effected
December 1, 1995.
(2) Represents the weighted average shares of common stock used in the
computation of earnings per share.
(3) Represents the weighted average shares of common stock used in the
computation of earnings per share - assuming dilution.
(4) The 1997 dividend was declared subsequent to the end of the Company's
1997 tax year and, therefore, had no tax effect to stockholders in
fiscal 1997. The 1993 dividend was taxable to stockholders.

19
<PAGE> 28

<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR FOR THE MONTH
MONTHS ENDED ENDED DEC 31, ENDED DEC 31, FOR THE FISCAL YEAR ENDED NOVEMBER 30,
------------------- ------------- ------------- ---------------------------------------
MAR. 31 FEB. 28
------- -------
1998 1997 1997 1996 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Cash flows provided by (used in):
Operating activities ............. $ 260 $ (24) $ 696 $ (20) $ 1,366 $ 811 $ 575 $ (384)
Investing activities ............. (775) (606) (5,022) 549 (979) (807) (333) (1,107)
Financing activities ............. (224) (206) 2,175 (51) (550) 2,634 (167) 1,499

Calculation of funds from
operations (unaudited) (5)

Net income (loss) ................ $ 252 $ (51) $ 296 $ (19) $ 853 $ 27 $ (429) $ (607)
Extraordinary gain ............... -- -- -- -- (253) -- -- --
Net gain on sale of real estate .. -- -- -- -- (673) -- -- --
Gain on sale of investments ...... (264) -- -- -- -- -- -- --
Depreciation and amortization of
real estate assets ............... 227 270 908 83 914 991 898 841
Depreciation and amortization
of real estate assets of
partnerships .................. 62 62 16 10 108 -- -- --
------- ------- ------- ------- ------- ------- ------- -------

FUNDS FROM OPERATIONS(2) ............. $ 277 $ 281 $ 1,220 $ 74 $ 949 $ 1,018 $ 469 $ 234
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

- ----------

(5) Funds from operations ("FFO"), as defined by the National Association
of Real Estate Investment Trusts, ("NAREIT") equals net income (loss),
computed in accordance with generally accepted accounting principles
("GAAP"), excluding gains (or losses) from debt restructuring and sales
of property, plus depreciation and amortization of real estate assets,
and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint
ventures are calculated to reflect FFO on the same basis. The
amortization of deferred financing costs is not added back to net
income (loss) in TRII's calculation. This treatment is consistent with
TRII and its predecessor's historical calculation of FFO. TRII believes
that FFO is useful to investors as a measure of the performance of an
equity REIT because, along with cash flows from operating activities,
investing activities, and financing activities, it provides investors
an understanding of the ability of TRII to incur and service debt and
to make capital expenditures. TRII believes that in order to facilitate
a clear understanding of operating results, FFO should be examined in
conjunction with net income (loss) as presented in the financial
statements. FFO does not represent cash generated from operating
activities in accordance with GAAP and therefore should not be
considered an alternative to net income as an indication of operating
performance or to cash flow as a measure of liquidity and is not
necessarily indicative of cash available to fund cash needs and
dividends. Management's calculation of FFO may differ from the
methodology for calculating FFO utilized by other REITs and,
accordingly, may not be comparable to such REITs. Effective December 1,
1996 TRII modified its calculation of FFO to include the add back of
amortization of leasing commissions associated with its commercial
properties. TRII believes that this treatment is consistent with a
majority of other REITs. If TRII had calculated FFO in the same manner
for each of the years ended November 30, 1996, 1995, 1994 and 1993, FFO
would have been higher by $46,000, $95,000, $31,000 and $28,000,
respectively. Net income for the fiscal year ended November 30, 1995
included a provision for losses credit of $190,000. See NOTE 3:
"ALLOWANCE FOR ESTIMATED LOSSES AND PROVISIONS FOR LOSSES" in the Notes
to TRII's Consolidated Financial Statements as of and for the year
ended December 31, 1997, for a description of the provision for losses.

20
<PAGE> 29
SELECTED FINANCIAL DATA OF NIRT

The following table summarizes selected historical consolidated financial
information of NIRT for the last five years ended December 31, 1997 and the
three-month periods ended March 31, 1998 and 1997. The historical consolidated
financial information is not necessarily indicative of NIRT's future results of
operations or financial condition. The information set forth below should be
read in conjunction with the NIRT Consolidated Financial Statements and notes
thereto appearing under "Index to Financial Statements." Dollar amounts are in
thousands, except per share amounts.

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
---------------------------- -------------------------------
1998 1997 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING DATA
Income .......................... $ 14,256 $ 12,180 $ 52,017 $ 49,962
Expenses ........................ 14,242 11,839 51,749 49,176
----------- ----------- ----------- -----------
Income (loss) before gains on
sales of real estate and
investments and insurance
settlement and extraordinary
gain (loss) ................... 14 341 268 786
Gain on sale of real estate ..... -- -- 4,350 3,700
Gain on sale of investments ..... 117 -- 913 --
Gain on insurance settlement .... -- -- -- 451
----------- ----------- ----------- -----------
Income (loss) from continuing
operations .................... 131 341 5,531 4,937
Extraordinary gain (loss) ....... (262) -- 61 --
----------- ----------- ----------- -----------
Net income (loss) ............... $ (131) $ 341 $ 5,592 $ 4,937
=========== =========== =========== ===========

PER SHARE DATA(1)
Earnings Per Share
Income (loss) from continuing
operations .................... $ 0.03 $ 0.09 $ 1.44 $ 1.21
Extraordinary gain (loss) ....... (0.06) -- 0.02 --
----------- ----------- ----------- -----------
Net income (loss) ............... $ (0.03) $ 0.09 $ 1.46 $ 1.21
=========== =========== =========== ===========

Weighted average shares(2) ...... 3,820,556 3,868,328 3,832,535 4,070,183

Earnings per Share -
Assuming Dilution
Income (loss) from continuing
operations .................. $ 0.03 $ 0.09 $ 1.43 $ 1.21
Extraordinary gain (loss) ...... (0.06) -- 0.01 --
----------- ----------- ----------- -----------
Net income (loss) .............. $ 0.03) $ 0.09 $ 1.44 $ 1.21
=========== =========== =========== ===========

Weighted average shares -
assuming dilution(3) .......... 3,876,723 3,906,728 3,871,248 4,088,382

Distributions(4) ................ $ 0.20 $ 0.18 $ 0.74 $ 0.69

<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
----------- ----------- -----------

<S> <C> <C> <C>
OPERATING DATA
Income .......................... $ 45,240 $ 40,135 $ 36,357
Expenses ........................ 46,214 40,915 40,370
----------- ----------- -----------
Income (loss) before gains on
sales of real estate and
investments and insurance
settlement and extraordinary
gain (loss) ................... (974) (780) (4,013)
Gain on sale of real estate ..... 533 385 945
Gain on sale of investments ..... 412 141 --
Gain on insurance settlement .... -- -- --
----------- ----------- -----------
Income (loss) from continuing
operations .................... (29) (254) (3,068)
Extraordinary gain (loss) ....... 737 -- 8,888
----------- ----------- -----------
Net income (loss) ............... $ 708 $ (254) $ 5,820
=========== =========== ===========

PER SHARE DATA(1)
Earnings Per Share
Income (loss) from continuing
operations .................... $ (0.01) $ (0.06) $ (0.69)
Extraordinary gain (loss) ....... 0.18 -- 1.99
----------- ----------- -----------
Net income (loss) ............... $ 0.17 $ (0.06) $ 1.30
=========== =========== ===========

Weighted average shares(2) ...... 4,101,453 4,262,073 4,469,426

Earnings per Share -
Assuming Dilution
Income (loss) from continuing
operations .................. $ (0.01) $ (0.06) $ (0.69)
Extraordinary gain (loss) ...... .18 -- 1.99
----------- ----------- -----------
Net income (loss) .............. $ .17 $ (0.06) $ 1.30
=========== =========== ===========

Weighted average shares -
assuming dilution(3) .......... 4,101,961 4,262,073 4,469,426

Distributions(4) ................ $ 0.62 $ 0.47 $ 0.14

</TABLE>

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------------------------------------------------------
BALANCE SHEET DATA 1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Real estate .............................. $234,463 $233,936 $193,722 $195,675 $184,658 $168,013
Notes and interest receivable(5) ......... -- -- -- 6,388 9,997 12,909
Investments in partnerships .............. 19,941 13,839 4,739 10,780 11,026 11,804
Total assets ............................. 270,023 265,640 211,341 222,038 217,040 199,486
Notes, debentures and interest payable ... 189,938 184,126 134,270 144,497 138,316 114,351
Shareholders' equity ..................... 69,910 71,091 69,063 69,627 73,360 78,174
Book value per share ..................... $ 18.33 $ 18.65 $ 19.60 $ 20.53 $ 22.81 $ 22.94
</TABLE>

- ----------
(1) Share and per share data have been restated to give effect to 10% share
distributions paid in September 1997, September 1996, September 1995
and September 1994.
(2) Represents the weighted average shares of beneficial interest used in
the computation of earnings per share.
(3) Represents the weighted average shares of beneficial interest used in
the computation of earnings per share-assuming dilution.
(4) Distributions in 1996, 1995 and 1994 represented return of capital.
1997 and 1993 distributions were taxable to shareholders as ordinary
income.
(5) Notes and interest receivable at December 31, 1997 and 1996 are
classified with other assets.

21
<PAGE> 30

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Cash flows provided by (used in):
Operating activities ............... $ 914 $ (603) $ 3,261 $ 3,795 $ 2,030 $ 1,852 $ 3,620
Investing activities ................ (8,455) (6,328) (43,813) (436) (5,436) (1,409) 1,272
Financing activities ................ 4,700 7,761 40,952 (1,171) 1,596 1,981 (5,582)

Calculation of funds from operations
(unaudited):(5)
Net income (loss) ................... $ (131) $ 341 $ 5,592 $ 4,937 $ 708 $ (254) $ 5,820
Extraordinary (gain) loss .......... 262 -- (61) -- (737) -- (8,888)
Gain on insurance settlement(6) ..... -- -- -- (451) -- -- --
Gain on sale of real estate ......... -- -- (4,350) (3,700) (533) (385) (945)
Gain on sale of investments ......... -- -- (215) -- -- -- --
Depreciation and amortization of real
estate assets ...................... 2,159 1,544 7,225 5,374 5,959 4,992 4,639
Depreciation and amortization of
real estate assets of partnerships 158 86 356 305 882 1,086 918
Distributions from partnerships in
excess of the Trust's investments
in the partnerships .............. -- -- (41) (899) -- -- --
-------- -------- -------- -------- -------- -------- --------

FUNDS FROM OPERATIONS ................... $ 2,448 $ 1,971 $ 8,506 $ 5,566 $ 6,279 $ 5,439 $ 1,544
======== ======== ======== ======== ======== ======== ========
</TABLE>

(5) FFO, as defined by NAREIT, equals net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization
of real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect FFO in the
same manner. The amortization of deferred financing costs is not added
to net income (loss) in the Trust's calculation of FFO, which is
consistent with the Trust's historical calculation of FFO. NIRT
generally considers FFO to be an appropriate measure of the performance
of an equity REIT. NIRT believes that FFO is useful to investors as a
measure of the performance of an equity REIT because, along with cash
flows from operating activities, investing activities and financing
activities, it provides investors an understanding of the ability of
NIRT to incur and service debt and to make capital expenditures. NIRT
believes that in order to facilitate a clear understanding of its
operating results, FFO should be examined in conjunction with net
income (loss) as presented in the financial statements included
elsewhere in this report. FFO does not represent cash generated from
operating activities in accordance with GAAP and therefore should not
be considered an alternative to net income as an indication of NIRT's
operating performance or to cash flow as a measure of liquidity and is
not necessarily indicative of cash available to fund cash needs and
cash distributions. NIRT's calculation of FFO may differ from the
methodology for calculating FFO utilized by other REITs and,
accordingly, may not be comparable to such other REITs. Effective
January 1, 1997, NIRT modified its calculation of FFO to include the
add-back of amortization of leasing commissions associated with its
commercial properties. NIRT believes that this treatment is consistent
with a majority of other REITs. If NIRT had calculated FFO in the same
manner for each of the years ended December 31, 1996, 1995, 1994 and
1993, FFO would have been higher by $262,000, $272,000, $235,000 and
$244,000, respectively. Included in FFO for the years ended December
31, 1997, 1995 and 1994, are gains totaling $698,000, $412,000 and
$141,000, respectively, resulting from NIRT's sale of investments in
marketable equity securities. Included in FFO for the three months
ended March 31, 1998, are gains totaling $117,000 resulting from the
sale of investments in marketable equity securities. Included in FFO
for the years ended December 31, 1993 and 1996 are provisions for
losses of $1.4 million and $300,000, respectively. Included in FFO for
the year ended December 31, 1995 is a provision for losses credit of
$425,000. See NOTE 2. "ALLOWANCE FOR ESTIMATED LOSSES AND PROVISIONS
FOR LOSSES" in the Notes to Consolidated Financial Statements as of and
for the year ended December 31, 1997, for descriptions of the 1996 and
1995 provisions for losses. The 1993 provision for losses was recorded
to provide allowances for estimated losses against one property held
for sale and one mortgage note receivable.

(6) The gain on insurance settlement represents the Trust's share of the
gain realized by Indcon, L.P., in which the Trust held a 40% interest
until November 1997. One of Indcon's warehouses was destroyed by fire
in September 1995. An insurance settlement totaling $2.2 million was
reached by the partnership in March 1996. As the partnership did not
rebuild the property, upon receipt of the insurance proceeds the
property was written off. This resulted in a gain of $1.1 million, of
which the Trust's share was $451,000.

22
<PAGE> 31
THE SPECIAL MEETINGS

GENERAL

TRII

This Joint Proxy Statement/Prospectus is being furnished to holders of
TRII Common Stock in connection with the solicitation of proxies by the TRII
Board for use at the TRII Special Meeting, to be held on October 20, 1998 and
any adjournments or postponements thereof to consider and vote upon the
approval and adoption of the Merger Agreement and approval of the transactions
contemplated thereby, including the issuance of shares of TRII Common Stock
pursuant to the Merger Agreement, and to transact such other business as may
properly come before the TRII Special Meeting or any adjournments thereof.
TRII does not currently intend to seek an adjournment of the TRII Special
Meeting.

THE TRII BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS
(WILLIAM S. FRIEDMAN ABSTAINING) THAT THE HOLDERS OF TRII COMMON STOCK VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF SHARES OF TRII
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.

NIRT

This Joint Proxy Statement/Prospectus is also being furnished to
holders of NIRT Shares in connection with the solicitation of proxies by the
NIRT Board for use at the NIRT Special Meeting, to be held on October 20,
1998 and any adjournments or postponements thereof to consider and vote upon
the approval of a proposal to incorporate NIRT as a California corporation
through the "Incorporation Procedure," the approval and adoption of the Merger
Agreement and approval of the transactions contemplated thereby (including any
amendments to NIRT's Declaration of Trust necessary to allow NIRT to consummate
the Merger) and to transact such other business as may properly come before the
NIRT Special Meeting or any adjournments thereof. NIRT does not currently
intend to seek an adjournment of the NIRT Special Meeting.

THE NIRT BOARD HAS UNANIMOUSLY APPROVED THE INCORPORATION PROCEDURE AND THE
MERGER AGREEMENT AND RECOMMENDS (WILLIAM S. FRIEDMAN ABSTAINING) THAT NIRT
SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE INCORPORATION PROCEDURE AND
MERGER AGREEMENT AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY
(INCLUDING THE APPROVAL OF ANY AMENDMENTS TO NIRT'S DECLARATION OF TRUST DEEMED
NECESSARY TO CONSUMMATE THE MERGER).

This Joint Proxy Statement/Prospectus is furnished to NIRT
shareholders as a prospectus in connection with the issuance by TRII of shares
of TRII Common Stock in connection with the Merger.

Each copy of this Joint Proxy Statement/Prospectus mailed to holders
of TRII Common Stock is accompanied by a form of proxy for use at the TRII
Special Meeting and each copy of this Joint Proxy Statement/Prospectus mailed
to holders of NIRT Shares is accompanied by a form of proxy for use at the NIRT
Special Meeting.

DATE, PLACE AND TIME

The TRII Special Meeting will be held at 280 Park Avenue, East
Building, 20th Floor, New York, New York on October 20, 1998 at 2:00 p.m.
local New York City time.

The NIRT Special Meeting will be held at 280 Park Avenue, East
Building, 20th Floor, New York, New York on October 20, 1998 at 1:00 p.m.
local New York City time.

RECORD DATES

TRII

The TRII Board has fixed the close of business on September 4, 1998 as
the TRII Record Date for the determination of holders of TRII Common Stock
entitled to receive notice of and to vote at the TRII Special Meeting and at
any adjournments or postponements thereof.

23
<PAGE> 32
NIRT

The NIRT Board has fixed the close of business on August 21, 1998 as
the NIRT Record Date for the determination of holders of NIRT Shares entitled to
receive notice of and to vote at the NIRT Special Meeting and at any
adjournments or postponements thereof. VOTES REQUIRED FOR APPROVAL

TRII

As of September 4, 1998, there were 1,272,180 shares of TRII Common
Stock issued and outstanding. Each share of TRII Common Stock outstanding on
the TRII Record Date is entitled to one vote upon each matter properly submitted
at the TRII Special Meeting. The affirmative vote of a majority of votes cast
at the TRII Special Meeting is necessary for the approval and adoption of the
Merger Agreement and approval of the transactions contemplated thereby,
including the issuance of the shares of TRII Common Stock pursuant to the Merger
Agreement.

The presence by person or by proxy at the TRII Special Meeting of the
holders entitled to vote a majority of the outstanding shares of TRII Common
Stock is necessary to constitute a quorum for the transaction of business.
Abstentions will be counted as present for the purposes of determining whether a
quorum is present. Any abstention or broker non-vote will have the same effect
as a negative vote. Brokers who hold shares in street name for customers will
not have the authority to vote on the Merger unless they receive specific
instructions from beneficial owners.

As of September 4, 1998, directors and executive officers of TRII and
their affiliates beneficially owned an aggregate of 395,303 shares of TRII
Common Stock (including shares which may be acquired within 60 days upon
exercise of stock options) or approximately 31% of the shares of TRII Common
Stock outstanding on such date. The directors and executive officers of TRII
have indicated their intention to vote all their shares of TRII Common Stock in
favor of approval and adoption of the Merger Agreement and approval of the
transactions contemplated thereby, including the issuance of shares of TRII
Common Stock pursuant to the Merger Agreement. As of August 21, 1998, the
Trustees and executive officers of NIRT (other than William S. Friedman) owned
an additional 16,749 shares of TRII Common Stock. See "The Merger-Interests of
Certain Persons in the Merger."

NIRT

As of August 21, 1998, there were 3,737,171 NIRT Shares issued and
outstanding. Each holder is entitled to one vote for each NIRT Share held on
the NIRT Record Date upon each matter properly submitted at the NIRT Special
Meeting. Section 3.5 of the NIRT Declaration of Trust provides that upon a vote
of two-thirds of the Trustees with the approval of the holders of a majority of
the NIRT Shares, the Trustees shall have the power to cause conversion of NIRT
to a corporation. Pursuant to the Modification of the Stipulation of Settlement
entered into in the Olive case, a merger with an affiliated party must be
approved by a unanimous vote of the Trustees of NIRT. Section 200.5 of the
California General Corporation Law requires an affirmative vote of the holders
of a majority of the outstanding NIRT shares to approve the Incorporation
Procedure, which will also be deemed to be an approval of the Merger Agreement
and transactions contemplated thereby. Section 8.3 of the NIRT Declaration of
Trust provides that the Declaration of Trust may be amended by the vote of a
majority of the outstanding NIRT Shares entitled to vote thereon, and a vote in
favor will also be deemed to be an approval of any necessary amendments to the
NIRT Declaration of Trust to consummate the Merger.

Section 6.7 of the NIRT Declaration of Trust provides that the presence
in person or by proxy of the holders of NIRT Shares entitled to vote a majority
of the outstanding NIRT Shares is necessary to constitute a quorum for the
transaction of business at such meeting. Abstentions will be counted as present
for the purposes of determining whether a quorum is present. Any abstention
will have the same effect as a negative vote. Broker non-votes, if any, will
not be included in the vote totals and as such, will have no effect on any
proposal. Brokers who hold shares in street name for customers will not have
the authority to vote on the Incorporation Procedure and Merger unless they
receive specific instructions from beneficial owners.

As of September 4, 1998, Trustees and executive officers of NIRT and
their affiliates beneficially owned an aggregate of 1,312,879 NIRT Shares
(including NIRT Shares which may be acquired within 60 days upon the exercise of
stock options) or approximately 35.1% of the NIRT Shares outstanding on such
date. The Trustees and executive officers of NIRT have indicated their
intention to vote all their NIRT Shares in favor of approval and adoption of the
Incorporation Procedure and Merger Agreement and approval of the transactions
contemplated thereby. As of September 4, 1998, directors and executive officers
of TRII (other than William S. Friedman) owned an additional 2,288 NIRT Shares.
See "The Merger-Interests of Certain Persons in the Merger."

24
<PAGE> 33
VOTING AND REVOCATION OF PROXIES

NIRT Shares and shares of TRII Common Stock represented by proxy
properly signed and received at or prior to the appropriate Special Meeting,
unless subsequently revoked, will be voted in accordance with the instructions
thereon. IF A PROXY IS SIGNED AND RETURNED WITHOUT INDICATING ANY VOTING
INSTRUCTIONS, SHARES OF TRII COMMON STOCK REPRESENTED BY THE PROXY WILL BE
VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND TO APPROVE
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF SHARES OF TRII
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT AND NIRT SHARES REPRESENTED BY
THE PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE INCORPORATION
PROCEDURE AND THE MERGER AGREEMENT AND TO APPROVE THE TRANSACTIONS CONTEMPLATED
THEREBY. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the proxy is voted by filing a duly
executed revocation or a duly executed proxy bearing a later date with American
Stock Transfer and Trust Company, 40 Wall Street, 46th floor, New York, New
York 10005, for holders of TRII Common Stock or for holders of NIRT Shares,
prior to or at the appropriate Special Meeting or, with respect to a proxy
given by a shareholder of TRII, by voting in person at the TRII Special
Meeting, although attendance at the TRII Special Meeting will not in and of
itself constitute a revocation of a proxy.

The TRII Board and the NIRT Board are not currently aware of any
business to be acted upon at their respective Special Meeting, of their
respective share owners, other than as described herein. If, however, other
matters are properly brought before either Special Meeting, or any adjournments
or postponements thereof, the persons appointed as proxies will have discretion
to vote or act thereon according to their best judgment. Such adjournment may
be for the purpose of soliciting additional proxies. Shares represented by
proxies voting against, in the case of TRII, approval and adoption of the
Merger Agreement and approval of the transactions contemplated thereby,
including issuance of shares of TRII Common Stock pursuant to the Merger
Agreement and, in the case of NIRT, approval and adoption of the Incorporation
Procedure and the Merger Agreement and the transactions contemplated thereby
(including any necessary amendments to NIRT's Declaration of Trust), will be
voted against a proposal to adjourn the respective Special Meeting for the
purpose of soliciting additional proxies. Neither TRII nor NIRT currently
intends to seek an adjournment of its respective Special Meeting.

Although Section 3.5 of the NIRT Declaration of Trust provides a
procedure for incorporation of NIRT, subpart (p) of Section 5.3 and Section 7.6
of the NIRT Declaration of Trust, when read together, may suggest that TRII
could be an "Affiliate" of Tarragon and that the "Incorporation Procedure" as
coupled with the Merger and acquisition of Tarragon should be viewed as some
type of sale of Real Properties to an Affiliate of Tarragon. In addition,
Section 7.6 of the Declaration of Trust has a general prohibition on certain
transactions with Affiliates, and no exception is provided for a merger with an
Affiliate. In order to address these issues and by virtue of the Modification
in the Olive case, a vote "FOR" the Incorporation Procedure and Merger will
also be deemed a vote FOR the approval of any amendments to subpart (p) of
Section 5.3 and Section 7.6 of NIRT's Declaration of Trust to the extent
necessary to remove any question that such transaction is not a type of sale of
Real Properties to an Affiliate of Tarragon and to remove the prohibitions set
forth therein so that the Merger with TRII is otherwise permissible. Under
Section 8.3 of NIRT's Declaration of Trust such Declaration of Trust may be
amended by the affirmative vote of a majority of the outstanding NIRT Shares
entitled to vote thereon.

Share owners of TRII and NIRT will not be entitled to present any
matter for consideration at either of the Special Meetings.

SOLICITATION OF PROXIES

In addition to solicitation by mail, directors, trustees, officers and
employees of TRII and NIRT, none of whom will be specifically compensated for
such services, may solicit proxies from the stockholders of TRII and
shareholders of NIRT, respectively, personally or by telephone, telecopy or
telegram or other forms of communication. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for the reasonable
expenses incurred in sending proxy materials to beneficial owners.

In addition, TRII and NIRT have retained American Stock Transfer and
Trust Company to assist in the solicitation of proxies from their respective
share owners. The fees to be paid to such firm for such services by each of
TRII and NIRT are not expected to exceed $2,000 plus reasonable out-of-pocket
costs and expenses. TRII and NIRT have not retained any firm to act as
information agent for the Merger. TRII and NIRT will each bear its own
respective expenses in connection with the solicitation of proxies for its
respective Special Meeting, except that NIRT will pay all printing, filing and
mailing costs and expenses incurred in connection with the Registration
Statement and this Joint Proxy Statement/Prospectus.

25
<PAGE> 34
HOLDERS OF NIRT SHARES SHOULD NOT SEND CERTIFICATES
REPRESENTING NIRT SHARES WITH THEIR PROXY CARDS

APPRAISAL RIGHTS

Holders of TRII Common Stock will not be entitled to any dissenter's
or appraisal rights under Section 92A.390 of the NRS in connection with the
Merger. Holders of NIRT Shares will also not be entitled to any dissenter's or
appraisal rights under Sections 1300 and 1301 of the California Corporation
Code as a result of the matters to be voted upon at the NIRT Special Meeting.

THE MERGER

This section of the Joint Proxy Statement/Prospectus describes certain
aspects of the Merger Agreement among TRII and NIRT. To the extent that the
discussion relates to the Merger Agreement, the following description does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, which is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. All shareholders
are urged to read the Merger Agreement in its entirety.

GENERAL

The Merger Agreement provides for a business combination between TRII
and NIRT in which, subject to the satisfaction of the conditions therein, NIRT
will be consolidated with and into TRII and the holders of NIRT Shares will be
issued TRII Common Stock in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a) of the Code for federal
income tax purposes. In the Merger, each outstanding NIRT Share will be
converted into the right to receive, and become exchangeable for, 1.97 shares
of TRII Common Stock (such ratio of 1 for 1.97 is herein called the "Exchange
Ratio"). The terms of the Merger Agreement do not contemplate any increase or
decrease in the Exchange Ratio. Each outstanding share of TRII Common Stock
will remain outstanding and be unaffected by the Merger. As a result of the
Merger, holders of TRII Common Stock immediately prior to Merger will own
approximately 34% of the TRII Common Stock after the Merger (based on the
number of shares of TRII Common Stock and NIRT Shares outstanding as of August
21, 1998 and based on the Exchange Ratio of one share of NIRT to 1.97 shares of
TRII Common Stock).

BACKGROUND OF THE MERGER

The actions of the TRII Board of Directors and the NIRT Board of
Trustees to approve the Merger Agreement was the ultimate outcome of a process
that began during late July 1997, with a review by the TRII Board of Directors
with Duff & Phelps, LLC, in consideration of the medium and longer-term outlook
for REITs in general and TRII specifically, including comparable entities,
historical performance and prospects as well as the means by which TRII could
best be positioned to meet anticipated challenges in the future. TRII's
management presented the view that TRII would need to substantially increase
the scale and scope of its operations in order to reduce the proportion of its
income devoted to overhead and to compete successfully against very large REITs
and private investors that are or will be competing with TRII. TRII's
management believes that TRII's competitiveness would depend on such factors as
ability to continue to improve the quality of its properties through consistent
capital improvements and to the extent surplus funds and attractive investments
were available, to acquire additional multi-family and commercial properties,
primarily in locations where TRII presently operates. TRII management believes
that ownership of the type of properties in which TRII invests is highly
fragmented in the areas of the country where TRII invests among individuals,
partnerships, public and private corporations and other real estate investment
trusts, and that no dominant entities exist for such properties in the markets
in which TRII invests. TRII competes with numerous entities engaged in real
estate activities (including NIRT), many of which have greater financial
resources than TRII. During such review, it became apparent that TRII, with
less than $40 million in book value of real estate located in six different
states, is too small and too diverse to be able to grow internally within an
acceptable time frame. Although TRII has been very successful in the past eight
years in increasing the market price of its Common Stock, the market seems to
be aware of the size challenge of TRII. Following that review, it became
apparent to the TRII Board that a combination with a larger entity with similar
management philosophies and structure would rapidly move TRII to a greater
size, spread combined overhead over a greater number of assets and permit TRII
to become self-managed. It also became apparent that NIRT has a similar
management philosophy and business objectives, has the same management as TRII,
shares an advisor and officers with TRII, and would be ideally situated to be a
Merger partner if self-management is a primary objective.

During the summer of 1997, TRII engaged Duff & Phelps, LLC to review
the possibility of a combination of TRII with NIRT and to ultimately provide an
opinion as to whether a proposed combination of

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TRII and NIRT (and the acquisition of the Advisor by the surviving entity)
would be fair from a financial point of view to the TRII shareholders.
Thereafter, a meeting occurred among members of the TRII Board of Directors on
September 19, 1997, and a letter dated September 26, 1997 was presented to the
NIRT Board proposing discussions of the structure and terms of a transaction in
which TRII, NIRT and the Advisor would combine through a tax-free transaction.
Such letter advised that in the opinion of the TRII Board of Directors, such a
transaction would be more beneficial to the NIRT shareholders as well as the
TRII shareholders than any other combination either entity could do together or
separately. That belief was based on a number of considerations.
Institutional investors and REIT analysts are near unanimous in the belief that
an internally-managed real estate investment trust with full capabilities to
act as a real estate company is the preferred model for a REIT. Without
support from institutional investors and REIT analysts, the share price for
TRII and/or NIRT may not realize full potential. The Advisor has performed
well as evidenced by the industry- leading growth in funds from operations
("FFO"); and, accordingly, TRII should continue the Advisor's services, thereby
avoiding the additional costs and potential risks from attempting to create a
new management team for either entity. TRII's structure as a modern Nevada
corporation offers legal and operational advantages over the older and
cumbersome California business trust structure of NIRT. With a market
capitalization of less than $85 million dollars on its own, NIRT may be too
small to attract substantial institutional interest. TRII with less than $15
million in market capitalization is less likely to attract such capital.
However, together the two entities have a larger market capitalization which
may attract institutional investors. Annual savings are possible in
consolidating the entities. All of TRII's properties are stabilized and
several of its significant assets are unencumbered. A combination of TRII and
NIRT would be financially stronger, have greater liquidity and a higher ratio
of "FFO" to interest expense than NIRT has on its own. TRII shares with NIRT
the goal of minimizing the appearance of conflicts of interest without a change
in current management. Only a combination of NIRT, TRII and the Advisor could
achieve that goal. Were either TRII or NIRT to acquire the Advisor, the
potential for conflicts of interest could be heightened rather than lessened
for the other entity. Therefore, a comprehensive and simultaneous transaction
seems most appropriate to the Boards of each entity. The TRII Board of
Directors also advised NIRT that, with a view toward this proposal, TRII had
retained Duff & Phelps, LLC to advise TRII and to render an opinion as to the
fairness to TRII's stockholders of any transaction which might be agreed upon
and that TRII had discussed the proposal with the Advisor and received its
concurrence and support. TRII also advised the NIRT Board of Trustees that it
was TRII's desire to fashion a transaction cooperatively with the independent
trustees of NIRT that is not only fair to the shareholders of both entities,
but will be received as such by the public and the real estate investment
community.

During October 1997, the NIRT Board of Trustees reviewed the
suggestions of the TRII Board and employed Gilford Securities, Incorporated
("Gilford") to advise NIRT relating to a combination of TRII and NIRT and the
acquisition by the resulting entity of Tarragon and possibly to render a
fairness opinion. Gilford's opinion would relate only to the consideration to
be paid to the NIRT shareholders through the Exchange Ratio and would not
constitute a recommendation to any shareholder as to how the shareholders
should vote. The NIRT Board of Trustees reviewed analyses of net equity ratios
based on market price per share, analyses of book value per share ratios,
analyses of funds from operations and earnings per share, analyses of net asset
value based on estimated market value of properties, combined relative value
ratios, effect on the combination of the ultimate acquisition of Tarragon and
its subsidiary, Tarragon Management, Inc. ("TMI") and the ultimate fairness
from a financial point of view to the NIRT shareholders. The Board of Trustees
also considered the same factors discussed above as having been considered by
the Board of Directors of TRII. Meetings of the combined TRII Board of
Directors and the NIRT Board of Trustees occurred on November 21-22, 1997 in
New York, and again on December 15, 1997 in New York. A number of
conversations occurred among individual NIRT Trustees and the Tarragon
directors during the months of November and December, 1997 and the participants
seemed to be in agreement as to the reasons for the combination and that in
concept, the combination of the entities was desirable. For that reason only
the Exchange Ratio was the subject of significant discussion and negotiation.
During the period from December 1997 through early February 1998, a number of
discussions continued and analyses by the independent trustees of NIRT and the
independent members of the TRII Board of Directors continued as well as
analysis by both financial advisors. On February 18, 1998, the Board of
Directors of TRII met to further review all analysis and the reasons for the
combination from the view of TRII. The TRII Board approved a transaction of a
combination of TRII and NIRT into a single entity utilizing TRII for
convenience as a surviving entity to be submitted to the shareholders of each
entity for approval at special meetings to be held as soon as practicable. The
TRII Board also approved, subject to the consummation of such transaction,
TRII's acquisition of Tarragon for up to 100,000 shares of TRII Common Stock
with a value (on the date ten days following the public announcement of the
intended transaction) not to exceed $1 million and options to acquire
additional shares of TRII Common Stock at prices ranging between $13 and $16
per share, together with the assumption by TRII of present indebtedness of the
Advisor approximating $1 million, all on the bases set forth in a specific
schedule which is summarized under "Acquisition of Advisor." On May 21, 1998,
the TRII Board met again to consider and approve the execution and delivery of
the definitive Merger Agreement and Advisor Acquisition Agreement which set
forth the terms agreed to in February.

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On February 6, 1998, the NIRT Board of Trustees met again to consider
the transaction and, at such meeting, after considering the issues raised, the
terms of the combination and the oral opinion of Gilford to the effect that the
Exchange Ratio is fair to NIRT from a financial point of view, and the other
factors set forth below under "Reasons for the Merger; Recommendations of the
Boards-NIRT," the NIRT Board of Trustees determined by vote of all independent
Trustees voting that the combination transaction and transactions contemplated
thereby are fair to and in the best interests of the NIRT shareholders. On May
21, 1998, the NIRT Board met again to consider and approve the execution and
delivery of the definitive Merger Agreement which sets forth the terms agreed
to in February.

REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS

TRII

The TRII Board has determined the terms of the Merger Agreement and
the transactions contemplated thereby are fair to, and in the best interests of
the holders of TRII Common Stock. In reaching this determination, the TRII
Board of Directors concluded that the combination transaction was likely to
increase the value of each shareholder's investment in TRII over what that
value would have been had TRII not agreed to the combination transaction and
the opportunities created by the combination transaction to increase
shareholder value more than offset the risk inherent in the combination
transaction. In reaching this conclusion, the TRII Board of Directors
considered that the combination transaction would:

(a) create a self-administered REIT with the same
management team responsible for the performance to date continuing to
operate the entity after the consolidation with future prospects for
growth, income and asset values;

(b) create a larger combined enterprise with total assets
with book value in excess of $300,000,000 with complimentary
geographic real estate assets;

(c) permit the realization of administrative and capital
expense efficiencies in connection with the joint development of
TRII's and NIRT's assets in the future to generate cash available for
distribution reflective of the true value of the properties spreading
the combined overhead over a greater number of assets;

(d) create an opportunity for the next several years for
the combined entities' stockholders to achieve a substantial market
premium without disrupting the operation of the properties of either
entity; and

(e) provide for the continued management expertise of
William S. Friedman and the other senior managers of the Advisor
through exclusive arrangements containing noncompetitive
under-takings.

The TRII Board weighed the advantages and opportunities against the
following risks associated with the Merger:

(a) The challenges inherent in the combination of two
business enterprises the size of TRII and NIRT and the possible
resulting diversion of management attention for an extended period of
time (which risk is lessened by the fact of the common management of
both entities);

(b) The possibility that the competitive environment in
the geographic areas where TRII and NIRT compete for business will
worsen due to the entrance of additional competitors, strategic
initiatives by existing competitors or regulatory changes that impose
an economic disadvantage upon the combined entity relative to its
competitors; and

(c) The risk associated with a greater concentration of
assets in real estate and the risk incident to ownership and financing
of that real estate and interests therein, including the general
illiquidity of real estate investments.

In reaching the determination that the terms of the Merger were fair
to and in the best interests of the TRII Stockholders, the TRII Board also
considered a number of additional factors, including its knowledge of TRII's
business and discussions with TRII's management concerning the results of
TRII's due diligence investigation of NIRT, the economic and regulatory
environment for real estate, the strategic, operational and financial
opportunities and risks associated with the Merger and the terms of the Merger
Agreement, the

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<PAGE> 37
historical and current market prices of NIRT Shares and the oral opinion of
TRII's financial advisor, Duff & Phelps, (which opinion was confirmed in
writing on May 21, 1998 and as of the date hereof), to the effect that as of
that date the terms of the Merger including the Exchange Ratio is fair to TRII
and its stockholders from a financial point of view.

The foregoing discussion of the information and factors which were
given weight by the TRII Board is not intended to be exhaustive but is believed
to include all material factors considered by the TRII Board. The TRII Board
did not assign specific weights to the foregoing factors and individual
Directors may have given different weights to different factors. The TRII
Board, however, unanimously approved the Merger Agreement and all of the
independent Directors recommend (Mr. Friedman having abstained from making any
recommendations) to the stockholders that they approve and adopt the Merger
Agreement and approve the transactions contemplated thereby, including the
issuance of shares of TRII Common Stock in the Merger.

ALL OF THE INDEPENDENT DIRECTORS OF TRII RECOMMEND THAT TRII
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF
SHARES OF TRII COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.

NIRT

The NIRT Board has determined that the terms of the Merger Agreement
and the transactions contemplated thereby are fair to, and in the best
interests of, NIRT and its shareholders. In reaching this determination, the
NIRT Board gave significant consideration to a number of factors including,
without limitation, the factors referred to below. In view of the wide variety
of factors bearing on its decision, the NIRT Board did not consider it
practical to, nor did it attempt to, quantify or otherwise assign relative
weight to the factors it considered in reaching its decision. The Board of
Trustees of NIRT received the advice of independent counsel throughout its
consideration of the Merger Agreement.

Such factors considered by the NIRT Board included the following:

(a) Ability to be Self-Administered. In evaluating the
Merger, the NIRT Board considered of primary importance that only by
combining with TRII (which intends to simultaneously acquire Tarragon)
could NIRT become a self-administered REIT with the management team
responsible for NIRT's performance to date continuing to operate the
entity after the consolidation. Although NIRT considered combining
with Tarragon without combining with TRII, this alternative would have
continued the apparent conflicts of interest due to the fact that
Tarragon would continue to serve as, the advisor to TRII. Because the
market is viewed as placing a higher premium on self-administered
REITs, a combination which would allow NIRT to be self- administered
by proven management was viewed extremely positively.

(b) Opportunity for Market Premium. The Board considered
that the Merger and the simultaneous acquisition of Tarragon would
create an opportunity for the shareholders of the combined entity to
achieve a substantial market premium without disrupting the operation
of either entity. The Board also believed that the combined entity
would be able to attract greater attention from the financial markets
that could, over time, increase investor interest in the combined
entity's stock.

(c) Focusing of Management's Attention. The NIRT Board
also considered the advantage of combining NIRT and TRII so that all
of senior management's attention would be focused on one entity which
would continue to be managed by William Friedman through exclusive
arrangements containing non-competitive undertakings and by the other
senior managers of Tarragon.

(d) Opinion of Gilford; Market Premium. The NIRT Board
viewed as favorable to its decision the opinion of Gilford to the
effect that as of May 21, 1998 the Exchange Ratio was fair to holders
of NIRT Shares from a financial point of view. The NIRT Board also
considered the oral and written presentations made to it by Gilford.
A copy of Gilford's written opinion to the NIRT Board dated as of May
21, 1998, is attached as Appendix "D" to this Joint Proxy
Statement/Prospectus.

The NIRT Board reviewed the historical market prices and
recent trading activities of NIRT Shares and TRII Common Stock. The
NIRT Board considered as favorable to its decision that the per share
value consideration to be received by the NIRT shareholders in the
NIRT merger represented a premium of approximately 20% over the
closing sale price of NIRT Shares on February 5, 1998, the day
preceding the date on which the Board approved the Merger.

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(e) Management's View. The NIRT Board considered
management's view that NIRT's best strategic alternative is to combine
with another REIT to create an enterprise with the scale and scope of
operations necessary to compete effectively in the industry. The NIRT
Board considered management's conclusion that such combined company
would have an improved cost structure which would allow it to better
meet competitive challenges in an industry that is likely to
experience further consolidation and substantially increased
competition. In making its determination, the NIRT Board also
considered the view expressed by management that entities with
significant scale and scope will be likely to attract the most
desirable investment and financing opportunities as the real estate
industry continues to evolve. The NIRT Board also considered the
conclusion of management that a significant alignment existed between
the strategic prospective of TRII and NIRT which share the same
management and similar business philosophies including mutual emphasis
on real properties located in six different states.

(f) NIRT's Business, Financial Condition and Prospects.
In evaluating the Merger, the NIRT Board also considered information
with respect to the business, financial condition and results of
operation of NIRT, as well as NIRT's prospects for growth in view of
industry and market conditions. The NIRT Board considered the
constraints on NIRT's ability to raise additional capital to take
advantage of attractive opportunities due to its Trust structure.

(g) TRII's Business, Financial Condition and Prospects.
The NIRT Board considered, among other things, information provided by
management and Gilford with respect to the business, financial
condition and results of operation of TRII. Such consideration
included, among other things, TRII's historically increasing earnings
growth and prospects for continued growth, TRII's relatively strong
borrowing capacity and lower capital costs, the strength and
experience of the senior management team which would remain in place
following the Merger, TRII's interests in real property operations and
the markets in which it competes. The NIRT Board also considered
risks associated with the proposed Merger including, among other
things, the possibility that the Merger will not be consummated,
diversion of management attention from operational matters as a result
of the proposed Merger, the impact of limitations in the Merger
Agreement on NIRT's ability to undertake significant new initiatives
prior to the Effective Time, the effect of rising levels of
competition on NIRT's existing properties and the possibility that
expected operating benefits from the Merger would be more difficult to
achieve than expected.

(h) Alternative Transactions. The NIRT Board considered
strategic alternatives other than a combination with TRII, such as
possible joint ventures or acquisitions, and concurred with
management's view that none of the alternatives considered would offer
as much value to the holders of NIRT Shares as a combination with
TRII. The NIRT Board also determined that, taking into account, among
other things, the Olive case continuation, preliminary inquiries of
other possible combination candidates, the desire to continue the
successful services of the Advisor and other legal considerations,
that it was unlikely that NIRT would be able to negotiate a
combination with another entity on terms as attractive to the proposed
Merger with TRII.

(i) Terms of the Merger Agreement. The NIRT Board
reviewed presentations from, and discussed the terms and conditions of
the Merger Agreement with, management and representatives of its
financial and legal advisors. Among other things, the NIRT Board
considered the fact that the Merger Agreement provides a fixed value
of the consideration to be received by the holders of NIRT Shares and
the potential advantages and disadvantages associated therewith, and
the fact that the Merger Agreement contains no adjustment mechanism
which could result in reduction in the Exchange Ratio based on costs
incurred in connection with any matter. The NIRT Board also gave
consideration to the fact that the Merger would be a tax-free
transaction to the holders of NIRT Shares (except with respect to any
cash received for fractional shares) and the fact that the Merger
Agreement would permit continued payment of dividends to the holders
of NIRT Shares prior to the Effective Time of the Merger. The NIRT
Board also considered the possible effect of interim operating
covenants and restrictions which would apply to the operations of NIRT
and TRII during the period from the signing of the Merger Agreement to
the Effective Time. The NIRT Board also considered and found
reasonable the views of its management and advisors that the various
provisions were not preclusive of any opportunities NIRT might
encounter prior to the Effective Time. The NIRT Board also gave
consideration to the terms of the Merger Agreement relating to the
treatment of NIRT Options and to the fact that the Merger would not
negatively impact the entitlements of certain officers and employees
of NIRT under various arrangements and benefit plans.

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ALL OF THE INDEPENDENT TRUSTEES OF NIRT RECOMMEND THAT NIRT
SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
INCORPORATION PROCEDURE AND THE TRANSACTIONS CONTEMPLATED THEREBY.

OPINIONS OF FINANCIAL ADVISORS

TRII

TRII has retained Duff & Phelps to act as its independent financial
advisor with respect to the Merger. Duff & Phelps delivered its written
opinion to the TRII Board to the effect that as of May 21, 1998 the Exchange
Ratio is fair to TRII and the holders of TRII Common Stock, from a financial
point of view. Duff & Phelps has confirmed its opinion as of the date of this
Joint Proxy Statement/Prospectus with its subsequent written opinion dated as
of the date hereof.

A copy of the full text of the opinion of Duff & Phelps, dated as of
the date of this Joint Proxy Statement/Prospectus, which sets forth the
assumptions made, matters considered, and limitations on the review undertaken
in connection with the opinion, is attached hereto as Appendix C and is
incorporated herein by reference. This summary discussion of the opinion of
Duff & Phelps is qualified in its entirety by reference to the full text of the
opinion. For the purposes of the Duff & Phelps' opinion, the terms
"shareholders" or "stockholders" does not include any person who will become a
stockholder of TRII solely by virtue of the Merger and "TRII" means TRII prior
to giving effect to the Merger. The engagement of Duff & Phelps and its
opinion are for the benefit of the TRII Board and its opinion was rendered to
the TRII Board in connection with its consideration of the Merger. Duff &
Phelps' opinion is directed only to the fairness of the Exchange Ratio from a
financial point of view to TRII and the holders of TRII Common Stock and does
not address any other aspect of the Merger. The opinion is not intended to,
and does not constitute, a recommendation to any holder of TRII Common Stock as
to whether such stockholder should vote for the Merger at the TRII Special
Meeting. HOLDERS OF TRII COMMON STOCK ARE URGED TO READ THE OPINION OF DUFF &
PHELPS' IN ITS ENTIRETY.

Duff & Phelps was authorized to undertake studies to enable it to
render its opinion, regardless of their effect on the outcome of the opinion.
No limitations were imposed by TRII with respect to the scope of the
investigation made or procedures followed by Duff & Phelps in rendering its
opinion. In performing its evaluation and rendering its opinion, Duff & Phelps
relied upon the accuracy and completeness of all information provided to it,
whether obtained from public or private sources, and did not attempt to
independently verify such information. Duff & Phelps also took into account
its assessment of general economic, market and financial conditions as they
existed and could be evaluated as of the date of its opinion, as well as its
experience in similar transactions and securities valuation generally. Duff &
Phelps did not make any independent appraisals of the assets or liabilities of
TRII or NIRT. The analysis was prepared with information available as of the
date of the opinion. In general, historical financial information was analyzed
for the periods ending no later than March 31, 1998.

Duff & Phelps presented its preliminary findings to the TRII Board
(excluding William S. Friedman) on November 21, 1997. At that time, Duff &
Phelps provided its oral opinion regarding a range of exchange ratios which
would render the Merger fair to TRII and its stockholders from a financial
point of view. Duff & Phelps supported its oral opinion by written analyses
which was based on the information provided as of that date, and subject to any
subsequent changes in the terms of the Merger and assuming no material changes
in the financial condition and outlook for TRII and the businesses of NIRT
prior to consummation of the Merger. On December 15, 1997, Duff & Phelps, in
its role as financial advisor to the TRII Board, participated in the meeting
between the TRII and NIRT Boards to negotiate the exchange ratio. On February
18, 1998, Duff & Phelps made an oral presentation of its analysis and report to
the TRII Board and subsequently delivered the opinion dated May 21, 1998 to the
TRII Board to the effect that, as of the date of such opinion, and based on and
subject to certain matters as stated therein, the Merger is fair to TRII and
the holders of TRII Common Stock from a financial point of view.

Analyses Conducted by Duff & Phelps. In conducting its analyses and
in preparing the opinion that the Exchange Ratio is fair from a financial point
of view to TRII and the holders of TRII Common Stock, Duff & Phelps, among
other things, (i) reviewed and analyzed the terms of the Merger Agreement and
descriptions thereof, (ii) analyzed certain historical, business and financial
information relating to TRII (including its predecessor VPT) and NIRT
including, but not limited to, TRII's Annual Reports to Shareholders and Forms
10-K filed with the Commission for the years ended November 30, 1991 through
1996, and the fiscal year ended December 31, 1997; NIRT's Annual Reports to
Shareholders and on Forms 10-K filed with the Commission for the fiscal years
ended December 31, 1991 through 1997; and TRII's and NIRT's 10-Qs for the
quarter ended March 31, 1998 (unaudited), (iii) reviewed certain internal
financial analyses and forecasts for TRII and NIRT

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on a stand-alone basis, (iv) reviewed certain internal financial analyses and
forecasts for TRII and NIRT on a combined basis based upon the terms of the
Merger Agreement, (v) reviewed the contractual advisory agreements among TRII
and NIRT and Tarragon and their respective affiliates, (vi) reviewed internal
operational and financial information relating to Tarragon; (vii) considered
the pro forma effect of the Merger Agreement on TRII's capitalization,
earnings, cash flow, funds from operations, book value and financial prospects;
(viii) reviewed current conditions and trends with respect to the real estate
industry and REITs in general, including interest rates and general business
and economic conditions in the markets where TRII and NIRT operate; (ix)
reviewed the reported market prices and trading volumes of TRII Common Stock
and NIRT Shares for recent periods; (x) reviewed publicly available information
concerning other entities deemed comparable, in whole or in part, to TRII and
NIRT, (xi) reviewed certain merger or change of control transactions that have
occurred within the industry; and (xii) conducted such other financial studies,
analyses and investigations as Duff & Phelps deemed appropriate. As background
for its analyses, Duff & Phelps held extensive discussions with members of the
TRII Board and members of the senior management of Tarragon regarding the
history, current business operations, financial condition, future prospects and
strategic objectives of TRII, both in its present form and on the combined
entity basis. Duff & Phelps and also visited certain properties owned by TRII
for which Tarragon (and/or TMI) has a responsibility for leasing and
management.

Description of Analyses. The following is a summary of certain
financial and comparative analyses performed by Duff & Phelps in support of its
opinion. Duff & Phelps analyzed the fairness of the Merger by evaluating the
reasonableness of the Exchange Ratio in examining the financial impact of the
Merger Agreement on TRII (with respect to, among other things, its projected
funds from operations and its ability to generate free cash flows) on a
stand-along basis and as a combined entity on a pro forma basis after giving
effect to the Merger. These analyses employed standard valuation and other
analytical methodologies described below which are generally accepted by the
professional financial community. The summary set forth below does not purport
to be a complete description of the analysis conducted by Duff & Phelps in
connection with the preparation of its opinion. The preparation of a fairness
opinion is a complex process and does not necessarily lend itself to partial
analyses or summary descriptions. Duff & Phelps incorporated into its analyses
numerous assumptions regarding the future performance of the national real
estate industry in general, as well as assumptions regarding interest rates and
general business and economic conditions and other matters, many of which are
beyond TRII's control. Such estimates are inherently subject to uncertainty,
and neither Duff & Phelps, TRII nor any other entity or individual assumes
responsibility for their accuracy. With respect to the pro forma merger
analysis, it was assumed that the transaction will be completed with an
Exchange Ratio of not more than 1.97 Shares of TRII Common Stock for each NIRT
Share and will otherwise be effected on terms substantially in accordance with
those contemplated by the Merger Agreement.

Reasonableness of Exchange Ratio. In assessing the reasonableness of
the Exchange Ratio, Duff & Phelps considered the historical market price of
TRII and NIRT (the "Market Price Analysis"); compared the implied valuation
multiples for NIRT with TRII's multiples and the selected publicly-traded
comparable company multiples (the "Comparable Company Analysis"); and examined
selected control transaction multiples (the "Control Transaction Analysis").

-- Market Price Analysis. Duff & Phelps examined the historical
price and trading volume for both TRII and NIRT. TRII's and
NIRT's market prices per share one day prior to the merger
announcement was $10.06 and $16.06, respectively, while their
respective one-year average share price daily and trading
volume was approximately $9.63 and $14.86 based upon 831 and
2,182 shares, respectively. TRII and NIRT also do not have
any active analyst coverage. The low trading volume and
absence of analyst coverage for both TRII and NIRT reduces the
reliability of the market price as being representative of the
fair market value of the two entities.

-- Comparative Company Analysis. Duff & Phelps compared the
valuation multiples implied by the Exchange Ratio for NIRT's
latest 12 months' ("LTM") performance with those of five
publicly traded REITs similar in character and categorization.
NIRT's implied Price/LTM Funds From Operations ("FFO") and
Enterprise Value/LTM earnings before interest, taxes,
depreciation and amortization ("EBITDA") multiples of 8.4x and
12.9x were at the low end of the comparable group and appear
consistent with NIRT's historical performance relative to the
comparative group.

-- Control Transaction Analysis. Duff & Phelps reviewed and
compared the consideration paid and selected mergers and
acquisitions in the REIT industry since March 1995. Duff &
Phelps noted that none of the selected transactions reviewed
was identical to the Merger and that, accordingly, the
analysis of comparable transactions necessarily involves
complex

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considerations and judgments concerning differences in
financial and operating characteristics of NIRT and other
factors that would affect the acquisition value of comparable
transactions. Duff & Phelps compared Enterprise Value/LTM
EBITDA, and equity value to LTM FFO and most recent net asset
value ("NAV"), median EBITDA, FFO and NAV multiples paid in
the control transactions were 14.3x, 12.8x and 1.1x,
respectively. As described under Comparative Company
Analysis, the Merger values NIRT at 12.9x LTM EBITDA, 8.4x LTM
FFO, and 0.4x latest NAV. Duff & Phelps used NIRT
management's estimate of NAV as of December 31, 1997.

Pro Forma Merger Analysis. Based on the qualitative and quantitative
information described above, Duff & Phelps evaluated the impact on TRII's
projected operating performance including, but not limited to, FFO, book value,
and EBITDA on a per share basis, both as a stand-alone entity and as a combined
entity. Projected performance numbers were based on information prepared by
management concerning net operating income, debt obligations and interest
expense, depreciation and amortization, estimated capital expenditures, and
other capital requirements. In the process of conducting the Pro Forma Merger
Analysis, Duff & Phelps considered various factors that would influence TRII's
operating characteristics and its prospects following the Merger including, but
not limited to, (a) significantly increased market capitalization of TRII and
its stronger financial condition, (b) TRII's status as a self-administered and
self-managed REIT through the acquisition of Tarragon immediately following the
effectiveness of the Merger, (c) the quality and experience of management, in
addition to management's significant equity interest in TRII, (d) the
additional business opportunities available to TRII as a result of its larger
size, and (e) the state of the capital markets and the availability of equity
capital to REITs such as TRII.

Based upon these analyses, Duff & Phelps concluded, among other
things, that TRII could reasonably be expected, on a pro forma basis, after
giving effect to the Merger, to have an improvement in TRII per share operating
performance numbers by virtue of the Merger.

The TRII Board retained Duff & Phelps to serve as its independent
financial advisor in July 1997, specifically to advise the TRII Board during
negotiations with the NIRT Board regarding the amount of shares of TRII Common
Stock to be offered for each NIRT Share as the Exchange Ratio and to provide an
opinion as to the fairness of such Exchange Ratio to TRII and to the holders of
TRII Common Stock from a financial point of view. In connection with Duff &
Phelps' services as a financial advisor to TRII, including its rendering of the
opinions summarized above, TRII agreed to pay a fee of $75,000 to Duff &
Phelps. No portion of Duff & Phelps' fee was contingent upon consummation of
the Merger or on the conclusions reached by Duff & Phelps in its opinion. If
the terms of the Merger were materially modified so that substantial analysis
was required by Duff & Phelps, TRII agreed to negotiate in good faith the terms
of additional compensation to Duff & Phelps. TRII is also obligated to
reimburse Duff & Phelps for its out-of-pocket expenses and to indemnify Duff &
Phelps against certain liabilities relating to services performed by Duff &
Phelps.

Duff & Phelps, as a part of its business, is regularly engaged in
evaluation of businesses and their securities in connection with mergers and
acquisitions, leveraged buy-outs, restructurings, private placements, employee
benefit plans, and valuations for estate, corporate and other purposes. The
TRII Board selected Duff & Phelps as its financial advisor based upon Duff &
Phelps' knowledge of the real estate industry in which TRII and NIRT operate,
in addition to Duff & Phelps' experience, ability and reputation for providing
fairness opinions for a wide variety of corporate transactions. Duff & Phelps
has not previously provided advisory or similar services to NIRT, TRII or
Tarragon or any of their respective affiliates.

NIRT

At the meeting of the NIRT Board on May 21, 1998, at which meeting the
NIRT Board approved the Merger Agreement, Gilford delivered its written opinion
to the effect that, as of such date, the Exchange Ratio is fair to the holders
of NIRT Shares from a financial point of view. No limitations were imposed by
the NIRT Board upon Gilford with respect to the investigations made or the
procedures followed by Gilford in rendering its opinion. Gilford has confirmed
its opinion as of the date of this Joint Proxy Statement/Prospectus with its
written opinion dated as of such date.

The full text of the written opinion of Gilford, dated as of May 21,
1998, is set forth as Appendix D to this Joint Proxy Statement/Prospectus and
sets forth the assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaking. NIRT Shareholders are
urged to read the opinion in its entirety. Gilford's opinion is directed only
to the fairness, from a financial point of view, of the Exchange Ratio and does
not constitute a recommendation concerning how holders of NIRT Shares should
vote with respect to the Incorporation Procedure and the Merger Agreement. The
summary of the opinion of Gilford

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set forth in this Joint Proxy Statement/Prospectus is qualified in its entirety
by reference to the full text of such opinion.

In connection with rendering its opinion, dated as of May 21, 1998.
Gilford reviewed and analyzed, among other things, the following: the Merger
Agreement; a draft of this Joint Proxy Statement/Prospectus; certain publicly
available information concerning TRII and NIRT, including the annual reports on
Form 10-K of NIRT and TRII (and its predecessor VPT) for each of the years in
the three-year period ended December 31, 1997; certain other financial
information, including financial forecasts prepared by NIRT and TRII and other
financial and market data information; and certain publicly available
information with respect to certain other entities that Gilford believed to be
comparable in certain respects to NIRT and TRII and the trading markets for
such other entities' securities. Gilford also met with certain officers and
employees of NIRT and TRII to discuss the foregoing, past and current business
operations, the historical and current financial condition, results of
operations and prospects of NIRT and TRII, as well as other matters Gilford
believes relevant to its inquiry, including the historical and current market
for equity securities of NIRT, TRII and certain other entities that Gilford
believed to be comparable in certain respects to NIRT or TRII, and management's
prepared projections. Gilford also took into its account its assessment of
general economic, market and financial conditions and its knowledge of the real
estate industry and related industries, as well as its experience in connection
with similar transactions and securities valuation generally. Gilford's
opinion necessarily was based upon conditions as they existed and could be
evaluated on the date of its opinion, and Gilford assumed no responsibility to
update or revise its opinion based upon circumstances or events occurring after
the date hereof. Gilford's opinion did not imply any conclusion as to the
likely trading range for TRII Common Stock following the consummation of the
Merger, which may vary depending upon, among other factors, changes in interest
rates, dividend rates, market conditions, general economic conditions and other
factors that generally influence the price of securities. Gilford's opinion
did not address NIRT's underlying business decision to effectuate the
Incorporation Procedure and the Merger. The analysis conducted by Gilford in
arriving at its opinion involved numerous macro economics, operating and
financial assumptions involving the application of complex methodologies and
educated judgment. Such analysis involved complex considerations and judgments
concerning differences in financial operating characteristics of comparable
entities and transactions and other factors that could affect the valuations of
the entities to which a comparison was being made. In preparing its opinion,
Gilford relied on the accuracy and completeness of all information supplied or
otherwise made available to it by TRII and NIRT and assumed without independent
verification that financial projections had been reasonably prepared and
reflected the best currently available estimates and judgments. Gilford also
made numerous assumptions regarding industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
TRII and NIRT. Gilford expressed no opinion with respect to such forecasts or
assumptions on which they were based and did not make or obtain or assume any
responsibility for making or obtaining any independent evaluations or
appraisals of any of the assets (including properties) or liabilities of NIRT
or TRII.

In rendering Gilford's opinion, Gilford assumed that in the ordinary
course no restrictions would be imposed that would have a material adverse
effect on the contemplated benefits of the Merger to TRII following the Merger.

In assessing the reasonableness of the Exchange Ratio, Gilford
examined the consideration paid in selected recent transactions involving
mergers and acquisitions of companies deemed reasonably comparable to NIRT and
TRII. Gilford also analyzed various valuation ratios of the two REITs,
including the net asset values of the entities, funds from operations, relative
market values, earnings per share and book value per share.

The preparation of a fairness opinion is not susceptible to partial
analysis or summary descriptions. Gilford believes that its analysis must be
considered as a whole and that selecting portions of its analysis and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the process underlying the analysis set forth in
its opinion. Gilford has not indicated that any of the analyses which it
performed had a greater significance than any other. The ranges of valuations
resulting from any particular analysis should not be taken to be the view of
Gilford or the actual value of NIRT and TRII. Gilford broadly considered all
of the analyses and did not assign any specific weights to any portion of any
analysis. Based upon the total analyses and other factors including historical
market and trading volume, past and current business prospects and management's
prepared projections, Gilford concluded that the consideration to be received
by the holders of Shares of NIRT pursuant to the Merger Agreement and the
Exchange Ratio were within the fair values indicated by the analyses considered
in the aggregate. The analyses which Gilford performed are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as a part of Gilford's analysis of the fairness,
from a financial point of view, of the consideration which the holders of
Shares of NIRT would receive in the Merger. The analyses do not purport to be
appraisals or to reflect prices

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at which a company might actually be sold or the prices at which any securities
may trade at the present time or at any time in the future.

Gilford is not affiliated with NIRT or TRII. Gilford is an investment
banking firm engaged on a regular basis to provide a range of investment
banking and financial advisory services, including the valuation of businesses
and their securities in connection with mergers and acquisitions. NIRT
selected Gilford on the basis of its background, experience and reputation.
Pursuant to an engagement letter dated October 15, 1997, NIRT agreed to pay
Gilford for its services in connection with the Merger a cash fee of $60,000
which has been paid to Gilford. NIRT also agreed to reimburse Gilford for
certain out-of-pocket expenses incurred by Gilford in connection with the
Merger. NIRT also agreed to indemnify Gilford and certain related persons
against certain liabilities, including liabilities under the federal securities
law, relating to or arising out of its engagement.

THE MERGER AGREEMENT

The following description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the copy of the
Merger Agreement attached as Appendix A to this Joint Proxy
Statement/Prospectus, which is incorporated herein by reference. All
shareholders are strongly encouraged to read the Merger Agreement in its
entirety.

TERMS OF THE MERGER

Incorporation Procedure. Because no explicit statutory authority
permits a California business trust to merge directly with and into a Nevada
corporation, in order to effectuate the combination of TRII and NIRT pursuant
to and in accordance with the Merger Agreement, NIRT will first be incorporated
in California (the "California Corporation") pursuant to Section 200.5 of the
California Corporations Code and the California Corporation (as the immediate
successor to NIRT) will then be merged with and into TRII.

The Merger. At the Effective Time, the California Corporation and
TRII will consummate the Merger in which the California Corporation will be
merged with and into TRII and the separate corporate existence of the
California Corporation (as the immediate successor in interest to NIRT) will
thereupon cease. TRII will be the Surviving Corporation in the Merger and will
continue to be governed by the laws of the State of Nevada.

The Effective Time. The Merger will become effective at the time (the
"Effective Time") and on the date (the "Effective Date") that (i) Articles of
Merger are filed with the Secretary of State of the State of Nevada in
accordance with Section 92A.200 of the Nevada Revised Statutes and (ii) a copy
of Articles of Merger or a certificate of merger are filed with the Secretary
of State of California in accordance with Section 1103 of the California
Corporations Code. The Effective Time shall be the time of filing of the
Articles of Merger with the Secretary of State of Nevada.

Articles of Incorporation and Bylaws. The Articles of Incorporation
and Bylaws of TRII will be the Articles of Incorporation and Bylaws of the
Surviving Corporation. However, pursuant to Article III, Section 3.1 of the
Bylaws of TRII, the number of members of the TRII Board of Directors shall be
increased by 5 to at least 9 in total number by appropriate resolution adopted
by the TRII Board of Directors.

Directors and Officers. The directors of TRII will be the existing
four directors of TRII and, at the Effective Time the directors of TRII shall
cause an increase in the size of the Board of Directors of TRII from 4 to at
least 9 and shall cause 5 of the existing members of the Board of Trustees of
NIRT to be appointed to the 5 new positions on the TRII Board of Directors as
of the Effective Time to serve with the existing 4 members of the TRII Board of
Directors. William S. Friedman is already a director of TRII and current NIRT
Trustees Messrs. Irving E. Cohen and Dan L. Johnston will not be elected. The
officers of TRII at the Effective Time shall be the officers of the surviving
corporation.

Effect on Capital Stock of TRII. At the Effective Time, each existing
holder of record of TRII Common Stock issued and outstanding immediately prior
to the Effective Time will be unaffected. At the Effective Time, each holder
of record of Shares of NIRT will receive a number of shares of TRII Common
Stock equal to the product of the number of Shares of NIRT held of record by
such holder immediately prior to the Effective Time multiplied by 1.97. If
between the date of the Merger Agreement and the Effective Time the outstanding
shares of TRII Common Stock are changed into a different number of shares or a
different class by reason of any reclassification, recapitalization, split up,
combination, exchange of shares or readjustment, the Exchange Ratio should be
adjusted accordingly.

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Effect of Merger on NIRT Options. At the Effective Time, TRII will
assume each outstanding NIRT Option. After the Effective Time, each NIRT
Option will entitle its holder to receive upon exercise (if and when vested)
the number of shares of TRII Common Stock equal to the product of the number of
Shares of NIRT issuable upon exercise of the option immediately prior to the
Effective Time (without regard to vesting) multiplied by the Exchange Ratio,
rounded to the nearest whole number of shares of TRII Common Stock. Each NIRT
Option will otherwise continue to have the same terms and conditions as before
the Effective Time.

Effect on NIRT Option Plans. At the Effective Time, TRII will assume
and combine the NIRT Option Plans with the similar TRII Option Plans which will
result in a continuation of the existing arrangements since the plans are
similar in nature except for the securities covered thereby. TRII will then
have available such number of shares of TRII Common Stock under its two option
plans (the TRII Share Option and Incentive Plan (the "TRII Option Plan") and
the TRII Independent Directors' Share Option Plan (the "Tarragon Directors'
Plan") together the "TRII Plans") so that the number of available shares under
such plans for future grants in total will be the same as would have been
available under all of the separate plans had such Merger not occurred. TRII
will also use its reasonable best efforts so that following the Effective Time
no holder of an option under any of the TRII Plans or the NIRT Plans will be
adversely affected by the Merger with respect to such options.

No Fractional Shares. TRII will not issue fractional shares of TRII
Common Stock in connection with the Merger. Instead, TRII will pay to each
holder otherwise entitled to a fractional share of TRII Common Stock an amount
in cash (rounded to the nearest whole cent) equal to the product of (i) the
fraction and (ii) the closing price of a Share of TRII Common Stock on the last
trading day immediately prior to the Effective Time as reported by published
financial sources.

Exchange of NIRT Share Certificates. TRII has appointed an exchange
agent (the "Exchange Agent") in connection with the Merger to facilitate the
surrender of certificates representing outstanding Shares of NIRT and the
issuance of certificates representing shares of TRII Common Stock to be issued
in the Merger. At the Closing, the holders will surrender to the Exchange
Agent the certificates representing all of the outstanding Shares of NIRT, all
of which will ultimately be canceled. The Exchange Agent will deliver to each
holder certificates representing the shares of TRII Common Stock issuable to
the holder and any cash in lieu of fractional shares.

NIRT SHAREHOLDERS SHOULD RETAIN THEIR SHARE CERTIFICATES AND SHOULD
NOT RETURN ANY OF THEIR SHARE CERTIFICATES WITH THE ENCLOSED PROXY CARD.

Tax Treatment. The parties intend that the Incorporation Procedure
constitute a reorganization within the meaning of Section 368(a)(1)(F) of the
Code and that the Merger qualify as the reorganization within the meaning of
Section 368(a)(1)(A) of the Code.

REPRESENTATIONS AND WARRANTIES OF NIRT

In the Merger Agreement, NIRT made various customary representations
and warranties to TRII regarding certain factual information about NIRT
including, among other things, the following matters: (i) organization,
standing, qualification, approvals and similar matters; (ii) force and effect
of declaration of trust and trustee's regulations and completeness of records;
(iii) capital structure of NIRT; (iv) the authorization, execution, delivery
and enforceability of the Merger Agreement; (v) the absence of any material
violation of governing documents, agreements or laws as a result of the
execution, delivery and performance of the Merger Agreement; (vi) compliance
with applicable laws; (vii) NIRT's investments in or ownership of other persons
or entities and other business relationships established outside the ordinary
course of business; (viii) reports and other documents filed with the
Commission and the fair presentation of the financial statements in accordance
with generally accepted accounting principles and the absence of undisclosed
liabilities; (ix) the absence of certain events and undisclosed liabilities;
(x) absence of undisclosed litigation; (xi) ownership and leasing of real
property; (xii) disclosure of, and absence of breaches and defaults under,
certain material agreements; (xiii) payment of taxes and certain other tax
matters; (xiv) absence of certain changes or events; (xv) potential conflicts
of interest; (xvi) absence of any obligation to pay finders' fees; (xvii)
environmental matters; (xvii) insurance policies and coverage; (xviii)
ownership, rights to use and absence of violations or claims or restrictions
with respect to intellectual property; and (xix) absence of agreements or
obligations restricting the business activities of NIRT.

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REPRESENTATIONS AND WARRANTIES OF TRII

TRII made various customary representations and warranties to NIRT
regarding certain factual information about TRII including, among other things,
the following matters: (i) corporate organization, standing, qualification,
approvals and similar matters; (ii) force and effect of articles of
incorporation and bylaws and completeness of corporate records; (iii) the
capital structure of TRII; (iv) the authorization, execution, delivery and
enforceability of the Merger Agreement; (v) reports and other documents filed
with the Commission and the fair presentation of the financial statements
contained therein in accordance with generally accepted accounting principles;
(vi) the absence of certain events and undisclosed liabilities; (vii) the
absence of pending or threatened litigation; (viii) compliance with applicable
law; (ix) payment of taxes and certain other tax matters; (x) ownership, rights
to use and absence of violations or claims or restrictions with respect to
intellectual property; (xi) the absence of conflict with, default under or
violation of agreements and laws, and the holding of permits material to the
conduct of business; (xii) ownership and leasing of real property; (xiii)
potential conflicts of interest; (xiv) absence of any obligation to pay
finders' fees; (xv) environmental matters; (xvi) insurance policies and
coverage; and (xviii) absence of agreements or obligations restricting the
business activities of TRII.

CONDUCT OF BUSINESS PENDING THE MERGER

In the Merger Agreement, each of TRII and NIRT agreed that except as
otherwise provided for in the Merger Agreement or unless TRII and NIRT shall
otherwise agree, the businesses of each party will be conducted only in a
manner consistent with past practice and that each party shall use its best
lawful efforts to preserve intact its business organization (except for the
conversion of NIRT into the California Corporation), to keep available the
services of their respective current officers, Advisor and consultants and to
preserve the current relationship of each party with their respective
customers, distributors, suppliers, licensors, licensees, contractors and other
persons with which each respective party has significant business relations.
Each of TRII and NIRT have agreed that, until the closing of the Merger
Agreement, neither would:

(a) amend or otherwise change their respective Declaration of
Trust, Articles of Incorporation or Bylaws or equivalent governing
documents; or

(b) except in connection with an agreement for TRII to acquire
the Advisor contingent upon the consummation of the transactions under
the Merger Agreement, or pursuant to the exercise of existing
outstanding options, issue, sell, pledge, dispose of, grant or
encumber, or authorize the issuance, sale, pledge, disposition, grant
or encumbrances of (i) any shares of capital stock of any class of any
such party or any options, warrants, convertible securities or other
rights of any kind to acquire any such shares of capital stock or
other ownership interest of such party, or (ii) any assets of such
party except for real estate transactions and financings conducted at
arm's length and for fair value; or

(c) set aside, make or pay any dividend or other distribution
payable in cash, stock, property or otherwise with respect to any of
its capital stock except that NIRT is entitled to pay distributions on
a quarterly basis in an amount per share NIRT paid during the quarter
preceding the date of the Merger Agreement; or

(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any shares of its
capital stock; or

(e) make any material tax election or settle or compromise any
material federal, state, local or foreign income tax liability; or

(f) take any action that would or is reasonably likely to
result in any of the covenants or agreements set forth in the Merger
Agreement not being satisfied on the Closing Date; or

(g) knowingly take any action that could be reasonably
expected to prevent the Merger from constituting a transaction
qualifying under Section 368(a) of the Code.

ADDITIONAL MATTERS

Proxy Statement/Prospectus. TRII agreed to prepare and file this
Proxy Statement/Prospectus with the Commission as soon as reasonably
practicable after execution of the Merger Agreement.

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Stockholders' Meetings. Each of NIRT and TRII agree to take all
necessary action in accordance with the requirements of law and their
respective governing documents to convene the Special Meetings to be held as
soon as reasonably practicable after the execution of the Merger Agreement and
the clearance by the Commission of the Joint Proxy Statement/Prospectus.

Access to Information. TRII and NIRT each agree to afford each other,
and to cause their independent accountants to afford the other party and its
accountants, counsel and other representatives, reasonable access during normal
business hours to all of the other party's properties, books, contracts,
commitments and records until the Closing. Each party agreed to use reasonable
efforts to furnish properly to the other party any information concerning its
business, properties and personnel that the other party may reasonably request.

Stock Exchange Listing. TRII agreed to prepare and submit to the New
York Stock Exchange, Inc. ("NYSE") a listing application covering its
outstanding TRII Common Stock and the shares of TRII Common Stock to be issued
in connection with the Merger Agreement and the Advisor Agreement and to use
reasonable efforts to cause such shares to be approved for listing on the NYSE
prior to the Effective Time, however such listing application becoming
effective is not a condition of the Closing.

Public Announcements. The parties agreed that each would consult with
each other before issuing any press release or otherwise make any public
statements with respect to the Merger Agreement or any transactions
contemplated thereby and no party would issue any such press release or make
any such public statement without the prior consent of the other except as may
be required by law, the NASD, NASDAQ or any national securities exchange.

CONDITIONS TO THE MERGER

Conditions to Each Party's Obligations. In order for each party of
the Merger Agreement to be obligated to complete the Merger and the other
transactions contemplated by the Merger Agreement, the following conditions
must be satisfied on or before the Closing Date or waived by that party:

(a) Shareholder Approval. The Merger Agreement shall
have been approved and adopted by the shareholders of NIRT and the
stockholders of TRII.

(b) Statutes. No statute, rule or regulation shall have
been enacted by any governmental entity that makes the consummation of
the transactions contemplated by the Merger Agreement illegal or
prohibits consummation of the Merger Agreement or renders NIRT or TRII
unable to consummate the transactions contemplated by the Merger
Agreement.

(c) Registration Statement Effectiveness. TRII's S-4
Registration Statement shall have been declared effective and no stop
order suspending the effectiveness thereof shall be in effect and no
proceedings for such purpose shall be pending before or threatened by
the Commission.

(d) State Statutes. TRII shall have received all state
securities and "blue sky" permits and approvals necessary to
consummate the Merger Agreement.

(e) Legal Action. No temporary restraining order,
preliminary injunction or permanent injunction or other order
preventing the consummation of the transactions contemplated by the
Merger Agreement shall have been issued by any court and remain in
effect. No litigation brought by any governmental entity seeking the
issuance of an order or injunction of this kind shall be pending
which, in the good faith judgment of NIRT's trustees or TRII's Board
of Directors, has a reasonable probability of resulting in an order or
injunction or damages. If any order or injunction is issued, each
party has agreed to use its reasonable efforts to have the injunction
lifted.

(f) Acquisition of Advisor. All conditions precedent set
forth in the Advisor Acquisition Agreement with the exception of the
consummation of the Incorporation Procedure shall have been satisfied.

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(g) Approvals. All of the necessary and material
governmental and regulatory clearances, consents or approvals shall
have been received.

Conditions to the Obligations of TRII. In order for TRII to be
obligated to complete the Merger and the other transactions contemplated by the
Merger Agreement, the following conditions must be satisfied on or before the
Closing Date or waived by TRII.

(a) Representations, Warranties and Performance of NIRT.
With certain limited exceptions, the representations and warranties of
NIRT in the Merger Agreement shall be true and correct on the date of
the Merger Agreement and on the Closing Date and TRII shall have
received a certificate signed by an executive officer of NIRT
confirming these matters.

(b) No Material Adverse Change. Since the date of the
Merger Agreement, there shall not have been any NIRT Material Adverse
Change and TRII shall have received a certificate of the chief
executive officer or chief financial officer of NIRT certifying to
such matters.

(c) Opinion of Counsel to TRII. TRII shall have received
an opinion dated as of the closing date from its counsel in the form
specified in the Merger Agreement to the effect that the NIRT Merger
will qualify as a reorganization under the provisions of Section
368(a) of the Code.

(d) Consents and Waivers. All consents and waivers from
third parties necessary in connection with the confirmation of the
transactions contemplated by the Merger Agreement shall have been
obtained.

Conditions to the Obligations of NIRT. In order for NIRT to be
obligated to complete the Merger and other transactions contemplated by the
Merger Agreement, the following conditions must be satisfied on or before the
Closing Date or waived by NIRT.

(a) Representations, Warranties and Performance of TRII.
With certain limited exceptions, the representations and warranties of
TRII in the Merger Agreement shall be true and correct on the date of
the Merger Agreement and on the Closing Date and NIRT shall have
received a certificate signed by an executive officer of TRII
confirming these matters.

(b) No Material Adverse Change. Since the date of the
Merger Agreement, there shall not have been any TRII Material Adverse
Change and NIRT shall have received a certificate of the chief
executive officer or chief financial officer of TRII certifying to
such matters.

(c) Opinion of Counsel to NIRT. NIRT shall have received
an opinion dated as of the closing date from its counsel in the form
specified in the Merger Agreement to the effect that the TRII Merger
will qualify as a reorganization under the provisions of Section
368(a) of the Code.

(d) Consents and Waivers. All consents and waivers from
third parties necessary in connection with the confirmation of the
transactions contemplated by the Merger Agreement shall have been
obtained.

TERMINATION

Basis for Termination. The Merger Agreement may be terminated prior
to closing:

(a) by mutual written consent of NIRT and TRII.

(b) by either TRII or NIRT if (i) any court of competent
jurisdiction shall have issued an order, decree or
ruling or take any other action restraining or
enjoining or otherwise prohibiting the NIRT Merger or
the consummation of the acquisition of the Advisor by
TRII, or (ii) the Effective Time shall not have
occurred on or before December 31, 1998.

(c) by either TRII or NIRT, if the stockholders' meeting
shall have been held and the holders of either the
outstanding shares of TRII Common Stock or NIRT
Shares shall have failed to approve and adopt the
Merger Agreement at such meeting.

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<PAGE> 48
(d) by TRII if there has been a material breach of any
representation, warranty, covenant or agreement in
the Merger Agreement on the part of NIRT and if the
breach is curable, the breach has not been cured
within 30 days after written notice of the breach.

(e) by NIRT if there has been a material breach of any
representation, warranty, covenant or agreement in
the Merger Agreement on the part of TRII and if the
breach is curable, the breach has not been cured
within 30 days after written notice of the breach.

Effect of Termination. If the Merger Agreement is terminated in
accordance with its terms, it will become void and there will be no liability
or obligation on the part of TRII or NIRT or their respective officers,
directors or trustees and all rights and obligations of any party shall cease.

INTEREST OF CERTAIN PERSONS IN THE MERGER

General. Considering the approval of the Merger Agreement and the
transactions contemplated thereby, as well as the recommendations of the TRII
Board and the NIRT Board, share owners should be aware that certain persons,
including members of TRII management, members of the NIRT Board and management,
and employees of Tarragon have interests in the Merger Agreement and the
transactions contemplated thereby that are in addition to those of the holders
of TRII Common Stock or Shares of NIRT generally including certain arrangements
with respect to the composition of the TRII Board following the Merger, certain
post-Merger employment arrangements, continued controlling positions as
stockholders, certain provisions relating to the indemnification of the members
of the NIRT Board and officers, and options to acquire shares of TRII Common
Stock. The TRII Board and NIRT Board were each aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.

Principal Share Ownership. As of September 4, 1998, William S. and
Lucy N. Friedman own approximately 30% of the outstanding shares of TRII Common
Stock and approximately 33% of the NIRT Shares. After giving effect to the
Merger and the subsequent acquisition of Tarragon (which is presently owned by
William S. and Lucy N. Friedman), the Friedman family is estimated to own
approximately 34.4% of the resulting outstanding shares of TRII Common Stock
and will hold options covering an additional 1,000,000 shares of TRII Common
Stock. Such percentage ownership in the surviving corporation will represent a
1.4% increase in favor of the Friedman family. By virtue of such 34.4%
estimated ownership of the TRII Common Stock following completion of such
transactions, the Friedman family will continue to maintain its position as the
controlling stockholder of TRII. William S. Friedman and Lucy N. Friedman have
each advised the TRII Board and the NIRT Board that they respectively presently
intend to vote all shares held by either of them of TRII Common Stock or NIRT
Shares in favor of the approval of the Merger Agreement at the TRII Special
Meeting and in favor of the Incorporation Procedure and Merger Agreement at the
NIRT Special Meeting.

Board Composition and Related Matters Post-Merger. Pursuant to the
Merger Agreement, TRII has agreed to increase the size of the TRII Board at the
Effective Time in order to add five out of the seven NIRT independent Trustees
to the TRII Board. The persons to be added to the TRII Board are Sally
Hernandez-Pinero, Lance Liebman, Lawrence G. Schafran, Raymond V. J. Schrag,
and Carl B. Weisbrod. William S. Friedman is already a director of TRII and
current NIRT Trustees, Messrs. Irving E. Cohen and Dan L. Johnston, will not
join the TRII Board. The officers of TRII at the Effective Time shall be the
officers of the surviving corporation; however, the officers of TRII hold the
same positions as officers with NIRT.

Indemnification of NIRT Trustees and Officers. TRII as the Surviving
Corporation has agreed to provide exculpation and indemnification for each
person who is or has been at any time prior to the date of the Merger Agreement
or becomes prior to the Effective Time an officer or trustee of NIRT to the
same extent as the exculpation and indemnification is presently provided by
NIRT to such parties prior to the Effective Time. The result is that pursuant
to the Merger Agreement, from and after the Effective Time, TRII will cause the
indemnification and holding harmless each present and former trustee and
officer of NIRT (determined as of the Effective Time) against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, to the fullest extent that NIRT would have been
permitted under its amended Declaration of Trust or California law in effect on
the date of the Merger Agreement to indemnify such person.

40
<PAGE> 49
New Employment Arrangement with William S. Friedman. Pursuant to the
Advisor Acquisition Agreement (the closing of which is subject to the prior
completion of all matters involving the Merger Agreement except the filing of
Articles of Merger in the State of Nevada which will be accomplished
simultaneously with the closing of the Advisor Acquisition Agreement), William
S. Friedman is to enter into an employment agreement with Tarragon and TRII on
terms mutually agreeable to TRII and Mr. Friedman for a term of four years at a
salary of $300,000 per year with a broad covenant by Mr. Friedman not to
compete with TRII and Tarragon and a right of first refusal in favor of TRII
and Tarragon with regard to any real estate investment opportunity which might
come to Mr. Friedman's attention. Also, pursuant to such employment agreement,
at the closing of the Advisor Acquisition Agreement, TRII is to grant to Mr.
Friedman options to purchase 650,000 shares of TRII Common Stock pursuant to a
Stock Option Agreement between TRII and Mr. Friedman which will be in a form
mutually acceptable to TRII and Mr. Friedman for a term of ten years covering
(i) 250,000 shares of TRII Common Stock at an exercise price of $12 per share,
(ii) 200,000 shares of TRII Common Stock at an exercise price of $15 per share,
and (iii) 200,000 shares of TRII Common Stock at an exercise price of $18 per
share.

Outstanding NIRT Options. Pursuant to the Merger Agreement, at the
Effective Time each of the NIRT Options which is outstanding and unexercised at
the Effective Time shall be assumed by TRII and will entitle the holder thereof
to receive upon exercise (if and when vested) the number of shares of TRII
Common Stock equal to the product of the number of Shares of NIRT issuable upon
exercise of such option immediately prior to the Effective Time (without regard
to vesting) multiplied by the Exchange Ratio, rounded to the nearest whole
number of shares of TRII Common Stock. This arrangement includes options
covering Shares of NIRT issuable upon exercise of any NIRT Option including the
NIRT Independent Trustees' Share Option Plan. TRII has also covenanted in the
Merger Agreement to use its reasonable best efforts so that following the
Effective Time no holder of an option under any of the TRII Plans or the NIRT
Plans will be adversely affected by the Merger with respect to such options.

ACCOUNTING TREATMENT

The merger of NIRT and TRII will be accounted for as a reverse
acquisition of TRII by NIRT using the purchase method of accounting. For
purposes of reporting TRII's consolidated financial statements, a new
accounting basis will be determined for TRII's assets by allocating the
purchase price to its assets using their relative fair values. The purchase
price is equal to the fair value of TRII's current outstanding stock plus its
liabilities. The historical balances of the combined entity will be those of
NIRT.

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<PAGE> 50
ACQUISITION OF THE ADVISOR

GENERAL

At the time of the execution of the Merger Agreement, TRII also
entered into a Stock Purchase Agreement dated June 5, 1998 (the "Advisor
Acquisition Agreement") among TRII, the Advisor and William S. Friedman and
Lucy Friedman. Mr. and Mrs. Friedman are the only stockholders of the Advisor
holding 200 shares of Common Stock no par value per share. Pursuant to the
Advisor Acquisition Agreement (the closing of which is subject to the prior
completion of all matters involving the Merger Agreement except the filing of
Articles of Merger in the State of Nevada which will be accomplished
simultaneously with the closing of the Advisor Acquisition Agreement) TRII will
acquire all of the issued and outstanding shares of common stock of the Advisor
from Mr. and Mrs. Friedman in exchange for the issuance to Mr. and Mrs.
Friedman of an aggregate of 100,000 shares of TRII Common Stock (which TRII and
Mr. and Mrs. Friedman have agreed have a value not exceeding $1,000,000 or $10
per share) and options to purchase 350,000 shares of TRII Common Stock pursuant
to Stock Option Agreements to be dated as of the Closing Date which shall cover
and provide for (i) 150,000 shares for ten years at an exercise price of $13
per share, (ii) 100,000 shares for ten years at an exercise price of $15 per
share, and (iii) 100,000 shares for ten years at an exercise price of $16 per
share, which Stock Option Agreements are to be in a form mutually acceptable to
TRII and Mr. and Mrs. Friedman. After giving effect to the consummation of the
Advisor Acquisition Agreement, the Advisor will become a wholly-owned
subsidiary of TRII and TRII will assume indebtedness of up to $1,000,000 of the
Advisor.

EMPLOYMENT AGREEMENT

As a requirement of the Advisor Acquisition Agreement, William S.
Friedman is to enter into an employment agreement with the Advisor on terms
mutually agreeable to TRII and Mr. Friedman for a term of four years at a
salary of $300,000 per year with a broad covenant by Mr. Friedman not to
compete with TRII and the Advisor and a right of first refusal in favor of TRII
and the Advisor with regard to any real estate investment opportunity which
might come to Mr. Friedman's attention. The Employment Agreement is to
provide that Mr. Friedman will work substantially full time for TRII and during
the period of employment under the Employment Agreement, Mr. Friedman is to use
his best efforts to transfer to TRII the management of the real estate assets
controlled by him or his family. Pursuant to the Employment Agreement, at the
closing of the Advisor Acquisition Agreement TRII is to grant to Mr. Friedman
options to purchase 650,000 shares of TRII Common Stock pursuant to a Stock
Option Agreement between TRII and Mr. Friedman which will be in a form mutually
acceptable to TRII and Mr. Friedman for a term of ten years covering (i)
250,000 shares of TRII Common Stock at an exercise price of $12 per share, (ii)
200,000 shares of TRII Common Stock at an exercise price of $15 per share, and
(iii) 200,000 shares of TRII Common Stock at an exercise price of $18 per
share.

ADDITIONAL PROVISIONS

In the Advisor Acquisition Agreement, William S. Friedman and Lucy
Friedman and the Advisor made various customary representations and warranties
to TRII regarding certain factual information about the Advisor including the
ownership of and title to the shares of Common Stock of the Advisor; the
authorization and enforceability of the Advisor Acquisition Agreement; the
investment intent of Mr. and Mrs. Friedman with respect to the acquisition of
the shares of TRII Common Stock; compliance with applicable laws; absences of
litigation; employee benefits; real and personal property; and a pro forma
consolidated balance sheet of the Advisor and its wholly-owned subsidiary TMI
as of the Closing Date. TRII made various customary representations and
warranties to William S. Friedman and Lucy N. Friedman in their capacity as
stockholders of the Advisor including corporate organization, standing,
qualification and similar matters; authorization, execution, delivery and
enforceability of the Advisor Acquisition Agreement; investment intent with
respect to the shares of Common Stock of the Advisor being acquired;
capitalization of TRII; and the due authorization, valid issuance and
non-assessability of TRII Common Stock to be issued to the stockholders of the
Advisor.

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<PAGE> 51
TERMINATION AND CONDITIONS PRECEDENT

The Advisor Acquisition Agreement and its closing is conditioned upon
all conditions precedent set forth in the Merger Agreement having been
satisfied and Articles of Merger being filed with the Secretary of State of
Nevada simultaneously with the Closing of the Advisor Acquisition Agreement.
The Advisor Acquisition Agreement may only be terminated by TRII and the
stockholders (i) by mutual agreement, or (ii) by either the stockholders or
TRII if (a) an order has been issued by a board of competent jurisdiction or
some other action has been taken to restrain, enjoin or otherwise prohibit the
Merger Agreement from being consummated, or (b) the closing has not occurred on
or before December 31, 1998.

REASONS FOR STRUCTURE OF TRANSACTION

The acquisition of the Advisor by TRII, while a part of the overall
transaction involving the consolidation of TRII and NIRT into a single entity,
is covered by a separate agreement from the Merger Agreement and is subject to
the consummation of the Merger Agreement to avoid complications that might
arise if it were handled in any other manner. If TRII were to acquire the
Advisor in advance, it is likely that the Advisor's relationship with NIRT
would no longer be available due to potential conflict of interest matters
involving NIRT. Therefore, in order to acquire the Advisor, it is necessary
for TRII to first acquire the Advisor's primary customer, NIRT, through a
consolidation. TRII concluded that it needs to acquire the Advisor and
effectively be a self-managed REIT. Institutional investors and REIT analysts
generally have the belief that an internally managed real estate investment
trust with full capabilities to act as a real estate company is the preferred
model for the future. However, by virtue of the requirements of the Olive
case, the potential for the appearance of a conflict of interest could arise if
the Advisor, as a wholly-owned subsidiary of TRII, also maintained its
contractual advisory arrangement with NIRT. Accordingly, if for any reason the
Merger Agreement is not consummated, the Advisor Acquisition Agreement will
also not be consummated.

The approval of the Advisor Acquisition Agreement is not presented to
the TRII stockholders for approval as a separate matter because the
consummation of the Advisor Acquisition Agreement is contingent upon the
consummation of the Merger Agreement. Therefore, a vote in favor of approval
and adoption of the Merger Agreement, which contemplates the consummation of
the Advisor Acquisition Agreement, will be deemed to be approval of the Advisor
Acquisition Agreement by each TRII stockholder voting in favor of the Merger
Agreement. Normally, the issuance of shares of TRII Common Stock, granting of
options and stock appreciation rights in a transaction such as the Advisor
Acquisition Agreement (absent any condition of consummation of the Merger
Agreement) would be a matter reserved to and capable of approval by the Board
of Directors of TRII without stockholder approval.

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<PAGE> 52
CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary discusses the material federal income tax
consequences of the Incorporation Procedure and the Merger. The summary is
based upon the Code, applicable Treasury regulations thereunder, and
administrative rulings and judicial authority as of the date hereof. All of
the foregoing are subject to change, possibly with retroactive effect, and any
such change could affect the continuing validity of the discussion. The
discussion assumes that holders of NIRT Shares hold such shares as a capital
asset. Further, the discussion does not address the tax consequences that may
be relevant to a particular share owner subject to special treatment under
certain federal income tax laws, such as dealers in securities, banks,
insurance companies, tax exempt organizations, non-United States persons, share
owners who acquire NIRT shares through exercise of options or otherwise as
compensation or through a tax-qualified retirement plan, or holders of options
and performance share units granted under NIRT's Share Option and Incentive
Plan or NIRT's Independent Trustees Share Option Plan. This discussion does
not address any consequences arising under the laws of any state, locality or
foreign jurisdiction.

Neither TRII nor NIRT has requested a ruling from the IRS with regard
to any of the federal income tax consequences of the Incorporation Procedure
and the Merger and the opinions of counsel as to such federal income tax
consequences set forth below will not be binding on the IRS.

GENERAL-INCORPORATION PROCEDURE

TRII has received an opinion from Prager, Metzger & Kroemer PLLC,
securities and tax counsel, to the effect that (i) the Incorporation Procedure
of NIRT by itself will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Code; (ii) upon consummation of the Incorporation
Procedure, the California Corporation will be treated as the same taxpayer as
NIRT for federal income tax purposes; (iii) thus, the incorporation of NIRT
into the California Corporation essentially will be irrelevant for federal
income tax purposes and the operations of NIRT and the California Corporation
will be combined for purposes of determining whether the California Corporation
qualifies as a real estate investment trust for the taxable year in which the
Incorporation Procedure is consummated; (iv) the Incorporation Procedure will
not, in and of itself, adversely affect the ability of NIRT or the California
Corporation to qualify as a real estate investment trust for federal income tax
purposes; and (v) the information in this Joint Proxy Statement/Prospectus
under the caption "Certain Federal Tax Consequences" to the extent it
constitutes matters of law or legal conclusions, is correct in all material
respects.

Pursuant to the Incorporation Procedure (i) each NIRT shareholder is
entitled to receive one share of California Corporation Common Stock for each
share of beneficial interest in NIRT that it owns, and (ii) the NIRT Shares are
deemed cancelled. Certificates representing NIRT Shares will continue to
represent shares of common stock of the California Corporation and no gain or
loss will be recognized by NIRT Shareholders in respect of these transactions
and the tax basis to a NIRT Shareholder of the shares of Common Stock of the
California Corporation it is entitled to receive will equal the tax basis to
the NIRT Shareholder of its NIRT Shares. In addition, the holding period of
the California Corporation Common Stock to which a NIRT Shareholder is entitled
to receive would include the period during which the NIRT Shareholder held its
NIRT Shares, provided that the NIRT Shares were held by the NIRT Shareholders
at the time the Incorporation Procedure was effected. Pursuant to the
Incorporation Procedure, NIRT will be incorporated in California into the
California Corporation. No gain or loss will be recognized by NIRT or the
California Corporation as a result of this transaction. The tax basis of the
assets received by the California Corporation in the Incorporation Procedure
will equal the tax basis of those assets to NIRT immediately prior to the time
the Incorporation Procedure is effected. The holding period of the assets
received by the California Corporation in the Incorporate Procedure would
include the period during which such assets were held by NIRT.

ASSUMPTIONS-MERGER

The opinion of counsel described above will assume the accuracy of the
facts and statements concerning the Merger set forth in this Joint Proxy
Statement/Prospectus and will receive and rely upon representations of fact
contained in certificates of TRII and NIRT including that (i) neither TRII nor
NIRT is aware of any plan, intention or obligation or commitment on the part of
any holder of 5% or more of NIRT Shares to sell, exchange or otherwise dispose
of (or reduce the risk of loss by short sale or otherwise, to enter into any
contract or arrangement with respect to, or consent to the sale, exchange or
other disposition of) TRII Common Stock received in the Merger by such holder
in exchange for such NIRT shares, (ii) TRII intends to cause the continuation
of NIRT's historic business and use a significant portion of NIRT's historic
business assets in the business of TRII, and (iii) after the Merger, TRII will
hold at least 90% of the fair market value of the NIRT Assets and at least 70%
of the fair market value of NIRT's gross assets held immediately prior to the
Merger.

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<PAGE> 53
TAX CONSEQUENCES TO NIRT SHAREHOLDERS

Under the reorganization provisions of the Code, no gain or loss will
be recognized by holders of NIRT Shares with respect thereto as a result of the
surrender of their NIRT Shares in exchange for shares of TRII Common Stock
pursuant to the Merger (except as discussed below with respect to any cash
received in lieu of fractional shares). The aggregate tax basis of the TRII
Common Stock received in the Merger (including any fractional shares of TRII
Common Stock deemed received) will be the same as the aggregate tax basis of
the NIRT Shares surrendered in exchange therefor in the Merger. The holding
period for the shares of TRII Common Stock received (including the holding
period of fractional shares of TRII Common Stock deemed received) will include
the holding period of the NIRT Shares surrendered in exchange therefor.

FRACTIONAL SHARES

If a holder of NIRT Shares receives cash in lieu of a fractional share
interest in TRII Common Stock in the Merger, such fractional share interest
will be treated as having been distributed to the holder, and such cash amount
will be treated as received in redemption of the fractional share interest.
Under Section 302 of the Code, if such redemption is "not essentially
equivalent to a dividend" after giving effect to the constructive ownership
rules of the Code, the holder will generally recognize capital gain or loss
equal to the cash amount received for the fractional share of TRII Common Stock
reduced by the portion of the holder's tax basis in NIRT Shares surrendered
that is allocable to the fractional share interest in TRII Common Stock. Under
these rules, a share owner of NIRT Shares should recognize capital gain or loss
on the receipt of cash in lieu of a fractional share interest in TRII Common
Stock. The capital gain or loss will be long-term capital gain or loss if the
holder's holding period in the fractional share interest is able to qualify for
that treatment.

CONSEQUENCES TO NIRT, TRII AND HOLDERS OF TRII COMMON STOCK

None of NIRT, TRII or the holders of TRII Common Stock before the
Merger will recognize gain or loss as a result of the Merger.

THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL OF THE POTENTIAL TAX EFFECTS RELATIVE TO THE INCORPORATION
PROCEDURE OR THE MERGER. THUS, NIRT SHARE OWNERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
INCORPORATION PROCEDURE AND THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER
APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.

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<PAGE> 54
MARKET PRICES; DISTRIBUTIONS AND RELATED SHAREHOLDERS MATTERS

The TRII Common Stock is listed on the NASDAQ SmallCap Market under
the symbol "VIPT" and the NIRT Shares are listed on the NASDAQ National Market
under the symbol "NIRTS." The following table sets forth, for the periods
indicated, the high and low bid quotations of the TRII Common Stock (including
its predecessor VPT) and the NIRT Shares as reported by the NASDAQ system for
the periods indicated, which consist of the last three fiscal years and the
quarters ending in the current year. Over-the-market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commissions, and may
not necessarily represent actual transactions.

<TABLE>
<CAPTION>
TRII COMMON STOCK(a) NIRT SHARES
----------------------------------- -----------------------------------
DISTRIBUTIONS DISTRIBUTIONS
HIGH LOW PAID HIGH LOW PAID(b)
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter ended February 28, 1995 $ 5 $ 4 3/8 -
First Quarter ended March 31, 1995 $ 8 7/8 $ 8 3/4 $ 0.14
Second Quarter ended May 31, 1995 5 5/8 5 -
Second Quarter ended June 30, 1995 8 7/8 8 5/8 0.15
Third Quarter ended August 31, 1995 5 5/8 5 -
Third Quarter ended September 30, 1995 8 7/8 7 1/4 0.15
Fourth Quarter ended November 30, 1995 5 5/8 5 -
Fourth Quarter ended December 31, 1995 9 1/8 8 7/8 0.17

1996

First Quarter ended February 28, 1996 $ 6 1/2 $ 5 -
First Quarter ended March 31, 1996 $ 11 $ 9 1/8 $ 0.17
Second Quarter ended May 31, 1996 6 1/2 5 -
Second Quarter ended June 30, 1996 11 5/8 11 0.17
Third Quarter ended August 31, 1996 7 7/8 5 -
Third Quarter ended September 30, 1996 11 5/8 11 1/8 0.17
Fourth Quarter ended November 30, 1996 7 1/2 7 -
Fourth Quarter ended December 31, 1996 11 1/4 10 7/8 0.18

1997
First Quarter ended February 28, 1997 $ 7 $ 7 -
First Quarter ended March 31, 1997 $ 13 7/8 $ 11 1/8 $ 0.18
Second Quarter ended May 31, 1997 9 8 -
Second Quarter ended June 30, 1997 14 1/2 13 7/8 0.18
Third Quarter ended September 30, 1997 -
(4 months) 10 3/4 9
Third Quarter ended September 30, 1997 - 15 5/8 14 1/8 0.18
Fourth Quarter ended December 31, 1997 10 10 - 17 15 1/4 0.20

1998

First Quarter ended March 31, 1998 $10 3/8 $ 9 1/2 $0.10 $ 18 $15 3/4 $ 0.20
Second Quarter ended June 30, 1998 10 3/8 10 - 21 7/8 18 0.20
Third Quarter ended September 30, 1998 13 3/4 10 1/4 - 27 5/8 21 -
(through September 4, 1998)

</TABLE>

- ----------
(a) Retroactive effect has been given to the merger effective July 25,
1997 which resulted in the conversion of VPT into TRII and a December
1, 1995 reverse share split on the basis of one-for-five shares of
VPT.

(b) NIRT cash distributions have been restated to give retroactive effect
to 10% share distributions in September 1995, September 1996 and
September 1997.

On February 18, 1998, the last trading day prior to the announcement
by TRII and NIRT that they had reached an agreement concerning the Merger, the
closing bid prices of TRII Common Stock as reported on the NASDAQ SmallCap
Market and NIRT Shares as reported on the NASDAQ National Market were $10 1/16
and $16 3/8 per share, respectively. Applying the Exchange Ratio to TRII's
closing bid price of $10 1/16, each NIRT Share would be valued at $19.83.

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<PAGE> 55
On September 4, 1998, the closing bid price of the NIRT Shares on the
NASDAQ National Market was $24 1/2 per share and such NIRT Shares were held by
approximately 6,100 holders of record and approximately 10,100 beneficial
owners including those Shares held in street name.

Following the Merger, TRII Common Stock will continue to be traded on
the NASDAQ Stock Market, NIRT Shares will cease to be traded and there will be
no further market for the NIRT Shares.

TRII COMMON STOCK HISTORY

TRII is the ultimate successor-in-interest to VPT which was
incorporated in California under the name Vinland Property Corporation on July
22, 1997 which was merged with and into TRII on July 25, 1997 with TRII being
the survivor to such merger. The VPT Board of Trustees approved a one-for-five
reverse share split of all of VPT's shares of beneficial interest which was
effective at the close of business on December 1, 1995, on the basis of one new
share (i.e., a "Post-Split Share") for each five shares then outstanding (each
an "Old VPT Share"). It was not intended that any material differences exist
between an Old VPT Share and a Post-Split Share except that fewer Post-Split
Shares were outstanding.

Following the one-for-five reverse share split, on December 1, 1995
VPT offered to purchase all shares of its beneficial interest no par value of
each shareholder holding 99 or fewer Post-Split Shares (or less than 500 Old
VPT Shares) either of record or beneficially on December 1, 1995. Under such
offer, as extended on January 22, 1996, VPT purchased all Post-Split Shares
duly tendered prior to 5:00 p.m. New York City time on February 29, 1996 (the
"Extended Expiration Date") at a price equal to the next closing price of the
VPT Post-Split Shares as reported by the NASDAQ Inter-Dealer Quotation System
on the day VPT, through its Transfer Agent Registrar, received the Letter of
Transmittal properly completed, signed and validly tendered, with certificates
for Old VPT Shares attached, at the address listed in the Letter of
Transmittal. VPT paid all expenses in connection with the sales pursuant to
such offer and a tendering shareholder was not required to pay any brokerage
commissions or similar charges. A total of 43,696 Post-Split Shares were
validly tendered to and purchased by VPT through such offer.

No cash distributions were paid on Old VPT Shares in 1994 or 1995. No
cash distributions were paid on Post- Split Shares of VPT in 1996 or 1997 and
no distributions have been paid on the TRII Common Stock since July 25, 1997,
the effective date of the merger which created TRII as the ultimate
successor-in-interest to VPT through December 31, 1997. A cash dividend of
$0.10 per share was declared on the TRII Common Stock in December 1997 and paid
in January 1998 to stockholders of record on December 26, 1997.

In 1993, VPT paid a taxable distribution of $1.25 per Post-Split
Share, totaling $1.5 million and equal to VPT's 1992 taxable income in the form
of either VPT's 9% Series A Convertible Subordinated Debentures (the
"Debentures") or Uncertificated Convertible Subordinated Obligations (the
"Obligations"). The Debentures and Obligations were convertible until January
13, 1994 at a price of $0.80 per share. VPT received $470,000 in new equity
from the conversion of the Debentures and the Obligations, which resulted in
issuance of 589,361 Old VPT Shares (117,872 Post- Split Shares). In December
1994, VPT redeemed all outstanding Obligations. The principal balance of the
Debentures at June 30, 1998 totaled $928,000, which was automatically assumed
by TRII pursuant to the merger effective July 25, 1997. Debenture interest is
payable on June 30 and December 31 of each year. The Debentures are scheduled
to mature on June 30, 2003 and are redeemable at any time at 100% of the
principal amount together with accrued but unpaid interest.

At the same time as VPT's 1993 distribution to shareholders, VPT also
issued share purchase rights to shareholders of record on September 15, 1993.
One share purchase right was issued for each Old VPT Share held by holders of
400 Old VPT Shares. Four share purchase rights entitled the holder to purchase
one additional Old VPT Share at a purchase price of $0.73 until January 13,
1994. Holders of fewer than 400 Old VPT Shares received $0.01 per share cash
payment in lieu of the share purchase rights. VPT received $296,100 in cash
and new equity from the exercise of share purchase rights which resulted in the
issuance of 404,885 additional Old VPT Shares (80,977 Post-Split Shares).

Future distributions to stockholders will be dependent upon TRII's
income, financial condition, capital requirements, cash flow and other factors
deemed relevant by the TRII Board. Prior to the consolidation, the TRII
Board's policy was to make cash distributions to shareholders only to the
extent required to maintain TRII's qualification as a REIT. Following the
consolidation, the TRII Board intends to make quarterly cash distributions at a
rate of between one-third and one-half of funds from operations.

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<PAGE> 56
DESCRIPTION OF TRII CAPITAL STOCK

The authorized capital stock of TRII currently consists of 20,000,000
shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of
Special Stock, par value $0.01 per share, issuable in series (the "Special
Stock"). The Board of Directors of TRII has the authority to fix or establish
by resolution the voting power, dividend rate, liquidation preference and rights
and qualifications, limitations or restrictions of any class or series of
Special Stock. As of September 4, 1998, no shares of Special Stock were issued
and outstanding and no shares of such Special Stock have been designated. As of
September 4, 1998, there were outstanding 1,272,180 shares of TRII Common Stock.
The CUSIP number of the TRII Common Stock is 876287-10-3.

GENERAL

The TRII Common Stock has no conversion, redemption, preemptive or
subscription rights. The holders of TRII Common Stock are entitled to share,
pro rata, in accordance with the number of shares held by them, such dividends
as may be declared, from time to time, by the Board of Directors out of funds
legally available therefor. Any such dividends are payable after all
dividends, current and accrued, shall have been paid or declared and set apart
for payment of any then outstanding shares of various series of Special Stock,
to the extent that the Board of Directors shall have directed the dividends on
any such Special Stock shall be paid or declared and set apart for payment
before payment or setting apart for payment of dividends on the Common Stock.
All shares of TRII Common Stock presently issued and outstanding are fully paid
and nonassessable.

RIGHTS ON LIQUIDATION

Upon liquidation, dissolution or winding up of TRII, the holders of
TRII Common Stock are entitled to receive out of the assets of TRII, after
payment of all debts and liabilities and the amounts or preference, if any, for
each outstanding share of Special Stock, all remaining assets of TRII, pro
rata, in proportion to the number of shares of TRII Common Stock held by them.

VOTING RIGHTS

Each share of TRII Common Stock is entitled to one vote for all
purposes in all matters submitted to the stockholders. Cumulative voting in
the election of directors is not authorized by the Articles of Incorporation of
TRII. Similarly, there are no redemption rights, sinking fund provisions or
rights of conversion with respect to the TRII Common Stock and the holders of
TRII Common Stock do not have any preemptive rights to acquire additional
shares of TRII Common Stock.

TRANSFER AGENT

The transfer agent and registrar for TRII Common Stock is American
Stock Transfer and Trust Company, 40 Wall Street, 46th Floor, New York, New
York 10005.

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<PAGE> 57
COMPARISON OF CERTAIN RIGHTS OF
STOCKHOLDERS OF TRII AND SHAREHOLDERS OF NIRT

GENERAL

As a result of the Merger, holders of Shares of NIRT will become
holders of TRII Common Stock and the rights of all such former holders of
Shares of NIRT will thereafter be governed by the Articles of Incorporation and
Bylaws of TRII and the NRS. The rights of the holders of Shares of NIRT are
presently governed by the Declaration of Trust, as amended, the Trustees'
Regulations of NIRT and the California Corporation Code. The following
summary, which does not purport to be a complete statement of the general
differences among the rights of shareholders of NIRT and stockholders of TRII
sets forth certain differences between TRII's Articles of Incorporation and
Bylaws, on the one hand, and NIRT's Declaration of Trust and Trustees'
Regulations, on the other hand, and is qualified in its entirety by reference
to the complete text of those documents. For information as to how such
documents may be obtained, see "Available Information."

SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS; DIRECTOR DESIGNEES

TRII

The Articles of Incorporation of TRII set the initial number of
directors at four. The exact number of directors may be fixed or changed by
the affirmative vote of a majority of the entire Board of Directors, from time
to time, within the limits set by the Articles of Incorporation which are that
the TRII Board of Directors shall consist of not fewer than three nor more than
15 directors. Any vacancy on the TRII Board of Directors may be filled by a
vote of the majority of the directors then in office or by a sole remaining
director. Directors are to be elected annually by a plurality of the votes at
a meeting called for that purpose. The TRII Board is not presently
"classified" (i.e., does not have classes of directors elected for staggered
multi-year terms). Under Article Eleventh of the Articles of Incorporation of
TRII, each director of the Board may be removed only by the affirmative vote of
the holders of not less than two-thirds of the outstanding stock then entitled
to vote for the election of such director. Pursuant to the Merger Agreement,
at the Effective Time, the number of directors comprising the full TRII Board
of Directors will be increased by five to a total of nine in order to add five
of the independent NIRT Trustees to the TRII Board of Directors.

NIRT

The NIRT Declaration of Trust provides that the number of Trustees
shall be no less than five nor more than 15 as determined by the vote of the
Shareholders of NIRT or the Trustees. The NIRT Declaration of Trust also
requires that a majority of the Trustees be persons who are not affiliates of
the original sponsor of NIRT and one of NIRT's former advisors, or any of the
original sponsors, affiliates or successor entities. Under the NIRT
Declaration of Trust, "Affiliate" is defined "as to any person, any other
person who owns beneficially, directly or indirectly, one percent or more of
the outstanding capital stock, shares or equity interests of such person or of
any other person which controls, is controlled by or is under common control
with such person or is an officer, retired officer, director, employee, partner
or trustee of such person or of any other person which controls, is controlled
by or is under common control with, such person." Under the NIRT Declaration
of Trust, "Person" is defined to include "individuals, corporations, limited
partnerships, general partnerships, joint stock companies or associations,
joint ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other entities and governments and agencies and
political subdivisions thereof." Under the NIRT Declaration of Trust, Trustees
may be removed by vote or consent of the holders of a majority of the
outstanding Shares entitled to vote thereon, or by a majority of the remaining
Trustees.

MANAGEMENT LIABILITY

TRII

TRII has defined the liability of corporate officers and directors
with great precision. Under the Management Liability Provision (Article NINTH
of the Articles of Incorporation), the directors do not have personal liability
to TRII or its stockholders for monetary damages for any breach of their
fiduciary duties as directors (including, without limitation, any liability for
gross negligence in the performance of their duties), except (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law or (ii) for the payment of dividends in violation of NRS 78.300. By
precluding personal liability for certain breaches of fiduciary duty, including
grossly negligent business decisions in evaluating takeover proposals to
acquire TRII, the Management Liability Provision supplements indemnification
rights afforded under TRII's

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Articles of Incorporation and Bylaws which provide, in substance, that TRII
shall indemnify its directors, officers, employees and agents to the fullest
extent permitted by the NRS and other applicable laws.

The Articles of Incorporation provide that TRII "shall indemnify to
the fullest extent authorized or permitted by law (as now or hereafter in
effect) . . . to any person made or threatened to be made a party or witness
to any action, suit or proceeding (whether civil or criminal or otherwise) by
reason of the fact that such person is or was a director, officer, employee or
agent of TRII . . ." Further, the Bylaws provide that "[e]ach officer, director
or employee . . . shall be indemnified . . . to the full extent permitted
under Chapter 78 of the Nevada Revised Statutes . . . and other applicable
law." Pursuant to the NRS, a corporation may indemnify persons for expenses
related to an action, suit or proceeding, except an action by or in the right
of the corporation, by reason of the fact that such person is or was a
director, officer, employee or agent, if such person acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, if such person had no reasonable cause to believe his conduct was
unlawful. The expenses indemnified against in this provision include
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred connection with the action, suit or proceeding. The NRS
further provides that a corporation may indemnify persons for attorneys' fees
related to an action, suit or proceeding by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that such person is or
was a director, officer, employee or agent, if such person acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation. The corporation may also indemnify
directors for amounts paid for judgments and settlements in such a suit, but
only if ordered by a court after determining that the person is "fairly and
reasonably" entitled to indemnity.

The Management Liability Provision contained in the Articles of
Incorporation is analogous to Article VII of the Declaration of Trust of NIRT.
Article VII, however, explicitly exculpates Trustees, officers, employees and
agents of the Trust while the Management Liability Provision explicitly
exculpates only directors. Further, under the Declaration of Trust of NIRT, a
Trustee would not be indemnified for liability arising from gross negligence or
reckless disregard of duty, whereas a director of TRII may be indemnified for
such liability under the Articles of Incorporation.

The NRS and Nevada common law provide that a corporation's board of
directors owes certain fiduciary duties to the corporation and its
stockholders, including a duty of loyalty and a duty of care. The duty of care
generally considered to require directors to be sufficiently diligent and
careful in informing themselves regarding, and in deciding whether to take or
not to take, corporate action. The duty of care to which directors are bound
is that which ordinarily prudent and diligent men would exercise under similar
circumstances. The duty of loyalty is generally considered to require
directors to act in what they determine is good faith, at appropriate
consideration, to be in the best interest of the corporation and not to engage
in self-dealing. With respect to limitations on the personal liability of
directors to TRII or its stockholders, the Management Liability Provision is
more expansive than the provision in the Declaration of Trust that addresses
the limitations on the personal liability of Trustees to the Trust or its
shareholders. Consequently, the Management Liability Provision expands the
current limitation on personal liability of members of management to cover, in
addition, certain violations of their fiduciary duty of care rising to the
level of gross negligence or reckless disregard of duty. The Management
Liability Provision would not, however, insulate directors of TRII from
liability to TRII or its stockholders for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or (ii) the payment
of distributions in violation of NRS 78.300. The limitation of liability
applies only to claims by TRII or its stockholders and does not preclude or
limit recovery of damages by others, such as creditors.

The Management Liability Provision further provides that any repeal or
modification of Article NINTH would not increase the personal liability of any
director of TRII for any act or occurrence taking place prior to such repeal or
modification, or otherwise adversely affect any right or protection of a
director of TRII existing at the time of such repeal or modification.
Moreover, the Management Liability Provision provides that if Nevada law is, in
the future, amended to further eliminate or limit the liability of directors,
the liability of a director shall be eliminated or limited to the fullest
extent permitted by Nevada law, as so amended.

By protecting directors from assessments of monetary damages for
breaches of the duty of care, Management Liability Provision limits the
remedies available to a stockholder seeking to challenge a Board of Directors
decision protected by the Management Liability Provision, including, for
example, decisions relating to acquisition proposals or similar transactions.
However, it does not eliminate or change the duty of care. Accordingly, the
Management Liability Provision does not limit the availability of equitable
remedies, such as an injunction or rescission based on a director's breach of
the duty of care, although, as a practical matter, particular equitable
remedies may not be available (e.g., after a transaction has already been
effected).

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Additionally, the Bylaws of TRII provide indemnification to each officer,
director and employee of TRII to the fullest extent permitted by Chapter 78 of
the NRS and other applicable law.

The Management Liability Provision also provides that TRII shall
indemnify to the fullest extent permitted by law any person who is a party or
is made or threatened to be made a party or witness to any action, suit or
proceeding (whether civil or criminal or otherwise) by reason of the fact that
such person is or was a director, officer, employee or agent of TRII, or is or
was serving at the request of TRII, any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity. The
Management Liability Provision also provides that TRII shall advance expenses
to the fullest extent permitted by law to such indemnitee. The Management
Liability Provision further states that any amendment to or repeal of Article
NINTH would not diminish such indemnification with respect to any acts or
omissions occurring prior to such amendment or repeal. The indemnity
provisions of the Management Liability Provision and Section 78.751 of the NRS
are comparable except that Section 78.751 of the NRS provides that a
corporation shall make no indemnification in respect of any claim as to which a
final adjudication establishes that the director is liable to TRII or for
amounts paid in settlement to TRII unless and only to the extent that the court
in which the action was brought determines upon application that in view of all
the circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses.

As herein described, directors and officers of TRII are indemnified
against certain liabilities under provisions of the Articles of Incorporation
and Bylaws. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, TRII has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

In addition, the Management Liability Provision provides, as permitted
by the NRS, that TRII may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of TRII or another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against such expense, liability or loss, whether or not TRII would have the
power to indemnify such person against any such expense, liability or loss
under the NRS. Section 7.4 of the Trust's Declaration of Trust is analogous to
this portion of the Management Liability Provision. Although the Trust has had
the power to purchase such insurance, to date the Trust has not done so.

NIRT

The Trustees and officers of the Trust are indemnified under the
Declaration of Trust of NIRT against judgments, fines, amounts paid on account
of and reasonable expenses (including attorneys' fees) incurred in connection
with the defense of suits or proceedings in which a claim or liability against
a person is asserted by reason of the fact that he is a Trustee or officer of
the Trust, as the case may be. Currently, each of the Trustees of the Trust
has been offered contractual indemnification to the fullest extent permitted by
the Declaration of Trust or to the fullest extent not prohibited under
applicable law.

The Declaration of Trust of NIRT provides that the Trust shall
indemnify and reimburse any person made a party to any action, suit or
proceeding or against whom any claim or liability is asserted because he was or
is a Trustee, officer, employee or agent of the Trust for any judgments, fines,
amounts paid on account thereof (whether in settlement or otherwise) and
reasonable expenses, including attorneys' fees, actually and reasonably
incurred by him in defending against such claim, action, suit or proceeding, or
alleged liability or in connection with any appeal therein, except where the
claim, obligation or liability arose out of such person's willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.

SHAREHOLDER LIABILITY

Limitations on the potential personal liability of stockholders for
the acts and obligations applicable to TRII under Nevada law are comparable to
the limitations under California law and the Declaration of Trust of NIRT
applicable to Shareholders of NIRT with respect to the Trust's acts and
obligations. Though the TRII Articles of Incorporation do not expressly limit
stockholder liability, pursuant to Article 8, Section 3, of the Nevada
constitution and Section 78.225 of the NRS, stockholders are not personally
liable for the payment of a corporation's debts, except to the extent a
stockholder has not paid the consideration for which that stockholder's shares
were authorized to be issued or which was specified in a written subscription
agreement between the corporation and the stockholder. Similarly, the
Declaration of Trust of NIRT provides that Shareholders shall not be subject to
any personal liability for the acts or obligations of NIRT and that every
written undertaking made by NIRT shall contain a provision that such
undertaking is not binding on any Shareholder personally. Under Section 23001
of the California Corporations Code, no shareholder of a real

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estate investment trust like NIRT shall be personally liable for any
liabilities, debts or obligations of, or claims against, such real estate
investment trust. Section 23002 of the Corporations Code further provides that
Section 23001 applies to any real estate investment trust under the laws of
California with respect to liabilities, debts, obligations and claims wherever
arising. Under Section 23000 of the California Corporations Code, NIRT is
classified as a "real estate investment trust" for purposes of the foregoing
provisions of California law. Thus, the Incorporation Procedure and Merger
will not materially alter Shareholder liability in California. It should be
noted that the law regarding other states where NIRT does business might treat
Shareholders' liability in a different manner (i.e., impose liability) if a
court in such state were not to apply California law to such issue.

THE RESTRICTIONS ON RELATED-PARTY TRANSACTIONS PROVISION

TRII

Article FOURTEENTH of the Articles of Incorporation provides that TRII
shall not, directly or indirectly, contract or engage in any transaction with
(i) any director, officer or employee of TRII, (ii) any director, officer or
employee of the advisor, (iii) the advisor or (iv) any affiliate or associate
(as such terms are defined in Rule 12b-2 under the Exchange Act, as amended) of
TRII or any person identified in the foregoing clauses (i) through (iii) unless
(a) the material facts as to the relationship among or financial interest of
the relevant individuals or persons and as to the contract or transaction are
disclosed to or are known by the Board of Directors or the appropriate
committee thereof and (b) the Board of Directors or committee thereof
determines that such contract or transaction is fair to TRII and simultaneously
authorizes or ratifies such contract or transaction by the affirmative vote of
a majority of the independent directors of TRII entitled to vote thereon.
Article FOURTEENTH defines an "independent director" as one who is neither an
officer or employee of TRII nor a director, officer or employee of TRII's
advisor.

Article FOURTEENTH does not supplant Nevada law regarding
related-party transactions; rather, Article FOURTEENTH provides additional
protection against the possibility of related-party transactions unfavorable to
TRII. Under the NRS, a contract or transaction between a corporation and one
or more of its directors or officers, or between a corporation and any
corporation, firm or association in which one or more of its directors or
officers are directors or officers or are financially interested, is not void
or voidable solely for this reason, or solely because the director or officer
is present at the meeting of the board of directors or a committee thereof
which authorizes or approves the contract or transaction, because the vote or
votes of common or interested directors are counted for that purpose, provided
that one of the four requirements below is met:

(i) The fact of the common directorship, office or financial
interest is disclosed or known to the board of directors or committee
and noted in the minutes, and the board or committee authorizes,
approves or ratifies the contract or transaction in good faith by a
vote sufficient for the purpose without counting the vote or votes of
the common or interested director or directors.

(ii) The fact of the common directorship, office or financial
interest is disclosed or known to the stockholders, and they approve
or ratify the contract or transaction in good faith by a majority vote
of stockholders holding a majority of voting power. The votes of the
common or interested directors or officers must be counted in any such
vote of stockholders.

(iii) The fact of the common directorship, office or financial
interest is not disclosed or known to the director or officer at the
time the transaction is brought before the board of directors of the
corporation for action.

(iv) The contract or transaction is fair as to the corporation
at the time it is authorized or approved.

NIRT

The basic restriction on transactions between NIRT and related parties
contained in the Declaration of Trust of NIRT is similar to restrictions
contained in TRII's Articles of Incorporation and the NRS. Section 7.6 of the
Declaration of Trust provides that, absent fraud and except as otherwise
prohibited by the Declaration of Trust of NIRT, a contract, act or other
transaction between NIRT and any other person, or in which NIRT is interested,
shall be valid even though one or more of the Trustees or officers of NIRT (i)
are directly or indirectly interested in, or connected with, or are trustees,
partners, directors, officers or related officers of such other person or (ii)
individually or jointly with others, are parties to or directly or indirectly
interested in, or connected with, such contract, act or transaction. Further,
no Trustee or officer shall be under any disability from or have any liability
as a result of entering into any such contract, act or transaction provided
that (a) such

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interest or connection is disclosed or known to the Trustees and thereafter the
non-interested Trustee vote to authorize such contract, act or other
transaction: (b) such interest or connection is disclosed or known to the
Shareholders and thereafter such contract, act or transaction is approved by
the Shareholders; and (c) such contract, act or transaction is fair and
reasonable to NIRT at the time it is authorized by the Trustees or by the
Shareholders.

The Declaration of Trust of NIRT also contains specific restrictions
on certain transactions between NIRT and certain other persons. Although the
standards and procedures by which such transactions are permissible under
TRII's Articles of Incorporation and Nevada law, on the one hand, and the
Declaration of Trust of NIRT, on the other, are not dissimilar in the opinion
of the Board of Trustees, the Declaration of Trust of NIRT absolutely prohibits
certain transactions between the Trust and certain related parties, as
discussed below, regardless of the fairness of the terms of such transactions
and whether such transactions are authorized by a majority of unaffiliated
Trustees or approved by the Shareholders. Because TRII's Articles of
Incorporation contains no analogous prohibition, TRII may be permitted greater
flexibility to engage in a larger class of transactions with related parties
than the more limited class of transactions between NIRT and certain related
parties than is currently permitted by the Declaration of Trust of NIRT.
Nevertheless, the Board of Trustees believes that the restrictions in TRII
Nevada's Articles of Incorporation and the restrictions mandated by the NRS
offer adequate protection to ensure the fairness and propriety of transactions
between TRII and related parties.

Section 7.6 of the Declaration of Trust of NIRT states that NIRT
"shall not purchase or lease, directly or indirectly, any real property or
purchase any mortgage from the [a]dvisor or any affiliated person or from any
partnership in which any of the foregoing may also be a general partner. . ."
Further, NIRT shall not "sell or lease, directly or indirectly, any of its real
property or sell any mortgage to any of the foregoing persons." The original
sponsor or NIRT's advisor may make mortgage loans, purchase real property and
assume loans in connection therewith in its own name and temporarily hold title
thereto for the purpose of facilitating the acquisition of such real property
or mortgage loans or the borrowing of money or obtaining of financing for NIRT,
or for any other purpose related to NIRT's business, as long as the price for
which NIRT purchases such asset is no greater than the cost to the original
sponsor or NIRT's advisor and there is no difference in the interest rates of
the loans related thereto at the time acquired by the original sponsor or
NIRT's advisor and the time acquired by NIRT, nor any other benefit to the
original sponsor or NIRT's advisor arising out of such transaction apart from
compensation otherwise permitted by the prospectus pursuant to which NIRT
offered its Shares to the public.

The Declaration of Trust of NIRT further provides in Section 7.6 that:

"the Trust shall not, directly or indirectly, engage in any
transaction with any Trustee, officer, or employee of the Trust or any
director, officer, or employee of the [a]dvisor. . ., or of any
company or other organization of which any of the foregoing is an
affiliate, except for. . . (c) transactions with . . .the [a]dvisor or
Affiliates thereof involving loans, real estate brokerage services,
mortgage brokerage services, real property management services, the
servicing of mortgages, the leasing of real or personal property, or
other services, provided such transactions are on terms not less
favorable to the Trust than the terms on which unaffiliated parties
are then making similar loans or performing similar services for
comparable entities in the same area and are not entered into on an
exclusive basis.

The Declaration of Trust defines "Affiliate" as follows:

"[A]s to any person, any other person who owns beneficially, directly
or indirectly, 1% or more of the outstanding capital stock, shares, or
equity interests of such person or of any other person which controls,
is controlled by, or is under common control with, such person or is
an officer, retired officer, director, employee, partner, or trustee
of such person or of any other person which controls, is controlled
by, or is under common control with such person."

A vote by a NIRT shareholder FOR the Incorporation Procedure and the
Merger will also be deemed a vote FOR the approval of any amendments to NIRT's
Declaration of Trust to the extent necessary to remove any question that such
transaction is not a type of sale of Real Properties to an Affiliate of
Tarragon and to remove the prohibitions set forth therein so that the Merger
with TRII is otherwise permissible.

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STOCKHOLDER MANAGEMENT RELATIONS

THE CONSENT PROVISION. The Consent Provision (Article EIGHTH of the
TRII Articles of Incorporation) provides that stockholders of TRII may act
without a duly called annual or special meeting by written consent setting
forth the action to be taken and signed by stockholders having not less than
the minimum number of votes that would be necessary to authorize or take action
at a meeting at which all shares entitled to vote thereon were present and
voting. Under the NRS, unless otherwise provided in a corporation's articles
of incorporation, any action which is required or permitted to be taken at an
annual or special meeting of stockholders may instead be taken without a
meeting if a written consent setting forth the action to be taken is signed by
stockholders holding at least a majority of the voting power, or of such
greater proportion as is required for such action. Like the TRII Articles of
Incorporation, the Declaration of Trust of NIRT permits Shareholders of the
Trust to approve certain acts by written consent without a meeting if such
consent sets forth the action so taken and is signed by holders of the majority
of the Trust's outstanding Shares.

THE STOCKHOLDER MEETING PROVISION. The Stockholder Meeting Provision
(also set forth in Article EIGHTH of the TRII Articles of Incorporation)
provides that subject to the rights of the holders of any series of preferred
stock, special meetings of stockholders may be called only by the TRII Board,
the Chairman of the Board or the President of TRII. Stockholders of TRII may
not by themselves call a special meeting of stockholders. In contrast to the
Stockholder Meeting Provision, the Declaration of Trust of NIRT permits
Shareholders to call special meetings upon the written request of Shareholders
holding not less than 10% of the outstanding Shares of the Trust entitled to
vote in the manner provided in the Trustees' Regulations. The Trustees'
Regulations further provide that special meetings of Shareholders may be called
at any time by the President or the Trustees or by any two or more Trustees, or
by one or more Shareholders holding not less than two-thirds of the outstanding
Shares of the Trust.

The Stockholder Meeting Provision could have the effect of inhibiting
stockholder actions that require a meeting of stockholders unless the TRII
Board, the Chairman thereof or the President of TRII calls such a meeting.
Such meetings can impose considerable expenses upon TRII. The management of
TRII believes that the TRII Board will be in the best position to determine
those issues which are properly the subject of a special meeting of
stockholders. Stockholders have a full opportunity to make proper proposals at
duly convened stockholder meetings and to request that any such proposal be
presented for consideration to other stockholders in TRII's annual proxy
statement.

OTHER PROVISIONS REGARDING STOCKHOLDER-MANAGEMENT RELATIONS. TRII's
Bylaws provide, among other things, that any stockholder entitled to vote in
the election of directors of the TRII Board generally may nominate one or more
persons for election as directors at a meeting only if such stockholder gives
not fewer than 35, nor more than 60, days' prior written notice of intent to
make such nomination or nominations to the Secretary of TRII (or, if fewer than
45 days' notice or prior public disclosure of the meeting date is given or made
to stockholders, not later than 10 days following such notice or disclosure).
Each such notice must set forth (i) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated;
(ii) the class and number of shares of stock held of record, owned beneficially
and represented by proxy by such stockholder as of the record date for the
meeting and as of the date of such notice; (iii) a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iv) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons pursuant to which the nomination or nominations are to
be made by the stockholder; (v) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Commission; and (vi) the
consent of each nominee to serve as a director of TRII if so elected. The
Chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure, which is referred to
herein as the "Nomination Provision." Neither the NIRT Declaration of Trust
nor the Trustees' Regulations contains any provisions analogous to the
Nomination Provision.

Although the Nomination Provision does not give the TRII Board any
power to approve or disapprove of stockholder nominations for the election of
directors, the Nomination Procedure may have the effect of precluding a
nomination for the election of directors at a particular annual meeting if the
proper procedures are not followed and may discourage or deter a third party
from conducting a solicitation of proxies to elect its own slate of directors
or otherwise attempting to obtain control of TRII, even if such attempt might
be deemed by some stockholders to be beneficial to TRII and its stockholders.
The TRII Board is currently unaware of any controlling judicial precedent
addressing the validity of the Nomination Provision and, therefore, the matter
is not entirely free from doubt. The TRII Board nevertheless believes that
this provision is appropriate because it requires stockholders to give adequate
notice to allow orderly and considered evaluation of nominees and fair
elections.

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TRII's Bylaws also provide that, in addition to any other applicable
requirements, for business not specified in the notice of meeting or brought by
or at the direction of the Board of Directors of TRII to be properly introduced
by a stockholder, the stockholder must give not fewer than 35, nor more 60,
days' prior notice to the Secretary of TRII (or if fewer than 45 days' notice
or prior public disclosure of the meeting date is given or made to
stockholders, not later than 10 days following such event). This provision
(the "Stockholder Proposal Provision") does not preclude discussion by any
stockholder of business properly brought before any meeting. Each such notice
must set forth (i) a description of each item of business proposed to be
brought before the meeting; (ii) the name and address of the stockholder
proposing to bring such item of business before the meeting; (iii) the class
and number of shares of stock held of record or owned beneficially and
represented by proxy by such stockholder as of the record date for the meeting
and as of the date of such stockholder meeting notice; and (iv) all other
information that would be required to be included in a proxy statement filed
with the Commission. Neither the NIRT Declaration of Trust nor the Trustees'
Regulations contains any provisions analogous to the Stockholder Proposal
Provision.

Although the Stockholder Proposal Provision does not give TRII Board
of Directors or the Chairman of the meeting any powers to approve or disapprove
such matters, the Stockholder Proposal Provision may have the effect of
precluding the consideration of matters at a particular meeting if the proper
procedures are not followed, even if approval of such matters may be deemed by
some stockholders to be beneficial to TRII and its stockholders. TRII is
presently unaware of any controlling judicial precedent addressing the validity
of the Stockholder Proposal Provision and, therefore, the matter is not
entirely free from doubt. As with the Nomination Provision, the TRII Board
believes that the Stockholder Proposal Provision is appropriate because it
requires stockholders to give both management and other stockholders adequate
notice of such proposals and time to consider and respond to such proposals.

TRII's Bylaws also provide that annual meetings of stockholders shall
be held within the first eight months of the calendar year, or as soon as
practicable thereafter. Written or printed notice of annual and special
meetings of stockholders shall be given to stockholders entitled to vote not
less than 10, nor more than 60, days before the date of such meeting, unless
stockholders are to vote upon a proposed merger, consolidation or disposition
of substantially all of TRII's assets, in which case notice shall be given no
later than 20, nor more than 60, days before the date of such meeting. The
NIRT Declaration of Trust contains similar provisions except that pursuant to
the Declaration of Trust annual meetings of stockholders are to be held within
the first six months after the end of the preceding fixed year.

A full and correct statement of the affairs of TRII is to be prepared
annually and submitted at the annual meeting. Such annual reports will include
a balance sheet and a financial statement of operations for the preceding
fiscal year. TRII is subject to the information requirements of the Exchange
Act and the balance sheet and financial statements will be required by such Act
to be certified by independent certified public accountants, although the TRII
Bylaws do not impose such a requirement. The NIRT Declaration of Trust
provides that the Trustees must mail an annual report not later than 120 days
after the close of each fiscal year. The NIRT annual report must include a
statement of assets and liabilities and a statement of income and expenses of
the Trust, accompanied by the report of an independent certified public
accountant. The NIRT Board is also required to send shareholders interim
reports at least quarterly.

THE BUSINESS COMBINATION PROVISION. The Business Combination
Provision (Article TENTH of the TRII Articles of Incorporation) is designed to
encourage companies interested in acquiring TRII to negotiate with the TRII
Board and to give greater assurance to the stockholders of TRII that they will
receive fair and equitable treatment in the event of a "Business Combination
(as defined below) involving TRII or a subsidiary thereof with, or proposed by
or on behalf of "Interested Stockholder" (as defined below) or certain related
parties.

Under Article TENTH of the TRII Articles of Incorporation, a Business
Combination with, or proposed by or on behalf of, any Interested Stockholder or
any affiliate or associate (as such terms are defined in Rule 12b-2 promulgated
under the Exchange Act) of any Interested Stockholder or any Person who
thereafter would be an affiliate or associate of any Interested Stockholder
would require approval by the affirmative vote of not less than 66 2/3% of the
votes entitled to be cast on such transaction by the holders of all shares of
voting stock of TRII then outstanding (the "Voting Stock"), voting together as
a single class, excluding shares Beneficially Owned by such Interested
Stockholders. However, the two-thirds affirmative vote of stockholders is not
required if a majority of the members of the TRII Board or, in the case of such
Business Combination involving any affiliate of TRII, a majority of the TRII
Board including a majority of the members of the TRII Board who at the time are
neither officers or employees of TRII nor directors, officers or employees of
TRII's advisor, approves the Business Combination prior to the date on which
the Interested Stockholder became the beneficial owner of 20% or more of TRII's
shares (the "Acquisition Date"). If such prior TRII Board's approval is
obtained, the Business Combination will be subject to the applicable voting
requirement under the NRS.

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<PAGE> 64
Presently, for most types of Business Combination transactions on which a
stockholder vote would be required, the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote on the matter (including
shares beneficially owned by the Interested Stockholder) is required. If the
two-thirds vote required by the Business Combination Provision is obtained in
connection with a particular proposed Business Combination, approval of a
majority of the TRII Board will not be necessary. Under certain circumstances
a Business Combination will be presumed to be proposed by or on behalf of an
Interested Stockholder unless a majority of the members of the TRII Board
determines otherwise.

The NIRT Shares are presently listed on the NASDAQ National Market
and, if as expected, the TRII Common Stock is listed on the NASDAQ National
Market as a successor to the NIRT Shares after the effectiveness of the
Merger, then, in addition, certain rules of the NASDAQ National Market would
apply to TRII. These rules require prior stockholder approval as a
prerequisite to the NASDAQ National Market approval of applications to list
additional shares where such shares are to be issued in any transaction or
series of related transactions (i) as sole or partial consideration for an
acquisition of the stock or assets of another company (a) if any individual
director, officer or substantial stockholder of the listed company has a 5% or
greater interest (or such persons collectively have a 10% or greater interest),
directly or indirectly, in the company or assets to be acquired or in the
consideration to be paid in the transaction and the present or potential
issuance of common stock, or securities convertible into common stock, could
result in an increase in outstanding common shares of 5% of more; or (b) where
the present or potential issuance of common stock, or securities convertible
into common stock, could result in an increase in outstanding common shares of
20% or more; (ii) in connection with (a) the sale or issuance of common stock
(or securities convertible into common stock) at a price less than the greater
of book or market value which together with sales by officers, directors or
principal stockholders of the company equal 20% or more of presently
outstanding common stock or (b) the sale or issuance by the company of common
stock (or securities convertible into common stock) equal to 20% or more of
presently outstanding stock for less than the greater of book or market value
of the stock; or (iii) the net effect of which is that a listed company is
acquired by an unlisted company even though the listed company is the nominal
survivor.

TRII presently contemplates seeking to list the TRII Common Stock
(including the shares to be issued in connection with the Merger and the
acquisition of Tarragon) on the NYSE. In the Merger Agreement, TRII has agreed
to prepare and submit to the NYSE a listing application covering the TRII
Common Stock including the shares of TRII Common Stock to be issued in
connection with the Merger Agreement and the acquisition of Tarragon. If such
application is approved, then following the consummation of the Merger, TRII's
Common Stock will be de-listed from the NASDAQ SmallCap Market. In any event,
NIRT's shares will be de-listed from the NASDAQ National Market.

An "Interested Stockholder" is defined in the Business Combination
Provision to include any Person who (i) is or has announced or publicly
disclosed a plan or intention to become the Beneficial Owner of 20% or more of
the Voting Stock or (ii) is an affiliate or associate of TRII and at any time
within the two-year period immediately prior to the date in question was the
Beneficial Owner of 20% or more of the Voting Stock. A person is the
"Beneficial Owner" of Voting Stock that such person and certain related
parties, directly or indirectly, own or have the right to acquire, hold, vote
or dispose of. TRII, any of its subsidiaries and certain profit-sharing and
employee-benefit plans are among the entities specifically excepted from the
definition of "Interested Stockholder." Currently TRII is not aware of any
Shareholder or group of Shareholders that would be an "Interested Stockholder"
subsequent to the Merger, except William S. Friedman and Lucy N. Friedman (see
"Principal Shareholders and Management").

A "Business Combination" includes the following transactions with, or
proposed by or on behalf of, any Interested Stockholder or certain related
parties: (i) a merger or consolidation of TRII or any subsidiary with an
Interested Stockholder or certain related parties; (ii) the sale, lease,
exchange, mortgage, pledge, transfer or other disposition by TRII or a
subsidiary of any assets or securities to an Interested Stockholder or certain
related parties, or any other arrangement with or for the benefit of an
Interested Stockholder or any such related party (including investments, loans,
advances, guarantees, extensions of credit, security interests and joint
venture participation) that (except in certain circumstances), together with
all other such arrangements (including all contemplated future events), involve
assets or securities having a value (or involving aggregate commitments) of $5
million or more or constitute more than 5% of the book value of the total
assets (in the case of transactions involving assets or commitments other than
capital stock) or 5% of the stockholders' equity (in the case of transactions
in capital stock) of the entity in question, as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing at the time
the stockholders of TRII would be required to approve or authorize such
transaction; (iii) the adoption of any plan or proposal for the liquidation or
dissolution of TRII; (iv) any reclassification of securities recapitalization,
merger with a subsidiary or other transaction which has the effect, directly or
indirectly, of increasing an Interested Stockholder's proportionate share of
the

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<PAGE> 65
outstanding capital stock of TRII or a subsidiary; or (v) any agreement or
arrangement providing for any one or more of the actions specified in the
foregoing clauses (i) through (iv).

By providing that the two-thirds vote requirement would not be invoked
if a majority of the TRII Board approves a Business Combination prior to the
Acquisition Date, the Business Combination Provision is intended to encourage
companies interested in acquiring TRII to negotiate in advance with the TRII
Board. The Business Combination Provision may discourage attempts to take over
TRII by a principal stockholder. By requiring a two-thirds vote of
stockholders other than the relevant Interested Stockholder to approve a
Business Combination not approved by the TRII Board, the Business Combination
Provision may enable a minority of TRII's stockholders to prevent consummation
of a Business Combination. To the extent that the Business Combination
Provision discourages tender offers or the accumulation of TRII Common Stock by
a third party, stockholders may be deprived of higher market prices for their
stock which may result from such events.

Article TENTH effectively allows the TRII Board to waive the
requirement that any Business Combination with, or proposed by or on behalf of,
any Interested Stockholder requires the approval of not less than two-thirds of
the votes cast by the holders of all shares of Voting Stock (excluding Voting
Stock owned by such Interested Stockholder). If a majority of the members of
the TRII Board or, in the case of Business Combination involving any affiliate
or TRII, a majority of the TRII Board including a majority of the members of
the Board of Directors who at the time are neither officers or employees of
TRII nor directors, officers or employees of TRII's advisor, approves such
Business Combination prior to the Acquisition date, such Business Combination
requires only such affirmative vote, if any, as is required by applicable law
or by any other provision of the Articles of Incorporation or Bylaws or by any
agreement with any national securities exchange.

The NRS imposes generally similar restrictions upon certain business
combinations with interested stockholders of a Nevada corporation, but, among
other differences, the NRS defines the terms "business combination" and
"interested stockholder" differently and, unlike Article TENTH of the Articles
of Incorporation, Nevada law subjects certain business combinations with
interested stockholders to a three-year moratorium unless specified conditions
are met. The NRS prohibits a Nevada corporation from engaging in a "business
combination" with an "interested stockholder" for three years following the
date that such person becomes an "interested stockholder." With certain
exceptions, an "interested stockholder" is a person or group that owns 10% or
more (compared to more than 20% under Article TENTH of the TRII Articles of
Incorporation) of such corporation's outstanding voting stock, or is an
affiliate or associate of the corporation and was the beneficial owner of 10%
or more of such voting stock at any time within the previous three years.

However, a Nevada corporation may elect not to be governed by the
Business Combination provisions of Nevada law by expressly electing not to be
governed by such statutes in the original Articles of Incorporation or an
amendment thereto. Because the TRII Board believes that the Business
Combination Provision offers sufficient protection, Article TENTH of the TRII
Articles of Incorporation contains a provision expressly electing not to be
governed by NRS statutes governing business combinations with interested
stockholders (NRS Sections 78.411 through 78.444, inclusive) and acquisitions
of a controlling interest (NRS Sections 78.378 through 78.3793, inclusive).

California has adopted legislation that has certain anti-takeover
implications. Although the California Corporations Code does not specifically
apply to business trusts, certain of its provisions could be applied to
business trusts by analogy. If the proposed Incorporation Procedure and Merger
is adopted, such legislation will not apply to NIRT.

Sections 1101 and 407 of the California General Corporation Law
require that holders of nonredeemable common stock receive nonredeemable common
stock in a merger of the corporation with the holder of more than 50% but less
than 90% of such common stock or its affiliate unless either (i) all of the
holders of such common stock consent to the transaction or (ii) the terms and
conditions of the transaction and the fairness of such terms and conditions
have been approved by the appropriate state regulatory agency. This provision
of California law may have the effect of making a "cash-out" merger by a
majority shareholder more difficult to accomplish. Nevada law has no
comparable provision. California law also requires that shareholders be
provided with a fairness opinion under certain circumstances when a tender
offer or a proposal for a reorganization or for a sale of assets is made by an
interested party. Again, Nevada law has no provision comparable to such
provision.

THE EVALUATION PROVISION. Article TWELFTH of the TRII Articles of
Incorporation (the "Evaluation Provision") permits the TRII Board to take into
account all factors it deems relevant in evaluating, among other things, tender
offers, proposals of business sales or combinations and proposals for corporate
liquidation or reorganizations involving TRII, including the potential impact
of any such transaction on TRII's creditors,

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<PAGE> 66
partners, joint venturers, other constituents or TRII and the communities in
which its' offices, other establishments or investments are located
(collectively, "Non-Stockholder Constituencies") and on TRII's continuing
status as a qualified REIT under the Code.

The Evaluation Provision does not specify the relative weight that the
TRII Board should give to the various factors. Under the Evaluation Provision,
the TRII Board might, for example, take into account whether a potential
acquiror proposed to use TRII's assets to finance an acquisition of TRII and
the effect that such use of TRII's assets might have on its Non-Stockholder
Constituencies, if any, and its REIT status. The TRII Board believes that
consideration of the effect of a business combination proposal on TRII's
Non-Stockholder Constituencies and REIT status may help to maintain or improve
the financial condition of TRII and, as a result, confer related benefits upon
its stockholders. However, because the Evaluation Provision allows the TRII
Board to consider numerous judgmental or subjective factors affecting such a
proposal, including certain non-financial matters, their consideration may lead
the TRII Board to oppose a transaction that, as an exclusively financial
matter, may be attractive to stockholders.

The NIRT Declaration of Trust does not contain any provision similar
to the Evaluation Provision. Courts construing California law have held that
the decisions of California corporate directors in evaluating takeover bids
generally are protected by the "business judgment rule," under which a court
will not question the directors' business judgment so long as they act in
accordance with their fiduciary duties to the corporation and to all of the
stockholders. The NIRT Board is currently unaware of any judicial precedent
construing California law that addresses the question of whether corporate
directors (and, by analogy, trustees of unincorporated business trusts) may
consider the interests of Non-Stockholder Constituencies or whether such
consideration of such interests would be protected by the "business judgment
rule."

The NRS expressly provides that directors in evaluating acquisition
proposals may consider certain interests of Non-Stockholder Constituencies
including (i) the interests of the corporation's employees, suppliers,
creditors and customers; (ii) the economy of the state and nation; (iii) the
interests of the community and of society; and (iv) the long-term as well as
short-term interests of the corporation and its stockholders, including the
possibility that these interests may be best served by the continued
independence of the corporation.

ESTABLISHMENT OF SUBSIDIARIES

Under Section 3.5 of the NIRT Declaration of Trust, a vote of
two-thirds of the Trustees and holders of a majority of the Shares voting at a
meeting called for such purpose is required for the formation of a subsidiary
to hold all or part of the Trust's assets. Shareholders, by approving the
Incorporation Procedure, will be ratifying the actions of the Trustees in
forming the California Corporation. There exists no comparable provision in
the TRII Articles of Incorporation.

AMENDMENT PROVISIONS

The Bylaw Amendment Provision and the Articles of Incorporation
Amendment Provision (each as defined below) generally require a super-majority
vote for changes in the governing documents of TRII submitted to stockholders.
Although those provisions may by themselves have a deterrent effect on some
potential acquisitions of TRII, they are designed primarily to ensure that an
acquiror cannot circumvent the acquisition safeguards contained in the
governing documents. The TRII Board recognizes that the amendment provisions
may serve to entrench current management; however, for the same reasons the
Trustees deem acquisition safeguards to be in the best interest of TRII and its
stockholders, the amendment provisions are required to buttress those
safeguards.

THE BYLAW AMENDMENT PROVISION. Article SEVENTEENTH of the Articles of
Incorporation (the "Bylaw Amendment Provision") expressly authorizes TRII's
Board to make, adopt, alter, amend, change or repeal TRII's Bylaws. The Bylaw
Amendment Provision further states that the stockholders of TRII may not make,
adopt, alter, amend, change or repeal TRII's Bylaws except upon the affirmative
vote of holders of not less than 75% of the outstanding stock of TRII entitled
to vote thereon. The TRII Board is currently unaware of any controlling
judicial precedent under the NRS addressing the validity of this aspect of the
Bylaw Amendment Provision and, therefore, the matter is not entirely free from
doubt. This super-majority voting provision could enable holders of only 26%
of the Nevada Common Stock to prevent holders of a substantial majority of the
TRII Common Stock who do not approve of certain provisions of the TRII Bylaws
from amending or repealing such provisions. In this regard, it should be noted
that certain directors, executive officers of TRII and persons and entities
with which they are affiliated have collective beneficial ownership of 31% of
the Shares (as of August 21, 1998). Nevertheless, the TRII Board believes that
the Bylaw Amendment Provision helps to ensure continuity with respect to the
management of the day-to-day operations of TRII. The provision

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<PAGE> 67
may also prevent a purchaser who acquires a majority of the shares of the TRII
Common Stock from adopting Bylaws that are not in the best interest of the
minority stockholders or repealing Bylaws that are in such stockholders'
interest.

6003 Section 3.3 of the NIRT Declaration of Trust vests the power to make,
adopt, amend or repeal Trustees' Regulations in the NIRT Board. Nevertheless,
the Trustees' Regulations (at Article VII thereof) provide that they may be
amended or repealed either by a two-thirds vote of Shareholders or by the NIRT
Board.

THE ARTICLES OF INCORPORATION AMENDMENT PROVISION. Article
SEVENTEENTH of the TRII Articles of Incorporation (the "Articles of
Incorporation Amendment Provision") requires the affirmative vote of at least
75% of all of the Voting Stock to alter, amend or repeal the Bylaw Amendment
Provision, Consent Provision, Stockholder Meeting Provision, Business
Combination Provision, Director Removal Provision, Evaluation Provision and
Articles of Incorporation Amendment Provision, unless a majority of the TRII
Board approves such alteration, amendment or repeal.

In contrast, the NIRT Declaration of Trust generally may be amended
(i) by Shareholders holding a majority of the outstanding Shares entitled to
vote thereon or (ii) by the Trustees without the vote or consent of
Shareholders to the extent they deem it necessary to cure any ambiguity or
inconsistency therein or to conform the NIRT Declaration of Trust to REIT
requirements or other applicable law, unless, in either case, the proposed
amendment would change certain rights with respect to any outstanding
securities of NIRT, in which case the NIRT Declaration of Trust requires the
vote or consent of the holders of two-thirds of the outstanding Shares entitled
to vote thereon.

Although the NIRT Declaration of Trust requires a super-majority vote
for certain proposed amendments, the TRII Articles of Incorporation Amendment
Provision makes it more difficult for stockholders to make changes in the TRII
Articles of Incorporation, including changes designed to enable holders of a
majority of the TRII Common Stock to obtain control over TRII. However, the
Articles of Incorporation Amendment Provision may help protect minority
stockholders from disadvantageous changes supported by less than a substantial
majority of other stockholders.

THE FOREGOING IS ONLY A SUMMARY OF THE SIMILARITIES AND DIFFERENCES
BETWEEN TRII'S ARTICLES OF INCORPORATION AND BYLAWS, ON THE ONE HAND, AND
NIRT'S DECLARATION OF TRUST AND TRUSTEES' REGULATIONS, ON THE OTHER, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXTS OF THOSE
DOCUMENTS.

OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT

As of September 4, 1998, according to the Common Stock transfer records
of TRII and the Share transfer records of NIRT and other information available
to each of TRII and NIRT, (i) the following persons were known to be beneficial
owners of more than 5% of the TRII Common Stock and the NIRT Shares,
respectively, and (ii) the executive officers and current directors or Trustees
and all officers and directors or Trustees as a group beneficially owned the
following TRII Common Stock and/or NIRT Shares:

<TABLE>
<CAPTION>
TRII COMMON STOCK NIRT SHARES
------------------------------------------ ------------------------------------------
Name of Amount and Nature of Approximate Amount and Nature of Approximate
Beneficial Owner Beneficial Ownership Percent of Class(a) Beneficial Ownership Percent of Class(2)
<S> <C> <C> <C> <C>
Lucy N. Friedman 385,603 30% 1,255,232 33.6%
(b)(c)(d)(e)(f) (2)(3)(4)(5)(6)

William S. Friedman 385,603 30% 1,255,232 33.6%
(b)(c)(d)(e)(f) (3)(4)(5)(6)(7)

Chester Beck 3,500 (h) * 2,288 (14) *

Irving E. Cohen 240 (j) * 6,940 (9) *

Willie K. Davis 2,700 (g) * -0-

Dan L. Johnston -0- 7,055 (10) *

Lance Liebman -0- 7,545 (12) *

Sally Hernandez-Pinero -0- 6,940 (13) *

Lawrence G. Schafran -0- 6,940 (13) *

Raymond V. J. Schrag 15,000 (j) 1.2% 14,726 (8) *

Michael E. Smith 2,500 (i) * -0-

Carl B. Weisbrod 1,000 * 7,501 (11) *

All TRII directors and
Executive Officers as a group 390,303
(7 individuals) (b)(c)(d)(e)(f)(g)(h)(i) 30.7%

All NIRT Trustees and Executive 1,312,879 35.1%
Officers as a group (9 (2)(3)(4)(5)(6)(7)(8)
individuals) (9)(10)(11)(12)(13)
</TABLE>

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- ----------------

* Less than 1%

(a) Percentages are based upon 1,272,180 shares of TRII Common Stock
outstanding at September 4, 1998.

(b) Includes 1,300 shares of TRII Common Stock owned by William S.
Friedman personally. Also includes 272,007 shares of TRII Common
Stock owned by William S. Friedman's wife, Lucy N. Friedman. Mrs.
Friedman has complete control over the Shares of TRII Common Stock
owned by her and Mr. Friedman disclaims beneficial ownership of such
shares. 147,000 of such shares have been pledged as collateral for
bank loans.

(c) Includes 29,750 shares of TRII Common Stock owned by Tarragon Capital
Corporation, of which Lucy N. Friedman and William S. Friedman are
executive officers and directors and Lucy N. Friedman is a
shareholder. 25,000 of such shares have been pledged as collateral
for bank loans.

(d) Includes 54,546 shares of TRII Common Stock owned by Tarragon
Partners, Ltd., of which Lucy N. Friedman and William S. Friedman are
limited partners and Tarragon Capital Corporation is the general
partner.

(e) Includes 26,000 shares of TRII Common Stock owned by Beachwold
Partners, L.P., a Texas limited partnership, of which William S. and
Lucy N. Friedman are the general partners and their four children are
the limited partners.

(f) Does not include 7,750 shares of TRII Common Stock owned by Tanya
Friedman, or 1,000 shares of TRII Common Stock owned by Ezra Friedman,
Mr. Friedman's adult children, as to which shares Mr. Friedman
disclaims any beneficial ownership; does include 2,000 shares of TRII
Common Stock owned by Mr. Friedman's minor sons, Gideon and Samuel.

(g) Includes 1,200 shares of TRII Common Stock owned by Mr. Davis
personally and 1,500 shares covered by four separate presently
exercisable options.

(h) Includes 2,000 shares of TRII Common Stock owned by Mr. Beck
personally and 1,500 shares covered by four separate presently
exercisable options.

(i) Includes 1,000 shares of TRII Common Stock owned by Mr. Smith
personally and 1,500 shares covered by four separate presently
exercisable options held by Mr. Smith.

(j) The shares are owned personally by the named individual.

(1) Percentages are based upon 3,737,171 NIRT Shares outstanding at
September 4, 1998.

(2) Includes 18,465 NIRT Shares owned by Lucy N. Friedman's husband,
William S. Friedman.

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(3) Includes 797,493 NIRT Shares owned by Lucy N. Friedman, of which
44,000 NIRT Shares serve as collateral for loans from a bank. In
addition, includes 18,272 NIRT Shares and 18,428 NIRT Shares owned by
Lucy N. Friedman's minor sons, Gideon and Samuel Friedman; Lucy
Friedman has control of such Shares. Also includes 263,760 NIRT
Shares owned by Beachwold Partners, L.P. in which William S. Friedman
is the general partner and his wife Lucy N. Friedman and their four
children are the limited partners.

(4) Does not include 45,434 NIRT Shares owned by Lucy N. Friedman's adult
son Ezra Friedman, and 29,743 NIRT Shares owned by Lucy N. Friedman's
adult daughter, Tanya Friedman. Mrs. Friedman disclaims beneficial
ownership of such NIRT Shares.

(5) Includes 35,052 NIRT Shares owned by a trust for the benefit of the
children and grandchildren of Samuel Friedman, deceased, William S.
Friedman's father, for which Robert A. Friedman and Gerald C. Friedman
(siblings of William S. Friedman), are the trustees; such shares are
distributable per stirpes to two of Mr. Friedman's siblings and his
four children; Lucy N. Friedman disclaims beneficial ownership of such
NIRT Shares. Also includes 17,322 NIRT Shares held by William S.
Friedman Grantor Trust (of which Mrs. Friedman is the Trustee) for the
benefit of Lucy N. Friedman and her children.

(6) Includes 47,456 NIRT Shares owned by Tarragon Capital Corporation, of
which William S. Friedman is an executive officer and Lucy N. Friedman
is an executive officer and director and 38,984 NIRT Shares owned by
Tarragon Partners, Ltd., of which Lucy N. Friedman and William S.
Friedman are limited partners.

(7) Mr. Friedman personally owns 18,465 NIRT Shares.

(8) Includes 7,786 NIRT Shares owned by Raymond V.J. Schrag directly and
6,940 NIRT Shares covered by four separate presently exercisable
options; does not include 1,330 NIRT Shares owned by Mr. Schrag's wife
as custodian for his two children as to which Mr. Schrag disclaims any
beneficial ownership.

(9) Includes 3,630 NIRT Shares owned by Irving E. Cohen directly and 3,310
NIRT Shares covered by three separate presently exercisable options.

(10) Includes 115 NIRT Shares owned by Dan L. Johnston directly and 6,940
NIRT Shares covered by four separate presently exercisable options.

(11) Includes 561 NIRT Shares owned by Carl B. Weisbrod directly and 6,940
NIRT Shares covered by four separate presently exercisable options;
Mr. Weisbrod also owns 1,000 shares of TRII Common Stock.

(12) Includes 605 NIRT Shares owned by Lance Liebman directly and 6,940
NIRT Shares covered by four separate presently exercisable options.

(13) Includes 6,940 NIRT Shares covered by four separate presently
exercisable options.

(14) Mr. Beck personally owns 2,288 NIRT Shares.

MANAGEMENT

TRII DIRECTORS

The affairs of TRII are managed and controlled by a Board of Directors
presently consisting of four members who all have been named initially as
directors in the TRII Articles of Incorporation and elected at the Annual
Meeting of Shareholders of VPT held on July 10, 1997. Directors are elected at
each Annual Meeting of Stockholders or appointed by the incumbent Board of
Directors and serve until the next Annual Meeting or until their respective
successor has been duly elected.

Set forth below is certain information about the directors of TRII
including their ages, terms of service, all positions and offices with TRII,
NIRT or Tarragon Realty Advisors, Inc. ("Tarragon"), other principal
occupations, business experience and directorships with other companies during
the last five years or more. The designation "Affiliated" when used below with
respect to a director means that the director is an officer, director or
employee of Tarragon or an officer of TRII. The designation "Independent" when
used below with respect

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to a director means the director is neither an officer or employee of TRII nor
a director, officer or employee of Tarragon, although TRII may have certain
business or professional relationships with such director as discussed below
under "Certain Business Relationships and Related Transactions - TRII."

NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS

<TABLE>
<CAPTION>
AGE
<S> <C>
CHESTER BECK: director since April 1997; Trustee of VPT May 1995 to July 1997 68
(Independent)

President (since March 1995) of Highland Funding Corp., a mortgage
brokerage firm; National Sales Manager (January 1994 to March 1995) of
Columbia Equities Limited, a real estate financing entity; Senior Vice
President (April 1992 to January 1994) of Peregine Mortgage Company,
Inc., an FHA approved mortgagee specializing in multifamily and health
care project financing; Senior Vice President (1988 to March 1992) of
Related Mortgage Corporation, an FHA Co-Insurer and Approved
Mortgagee.

WILLIE K. DAVIS: director since April 1997; Trustee of VPT October 1988 to July
1997 (Independent) 66

President (1971 to 1985) and Chairman and 50% shareholder (since 1985)
of Mid-South Financial Corporation, holding company for Mid-South
Mortgage Company and Gibbs Mortgage Company; President (1978 to 1995)
and Chairman and sole shareholder (since December 1995) of FMS, Inc.,
a property management and real estate development firm; President
(1983 to February 1990) of BVT Management Services, Inc., a real
estate advisory and tax service firm; Director (since 1987) of
Southtrust Bank of Middle Tennessee; Trustee and Treasurer (since
1986) of Baptist Hospital, Inc., a Tennessee general welfare
not-for-profit corporation; and Trustee or Director (October 1988 to
March 7, 1995) of Continental Mortgage and Equity Trust ("CMET");
Income Opportunity Trust ("IORT"); Transcontinental Realty Investors,
Inc. ("TCI"); and Trustee (October 1988 to March 31, 1995) of NIRT.

WILLIAM S. FRIEDMAN: director since April 1997; Trustee of VPT March 1988 to 54
July 1997 (Affiliated)

Chief Executive Officer (since December 1993), President (since
December 1988), Acting Chief Financial Officer (May 1990 to February
1991), Treasurer (August to September 1989) and Acting Principal
Financial and Accounting Officer (December 1988 to August 1989) of
TRII (and its predecessor) and NIRT; Trustee or Director (March 1988
to February 1994), Chief Executive Officer (December 1993 to February
1994), President (December 1988 to February 1994), Acting Chief
Financial Officer (May 1990 to February 1991), Treasurer (August to
September 1989) and Acting Principal Accounting Officer (December 1988
to August 1989) of CMET, IORT and TCI; Director and Chief Executive
Officer (since December 1990) of Tarragon; President (February 1989 to
March 1993) and Director (February to December 1989) of Basic Capital
Management, Inc. ("BCM"), the Advisor to VPT and NIRT (March 1989 to
March 1994); General Partner (1987 to March 1994) of Syntek Asset
Management, L.P. ("SAMLP"), which is the General Partner of National
Realty, L.P. ("NRLP") and National Operating, L.P. ("NOLP"); Director
and President (March 1989 to February 1994) and Secretary (March 1989
to December 1990) of Syntek Asset Management, Inc. ("SAMI"), the
Managing General Partner of SAMLP and a corporation owned by BCM;
President (1982 to October 1990) of Syntek Investment Properties, Inc.
("SIPI"), which has invested in, developed and syndicated real estate
through its subsidiaries and other related entities since 1973;
Director and President (1982 to October 1990) of Syntek West, Inc.
("SWI"); Vice President (1984 to October 1990) of Syntek Finance
Corporation; Director (1981 to December 1992), President (July 1991 to
December 1992), Vice President and Treasurer (January 1987 to July
1991) and Acting Chief Financial Officer (May 1990 to February 1991)
of American Realty Trust, Inc. ("ART"); practicing Attorney (since
1971) with the Law Offices of William S. Friedman; Director and
Treasurer (November 1989 to February 1991) of Carmel Realty Services,
Inc. ("CRSI"); Limited Partner (January 1991 to December 1992) of
Carmel Realty Services, Ltd. ("Carmel, Ltd."). Also see "Litigation
and Claims Involving Mr. Friedman Related to Southmark Corporation"
below.
</TABLE>

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<TABLE>
<S> <C>
MICHAEL E. SMITH: director since April 1997; Trustee of VPT from October 55
1988 to August 1991 and from May 1995 to July 1997 (Independent)

Lawyer and Assistant Professor of Law (since August 1995), University
of Wisconsin, Madison, Wisconsin; Research Director of the Remington
Center at the University of Wisconsin Law School (since 1997);
President (1988 to 1995) and Director (1978 to 1995) of the Vera
Institute of Justice, a New York not- for-profit corporation concerned
with the administration of justice; Trustee of Prosecuting Attorney's
Research Council, Inc. (1987 to 1995), New York Lawyers for the Public
Interest (1986 to 1990), Housing and Services, Inc. (1986 to 1993),
Manhattan Bowery Corporation, Inc. (1978 to 1995), Center for
Alternative Sentencing and Employment Services, Inc., formerly the
Court Employment Project, Inc. (1978 to 1995), and New York City
Criminal Justice Agency, Inc. (since 1978); Trustee or Director
(October 1988 to March 1992) of IORT, CMET and TCI; and Attorney at
Law (since 1971).
</TABLE>

TRUSTEES OF NIRT

On May 4, 1994, NIRT, together with CMET, IORT, the predecessor of
Income Opportunity Realty Investors, Inc., a Nevada corporation ("IORI"), and
TCI, entered into a Modification of Stipulation of Settlement dated April 27,
1994 (the "Modification"), which settled subsequent claims of breaches of the
settlement which were asserted by plaintiffs and modified certain provisions of
a 1990 settlement of the action styled Olive, et al v. National Income Realty
Trust, et al (the "Olive Case"). The original settlement, approved April 23,
1990 by the Court, related to the operation and management of each of the
entities. The Modification was approved by the Court on December 12, 1994 and
became effective January 11, 1995.

The Modification, among other things, provided for the resignation of
certain trustees, the addition of at least three new, unaffiliated members to
be appointed to the NIRT Board, and set forth new requirements for approval of
any transactions with affiliates over the next five years. Under the
Modification, NIRT, the other entities, and their shareholders released the
defendants from any claims relating to the plaintiffs' allegations. NIRT and
other entities also agreed to waive any demand requirement for plaintiffs to
pursue claims on behalf of each of them against certain persons or entities.
The Modification also requires that any shares of NIRT held by Mr. Friedman or
his affiliates shall be voted (i) in favor of the re-election of all current
Board members that stand for re-election during the two calendar years
following January 11, 1995, the effective date of the Modification, and (ii) in
favor of all new Board members appointed pursuant to the terms of the
Modification that stand for re-election during the three calendar years
following January 11, 1995. The Modification also terminated a number of
provisions of the original Stipulation of Settlement, including the requirement
that NIRT or the other entities maintain a Related Party Transaction Committee
and a Litigation Committee of the Board.

Pursuant to the requirements (and in anticipation of the
effectiveness) of the Modification, NIRT did not hold an Annual Meeting of
Shareholders in 1994, John A. Doyle (a Trustee elected in February 1994)
resigned as a Trustee on April 22, 1994, Ted P. Stokely (a Trustee elected in
April 1990) resigned as a Trustee in August 1994, A. Bob Jordan (a Trustee
elected in October 1992) resigned as a Trustee in June 1994, Bennett B. Sims (a
Trustee elected in April 1990) resigned as a Trustee in August 1994, Geoffrey
C. Etnire (a Trustee elected in January 1993) ceased to be a Trustee on March
9, 1995, and Willie K. Davis (a Trustee elected in October 1988) retired as a
Trustee effective March 31, 1995. Carl B. Weisbrod (a Trustee since February
1994) was elected Chairman of the Board on March 9, 1995, to replace William S.
Friedman, who remained as President, Chief Executive Officer and Trustee of
NIRT. During the period from May 1994 to March 9, 1995, the NIRT Board
appointed four new, independent Trustees to replace a number of those who
resigned and the number of members of the Board was reduced from ten at
December 31, 1993 to eight at March 31, 1995. Independent Trustees appointed
were Irving E. Cohen (June 2, 1994), Sally Hernandez-Pinero (May 19, 1994),
Lance Liebman (March 9, 1995), and Lawrence G. Schafran (March 9, 1995).
Messrs. Williams S. Friedman, Dan L. Johnston, Raymond V.J. Schrag and Carl B.
Weisbrod continued as Trustees.

The affairs of NIRT are managed and controlled by the NIRT Board
presently consisting of eight members who have all been elected as Trustees at
the last Annual Meeting of Shareholders on March 20, 1997 to serve as Trustees
until the next Annual Meeting of Shareholders. The Trustees are elected at the
Annual meeting of Shareholders or appointed by the incumbent Board of Trustees
and serve until the next Annual Meeting of Shareholders or until their
respective successor has been duly elected.

The eight Trustees of NIRT are listed below, together with their ages,
terms of service, all positions and offices with NIRT or Tarragon, other
principal occupations, business experience and directorships with other
companies during the last five years or more. The designation "Affiliated",
when used below with respect to a Trustee, means that Trustee is an officer,
director or employee of Tarragon or an officer of NIRT. The designation
"Independent", when used below with respect to

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<PAGE> 72
a Trustee, means Trustee is neither an officer or employee of NIRT nor a
director, officer or employee of Tarragon, although NIRT may have certain
business or professional relationships with such Trustee as discussed below
under "Certain Business Relationships and Related Transactions - NIRT".

NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS
<TABLE>
<CAPTION>
AGE
<S> <C>
IRVING E. COHEN: Trustee since June 1994 (Independent) 51

Vice President and Regional Director (since 1997) Cherokee
Environmental Realty Advisors, LLC, a real estate investor; Managing
Director and Chief Acquisition Officer (1996-1997) Dames &
Moore/Brookhill, LLC, a real estate development company; Managing
Director (1994-1996) CPR Group, a real estate consulting company;
Managing Partner (from 1990 to 1994) Fuller Corporate Realty Partners,
a real estate asset management entity; Director of Real Estate
Consulting Services for Price Waterhouse (1989- 1990); Special Adviser
(1988-1989) and Trustee (1985-1989) Mellon Participating Mortgage
Trust, a mortgage real estate investment trust (a "REIT"); and
Executive Vice President, E. F. Hutton Properties, Inc. (from 1983 to
1987).

WILLIAM S. FRIEDMAN: President since December 1988 and Trustee since March 1988 54
(Affiliated)

Trustee (since March 1988), Chief Executive Officer (since December
1993), President (since December 1988), Acting Chief Financial Officer
(May 1990 to February 1991), Treasurer (August to September 1989) and
Acting Principal Financial and Accounting Officer (December 1988 to
August 1989) of NIRT. See description under "Directors of TRII" for
his experience and other offices and directorships. Also see
"Litigation and Claims Involving Mr. Friedman Related to Southmark
Corporation" below.

SALLY HERNANDEZ-PINERO: Trustee since May 1994 (Independent) 45

Managing Director (since July 1998) Fannie Mae American Communities
Fund; Of Counsel (October 1994 to June 1998) Kalkines, Arky, Zall and
Bernstein, New York City; Chairwoman (February 1992 to April 1994) New
York City Housing Authority; Deputy Mayor (January 1990 to February
1992) for Finance and Economic Development, City of New York;
Commissioner/Chairwoman of the Board of Directors (February 1988 to
December 1989) Financial Services Corporation of New York City;
Director (since July 1994) of Consolidated Edison; Director (since
April 1994) of Dime Savings Bank; Attorney at Law (since 1978).

DAN L. JOHNSTON: Trustee April 1990 to June 1990 and since February 1991 60
(Independent)

Attorney in solo practice in New York, New York (1991 to 1994 and
since August 1995); Partner in the law firm of Johnston, Kaplan and
Lombardi (January to July 1995), New York City; Director (1992) of the
Complex Drug Investigation and Prosecution Project for the Jefferson
Institute for Justice Studies; Chief Counsel, Subcommittee on Criminal
Justice, U.S. House of Representatives (June 1990 to January 1991);
Executive Director (1986 to 1990) of Prosecuting Attorney's Research
Council, a nationwide organization of metropolitan prosecutors to
further research to improve the prosecutorial function; Consultant
(February 1985 to June 1990) to the Edna McConnell Clark Foundation;
Member (October 1987 to June 1990) of the Civilian Complaint Review
Board of the New York City Police Department; Project Director (March
1985 to February 1986) and Consultant (January 1984 to March 1985) of
the Vera Institute of Justice; County Attorney (March 1977 to March
1985) of Polk County, Des Moines, Iowa; Assistant Iowa Attorney
General in charge of consumer fraud division (1965); Trustee (December
1992 to May 1995) of VPT; and Director or Trustee (April 1990 to June
1990 and from February 1991 to January 1995) of CMET, IORT and TCI.

</TABLE>

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<PAGE> 73
<TABLE>
<S> <C>
LANCE LIEBMAN: Trustee since March 1995 (Independent) 56

William S. Beinecke, Professor of Law Columbia School of Law, New York
City (since 1991); Director, Parker School of Foreign and Comparative
Law; Director Designate, American Law Institute; Dean (1991- 1995)
Columbia School of Law, New York City; Professor of Law (1976 to 1991)
and Associate Dean (1981 to 1984) Harvard Law School; past teaching at
Tokyo University, Fulbright Center, Ho Chi Minh City, Vietnam, and
Hebrew University, Jerusalem; Lecturer on Law; Director (since 1991)
of Greater New York Insurance Co. (both mutual and stock companies);
Director (since 1995) of M&F Worldwide; Director (since 1996) of World
Financial Properties, Inc.; author of numerous articles published in a
number of legal periodicals and seven books; member of the bars of the
District of Columbia, Massachusetts and New York; Attorney at Law
(since 1967).

LAWRENCE G. SCHAFRAN: Trustee since March 1995 (Independent) 59

Managing General Partner (since 1984) L. G. Schafran & Associates, a
real estate investment and development firm in New York City;
Director, Publicker Industries (since 1986), an Old Greenwich,
Connecticut NYSE listed holding company that operates through
subsidiaries in manufacturing services; Director, Capsure Holdings
Corp. (1986 to December 1997), a Chicago, Illinois NYSE listed
property and casualty insurer; Director, Oxigene, Inc. (1993 to 1996),
a U.S. and Swedish pharmaceutical developer; Director, Glasstech,
Inc.* (January 1995 to July 1997), a Perrysberg, Ohio manufacturer of
glass bending and tempering equipment; and Director (December 1993 to
October 1997) and Member (September 1994 to October 1997) and Chairman
(from December 1994 to October 1997) of the Executive Committee of The
Dart Group Corporation, a Landover, Maryland NASDAQ listed company
engaged with other publicly traded subsidiaries in discount automotive
parts and accessories (Trak Auto Corporation), discount bookstores
(Crown Books Corporation), discount supermarkets, beverages and real
estate; Chairman (since January 1996) Delta-Omega Technologies, Inc.,
a Broussard, Louisiana manufacturer and distributor of environmentally
safe fire foams, industrial cleaners and de-greasers; Director,
Discovery Zone, Inc. (since 1997); Director, Kaspar A.S.L. Ltd.
(since 1997); and Director, Consat Corporation (since 1997).

RAYMOND V.J. SCHRAG: Trustee since October 1988 (Independent) 52

Attorney, Law Offices of Raymond V. J. Schrag in New York, New York
(since January 1995); attorney, Law Offices of Paul J. Schrag, in New
York, New York (since 1975); Trustee (1986 to December 1989) of Hidden
Strength Mutual Funds; and Trustee or Director (October 1988 to August
1994) of TCI, IORT and CMET; Trustee (October 1988 to May 1995) of
VPT.

CARL B. WEISBROD: Chairman of the Board since March 1995 and Trustee since 53
February 1994 (Independent)

Trustee (since 1996) Ford Foundation; President (since 1994) Alliance
for Downtown New York, Inc.; Trustee (February 1994 to May 1995) of
VPT; President and Chief Executive Officer (April 1990 to 1994) of New
York City Economic Development Corporation; President (May 1987 to
April 1990) of 42nd Street Development Project, Inc. of New York State
Urban Development Corporation; Executive Director (March 1986 to May
1987) of Department of City Planning of the City of New York; and
Executive Director (July 1984 to March 1986) of City Volunteer Corps
of the City of New York.
</TABLE>

EXECUTIVE COMPENSATION

Each of TRII and NIRT has no employees, payroll or benefit plans and
pays no compensation to the executive officers. Officers of each of TRII and
NIRT who are also officers or employees of Tarragon are

- ----------
* On May 24, 1993, Glasstech, Inc. filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware. An Order confirming a plan of
reorganization became effective January 3, 1995 which is the same day Mr.
Schafran became a director of Glasstech, Inc.

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<PAGE> 74
compensated by Tarragon. Such officers perform a variety of services for the
Advisor and the amount of their compensation is determined solely by Tarragon.
Compensation for certain officers who are responsible for legal and accounting
services are allocated among the various entities for which Tarragon serves as
advisor.

The only direct remuneration paid by either TRII or NIRT is to the
TRII directors and/or NIRT Trustees who are not officers or directors of
Tarragon or their affiliated companies. The Independent TRII directors and/or
NIRT Trustees (i) review the business plan of the respective entity to
determine that it is in the best interest of the shareholders, (ii) review the
contract with the advisor, (iii) supervise the performance of the advisor and
review the reasonableness of the compensation which is paid to its advisor in
terms of the nature and quality of services performed, (iv) review the
reasonableness of the total fees and expenses of the respective entity and (v)
select, when necessary, a qualified independent real estate appraiser to
appraise properties acquired by the respective entity. The Independent TRII
directors each receive compensation in the amount of $6,000 per year, plus
reimbursement for expenses. In addition, each Independent TRII director
receives $3,000 per year for each committee of the Board on which he serves,
$2,500 per year for each committee chairmanship and $1,000 per day for any
special services rendered by him to the entity outside of his ordinary duties
as a Director, plus reimbursement for expenses, provided such services are
specifically requested by the Board. The Independent NIRT Trustees each
receive compensation in the amount of $15,000 per year, plus reimbursement for
expenses. In addition, each Trustee receives $2,000 per year for each
committee of the Board on which he serves, $1,000 per year for each committee
chairmanship, and $1,000 per day for any special services rendered by him to
NIRT outside of his ordinary duties as a Trustee, plus reimbursement for
expenses, provided such services are specifically requested by the Board.

LITIGATION AND CLAIMS INVOLVING MR. FRIEDMAN RELATED TO SOUTHMARK CORPORATION

Until January 1989, William S. Friedman, the President and a director
of TRII and President and a Trustee of NIRT, was an executive officer and
director of Southmark Corporation ("Southmark"), serving as Vice Chairman of
the Board (since 1982), Director (since 1980) and Secretary (since 1984) of
Southmark. As a result of a deadlock on Southmark's Board of Directors, Mr.
Friedman and Gene E. Phillips, (who served as Trustee of each of VPT and NIRT
until December 31, 1992) reached a series of related agreements (later
modified) with Southmark on January 17, 1989 whereby Messrs. Friedman and
Phillips resigned their position with Southmark and certain of Southmark's
subsidiaries and affiliates. Southmark filed a voluntary petition in
bankruptcy under Chapter 11 of the United States Bankruptcy Code on July 14,
1989. Subsequent to the filing of the Southmark bankruptcy, several lawsuits
were filed against Southmark, its former officers and directors (including Mr.
Friedman) and others, alleging, among other things, that such persons and
entities misrepresented the financial condition of Southmark. Mr. Friedman
denies all of such allegations. Those lawsuits in which Mr. Friedman was also
a defendant involved two securities class actions (settled in 1993 for nominal
payments), actions by investors in limited partnerships involving real estate
syndication (four voluntarily dismissed by the plaintiffs, two settled in 1993
for nominal payments and one where all claims were dismissed by the court and
sanctions awarded against plaintiffs' counsel), an action by the California
Insurance Commissioner (Mr. Friedman discharged from further liability in
January 1998) and an action by the Resolution Trust Corporation ("RTC") and
Office of Thrift Supervision ("OTS") (Mr. Friedman's liability terminated in
September 1996). NEITHER TRII NOR NIRT WAS A DEFENDANT IN ANY OF THESE
LAWSUITS, ALL OF WHICH HAVE BEEN SETTLED OR DISMISSED.

EXECUTIVE OFFICERS OF TRII AND NIRT

The only person currently serving as an executive officer of TRII and
NIRT is William S. Friedman, President and Chief Executive Officer of TRII and
NIRT. Mr. Friedman's positions with TRII and NIRT are not subject to a vote of
the stockholders of TRII or the shareholders of NIRT. The age, terms of
service, all positions and offices with TRII, NIRT or Tarragon, other principal
occupations, business experience and directorships with other companies during
the last five years or more of Mr. Friedman is set forth above under the
"Directors of TRII."

OFFICERS

Although not executive officers of TRII or NIRT, the persons currently
listed below serve as officers of TRII and NIRT, each holding the same office
and position with each of TRII and NIRT. Their positions with each of TRII and
NIRT are not subject to a vote of shareholders. Their ages, terms of service,
all positions and offices with the each of TRII or NIRT, or Tarragon, other
principal occupations, business experience and directorships with other
companies during the last five years or more are set forth below.

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<PAGE> 75
BRUCE A. SCHNITZ: Age 48, Chief Operating Officer (since January 1996).

Chief Operating Officer (since January 1996) of TRII (and predecessor
VPT), NIRT and Tarragon; President and Chief Executive Officer
(1993-1994) of McNeil Acquisition Corporation; President, Chief
Operating Officer, and Director (1991-1993), McNeil Real Estate
Management, Inc.

ROBERT C. IRVINE: Age 49, Executive Vice President and Chief Financial Officer
(since September 1996).

Executive Vice President and Chief Financial Officer (since September
1996) of TRII (and predecessor VPT), NIRT and Tarragon; Executive Vice
President and Chief Financial Officer of FYI, Inc. (February 1996 to
July 1996); Executive Vice President, Secretary, Treasurer, Chief
Financial Officer and a director of McNeil Real Estate Management,
Inc. and a Vice President of McNeil Investors, an affiliated entity
(1991-1995) and Certified Public Accountant (since 1977).

CHRIS W. CLINTON: Age 51, Senior Vice President - Asset Management (since May
1995) and Senior President - Commercial Asset Management (March 1994 to
April 1995).

Senior Vice President - Asset Management (since May 1995) and Senior
Vice President -Commercial Asset Management (March 1994 to April 1995)
of TRII (and predecessor VPT) and NIRT; Senior Vice President (since
March 1994) of Tarragon; Vice President (October 1988 to March 1994)
of ART, CMET, IORT, NIRT, TCI, VPT and BCM.

WILLIAM L. GRIGSBY: Age 49, Senior Vice President - Construction (since
September 1996).

Senior Vice President - Construction (since September 1996) of TRII
and NIRT; Senior Vice President (since September 1996) of Tarragon;
Director of Construction (December 1994 to August 1996) of TRII and
NIRT; Area Vice President of Property Management, Grapat Group Real
Estate Management (1993 - 1994); and Registered Landscape Architect
since 1979.

PETER LARSEN: Age 56, Senior Vice President - Acquisitions (since July 1997).

Senior Vice President - Acquisitions (since July 1997) of TRII and
NIRT; Senior Vice President (since July 1997) of Tarragon; Vice
President - Acquisitions (April 1996 to June 1997) of TRII and NIRT;
Vice President (April 1996 to June 1997) of Tarragon; Independent
Consultant (January 1995 to June 1996); and Vice President (May 1992
to December 1994) of BCM and CRSI.

NEIL SWINGRUBER: Age 39, Senior Vice President - Director of Property
Management (since June 1997).

Senior Vice President - Director of Property Management (since June
1997) of TRII and NIRT; Executive Vice President (since February 1996)
of TMI; Vice President of Property Management (1994 to 1995) of
Binings; and Vice President of Property Management (1986 to 1993) of
McNeil Real Estate Management, Inc.

ERIN D. DAVIS: Age 36, Vice President and Chief Accounting Officer (since
September 1996).

Vice President and Chief Accounting Officer (since September 1996) of
TRII (and predecessor VPT), NIRT and Tarragon; Accounting Manager of
VPT, NIRT and Tarragon (June 1995 to August 1996); Senior Associate,
BDO Seidman (January 1993 to June 1995); and Certified Public
Accountant (since 1990).

TODD C. MINOR: Age 39, Treasurer (since December 1996).

Senior Vice President - Mortgage Servicing and Financing (May 1995 to
November 1996) and Senior Vice President - Finance (March 1994 to
April 1995 and from July 1993 to January 1994) of TRII (and
predecessor VPT) and NIRT; Senior Vice President (since March 1994) of
Tarragon; Senior Vice President -Finance (from July 1993 to March
1994) of BCM, ART, CMET, IORT and TCI; Vice President (from January
1989 to July 1993) of BCM and (from April 1991 to July 1993) of ART,
CMET, IORT, NIRT, TCI and VPT.

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KATHRYN MANSFIELD: Age 38, Vice President and Secretary (since May 1998).

Vice President and Secretary of TRII and NIRT (since May 1998); Vice
President and Senior Counsel of CB Richard Ellis, Inc., formerly CB
Commercial Real Estate Group, Inc. (October 1994 to May 1998);
Litigation Counsel for BCM (March 1990 to October 1994); and Attorney
at Law (since 1984).

In addition to the foregoing officers, each of TRII and NIRT has other
officers who are not listed.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - TRII

CERTAIN BUSINESS RELATIONSHIPS. On February 10, 1994, the VPT Board
selected Tarragon to replace BCM as VPT's advisor effective March 1, 1994 under
an advisory agreement. Mr. Friedman serves as director and Chief Executive
Officer of Tarragon. Tarragon is owned by William S. and Lucy N. Friedman. As
of August 21, 1998, the Friedman family owns approximately 30% of the
outstanding shares of TRII, the successor to VPT.

Also on February 10, 1994, the NIRT Board selected Tarragon to replace
BCM as NIRT's advisor commencing April 1, 1994. William S. Friedman, a Trustee
and President and Chief Executive Officer of TRII also serves as a trustee and
officer of NIRT. NIRT has the same relationship with Tarragon as TRII. Mr.
Friedman owes fiduciary duties to such other entities as well as TRII under
applicable law.

Tarragon occupied office space at TRII's One Turtle Creek
Office/Retail Complex from March 1994 to October 1996, which also served as
VPT's executive offices until October 11, 1996. During the period of occupancy
of such space by Tarragon, Tarragon and its affiliates paid the Trust annual
rental of $12 per square foot which was at least equal to the rent paid to VPT
by unaffiliated tenants for similar space.

RELATED PARTY TRANSACTIONS. Historically, VPT (and subsequently TRII)
has engaged in and may continue to engage in business transactions, including
real estate partnerships, with related parties. All related party transactions
entered into by TRII must be approved by a majority of the TRII Board,
including a majority of the Independent Trustees. TRII management believes
that all of the related party transactions were at least as advantageous to
TRII and to its predecessor VPT, as could have been obtained from unrelated
third parties.

In May 1995, VPT purchased three apartment complexes (Collegewood,
Florida Towers, and Jefferson Towers) located in Tallahassee, Florida, for $2.5
million, subject to an existing nonrecourse wrap mortgage of $2.4 million. VPT
assumed the existing mortgage loan and paid the remaining purchase price, along
with closing costs, of $118,000 in cash from the general working capital of
VPT. Concurrently with the execution of the loan assumption, on June 5, 1995,
VPT paid the lender $300,000 in cash reducing the principal balance by the same
amount. The mortgage loan calls for monthly interest payments calculated at
10% per annum and matured June 1997. VPT purchased such properties from
Investors Florida Capitol Fund II, Ltd., a Florida limited partnership (the
"Seller"). Investors General, Inc. ("IGI"), which owns a 1% general
partnership interest in the Seller, is owned by Investors General Acquisition
Corporation ("IGAC"). John A. Doyle, (a Trustee and officer of VPT from
January 1994 to August 1996), is a 62.5% stockholder of IGAC. The purchase
price of the properties was based on their fair market values, and the entire
transaction was approved by a majority of the limited partners of the Seller as
well as the Independent Trustees of VPT. IGI and Messrs. Friedman and Doyle
abstained in the voting.

On June 30, 1989, VPT purchased from First City, Texas - Houston
("First City"), a $1.2 million first lien mortgage note (the "Cochonour Note")
with respect to which an individual is the borrower, secured in part by a lien
on a thoroughbred horse breeding farm located in Carroll County, Missouri, and
a personal guarantee from a third party who, at the time, was an officer of
First City. Until November 30, 1992, F.C. MacArthur, Inc., a wholly-owned
subsidiary of Collecting Bank, N.A., owned approximately 16% of the outstanding
shares of beneficial interest of IORT and 4% of the outstanding shares of
common stock of TCI. First City performed substantial management and
investment functions for Collecting Bank, N.A. At the time, Trustees of VPT
also served as trustees or directors to IORT and TCI and at that time IORT and
TCI were deemed to be "related parties." At present, none of the current
directors of TRII also serve as a director of IORI (the successor to IORT) or
TCI. The note matured on December 7, 1990. In September 1991, the guarantor
provided additional collateral in the form of first lien mortgages and
assignments of mortgages on condominium units located in Cook County, Illinois.
In return, VPT extended the maturity date of the note to December 7, 1995 and
all accrued but unpaid interest was added to principal and the outstanding
principal balance of the note was increased to $1.4 million. During 1993 and
1994, eighteen of the twenty condominium units securing the Cochonour Note
receivable were sold, and in accordance with the terms of the note, the
proceeds of such sales

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were applied to reduce the principal balance of the note. In connection with
the sale of three units, VPT accepted five-year notes in the principal amounts
of $69,900, $73,000 and $66,400, secured by each respective unit. Terms of the
condominium notes provide for monthly payments of principal and interest, based
upon a 25-year amortization, with the unpaid principal balance due at the
notes' maturity. The notes bore interest from 6% to 7% per annum for the first
two years and from 8% to 9% per annum thereafter. In September 1994, VPT and
the borrower agreed to a settlement of the Cochonour Note. Under the
agreed-upon terms, a portion of the collateral property, a farm and luxury
residence in Carroll County, Missouri, was conveyed to VPT. In April 1995, the
two remaining condominium units securing the note were sold and the net
proceeds of sale were remitted to VPT for application against and payment in
full of the principal balance of the Cochonour Note of $110,000. Also in April
1995, one of the condominium notes in the amount of $66,000 was paid in full.

In fiscal 1995, VPT paid to Tarragon $146,000 in advisory fees,
$53,000 in equity refinancing fees, $83,000 in property management fees and
cost reimbursements of $165,000.

In fiscal 1996, VPT incurred fees and expenses paid to Tarragon and
TMI of $181,000 in advisory fees, $43,000 in acquisition fees, $194,000 in
brokerage commissions, $235,000 in property management fees, and expense
reimbursements of $232,000.

For the one month ended December 31, 1996, VPT incurred fees and
expenses paid to Tarragon and TMI of $13,000 in advisory fees, $22,000 in
acquisition fees, no brokerage commissions or equity refinancing fees, $26,000
in property management fees, and expense reimbursements of $32,000.

In fiscal 1997, TRII incurred fees and expenses paid to Tarragon and
TMI of $232,000 in advisory fees, $56,000 in acquisition fees, no brokerage
commissions, $80,000 in equity refinancing fees, $339,000 in property
management fees, and expense reimbursements of $236,000.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - NIRT

CERTAIN BUSINESS RELATIONSHIPS. On February 10, 1994, the NIRT Board
selected Tarragon to replace BCM as NIRT's advisor effective April 1, 1994
under an advisory agreement. Mr. Friedman serves as director and Chief
Executive Officer of Tarragon. Tarragon is owned by William S. and Lucy N.
Friedman. The Friedman family owns approximately 32% of the outstanding shares
of NIRT.

Also on February 10, 1994, the VPT Board selected Tarragon to replace
BCM as VPT's advisor commencing March 1, 1994. Messrs. Johnston, Schrag and
Weisbrod, each a Trustee of NIRT, resigned from the VPT Board on May 17, 1995.
William S. Friedman also presently serves as President and a director of TRII,
the successor to VPT. Mr. Friedman owes fiduciary duties to TRII as well as to
NIRT under applicable law. TRII has the same relationship with Tarragon as
NIRT.

Since January 1, 1993, FMS, a company of which Mr. Davis (a current
Director of TRII and a former Trustee of NIRT from October 1988 to March 31,
1995) is Chairman, President and sole shareholder, has been providing
property-level management services, as a subcontractor for up to three
properties owned by NIRT. In 1995, 1996 and 1997, FMS earned fees of $66,940,
$82,292 and $80,920, respectively, for performing such services. The
management of NIRT believes that such fees were at least as favorable to NIRT
as those that would be paid to unaffiliated third parties for the performance
of similar services.

In February 1998, National Omni Associates, L.P., in which NIRT holds
a 46% interest and TRI holds a 25% interest, paid a brokerage commission of
$100,000 to Highland Funding Corp., for which Chester Beck, who serves as
Director for TRII, serves as President, for consulting services provided in
connection with the acquisition of 5600 Collins.

RELATED PARTY TRANSACTIONS. Historically, NIRT has engaged in and may
continue to engage in business transactions, including real estate
partnerships, with related parties. Prior to January 11, 1995, all related
party transactions entered into by NIRT were to be approved by a majority of
the NIRT Board, including a majority of the Independent Trustees. In addition,
the Related Party Transaction Committee of the NIRT Board was to review all
such transactions prior to their submission to the NIRT Board for
consideration. NIRT's management believes that all of the related party
transactions were at least as advantageous to NIRT as could have been obtained
from unrelated third parties.

NIRT is a partner with CMET in Sacramento Nine ("SAC 9"). NIRT holds
a 70% non-controlling, undivided interest in SAC 9, which currently owns two
office buildings in the Sacramento, California area. The SAC 9 joint tenancy
agreement requires unanimous consent of both NIRT and CMET for any material
changes

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<PAGE> 78
in the operations of SAC 9's properties, including sales, refinancings and
property management changes. Until March 9, 1995, Geoffrey C. Etnire, a
Trustee of CMET, was also a Trustee of NIRT and until August 1994, Messrs.
Stokley and Sims, Trustees of CMET, also served as Trustees of NIRT. Since
March 9, 1995, NIRT and CMET have had no Trustee who serves on both boards.

On December 10, 1990, the NIRT Board, based on the recommendation of
its Related Party Transaction Committee, authorized the purchase of up to $1
million of the shares of beneficial interest of CMET through negotiated or open
market transactions. At December 31, 1994, NIRT owned 39,500 shares of
beneficial interest of CMET which it purchased in 1990 and 1991 through open
market transactions, at a total cost to NIRT of $180,500. During the first
three months of 1995, NIRT sold the shares for $592,500 and, as a result,
recorded a $412,000 gain on sale of investments.

In December 1993, the NIRT Board approved the issuance of a $1 million
convertible subordinated debenture to Mr. Doyle (Chief Financial Officer of
NIRT and TRII from February 1994 until August 1996) in exchange for his 10%
participation in the profits of the Consolidated Capital Properties II ("CCP
II") assets, which NIRT had acquired in November 1992. This participation was
granted as consideration for Mr. Doyle's services to NIRT in connection with
the CCP II portfolio. The debenture bore interest at a rate of 6% per annum
and was scheduled to mature in 1999. In February 1996, Mr. Doyle converted the
debenture into 93,076 NIRT Shares. NIRT repurchased 50,000 of these Shares
from Mr. Doyle in September 1996 for $700,000.

In 1995, NIRT paid Tarragon $1 million in advisory fees, $445,000 in
real estate and mortgage brokerage commissions, $330,000 in property management
fees and $960,000 in cost reimbursements.

In 1996, NIRT paid Tarragon and affiliates $1,117,000 in advisory
fees, $293,000 in real estate and mortgage brokerage commissions, and
$1,014,000 in property management fees and $1,176,000 in expense
reimbursements.

In 1997, NIRT paid Tarragon and TMI $1,438,000 in advisory fees,
$234,000 in real estate acquisition fees, $773,000 in equity refinancing fees,
$39,000 in commercial lease commissions, $1,610,000 in property management
fees, and $1,411,000 in expense reimbursements.

RESTRICTIONS ON RELATED PARTY TRANSACTIONS. NIRT's Declaration of
Trust provides that:

"[t]he Trustees shall not . . . purchase, sell or lease any Real
Properties or Mortgages to or from . . . the Advisor or any of [its]
Affiliates," and that "[t]he Trustees shall not . . . make any loan to
. . . the Advisor or any of [its] Affiliates."

Moreover, the NIRT Declaration of Trust further provides that:

"[t]he Trust shall not purchase or lease, directly or indirectly, any
Real Property or purchase any Mortgage from the Advisor or any
affiliated Person, or any partnership in which any of the foregoing
may also be a general partner, and NIRT will not sell or lease,
directly or indirectly, any of its Real Property or sell any Mortgage
to any of the foregoing Persons."

The NIRT Declaration of Trust further provides that:

"[t]he Trust shall not directly or indirectly, engage in any
transaction with any Trustee, officer or employee of NIRT or any
director, officer or employee of the Advisor . . . or of any company
or other organization of which any of the foregoing is an Affiliate,
except for . . . [among other things] transactions with . . . the
Advisor or Affiliates thereof involving loans, real estate brokerage
services, real property management services, the servicing of
Mortgages, the leasing of real or personal property, or other
services, provided such transactions are on terms not less favorable
to NIRT than the terms on which nonaffiliated parties are then making
similar loans or performing similar services for comparable entities
in the same area and are not entered into on an exclusive basis."

The NIRT Declaration of Trust defines "Affiliate" as follows:

"[A]s to any Person, any other Person who owns beneficially, directly,
or indirectly, 1% or more of the outstanding capital stock, shares, or
equity interests of such Person or of any other Person which controls,
is controlled by, or is under common control with, such Person or is
an officer, retired officer, director, employee, partner, or trustee
(excluding independent

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<PAGE> 79
trustees not otherwise affiliated with the entity) of such Person or
of any other Person which controls, is controlled by, or is under
common control with, such Person."

Prior to January 11, 1995, all related party transactions that NIRT
contemplated were to be reviewed by the Related Party Transaction Committee of
the NIRT Board to determine whether such transactions were (i) fair to NIRT and
(ii) permitted by NIRT's governing documents. Each of the members of the
Related Party Transaction Committee was a Trustee who is not an officer,
director or employee of NIRT's advisor, Tarragon, and is not an officer or
employee of NIRT. Such committee was disbanded in February 1995 and its
responsibilities assumed by the Independent Trustees.

Pursuant to the terms of the Modification in the Olive case, which
became effective January 11, 1995, any related-party transaction which NIRT may
enter into prior to April 27, 1999, with two categories of exceptions, will
require the unanimous approval of the NIRT Board. In addition, except for the
categories noted below, certain defined related-party transactions may only be
entered into in exceptional circumstances and after determination by the NIRT
Board that the transaction is in the best interests of NIRT and that no other
opportunity exists that is as good as the opportunity presented by such
transaction. Two categories of exception are:

(i) direct contractual agreements for services between NIRT
and the Advisor or one of its affiliates (i.e., the Advisory
Agreement, property management contracts, etc.) which require prior
approval by two-thirds of Trustees of NIRT and, if required, approval
by a majority of the Shareholders;

(ii) joint ventures among NIRT and another party to the
Modification in the Olive case or any of their affiliates or
subsidiaries and a third party having no prior or intended future
business or financial relationship with specified persons, or any
affiliate of such persons, may be entered into on the affirmative vote
of a majority of Trustees of NIRT.

Under the terms of the Modification in the Olive case, approval of the
Merger Agreement by the Board of Trustees of NIRT required the unanimous
approval of the NIRT Board.

THE ADVISOR

Although each of the TRII Board and NIRT Board, respectively, is
directly responsible for managing the respective affairs of TRII and NIRT and
for setting the respective policies which guide each entity, the day-to-day
operations of each of TRII and NIRT are performed by a contractual advisory
firm under the supervision of the TRII Board and the NIRT Board. In each case,
the stated duties of the Advisor include, among other things, locating,
investigating, evaluating and recommending real estate and mortgage note
investment and sales opportunities, as well as financing and refinancing
sources for each of TRII and NIRT. The Advisor also serves as a consultant in
connection with the business plan and investment policy decisions made by the
TRII Board and the NIRT Board.

Consolidated Capital Equities Corporation ("CCEC") was the sponsor
of and original advisor to each of VPT and NIRT. CCEC was replaced as advisor
on August 1, 1988, by Consolidated Advisors, Inc. ("CAI"), the parent of CCEC.
On December 2, 1988, CCEC filed a petition seeking reorganization under Chapter
11 of the United States Bankruptcy Code in the United States District Court for
the Northern District of Texas. Mr. Friedman was director of CCEC and CAI from
March 1988 through January 1989. Southmark was a controlling shareholder of
The Consolidated Companies, the parent of CAI, from March 1988 through February
1989.

BCM served as the advisor to each of VPT and NIRT from March 1989
to February 28, 1994 (VPT) and March 31, 1994 (NIRT). Mr. Friedman served as
President of BCM until May 1, 1993. BCM is beneficially owned by a trust for
the benefit of the children of Mr. Phillips, who served as a Trustee of each of
VPT and NIRT until December 7, 1992. At the annual meetings of shareholders of
each of VPT and NIRT held on April 26, 1993, the shareholders of each of VPT
and NIRT approved the renewal of the Advisory Agreement with BCM. BCM resigned
as advisor to VPT effective February 28, 1994 and NIRT effective March 31,
1994. BCM also serves as advisor to CMET, IORI, the successor to IORT, and
TCI. One director of TRII, Willie K. Davis, was also a trustee of CMET and
IORT (the predecessor of IORI) and a director of TCI until March 7, 1995.
Messrs. Friedman and Phillips served as executive officers and directors of ART
until November 6, 1992 and December 31, 1992, respectively. Mr. Friedman
resigned from his positions with CMET, IORT and TCI in February 1994 and from
his position with NRLP in March 1994 to concentrate his attention on VPT, NIRT
and Tarragon.

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<PAGE> 80
On February 10, 1994, each of the VPT and NIRT Boards selected
Tarragon to replace BCM as advisor to each of VPT and NIRT. Since March 1,
1994, Tarragon has provided advisory services to NIRT and VPT (and its
successor TRII) under an advisory agreement. Mr. Friedman serves as a director
and Chief Executive Officer of Tarragon. Tarragon is owned by William S. and
Lucy N. Friedman. The Friedman family owns approximately 30% and 33%,
respectively, of the outstanding TRII Common Stock and NIRT Shares.

Under the current Tarragon Advisory Agreement with each of TRII
and NIRT, the Advisor is required to formulate and submit annually for approval
by the TRII Board and/or NIRT Board (as the case may be) a budget and business
plan for each entity containing a twelve-month forecast of operations and cash
flow, a general plan for asset sales or acquisitions, lending, foreclosure and
borrowing activity, and other investments, and the Advisor is required to
report quarterly to the Board on the entity's performance against the business
plan. In addition, all transactions or investments by the respective entity
require prior approval by the respective Board unless they are explicitly
provided for in the approved business plan or are made pursuant to authority
expressly delegated to the Advisor by the respective Board.

The Tarragon Advisory Agreement also requires prior approval of
the respective Board for retention of all consultants and third party
professionals, other than legal counsel. The Advisory Agreement provides that
the Advisor shall be deemed to be in a fiduciary relationship to the respective
shareholders; contains guidelines for the Advisor's allocation of investment
opportunities as among itself, TRII, NIRT and other entities it advises; and
contains a broad standard governing the Advisor's liability for losses by each
of TRII and NIRT. Under the Advisory Agreement, neither the Advisor nor any of
its shareholders, directors, officers or employees shall be liable to TRII,
NIRT, the TRII directors, the NIRT Trustees, or the holders of securities of
TRII or NIRT for any losses from the operations if the Advisor had determined,
in good faith, that the course of conduct which caused the loss or liability
was in the best interests of the respective entity and the loss or liability
was not the result of negligence or misconduct by the Advisor. In no event
will the directors, officers or employees of the Advisor be personally liable
for any action or inaction unless it was the result of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty.

Also, if either of TRII or NIRT were to request that the Advisor
render services other than those required by the advisory agreement, the
Advisor or an affiliate of the Advisor would be separately compensated for such
additional services on terms to be agreed upon from time to time. In the past,
each of VPT and NIRT had hired Carmel, Ltd., an affiliate of BCM, to provide
property management services for properties. Since April 1, 1994, Tarragon has
provided property management services for properties. Beginning April 1, 1996,
Tarragon Management, Inc., a wholly- owned subsidiary of Tarragon, assumed the
property-level management of the multifamily properties. Each of VPT and NIRT
also engaged, on a non-exclusive basis, Carmel Realty, Inc. ("Carmel Realty"),
also an affiliate of BCM, to perform brokerage services until March 31, 1994.

Approval, and any renewal, of the Tarragon Advisory Agreement is
required by NIRT's shareholders.

The Advisory Agreement may only be assigned by Tarragon with the
prior consent of the other party (i.e., either TRII or NIRT).

The following table sets forth the compensation payable to
Tarragon under the Tarragon Advisory Agreement of each TRII and NIRT:

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<PAGE> 81
<TABLE>
<CAPTION>
TRII AND NIRT AND
TARRAGON ADVISORY TARRAGON ADVISORY
AGREEMENT AS AMENDED AGREEMENT AS AMENDED
DATED APRIL 1, 1995 DATED APRIL 1, 1995
<S> <C> <C>
Base fixed annual fee None None

Net Income fee None None

Incentive advisory fee for 16% per annum of TRII 16% per annum of NIRT
successful investment and "Adjusted Funds from "Adjusted Funds from
management of Trust's Operations" (as defined) Operations" (as defined)
assets

For supervision of the 1% of the cost, but no fee on 1% of the cost, but no fee on
acquisition, purchase or acquisitions from affiliates acquisitions from affiliates
long-term lease of real
property of the Trust

Mortgage brokerage and the lesser of (i) 1% of the the lesser of (i) 1% of the
refinancing fees amount of loan or amount amount of loan or amount
refinanced or (ii) a fee refinanced or (ii) a fee
which is reasonable and fair which is reasonable and fair
under the circumstances under the circumstances

Mortgage or loan None None
acquisition fees

Real estate brokerage Subject to approval by TRII Subject to approval by NIRT
commissions Board, may pay if the Advisor Board, may pay if the Advisor
--- ---
or affiliate acts as the or affiliate acts as the
broker in such amounts not to broker in such amounts not to
exceed customary fees charged exceed customary fees charged
by nationally recognized real by nationally recognized real
estate brokers for normal, estate brokers for normal,
similar transactions on a similar transactions on a
non-exclusive basis non-exclusive basis

Incentive sales None None
compensation

Third-party mortgage Advisor shall pay to TRII all Advisor shall pay to NIRT all
placement fees compensation received from compensation received from
third parties for third parties for
origination, placement or origination, placement or
brokerage of any loan made by brokerage of any loan made by
TRII NIRT

Additional services If and to the extent If and to the extent
requested by TRII, separately requested by NIRT, separately
on terms to be agreed upon on terms to be agreed upon
between TRII and such party between NIRT and such party
</TABLE>

Assuming the consummation of the Merger and the acquisition of
Tarragon by TRII, Tarragon will continue to provide advisory services to TRII,
except that no separate fee shall be paid by TRII for those services. Instead,
TRII will pay all overhead expenses of Tarragon, including all employee
compensation and benefits.

The directors and principal officers of Tarragon are set forth
below:

WILLIAM S. FRIEDMAN:
Director and Chief Executive Officer

BRUCE A. SCHNITZ:
Chief Operating Officer

ROBERT C. IRVINE:
Executive Vice President and Chief Financial Officer

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<PAGE> 82
CHRIS W. CLINTON:
Senior Vice President - Commercial Portfolio

WILLIAM GRIGSBY:
Senior Vice President - Construction

PETER LARSEN:
Senior Vice President - Acquisition

NEIL SWINGRUBER:
Senior Vice President - Director of Property
Management

ERIN D. DAVIS:
Vice President and Chief Accounting Officer

KATHRYN MANSFIELD:
Vice President, Corporate Counsel and Secretary

TODD C. MINOR:
Treasurer

PROPERTY MANAGEMENT

Since March 1, 1994, Tarragon has provided property management
services to each of TRII (and its predecessor VPT) and NIRT for a fee of 4.5%
of the monthly gross rents collected on apartment properties and not in excess
of 5% of the monthly gross rents collected on commercial properties. Until
April 1996, Tarragon subcontracted with other entities for the provision of the
property-level management services to each of TRII (and its predecessor VPT)
and NIRT. TMI, a wholly-owned subsidiary of Tarragon, currently provides
property-level management services to the multifamily properties for a fee of
4.5% of the monthly gross rents collected, while the property-level Management
services are provided by subcontractors for the commercial properties.
Assuming the consummation of the Merger and the acquisition by TRII of
Tarragon, these services will continue to be provided by TMI as an indirect
wholly-owned subsidiary of TRII, except that no separate fee shall be paid by
TRII for these services. In lieu of such fees, TRII will pay substantially all
overhead expenses of TMI, including all employee compensation and benefits.
Following the Merger, TMI will continue to manage four multifamily projects and
two shopping centers owned by entities affiliated with the Friedman family.
Mr. Friedman has agreed to use his best efforts to continue these existing
management arrangements and fee structures as long as TMI renders customary
management services in a commercially reasonable manner.

REAL ESTATE BROKERAGE

Since March 1, 1994, each of TRII (and its predecessor VPT) and NIRT
has also engaged Tarragon to perform acquisition services for each. Tarragon
is available to and may act as a broker in both purchases and sales of property
with commissions payable in amounts customarily charged in arms-length
transactions by others rendering similar property acquisition services in the
same geographical location and for comparable property.

INFORMATION ABOUT TRII

TRII is the Nevada corporation incorporated April 2, 1997 and the
ultimate successor-in-interest to VPT, a California business trust originally
established July 18, 1973 which commenced operations April 2, 1974. On July
10, 1997, the shareholders of VPT approved the conversion of VPT into a Nevada
corporation which was accomplished by incorporating VPT as a California
corporation and merging it into TRII, then a wholly-owned subsidiary of VPT,
with TRII being the surviving entity. The effective date of such merger was
July 25, 1997. TRII (and its predecessor VPT) has elected to be treated as a
REIT and in the opinion of management of TRII, TRII and its predecessor have
continuously qualified for federal taxation as a REIT. TRII's primary business
and only industry segment is investing in equity interests in real estate and
financing real estate and real estate related activities through mortgage
loans, including first, wrap-around and junior mortgage loans. TRII's real
estate investments are located primarily in Texas, Oklahoma, California and
Florida.

BUSINESS DESCRIPTION AND INVESTMENT OBJECTIVES

TRII's principal objectives are to increase FFO and maximize the value
of its existing real estate through aggressive management and consistent
capital improvements. TRII intends to use the proceeds from property

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<PAGE> 83
sales and mortgage refinancings to expand its portfolio through opportunistic
purchases of income-producing properties predominantly in the markets where
TRII presently operates. Future investments will be focused on older,
mismanaged, or under-performing properties, both multifamily and commercial,
and will be selected based on initial rates of return and the potential for
appreciation through revenue-enhancing capital improvements and proper
management. Investments may take the form of joint ventures, new construction,
mortgage participation, investments and partnerships, as well as outright
purchases.

EMPLOYEES

TRII has no employees. Employees of Tarragon provide executive and
administrative services to TRII. The officers of TRII are also officers of
Tarragon.

COMPETITION

TRII's plan of operation is to continue to improve the quality of its
properties through consistent capital improvements and, to the extent surplus
funds and attractive investments are available, to acquire additional
multifamily and commercial properties, primarily in locations where TRII
presently operates. Management believes that ownership of the type of
properties in which TRII invests is highly fragmented among individuals,
partnerships, public and private corporations, and other REITs and that no
dominant entities exist in the market for such properties. TRII competes with
numerous entities and individuals engaged in real estate activities, many of
which have greater financial resources than TRII.

Management of TRII believes that success in real estate investment is
primarily dependent upon general market conditions determined by such factors
as job formation and income growth; geographic location; and the performance of
asset and property managers in marketing, collections, tenant services, capital
improvements, control of operating expenses, and the maintenance and appearance
of the property more than on the activities of competitors. Additional
competitive factors with respect to commercial properties are the ease of
access to the property, the adequacy of related facilities (such as parking),
and sensitivity in setting rental rates. With respect to multifamily
properties, management believes that there is and will continue to be a strong
demand for well maintained, affordable housing in markets in which TRII
operates. However, since the success of any real estate investment is impacted
by other factors outside the control of TRII including general demand for
apartment housing, interest rates, operating costs, and the ability to attract
and retain qualified property managers, there can be no assurances that TRII
will continue to be successful.

PROPERTIES

Details of TRII's real estate portfolio at December 31, 1997 and at
March 31, 1998 are set forth in the Consolidated Financial Statements and the
Notes to Consolidated Financial Statements (see specifically Notes 2 and 3).
At March 31, 1998, TRII's real estate portfolio, concentrated in Texas,
Oklahoma, California and Florida, consisted of nine multifamily properties, a
shopping center, a combination office building and shopping center, a
combination office/retail/medical facility, an office park, and a farm and
luxury residence.

To continue to qualify for federal taxation as a REIT under the Code,
TRII is required, among other things, to hold at least 75% of the value of its
assets in real estate assets, government securities, and cash and cash
equivalents at the close of each quarter of each taxable year. At December 31,
1997, 74% of TRII's assets consisted of real estate held for investment, 11%
consisted of real estate held for sale, 5% consisted of investments in and
advances to partnerships which owned real estate or mortgage loans secured by
real estate, and 3% consisted of cash and cash equivalents. The remaining 7%
of TRII's assets consisted of restricted cash and other assets. The percentage
of TRII's assets invested in any one category at any particular time is subject
to change, and no assurance can be given that the composition of TRII's assets
in the future will approximate the percentages stated above.

MANAGEMENT AND ADDITIONAL INFORMATION

Certain information relating to summaries of real estate, principal
stockholders, certain relationships and related transactions, voting securities
and principal holders thereof, and other related matters as to TRII is
incorporated by reference or set forth in TRII's Annual Report on Form 10-K for
the year ended December 31, 1997, incorporated herein by reference and in
TRII's Form 10-Q Quarterly Report for the quarter ended March 31, 1998.
Stockholders of TRII and Shareholders of NIRT desiring copies of such documents
may contact TRII at its address or telephone number indicated under
"Incorporation of Certain Documents by Reference."

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<PAGE> 84
RELATIONSHIPS WITH INDEPENDENT PUBLIC ACCOUNTANTS

It is expected that representatives of Arthur Andersen LLP will be
present at the TRII Special Meeting and at the NIRT Special Meeting to respond
to appropriate questions of holders of TRII Common Stock and holders of NIRT
Shares and to make a statement if they so desire.

LEGAL MATTERS

The validity of the shares of TRII Common Stock to be issued by TRII
pursuant to the Merger and the federal income tax consequences of the
"Incorporation Procedure" and Merger have been passed upon by Prager, Metzger &
Kroemer PLLC, Dallas, Texas. Prager, Metzger & Kroemer PLLC will rely as to
all matters of Nevada law on Kummer Kaempher Bonner & Renshaw, Las Vegas,
Nevada.

EXPERTS

TRII's consolidated financial statements as of December 31, 1997 and
November 30, 1996 and for the year ended December 31, 1997, the month ended
December 31, 1996, and for each of the two years in the period ended November
30, 1996, incorporated by reference in this Joint Proxy Statement/Prospectus
and the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in auditing and accounting in giving said report.

NIRT's consolidated financial statements as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Joint Proxy Statement/Prospectus and the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
auditing and accounting in giving said report.

OTHER MATTERS

As of the date of this Joint Proxy Statement/Prospectus, the TRII
Board and its officers and the NIRT Board and its officers do not know of any
other matters that may properly be, or that are likely to be, brought before
the respective Special Meetings. However, if any other matters are properly
brought before either or both of the Special Meetings, the persons named in the
enclosed respective proxies or their substitutes will vote in accordance with
their best judgment on such matters.

FUTURE PROPOSALS OF SHAREHOLDERS

Any proposals of holders of TRII Common Stock intended to be presented
at the next Annual Meeting of Stockholders of TRII to be held in 1998 must be
received by TRII, addressed at its principal executive offices, 3100 Monticello
Avenue, Suite 200, Dallas, Texas 75205 no later than October 16, 1998, to be
considered for inclusion in the proxy statement and form of proxy related to
that meeting.

If the Incorporation Procedure and the Merger are not consummated, any
proposals of holders of record of NIRT Shares intended to be presented at the
Annual Meeting of Shareholders of NIRT to be held in 1998 must be received by
NIRT, addressed to the Secretary at 280 Park Avenue, East Building, 20th Floor,
New York, New York 10017, no later than October 16, 1998, to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.

BY ORDER OF THE BOARD OF DIRECTORS BY ORDER OF THE BOARD OF TRUSTEES
OF TARRAGON REALTY INVESTORS, INC. OF NATIONAL INCOME REALTY TRUST

William S. Friedman, President William S. Friedman, President

76
<PAGE> 85
INDEX OF DEFINED TERMS

<TABLE>
<S> <C>
Acquisition Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Advisor Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ART . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Articles of Incorporation Amendment Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
BCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Beneficial Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Business Combination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Bylaw Amendment Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
CAI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
California Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Carmel Realty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Carmel, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
CCEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
CCP II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
CMET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Comparable Company Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Control Transaction Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
CRSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Director Designees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Duff & Phelps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Evaluation Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Extended Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 32
First City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Gilford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
IGAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
IGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Incorporation Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Independent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Interested Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
IORI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
IORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
LTM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Market Price Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
NAREIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
NAV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
NIRT Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
NIRT Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
NIRT Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
NIRT Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
NIRTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
NOLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Nomination Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Non-Stockholder Constituencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
NRLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
NRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Old VPT Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Olive Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Post-Split Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SAC 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SAMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SAMLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
SIPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Southmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Special Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Stockholder Proposal Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
SWI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Tarragon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Tarragon Directors' Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
TMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TRII Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
TRII Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
TRII Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
TRII Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
TRII Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TRII Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TRII Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
TRII Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
VIPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
VPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>

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APPENDIX A

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER dated June 5, 1998 (this "Agreement")
between TARRAGON REALTY INVESTORS, INC., a Nevada corporation ("Tarragon") and
NATIONAL INCOME REALTY TRUST, a California business trust ("NIRT").

WHEREAS, the Board of Directors of Tarragon and the Board of Trustees of
NIRT desire to consolidate the two entities into a single entity utilizing
Tarragon for convenience as the surviving entity to create a combined real
estate investment trust (as a corporation) and, subject to consummation
thereof, for the resulting entity to acquire Tarragon Realty Advisors, Inc.,
the advisor to both Tarragon and NIRT (the "Advisor");

WHEREAS, because no explicit statutory authority permits a California
business trust to merge directly with and into a Nevada corporation, in order
to effectuate such consolidation pursuant to and in accordance with this
Agreement, subject to the approval of the holders of shares of Beneficial
Interest of NIRT and of the holders of shares of common stock of Tarragon, the
Board of Trustees of NIRT shall cause NIRT to be incorporated in the State of
California pursuant to and in accordance with Section 200.5 of the California
Corporation Code under the name National Income Realty Corporation (the
"California Corporation"), which California Corporation will then consolidate
by merger with and into Tarragon (the "NIRT Merger");

WHEREAS, the Board of Directors of Tarragon has (i) determined that the
NIRT Merger is fair to the holders of shares of Tarragon's common stock and is
in the best interests of such stockholders and (ii) unanimously approved this
Agreement and the transactions contemplated hereby, recommended unanimously
(with the exception of William Friedman, who has abstained from such
recommendation) that the holders of shares of Tarragon's Common Stock approve
and adopt this Agreement and issued a joint press release with NIRT on February
19, 1998 disclosing such agreement;

WHEREAS, the Board of Trustees of NIRT has (i) determined that the NIRT
Merger is fair to the holders of shares of beneficial interest of NIRT and is
in the best interests of such stockholders and (ii) unanimously approved this
Agreement and the transactions contemplated hereby, recommended unanimously
(with the exception of William Friedman, who has abstained from such
recommendation) that the holders of shares of beneficial interest of NIRT
approve and adopt this Agreement and issued a joint press release with Tarragon
on February 19, 1998 disclosing such agreement; and

WHEREAS, for federal income tax purposes, it is intended that the NIRT
Merger shall qualify as a reorganization under the provisions of Section 368 of
the United States Internal Revenue Code of 1986, as amended (the "Code").

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained and intending to be legally bound
hereby, Tarragon and NIRT hereby agree as follows:

ARTICLE I

THE NIRT MERGER

SECTION 1.01. The NIRT Merger. Upon the terms and subject to the
conditions set forth in this Agreement, following the approval of the
shareholders of NIRT, NIRT shall be incorporated in California pursuant to
Section 200.5 of the California Corporation Code under the name "National
Income Realty Corporation" as the California Corporation and the California
Corporation (as the immediate successor to NIRT) shall then, in accordance with
the General Corporation Law of Nevada (the "Nevada Law") and the General
Corporation Law of California (the "California Law") be merged with and into
Tarragon. As a result of the NIRT Merger, the separate corporate existence of
the California Corporation (as the immediate successor to NIRT) shall cease and
Tarragon shall be the surviving corporation of the NIRT Merger (the "Surviving
Corporation") and shall continue to be governed by Nevada Law and the separate
corporate

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existence of Tarragon with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the NIRT Merger.

SECTION 1.02. Effective Time: Closing. As promptly as practicable, and in
no event later than five business days after the satisfaction or, if
permissible, waiver of the conditions set forth in Article VIII (other than
those conditions that can only be satisfied on the Closing Date (as defined
below)), the parties hereto shall cause the NIRT Merger to be consummated by
filing (i) articles of merger (the "Nevada Articles of Merger") with the
Secretary of State of the State of Nevada, in such form as is required by, and
executed in accordance with, Section 92A.200 of Nevada Law, and (ii) articles
of merger (the "California Articles of Merger") with the Secretary of State of
California, in such form as is required by, and executed in accordance with,
Section 1103 of California Law. The term "Effective Time" means the date and
time of the filing of the Articles of Merger with the Secretaries of State of
the States of Nevada and California (or such later time as may be agreed by the
parties hereto and specified in the Articles of Merger). Immediately prior to
the filing of the Articles of Merger, a closing will be held at the offices of
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, 200 Park Avenue, New York,
New York 10166 (or such other place as the parties may agree) (the date on
which such closing takes place being the "Closing Date").

SECTION 1.03. Effect of the NIRT Merger. At the Effective Time, the
effect of the NIRT Merger shall be as provided in the applicable provisions of
California Law and Nevada Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of NIRT and Tarragon shall vest in
the Surviving Corporation.

SECTION 1.04. Articles of Incorporation: Bylaws.

(a) Subject to the terms of Section 7.06, at the Effective Time, the
Articles of Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of Tarragon in effect immediately prior to the Effective Time
until duly amended as provided therein or by applicable law.

(b) Subject to the terms of Section 7.06, at the Effective Time, the
Bylaws of the Surviving Corporation shall be the Bylaws of Tarragon in effect
immediately prior to the Effective Time until duly amended as provided therein
or by applicable law.

SECTION 1.05. Directors and Officers.

(a) The directors of Tarragon at the Effective Time shall, from and after
the Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
sooner death, resignation or removal in accordance with the Articles of
Incorporation and the Bylaws. At the Effective Time, the Board of Directors of
Tarragon shall cause an increase in the size of the Board of Directors from
four to nine and shall cause certain existing members of the Board of Trustees
of NIRT (except William S. Friedman who is already a director of Tarragon) to
be appointed to the new positions on the Tarragon Board of Directors as of the
Effective Time to serve with the existing members of the Board of Directors of
Tarragon.

(b) The officers of Tarragon at the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified.

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<PAGE> 88

ARTICLE II

CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

SECTION 2.01. Conversion of NIRT Common Stock. (a) As of the Effective
Time, by virtue of the NIRT Merger and without any action on the part of the
holder of any shares of common stock, par value $0.01 per share of NIRT (the
NIRT Common Stock") or any shares of capital stock of Tarragon, except as
otherwise provided in this Section 2.01 and subject to Section 2.05(f), each
share of NIRT Common Stock issued and outstanding immediately prior to the
Effective Time (other than NIRT Common Stock to be cancelled in accordance with
Section 2.02) shall be converted into the right to receive 1.97 (the "Exchange
Ratio") shares of common stock, par value $0.01 per share, of Tarragon
("Tarragon Common Stock"). The shares of NIRT Common Stock which are being
converted in the NIRT Merger will have been deemed to have been previously
issued to holders of beneficial interest of NIRT ("Beneficial Interests"), upon
the conversion of NIRT into the California Corporation although no physical
certificates will have been issued. As of the Effective Time, all such shares
of NIRT Common Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of NIRT Common Stock shall cease to
have any rights with respect thereto, except the right to receive Tarragon
Common Stock.

SECTION 2.02. Cancellation of Treasury Stock. As of the Effective Time, by
virtue of the NIRT Merger and without any action on the part of the holder of
any shares of NIRT Common Stock or any shares of capital stock of Tarragon,
each share of NIRT Common Stock issued and held immediately prior to the
Effective Time in NIRT's treasury and each share of NIRT Common Stock that is
owned by Tarragon or any wholly-owned subsidiary of Tarragon shall
automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.

SECTION 2.03. Stock Transfer Books. At the Effective Time, the share
transfer books of NIRT and the California Corporation shall be closed and there
shall be no further registration of transfers of shares of Beneficial Interests
or NIRT Common Stock thereafter on the records of NIRT and the California
Corporation. From and after the Effective Time, the holders of certificates
representing NIRT Common Stock shall cease to have any rights with respect to
such shares of NIRT Common Stock except as otherwise provided herein or by law.
On or after the Effective Time, any certificates representing NIRT Common Stock
presented to the Exchange Agent (as defined in Section 2.05) or the Surviving
Corporation for any reason shall be converted into the applicable shares of
Tarragon Common Stock and Additional Payments (as defined in Section 2.05), if
any.

SECTION 2.04. Options. At the Effective Time, each holder of an option
granted by NIRT (a "NIRT Option") to purchase shares of Beneficial Interest
which is outstanding and unexercised immediately prior thereto and which was
granted under NIRT's Share Option and Incentive Plan (the "1995 Incentive Plan")
or the NIRT Independent Trustee's Share Option Plan (the "1995 Trustee's Option
Plan") (the 1995 Incentive Plan and the 1995 Trustee's Option Plan are
collectively called the NIRT Option Plans") shall be converted automatically
into the right to receive such number of shares (rounded to the nearest whole
share) of Tarragon Common Stock as is equal to a number of shares of Tarragon
Common Stock by which the product of (A) the number of NIRT shares of Beneficial
Interest subject to such option, and (B) the Exchange Ratio, it being intended
that all outstanding options under the NIRT Option Plans and agreements relating
thereto shall be assumed by and converted into options to purchase shares of
Tarragon Common Stock, in an amount equivalent to the Exchange Ratio, provided
that any fractional shares resulting from such calculations shall be rounded to
the nearest share and that after the Effective Time the holder of such options
shall be entitled, upon exercise of such option under the NIRT Option Plans (if
and when vested) to receive the number of shares of Tarragon Common Stock that
would have been received had such holder of such option been a holder of shares
of NIRT Beneficial Interest at the Effective Time. Following the Effective Time,
each such assumed option under the NIRT Option Plans shall continue to have, and
be subject to, the same terms and conditions as provided in the Option Agreement
governing such option immediately prior to the Effective Time, except as set
forth herein. At the Effective Time, Tarragon shall assume the NIRT Option Plans
and the 1995 Incentive Plan shall be combined with Tarragon's Share Option

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and Incentive Plan (the "Tarragon Option Plan") and the 1995 Trustee's Option
Plan shall be combined with the Tarragon Independent Directors' Share Option
Plan (the "Tarragon Directors' Plan"), with the shares of Tarragon Common Stock
available under each of the Tarragon Option Plan and the Tarragon Directors'
Plan being increased by the number of NIRT shares of Beneficial Interest under
the 1995 Incentive Plan and the 1995 Trustee's Option Plan, respectively,
multiplied by the Exchange Ratio with the result in each case being rounded to
the nearest whole number. It being the intention of Tarragon and NIRT to provide
for a combination and consolidation of their respective plans into the Tarragon
Option Plan and the Tarragon Directors' Plan so that Tarragon, as the surviving
entity shall have available such number of shares of Tarragon Common Stock under
the Tarragon Option Plan and Tarragon Directors' Plan for future grants in total
as would have been available under each of the separate plans of NIRT,
multiplied by the Exchange Ratio, and of Tarragon had such Merger not occurred.
Tarragon shall use its reasonable best efforts so that following the Effective
Time no holder of an option under the 1995 Incentive Plan, the 1995 Trustee's
Option Plan, the Tarragon Option Plan, or the Tarragon Directors' Plan shall be
adversely affected by the Merger with respect to such option.

Notwithstanding the above provisions of this Section 2.04, the conversion
of a NIRT Option which is an "Incentive Stock Option" (within the meaning of
Section 422 of the Code into an Incentive Stock Option to acquire shares of
Tarragon Common Stock shall be accomplished in a manner consistent with the
rules and regulations set forth under Treas. Reg. Section 1.425-1(a) so that the
conversion will not constitute a modification, extension or renewal that would
be considered to be the granting of a new option. Thus, upon the conversion of
an Incentive Stock Option:

(a) the excess of the fair market value of the shares subject to the
Option immediately after the conversion over the aggregate exercise price
is not greater than excess of the fair market value of such shares subject
to the Option immediately prior to the conversion over the aggregate
exercise price immediately prior to such conversion, and

(b) the conversion does not give the employee "additional benefit"
that he did not have under the Option prior to the conversion. For these
purposes, on a share-by-share comparison the ratio of the exercise price to
the fair market value of the stock subject to the option immediately after
the conversion is no more favorable to the employee than such ratio
determined immediately prior to the conversion.

SECTION 2.05. Exchange of Certificates. (a) Exchange Agent. From and after
the Effective Time, (i) Tarragon shall make available to a bank or trust company
or transfer agent designated by Tarragon and reasonably satisfactory to NIRT
(the "Exchange Agent"), for the benefit of the holders of shares of NIRT Common
Stock, for exchange in accordance with this Article II through the Exchange
Agent, certificates evidencing such number of shares of Tarragon Common Stock as
are issuable to holders of NIRT Common Stock in the NIRT Merger pursuant to
Section 2.01 hereof. The Exchange Agent shall, pursuant to written instructions
jointly furnished by Tarragon and NIRT deliver the Tarragon Common Stock
contemplated to be issued pursuant to Section 2.01 hereof. Except as
contemplated by Section 2.05(g) hereof, the Exchange Fund (as defined below)
shall not be used for any other purpose.

(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Tarragon shall cause the Exchange Agent to mail to each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding NIRT Common Stock (the "Certificates") (i) a letter of
transmittal (which shall be in customary form and shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for Tarragon Common Stock.

(c) Exchange of Certificates. Upon surrender to the Exchange Agent of a
Certificate for cancellation, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor (A)
a certificate representing

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that number of whole shares of Tarragon Common Stock, if any, to which such
holder is entitled pursuant to this Article II and (B) a check in the amount
equal to the cash, if any, to which such holder is entitled pursuant to the
provisions of this Article II (including any cash in lieu of any fractional
shares of Tarragon Common Stock to which such holder is entitled pursuant to
Section 2.05(f) and any dividends or other distributions to which such holder
is entitled pursuant to Section 2.05(d) (together, all such items of cash are
called the "Additional Payments")), and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of shares of
NIRT Common Stock which is not registered in the transfer records of NIRT, the
applicable Tarragon Common Stock and Additional Payments, if any, may be issued
to a transferee if the Certificate representing such shares of NIRT Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.05, each Certificate shall be deemed at all times after the Effective
Time to represent only the right to receive upon such surrender the applicable
shares of Tarragon Common Stock with respect to the shares NIRT Common Stock
formerly represented thereby and Additional Payments, if any.

(d) Distributions with Respect to Un-surrendered Certificates. No
dividends or other distributions declared or made after the Effective Time with
respect to Tarragon Common Stock with a record date after the Effective Time
shall be paid to the holder of any un-surrendered Certificate with respect to
the shares of Tarragon Common Stock the holder thereof is entitled to receive
upon surrender thereof, and no cash payment in lieu of any fractional shares
shall be paid to any such holder pursuant to Section 2.05(f), until the holder
of such Certificate shall surrender such Certificate. Subject to the effect of
escheat, tax or other applicable Laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates representing
whole shares of Tarragon Common Stock issued in exchange therefor, without
interest, (i) promptly, the amount of any cash payable with respect to a
fractional share of Tarragon Common Stock to which such holder is entitled
pursuant to Section 2.05(f) and the amount of dividends or other distributions
with a record date after the Effective Time and theretofore paid with respect
to such whole shares of Tarragon Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions, with a record
date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of
Tarragon Common Stock. After the Effective Time, each outstanding Certificate
which theretofore represented shares of Beneficial Interests shall, until
surrendered for exchange in accordance with this Section 2.05, be deemed for
all purposes to evidence ownership of the number of whole shares of Tarragon
Common Stock into which the shares of Beneficial Interests (which, prior to the
Effective Time, were represented thereby) shall have been so converted.

(e) No Further Rights in NIRT Common Stock. All shares of Tarragon Common
Stock issued or cash paid upon conversion of shares of Beneficial Interests in
accordance with the terms hereof (including any cash paid pursuant to Section
2.05(d) or (f) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of NIRT Common Stock.

(f) No Fractional Shares. No certificates or scrip representing fractional
shares of Tarragon Common Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Tarragon. Each
holder of a fractional share interest shall be paid an amount in cash equal to
the product obtained by multiplying (i) such fractional share interest to which
such holder (after taking into account all fractional share interests then held
by such holder) would otherwise be entitled by (ii) the closing price of a
share of Tarragon Common Stock on the last trading day immediately prior to the
Effective Time, as reported by published financial sources. As promptly as
practicable after the determination of the amount of cash, if any, to be paid
to holders of fractional share interests, the Exchange Agent shall so notify
the Surviving Corporation, and the Surviving Corporation shall either deposit
such amount with the Exchange Agent or make funds available from time to time
to the Exchange Agent sufficient to enable the Exchange Agent to forward
payments within two (2) Business Days, and shall cause the Exchange Agent to
forward payments to such holders of fractional share interests subject to and
in accordance with the terms of Sections 2.05(b), (c) and (d).

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(g) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any shares of Tarragon Common Stock) which remains undistributed to
the holders of shares of NIRT Common Stock for six months after the Effective
Time shall be delivered to the Surviving Corporation, upon demand, and any
holders of shares of NIRT Common Stock who have not theretofore complied with
this Article II shall thereafter look only to Tarragon for the applicable
Tarragon Common Stock and any Additional Payments to which they are entitled.
Any portion of the Exchange Fund remaining unclaimed by holders of shares NIRT
Common Stock or Tarragon Common Stock as of a date which is immediately prior
to such time as such amounts would otherwise escheat to or become property of
any government entity shall, to the extent permitted by applicable Law, become
the property of the Surviving Corporation free and clear of any claims or
interest of any person previously entitled thereto.

(h) No Liability. Neither the Exchange Agent nor the Surviving Corporation
shall be liable to any holder of Certificates for any shares of Tarragon Common
Stock (or dividends or distributions with respect thereto), or cash delivered
to a public official pursuant to any abandoned property, escheat or similar
law.

(i) Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Certificates such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by the Surviving Corporation such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Certificates in respect of which such deduction and withholding was made by
the Surviving Corporation.

(j) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Tarragon,
the posting by such person of a bond, in the form customarily required by
Tarragon and in such reasonable amount as Tarragon may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the applicable Tarragon Common Stock and Additional Payments, if
any.

(k) Dissenters' Rights. In accordance with Section 92A.390 of the Nevada
Law, no appraisal rights shall be available to holders of Tarragon Common Stock
in connection with the NIRT Merger. In accordance with Section 1300, et seq.,
of the California Law, no appraisal rights shall be available to holders of
NIRT Common Stock in connection with the NIRT Merger.

(l) Adjustments to Prevent Dilution. In the event that prior to the
Effective Time there is a change in the number of shares of Tarragon Common
Stock or securities convertible or exchangeable into or exercisable for
Tarragon Common Stock issued and outstanding as a direct result of a
distribution, reclassification, stock split (including a reverse split), stock
dividend or distribution, or other similar transaction, the Exchange Ratio
specified in Section 2.01 shall be equitably adjusted to eliminate the effects
of such event.

(m) Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of Tarragon or NIRT, as applicable, acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the NIRT Merger or otherwise to carry out this Agreement, the officers of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of Tarragon and NIRT, or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in such names and
on such behalves or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF TARRAGON

Tarragon hereby represents and warrants to NIRT that:

SECTION 3.01. Organization and Qualification. Tarragon (as of the date of
this Agreement and as of the Closing Date) is a corporation incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate, and all necessary governmental
approvals to own, lease and operate the Tarragon Properties (as defined in
Section 3.10) and to carry on its business as it is now being conducted, except
where the lack of such power, authority and approval would not, individually or
in the aggregate, have a Tarragon Material Adverse Effect (as defined below).
Tarragon is duly qualified or licensed as a foreign corporation, to do
business, and is in good standing, in each jurisdiction where the character of
the Tarragon Properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Tarragon Material Adverse Effect. The
term "Tarragon Material Adverse Effect" means any circumstances, change in, or
effect on, Tarragon when taken as a consolidated whole, which is, or could
reasonably be expected in the future to be, materially adverse to the
operations, assets or liabilities, employee relationships, customer or supplier
relationships, earnings or results of operations, financial projections or
forecasts, or the business prospects and condition (financial or otherwise) of
Tarragon and its subsidiaries, if any.

SECTION 3.02. Articles of Incorporation and Bylaws. Tarragon has
heretofore furnished to NIRT complete and correct copies of the Articles of
Incorporation and the Bylaws, each as amended to date, of Tarragon. Such
Articles of Incorporation and Bylaws are in full force and effect. Tarragon is
not in violation of any provision of its Articles of Incorporation or Bylaws.

SECTION 3.03. Capitalization. The authorized capital stock of Tarragon
consists of (i) 20,000,000 shares of Tarragon Common Stock and (ii) 10,000,000
shares of special stock, par value $.01 per share, issuable in such series and
with such rights and designations as the Board of Directors of Tarragon may
from time to time determine (the "Tarragon Special Stock"). As of March 9,
1998, (a) 1,286,897 shares of Tarragon Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable,
(b) 160,000 shares of Tarragon Common Stock were reserved for future issuance
pursuant to Tarragon's Share Option Plans, and (c) no shares of Tarragon
Special Stock were issued and outstanding. All publicly traded shares of
Tarragon Common Stock have been approved for trading on the National
Association of Securities Dealers, Inc. Automated Quotation/Small Cap Market
("NASDAQ"). Set forth in the Tarragon SEC Reports is a summary setting forth
the number of outstanding options, stock incentive rights or any other rights
to acquire shares of Tarragon Common Stock pursuant to Tarragon's Share Option
Plans and the exercise price therefor as of December 31, 1997. From December
31, 1997 through the date of this Agreement, Tarragon has not issued, sold,
pledged, disposed of, granted to employees of the Advisor, encumbered, or
authorized the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of capital stock of any class or other equity interests of Tarragon or
any rights to acquire such shares or other equity interests in Tarragon, except
pursuant to the exercise of options that were outstanding as of December 31,
1997 and those additional options granted since December 31, 1997 that are set
forth in the Tarragon SEC Reports. Except as set forth in this Section 3.03 or
in the Tarragon Form 10-K for the fiscal year ended December 31, 1997 (the
"Tarragon 1997 Form 10-K"), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock or other equity interests of Tarragon or obligating
Tarragon to issue or sell any shares of capital stock of, or other equity
interests in, Tarragon. All shares of Tarragon Common Stock subject to issuance
as aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as disclosed in the
Tarragon 1997 Form 10-K, there are no outstanding contractual obligations of
Tarragon to repurchase, redeem or otherwise acquire any shares of Tarragon
Common Stock.

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SECTION 3.04. Authority Relative to this Agreement. Tarragon has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its respective obligations hereunder and to consummate the NIRT
Merger. The execution and delivery of this Agreement by Tarragon and the
consummation by Tarragon of the NIRT Merger have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Tarragon are necessary to authorize this Agreement or to
consummate the NIRT Merger (other than, with respect to the NIRT Merger, as to
Tarragon, the approval and adoption of this Agreement by the holders of at least
a majority of the shares of Tarragon Common Stock and the filing and recordation
of appropriate merger documents as required by Nevada Law and California Law).
This Agreement has been duly and validly executed and delivered by Tarragon and,
assuming the due authorization, execution and delivery by NIRT constitutes a
legal, valid and binding obligation of Tarragon, enforceable against Tarragon in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

SECTION 3.05. No Conflict; Required Filings and Consents.

(a) The execution and delivery of this Agreement by Tarragon does not,
and the performance of this Agreement by Tarragon will not, (i) conflict with
or violate the Articles of Incorporation or Bylaws of Tarragon (ii) conflict
with or violate any domestic (federal, state or local) or foreign law, rule,
regulation, order, judgment or decree (collectively, "Laws") applicable to
Tarragon or by which any Tarragon Property or asset of Tarragon is bound or
affected, except for such conflicts or violations that, individually or in the
aggregate, are not reasonably likely to have a Tarragon Material Adverse
Effect, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on
any Tarragon Property or asset of Tarragon pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Tarragon is a party or by which
Tarragon or any Tarragon Property or asset of Tarragon is bound or affected,
except (x) for any such breaches, defaults or other occurrences that,
individually or in the aggregate, would not have a Tarragon Material Adverse
Effect and will not prevent or delay the consummation of the transactions
contemplated by this Agreement and (y) for consents required pursuant to loan
documents and mortgages relating to certain Tarragon Properties which will be
obtained prior to the Effective Time or which if not obtained are not
reasonably likely, individually or in the aggregate, to have a Tarragon
Material Adverse Effect.

(b) The execution and delivery of this Agreement by Tarragon does not,
and the performance of this Agreement by Tarragon will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic, foreign or supranational, except
(i) for applicable requirements, if any, of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), state securities or "blue sky" laws ("Blue Sky Laws"), state
takeover laws, and filing and recordation of appropriate merger documents as
required by Nevada Law and California Law and the rules of the National
Association of Securities Dealers ("NASD") (ii) for consents required pursuant
to loan documents and mortgages relating to certain Tarragon Properties, and
(iii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, individually or in the
aggregate, is not reasonably likely to have a Tarragon Material Adverse Effect.

SECTION 3.06. Compliance with Laws; Permits. Tarragon is not in conflict
with, or in default or violation of any Laws applicable to Tarragon or by which
any Tarragon Property or asset of Tarragon is bound or affected, except for any
such conflicts, defaults or violations that do not, individually or in the
aggregate, have a Tarragon Material Adverse Effect.

SECTION 3.07. SEC Filings; Financial Statements.

(a) Tarragon has filed all forms, reports and documents required to be
filed by it (and/or its predecessor in interest) with the Securities and
Exchange Commission (the "SEC") since January 1, 1995 and

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has made available to NIRT all registration statements filed by Tarragon with
the SEC, including all exhibits filed in connection therewith (on all forms
applicable to the registration of securities) since January 1, 1995 and prior
to the date of this Agreement (collectively, the "Tarragon SEC Reports"), and
has heretofore made available to NIRT complete (i.e., un-redacted) copies of
each exhibit (which is in effect as of the date hereof) to the Tarragon SEC
Reports filed with the SEC. The Tarragon SEC Reports (i) were prepared in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations thereunder
and (ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

(b) Each of the consolidated financial statements (including, in each
case, any notes and schedules thereto) contained in the Tarragon SEC Reports
substantially complied as to form with the applicable accounting requirements
and rules and regulations of the SEC and was prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto), and each fairly presented the consolidated financial position,
results of operations and cash flows of Tarragon as at the respective dates
thereof and for the respective periods indicated therein in accordance with
United States generally accepted accounting principles (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a Tarragon
Material Adverse Effect).

(c) Except as and to the extent set forth on the consolidated balance
sheet of Tarragon as of December 31, 1997, including the notes thereto (the
"Tarragon 1997 Balance Sheet"), Tarragon has no liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with United States generally accepted accounting principles,
except for liabilities and obligations (i) disclosed in any Tarragon SEC Report
filed since December 31, 1997 and prior to the date of this Agreement, (ii)
incurred since December 31, 1997 in the ordinary course of business which,
individually or in the aggregate, do not have a Tarragon Material Adverse
Effect, or (iii) incurred pursuant to or as contemplated by this Agreement.

SECTION 3.08. Absence of Certain Changes or Events. Since December 31,
1997, except as contemplated by this Agreement or disclosed in any Tarragon SEC
Report filed since December 31, 1997, Tarragon has conducted its business only
in the ordinary course and in a manner consistent with past practice and, since
December 31, 1997, there has not been (a) any event or events having,
individually or in the aggregate, a Tarragon Material Adverse Effect, (b) any
revaluation by Tarragon of any material asset (including, without limitation,
any writing down or writing up of the value of any Tarragon Properties, writing
off of notes or accounts receivable or reversing of any accruals or reserves),
other than in the ordinary course of business consistent with past practice,
(c) any entry by Tarragon into any commitment or transaction material to
Tarragon (with the exception of any real estate transactions, including related
financings, conducted at arms' length and for fair value), or (d) other than
regular dividends, of which none were paid in 1997 and $0.10 per share of
Tarragon Common Stock was paid in January 1998 to holders of record on December
26, 1997, any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Tarragon or any redemption,
purchase or other acquisition of any of its securities. The results of
operations for the most recently completed fiscal quarter are not materially
lower than the results of operations for the immediately preceding fiscal
quarter, and there is no reason to believe that the results of operations for
the current fiscal quarter will be materially lower than the results of
operations for Tarragon's most recently completed fiscal quarter.

SECTION 3.09. Absence of Litigation.

(a) Except as disclosed in the Tarragon SEC Reports, there is no claim,
action, proceeding or investigation pending or, to Tarragon's Knowledge,
threatened against Tarragon, or any Tarragon Property or asset of Tarragon,
before any court, arbitrator or Governmental Authority (as defined in
Article V),

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which, individually or when aggregated with other claims, actions, proceedings
or investigations or product liability claims, actions, proceedings or
investigations which are reasonably likely to result from facts and
circumstances that have given rise to such a claim, action, proceeding or
investigation, would have a Tarragon Material Adverse Effect. As of the date
hereof, neither Tarragon nor any Tarragon Property or asset of Tarragon is
subject to any order, writ, judgment, injunction, decree, determination or
award having, individually or in the aggregate, a Tarragon Material Adverse
Effect.

(b) Tarragon has not received notice from any source that Tarragon may be
liable with respect to product liability or worker's compensation claims,
except for such claims that, if determined adversely to Tarragon, would not,
individually or in the aggregate, have a Tarragon Material Adverse Effect.

SECTION 3.10. Title to and Sufficiency of Assets. As of the date hereof
Tarragon either directly or through a subsidiary or other entity owns, and as
of the Effective Time Tarragon will own, good title to all of its assets
constituting real property, including raw land and properties under
construction (the "Tarragon Properties"), and personal property which is
material to its businesses, taken as a whole (excluding, for purposes of this
sentence, assets held under leases), free and clear of any and all mortgages,
liens, encumbrances, charges, claims, restrictions, pledges, security interests
or impositions (collectively, "Liens"), except as set forth in the Tarragon SEC
Reports or such encumbrances or restrictions as do not materially interfere
with the current use of such property. Such assets, together with all assets
held by Tarragon under leases, include all tangible and intangible real or
personal property, contracts and rights necessary or required for the operation
of the business of Tarragon.

SECTION 3.11. Intellectual Property. "Tarragon Intellectual Property"
means all trademarks, trademark registrations, trademark rights, trade names,
trade name rights, patents, patent rights, patent applications, industrial
models, inventions, invention disclosures, copyrights, copyright registrations,
service marks, service mark registrations, service mark rights, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights, data and information of any nature or form used or held for
use in connection with the business of Tarragon as currently conducted or as
currently contemplated by Tarragon, together with all applications currently
pending for any of the foregoing. Except as disclosed in the Tarragon SEC
Reports, Tarragon owns or possess adequate licenses or other valid rights to
use all of the Tarragon Intellectual Property that is necessary or appropriate
for the conduct or contemplated conduct of Tarragon's business.

SECTION 3.12. Tax Matters. (a) Tarragon has filed all tax returns and
reports required to be filed by it (after giving effect to any filing extension
properly granted by a Governmental Authority having authority to do so) and has
paid (or Tarragon has paid on its behalf) all Taxes (as defined below) shown on
such returns and reports as required to be paid by it except (i) as set forth
in Tarragon SEC Reports or (ii) Taxes that are being contested in good faith by
appropriate proceedings and for which Tarragon has set aside on its books
adequate reserves. The most recent audited financial statements contained in
the Tarragon SEC Reports reflect an adequate reserve for all material Taxes
payable by Tarragon for all taxable periods and portions thereof through the
date of such financial statements. Since December 31, 1997, Tarragon has
incurred no liability for taxes under Sections 857(b), 860(c) or 4981 of the
Code, including without limitation any tax arising from a prohibited transaction
described in Section 857(b)(6) of the Code, and Tarragon has not incurred any
liability for taxes other than in the ordinary course of business. No event has
occurred, and no condition or circumstances exists which presents a material
risk that any material Tax described in the preceding sentence will be imposed
upon Tarragon. To the Knowledge of Tarragon, no deficiencies for any Taxes have
been proposed, asserted or assessed against Tarragon, and no requests for
waivers of the time to assess any such Taxes are pending, except that Tarragon
has executed waivers regarding the application of the statute of limitations
with respect to federal Taxes for 1994 and all subsequent years. As used in
this Agreement, "Taxes" shall include all federal, state, local and foreign
income, property, sales, franchise, employment, excise and other taxes, tariffs
or governmental charges of any nature whatsoever, together with penalties,
interest or additions to Tax with respect thereto.

(b) Tarragon and/or its predecessor (i) for all taxable years commencing
with the tax year which began December 1, 1990 through the period ended
December 31, 1997 has been subject to taxation

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as a real estate investment trust (a "REIT") within the meaning of Section 856
of the Code and has satisfied all requirements to qualify as a REIT for such
years, (ii) has operated since January 1, 1998 to the date of this
representation, and intends to continue to operate, in such a manner as to
qualify as a REIT for the taxable year ending November 30, 1998 or the Closing
Date, whichever is earlier, and (iii) has not taken or omitted to take any
action which would reasonably be expected to (A) result in any rents paid by
the tenants of the Tarragon Properties to be excluded from the definition of
"rents from real property" under Section 856(d)(2)(c) of the Code (except for
certain rents derived from the rental of apartments to winter visitors and
corporate clients, which, if not treated as "rents from real property, will
not result in the disqualification of Tarragon as a REIT under Section 856 or
the Code) or (B) otherwise result in a challenge to its status as a REIT, and
to Tarragon's Knowledge, no such challenge is pending or threatened.

SECTION 3.13. Environmental Matters.

(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) petroleum and
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (B) any other
chemicals, materials or substances regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law; (ii)
"Environmental Law" means any law, past, present or future and as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, or common law, relating to
pollution or protection of the environment, health or safety or natural
resources, including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Substances; and (iii) "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law.

(b) Except as disclosed in the Tarragon SEC Reports, Tarragon is and has
been in compliance with all applicable Environmental Laws, has obtained all
Environmental Permits and is in compliance with their requirements, and has
resolved all past non-compliance with Environmental Laws and Environmental
Permits without any pending, on-going or future obligation, cost or liability,
except in each case for the notices set forth in the Tarragon SEC Reports or
where such non-compliance would not, individually or in the aggregate, have a
Tarragon Material Adverse Effect.

(c) Except as disclosed in the Tarragon SEC Reports, no Environmental Law
imposes any material obligation upon Tarragon arising out of or as a condition
to any transaction contemplated by this Agreement, including any requirement to
modify or to transfer any permit or license, any requirement to file any notice
or other submission with any Governmental Authority, the placement of any
notice, acknowledgement or covenant in any land records, or the modification of
or provision of notice under any agreement, consent order or consent decree.
Except as disclosed in the Tarragon SEC Reports, no Lien has been placed upon
any of the Tarragon Properties under any Environmental Law.

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SECTION 3.14. Material Contracts. Tarragon has not received a written
notice that Tarragon is in violation of or in default under (nor to the
Knowledge of Tarragon does there exist any condition which upon the passage of
time or the giving of notice or both would cause such a violation of or default
under) any material loan or credit agreement, note, bond, mortgage, indenture,
lease, permit, concession, franchise, license or any other material contract,
agreement, arrangement or understanding, to which it is a party or by which it
or any of the Tarragon Properties or assets is bound, except as set forth in
the Tarragon SEC Reports, nor to the Knowledge of Tarragon does such a
violation or default exist, except to the extent that such violation or
default, individually or in the aggregate, would not have a Tarragon Material
Adverse Effect.

SECTION 3.15. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Tarragon are with reputable insurance
carriers, provide full and adequate coverage for all normal risks incident to
the businesses of Tarragon and the Tarragon Properties and assets, and are in
character and amount at least equivalent to that carried by persons engaged in
similar businesses and subject to the same or similar perils or hazards, except
for any such failures to maintain insurance policies that, individually or in
the aggregate, would not have a Tarragon Material Adverse Effect. Tarragon has
made any and all payments required to maintain such policies in full force and
effect. Except as set forth in the Tarragon SEC Reports, Tarragon has not
received notice of default under any such policy, nor has either received
written notice or, to the Knowledge of Tarragon, oral notice of any pending or
threatened termination or cancellation, coverage limitation or reduction or
material premium increase with respect to such policy.

SECTION 3.16. Accuracy of Information. Neither this Agreement nor any
other document required to be provided by Tarragon or any of its employees or
agents to NIRT in connection with the transactions contemplated herein contains
an untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained therein not misleading.

SECTION 3.17. Transactions with Affiliates.(a) For purposes of this
Section 3.17, the term "Tarragon Affiliated Person" means (i) any holder of 2%
or more of the Tarragon Common Stock, (ii) any director, officer or senior
executive of Tarragon, (iii) any person, firm or corporation that directly or
indirectly controls, is controlled by, or is under common control with,
Tarragon or (iv) any member of the immediate family of any of such persons; but
"Tarragon Affiliated Person" does not include NIRT or Advisor or Tarragon
Management, Inc. ("TMI").

(b) Except as set forth in the Tarragon SEC Reports, since December 31,
1997, Tarragon has not, in the ordinary course of business or otherwise, (i)
purchased, leased or otherwise acquired any material property or assets or
obtained any material services from, (ii) sold, leased or otherwise disposed of
any material Tarragon Property or assets or provided any material services to
(except with respect to remuneration for services rendered in the ordinary
course of business as director, officer or employee of Tarragon), (iii) entered
into or modified in any manner any contract with, or (iv) borrowed any money
from, or made or forgiven any loan or other advance (other than expenses or
similar advances made in the ordinary course of business) to, any Tarragon
Affiliated Person.

(c) Except as set forth in the Tarragon SEC Reports, (i) the contracts of
Tarragon do not include any material obligation or commitment between Tarragon
or any Tarragon Affiliated Person, (ii) the assets of Tarragon not include any
receivable or other obligation or commitment from a Tarragon Affiliated Person
to Tarragon and (iii) the liabilities of Tarragon do not include any payable or
other obligation or commitment from Tarragon to any Tarragon Affiliated Person.

(d) To the Knowledge of Tarragon and except as set forth in the Tarragon
SEC Reports, no Tarragon Affiliated Person of Tarragon is a party to any
contract with any customer or supplier of Tarragon that affects in any material
manner the business, financial condition or results of operation of Tarragon.

SECTION 3.18. Opinion of Financial Advisor. Tarragon has received the
opinion of Duff & Phelps (the "Tarragon Financial Advisor"), to the effect
that, as of the date on which the Board of Directors of

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Tarragon approved the NIRT Merger, the NIRT Merger is fair to the Tarragon
stockholders from a financial point of view.

SECTION 3.19. Brokers. No broker, finder or investment banker (other than
the Tarragon Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the NIRT Merger based upon arrangements
made by or on behalf of Tarragon. Tarragon has heretofore furnished to NIRT a
complete and correct copy of all agreements between Tarragon and the Tarragon
Financial Advisor pursuant to which such firm would be entitled to any payment
relating to the NIRT Merger.

SECTION 3.20. Tarragon Common Stock to Be Issued in the NIRT Merger. The
shares of Tarragon Common Stock to be issued pursuant to the NIRT Merger will
when issued pursuant to this Agreement, be duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights created by
statute, Tarragon's Articles of Incorporation or Bylaws or any agreement to
which Tarragon is a party or by which Tarragon is bound and will, when issued,
be registered under the Securities Act and the Exchange Act and registered or
exempt from registration under applicable Blue Sky Laws.

SECTION 3.21. Definition of Knowledge of Tarragon. As used in this
Agreement, the phrase "Knowledge of Tarragon" (or words of similar import)
means the knowledge of the following individuals: William Friedman, Bruce
Schnitz and Robert Irvine.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF NIRT

NIRT hereby represents and warrants to Tarragon that:

SECTION 4.01. Organization and Qualification: Subsidiaries. As of the
date of execution of this Agreement, NIRT is a California business trust
validly existing under the laws of the State of California and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate the NIRT Properties (as defined in Section 4.10) and to carry
on its business as it is now being conducted, except where the lack of such
power, authority and approval would not have a NIRT Material Adverse Effect (as
defined below). NIRT (as of the Closing Date) is a corporation, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate the NIRT Properties
as defined in Section 4.10 and to carry on its business as it is now being
conducted, except where the lack of such power, authority and approval would
not, individually or in the aggregate, have a NIRT Material Adverse Effect.
NIRT (as of the Closing Date) is duly qualified or licensed as a foreign
corporation, to do business, and is in good standing, in each jurisdiction
where the character of the NIRT Properties owned, leased or operated by it or
the nature of its business makes such qualification or licensing necessary,
except for such failures to be so qualified or licensed and in good standing
that would not, individually or in the aggregate, have a NIRT Material Adverse
Effect. The term "NIRT Material Adverse Effect" means any circumstances, change
in, or effect on, NIRT when taken as a consolidated whole, which is, or could
reasonably be expected in the future to be, materially adverse to the
operations, assets or liabilities, employee relationships, customer or supplier
relationships, earnings or results of operations, financial projections or
forecasts, or the business prospects and condition (financial or otherwise) of
NIRT and its subsidiaries if any.

SECTION 4.02. Articles of Incorporation and Bylaws. NIRT has heretofore
furnished to Tarragon complete and correct copies of the Declaration of Trust
and Trustees' Regulations, each as amended to date, of NIRT and Articles of
Incorporation and Bylaws of the California Corporation. Such Declaration of
Trust and Trustees' Regulations (as of the date of this Agreement) are, and
such Articles of Incorporation and Bylaws (as of the Closing Date) will be, in
full force and effect. NIRT is not in violation of any provision of its
Declaration of Trust or Trustees' Regulations (as of the date of this
Agreement) or its Articles of Incorporation or Bylaws (as of the Closing Date).

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SECTION 4.03. Capitalization. As of the date of this Agreement, there is
no limit on the number of shares of Beneficial Interests which can be issued by
NIRT. As of the Closing Date, NIRT will be a California corporation, the
authorized capital stock of which will consist of 10,000,000 shares of NIRT
Common Stock. As of the Closing Date (a) no more than 3,800,000 shares of NIRT
Common Stock will be issued and outstanding, all of which will be validly
issued, fully paid and nonassessable and (b) no more than 100,000 shares of
NIRT Common Stock will be deemed to be reserved for future issuance pursuant to
the NIRT Share Option Plans. All publicly traded Beneficial Interests of NIRT
have been approved for trading on the National Association of Securities
Dealers, Inc. Automated Quotation/National Market System ("NASDAQ/NMS"). Set
forth in the NIRT SEC Reports is a summary setting forth the number of
outstanding NIRT options, stock incentive rights or any other rights to acquire
shares of NIRT Beneficial Interests pursuant to the NIRT Share Option Plans and
the exercise price therefor as of December 31, 1997. From December 31, 1997
through the date of this Agreement, NIRT has not issued, sold, pledged,
disposed of, granted to employees of the Advisor, encumbered, or authorized the
issuance, sale, pledge, disposition, grant or encumbrance of any shares of
Beneficial Interests of NIRT or any rights to acquire such Beneficial Interests
or other equity interests in NIRT, except pursuant to the exercise of NIRT
options that were outstanding as of December 31, 1997 and those additional NIRT
options granted since December 31, 1997 that are set forth the NIRT SEC
Reports. Except as set forth in this Section 4.03 or in the NIRT Form 10-K for
the fiscal year ended December 31, 1997 (the NIRT 1997 Form 10-K") there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued Beneficial Interests or other
equity interests of NIRT or obligating NIRT to issue or sell any shares of
Beneficial Interests of, or other equity interests in, NIRT. All shares of
Beneficial Interests subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in the NIRT 1997 Form 10-K, there are no
outstanding contractual obligations of NIRT to repurchase, redeem or otherwise
acquire any shares of Beneficial Interests.

SECTION 4.04. Authority Relative to this Agreement. NIRT has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the NIRT Merger. The execution and
delivery of this Agreement by NIRT and the consummation by NIRT of the NIRT
Merger has been duly and validly authorized by all necessary action and no
other proceedings on the part of NIRT are necessary to authorize this Agreement
or to consummate the NIRT Merger (other than, with respect to the NIRT Merger,
as to NIRT, the approval and adoption of this Agreement and the transactions
contemplated hereby by the holders of at least a majority of the shares of
Beneficial Interests, including the provisions relating to the conversion of
NIRT from a California business trust into the California Corporation as
required pursuant to Section 7.02 hereof, and the subsequent filing and
recordation of appropriate merger documents as required by Nevada Law and
California Law. This Agreement has been duly and validly executed and delivered
by NIRT and, assuming the due authorization, execution and delivery by
Tarragon, constitutes a legal, valid and binding obligation of NIRT,
enforceable against NIRT in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.

SECTION 4.05. No Conflict: Required Filings and Consents.

(a) The execution and delivery of this Agreement by NIRT does not, and
the performance of this Agreement by NIRT will not, (i) conflict with or
violate the Articles of Incorporation or Bylaws of NIRT, (ii) conflict with or
violate any Laws applicable to NIRT or by which any NIRT Property or asset of
NIRT is bound or affected, except for such conflicts or violations that,
individually or in the aggregate, are not reasonably likely to have a NIRT
Material Adverse Effect, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any NIRT Property or asset of NIRT pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which NIRT is a party or by which NIRT or any
NIRT Property or asset of NIRT is bound or affected, except (x) for any such
breaches, defaults or other occurrences that, individually or in the aggregate,
would not have

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a NIRT Material Adverse Effect and will not prevent or delay the consummation
of the transactions contemplated by this Agreement and (y) for consents
required pursuant to loan documents and mortgages relating to certain NIRT
Properties and/or NIRT's agreements with GMAC Commercial Mortgage which will be
obtained prior to the Effective Time or which if not obtained are not
reasonably likely, individually or in the aggregate, to have a NIRT Material
Adverse Effect.

(b) The execution and delivery of this Agreement by NIRT does not, and
the performance of this Agreement by NIRT will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic, foreign or supranational,
except (i) for applicable requirements, if any, of the Exchange Act, the
Securities Act, Blue Sky Laws, state takeover laws and filing and recordation
of appropriate merger documents as required by Nevada Law and California Law
and the rules of the NASD (ii) for consents required pursuant to loan documents
and mortgages relating to certain NIRT Properties and/or NIRT's agreements with
GMAC Commercial Mortgage and (iii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
individually or in the aggregate, is not reasonably likely to have a NIRT
Material Adverse Effect.

SECTION 4.06. Compliance with Laws; Permits. NIRT is not in conflict
with, or in default or violation of any Laws applicable to NIRT or by which any
NIRT Property or asset of NIRT is bound or affected, except for any such
conflicts, defaults or violations that do not, individually or in the
aggregate, have a NIRT Material Adverse Effect.

SECTION 4.07. SEC Filings; Financial Statements.

(a) NIRT has filed all forms, reports and documents required to be filed
by it with the SEC since January 1, 1995 and has made available to Tarragon all
registration statements filed by NIRT with the SEC, including all exhibits
filed in connection therewith (on all forms applicable to the registration of
securities) since January 1, 1995 and prior to the date of this Agreement
(collectively, the NIRT SEC Reports"), and has heretofore made available to
Tarragon complete (i.e., un-redacted) copies of each exhibit (which is in effect
as of the date hereof) to the NIRT SEC Reports filed with the SEC. The NIRT SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations thereunder and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.

(b) Each of the consolidated financial statements (including, in each
case, any notes and schedules thereto) contained in the NIRT SEC Reports
substantially complied as to form with the applicable accounting requirements
and rules and regulations of the SEC and was prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto), and each fairly presented the consolidated financial position,
results of operations and cash flows of NIRT as at the respective dates thereof
and for the respective periods indicated therein in accordance with United
States generally accepted accounting principles (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a NIRT
Material Adverse Effect).

(c) Except as and to the extent set forth on the consolidated balance
sheet of NIRT as of December 31, 1997, including the notes thereto (the "NIRT
1997 Balance Sheet"), NIRT has no liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet, or in the notes thereto, prepared in
accordance with United States generally accepted accounting principles, except
for liabilities and obligations (i) disclosed in any NIRT SEC Report filed
since December 31, 1997 and prior to the date of this Agreement, (ii) incurred
since December 31, 1997 in the ordinary course of business which, individually
or in the aggregate, do not have a NIRT Material Adverse Effect, or (iii)
incurred pursuant to this Agreement.

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SECTION 4.08. Absence of Certain Changes or Events. Since December 31,
1997, except as contemplated by this Agreement, or disclosed in any NIRT SEC
Report filed since December 31, 1997, NIRT has conducted its business only in
the ordinary course and in a manner consistent with past practice and, since
December 31, 1997, there has not been (a) any event or events having,
individually or in the aggregate, a NIRT Material Adverse Effect, (b) any
revaluation by NIRT of any material asset (including, without limitation, any
writing down or writing up of the value of any properties, writing off of notes
or accounts receivable or reversing of any accruals or reserves), other than in
the ordinary course of business consistent with past practice, (c) any entry by
NIRT into any commitment or transaction material to NIRT (with the exception of
any real estate transactions, including related financings, conducted at arm's
length and for fair value), or (d) other than regular distributions, of which
$0.74 cash per Beneficial Interest and a 10% share distribution was paid in
calendar 1997 and $0.20 cash per Beneficial Interest was paid in April 1998,
any declaration, setting aside or payment of any dividend or distribution in
respect of any Beneficial Interests of NIRT or any redemption, purchase or
other acquisition of any of its securities. The results of operations for the
most recently completed fiscal quarter are not materially lower than the
results of operations for the immediately preceding fiscal quarter, and there
is no reason to believe that the results of operations for the current fiscal
quarter will be materially lower than the results of operations for NIRT's most
recently completed fiscal quarter.

SECTION 4.09. Absence of Litigation

(a) Except as disclosed in the NIRT SEC Reports, there is no claim,
action, proceeding or investigation pending or, to NIRT's Knowledge, threatened
against NIRT, or any NIRT Property or asset of NIRT, before any court,
arbitrator or Governmental Authority, which, individually or when aggregated
with other claims, actions, proceedings or investigations or product liability
claims, actions, proceedings or investigations which are reasonably likely to
result from facts and circumstances that have given rise to such a claim,
action, proceeding or investigation, would have a NIRT Material Adverse Effect.
As of the date hereof, neither NIRT nor any NIRT Property or asset of NIRT is
subject to any order, writ, judgment, injunction, decree, determination or
award having, individually or in the aggregate, a NIRT Material Adverse Effect.

(b) NIRT has not received notice from any source that NIRT may be liable
with respect to product liability or worker's compensation claims, except for
such claims that, if determined adversely to NIRT, would not, individually or
in the aggregate, have a NIRT Material Adverse Effect.

SECTION 4.10. Title to and Sufficiency of Assets. As of the date hereof
NIRT, either directly or through a subsidiary or other entity, owns, and as of
the Effective Time NIRT will own, good title to all of its assets constituting
real property, including raw land and properties under construction (the "NIRT
Properties") and personal property which is material to its businesses, taken
as a whole (excluding, for purposes of this sentence, assets held under
leases), free and clear of any and all Liens, except as set forth in the NIRT
SEC Reports or such encumbrances or restrictions as do not materially interfere
with the current use of such property. Such assets, together with all assets
held by NIRT leases, include all tangible and intangible real or personal
property, contracts and rights necessary or required for the operation of the
business of NIRT.

SECTION 4.11. Intellectual Property. NIRT Intellectual Property" means
all trademarks, trademark registrations, trademark rights, trade names, trade
name rights, patents, patent rights, patent applications, industrial models,
inventions, invention disclosures, copyrights, copyright registrations, service
marks, service mark registrations, service mark rights, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights, data and information of any nature or form used or held for
use in connection with the businesses of NIRT as currently conducted or as
currently contemplated by NIRT, together with all applications currently
pending for any of the foregoing. Except as disclosed in the NIRT SEC Reports,
NIRT owns or possesses adequate licenses or other valid rights to use all of
the NIRT Intellectual Property that is necessary or appropriate for the conduct
or contemplated conduct of NIRT's business.

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SECTION 4.12. Tax Matters. (a) NIRT has filed all tax returns and reports
required to be filed by it (after giving effect to any filing extension
properly granted by a Governmental Authority having authority to do so) and has
paid (or NIRT has paid on its behalf) all Taxes shown on such returns and
reports as required to be paid by it except (i) as set forth in the NIRT SEC
Reports or (ii) taxes that are being contested in good faith by appropriate
proceedings and for which NIRT shall have set aside on its books adequate
reserves. The most recent audited financial statements contained in the NIRT
SEC Reports reflect an adequate reserve for all material Taxes payable by NIRT
for all taxable periods and portions thereof through the date of such financial
statements. Since December 31, 1997, NIRT has incurred no liability for taxes
under Sections 857(b), 860(c) or 4981 of the Code, including without limitation
any tax arising from a prohibited transaction described in Section 857(b)(6) of
the Code, and NIRT has not incurred any liability for taxes other than in the
ordinary course of business. No event has occurred, and no condition or
circumstance exists, which presents a material risk that any material Tax
described in the preceding sentence will be imposed upon NIRT. To the Knowledge
of NIRT, no deficiencies for any Taxes have been proposed, asserted or assessed
against NIRT, and no requests for waivers of the time to assess any such Taxes
are pending, except that NIRT has executed waivers regarding the application of
the statute of limitations with respect to federal Taxes for 1994 and all
subsequent years.

(b) NIRT (i) for all taxable years commencing with the tax year which
began January 1, 1990 through the tax year ended December 31, 1997 has been
subject to taxation as a REIT within the meaning of Section 856 of the Code and
has satisfied all requirements to qualify as a REIT for such years, (ii) has
operated since January 1, 1998 to the date of this representation, and intends
to continue to operate, in such a manner as to qualify as a REIT for the
taxable year ending December 31, 1998 or the Closing Date, whichever is
earlier, and (iii) has not taken or omitted to take any action which would
reasonably be expected to (A) result in any rents paid by the tenants of the
NIRT Properties to be excluded from the definition of "rents from real
property" under Section 856(d)(2)(C) of the Code (except for certain rents
derived from the rental of apartments to winter visitors and corporate clients,
which, if not treated as "rents from real property", will not result in the
disqualification of NIRT as a REIT under Section 856 of the Code) or (B)
otherwise result in a challenge to its status as a REIT and to the Knowledge of
NIRT, no such challenge is pending or threatened.

SECTION 4.13. Environmental Matters.

(a) Except as disclosed in the NIRT SEC Reports, NIRT is and has been in
compliance with all applicable Environmental Laws, has obtained all
Environmental Permits and is in compliance with their requirements, and has
resolved all past non-compliance with Environmental Laws and Environmental
Permits without any pending, on-going or future obligation, cost or liability,
except in each case for the notices set forth in the NIRT SEC Reports or where
such non-compliance would not, individually or in the aggregate, have a NIRT
Material Adverse Effect.

(b) Except as disclosed in the NIRT SEC Reports, no Environmental Law
imposes any material obligation upon NIRT arising out of or as a condition to
any transaction contemplated by this Agreement, including any requirement to
modify or to transfer any permit or license, any requirement to file any notice
or other submission with any Governmental Authority, the placement of any
notice, acknowledgement or covenant in any land records, or the modification of
or provision of notice under any agreement, consent order or consent decree.
Except as disclosed in the NIRT SEC Reports, no Lien has been placed upon any
of Properties under any Environmental Law.

SECTION 4.14. Material Contracts. NIRT has not received a written notice
that NIRT is in violation of or in default under (nor to the knowledge of NIRT
does there exist any condition which upon the passage of time or the giving of
notice or both would cause such a violation of or default under) any material
loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
the NIRT Properties or assets is bound, except as set forth in the NIRT SEC
Reports, nor to the Knowledge of NIRT does such a violation or default exist,
except to the extent that such violation or default, individually or in the
aggregate, would not have a NIRT Material Adverse Effect.

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SECTION 4.15. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by NIRT are with reputable insurance
carriers, provide full and adequate coverage for all normal risks incident to
the business of NIRT and the NIRT Properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for any
such failures to maintain insurance policies that, individually or in the
aggregate, would not have a NIRT Material Adverse Effect. NIRT has made any and
all payments required to maintain such policies in full force and effect.
Except as set forth in the NIRT SEC Reports, NIRT has not received notice of
default under any such policy, nor has either received written notice or, to
the Knowledge of NIRT, oral notice of any pending or threatened termination or
cancellation, coverage limitation or reduction or material premium increase
with respect to such policy.

SECTION 4.16. Accuracy of Information. Neither this Agreement nor any
other document required to be provided by NIRT or any of its employees or
agents to Tarragon in connection with the transactions contemplated herein
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading.

SECTION 4.17. Transactions with Affiliates. (a) For purposes of this
Section 4.17, the term "NIRT Affiliated Person" means (i) any holder of 2% or
more of the NIRT Beneficial Interests, (ii) any director, trustee, officer or
senior executive of NIRT, (iii) any person, firm or corporation that directly
or indirectly controls, is controlled by, or is under common control with NIRT,
or (iv) any member of the immediate family of any of such persons; but "NIRT
Affiliated Person" does not include Tarragon or Advisor or TMI.

(b) Except as set forth in the NIRT SEC Reports, since December 31, 1997,
NIRT has not, in the ordinary course of business or otherwise, (i) purchased,
leased or otherwise acquired any material NIRT Property or assets or obtained
any material services from, (ii) sold, leased or otherwise disposed of any
material property or assets or provided any material services to (except with
respect to remuneration for services rendered in the ordinary course of
business as director, trustee, officer or employee of NIRT), (iii) entered into
or modified in any manner any contract with, or (iv) borrowed any money from,
or made or forgiven any loan or other advance (other than expenses or similar
advances made in the ordinary course of business) to, any Affiliated Person.

(c) Except as set forth in the NIRT SEC Reports, (i) the contracts of
NIRT do not include any material obligation or commitment between NIRT and any
NIRT Affiliated Person, (ii) the assets of NIRT do not include any receivable
or other obligation or commitment from a NIRT Affiliated Person to NIRT and
(iii) the liabilities of NIRT do not include any payable or other obligation or
commitment from NIRT to any NIRT Affiliated Person.

(d) To the Knowledge of NIRT and except as set forth in the NIRT SEC
Reports, no NIRT Affiliated Person of any of NIRT is a party to any contract
with any customer or supplier of NIRT that affects in any material manner the
business, financial condition or results of operation of NIRT.

SECTION 4.18. Opinion of Financial Advisor. NIRT has received the opinion
of Gilford Securities (the "NIRT Financial Advisor"), to the effect that, as of
the date on which the Board of Directors approved the NIRT Merger the
consideration is fair to the NIRT stockholders from a financial point of view.

SECTION 4.19. Brokers. No broker, finder or investment banker (other than
the NIRT Financial Advisor) is entitled to any brokerage, finder's or other fee
or commission in connection with the NIRT Merger based upon arrangements made
by or on behalf of NIRT. NIRT has heretofore furnished to Tarragon a complete
and correct copy of all agreements between NIRT and the NIRT Financial Advisor
pursuant to which such firm would be entitled to any payment relating to the
NIRT Merger.

SECTION 4.20. Definition of Knowledge of NIRT. As used in this Agreement,
the phrase "Knowledge of NIRT" (or words of similar import) means the knowledge
of the following individuals: William Friedman, Bruce Schnitz and Robert
Irvine.

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ARTICLE V

CERTAIN DEFINITIONS

For purposes of this Agreement, the term:

(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;

(b) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such person
or any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or any person with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
such shares;

(c) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining
a date when any payment is due, any day on which banks are not required or
authorized to close in the City of New York, New York;

(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;

(e) "Governmental Authority" means any United States (federal, state or
local), foreign or supra-national Government, or governmental, regulatory or
administrative authority, agency or commission;

(f) "person" means an individual, corporation, limited liability company,
partnership, limited partnership, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government;

(g) "Real Estate" means, with respect to Tarragon or NIRT, as applicable,
all of the fee or leasehold ownership right, title and interest of such person,
in and to all real estate and improvements owned or leased by any such person
and which is used by any such person in connection with the operation of its
business; and

(h) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, limited partnership, joint venture, limited liability company or
other legal entity of which such person (either above or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.

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ARTICLE VI

CONDUCT OF BUSINESS PENDING THE NIRT MERGER

SECTION 6.01. Conduct of Business by Tarragon and NIRT Pending the NIRT
Merger. Each of the parties hereto covenants and agrees that, between the date
of this Agreement and the Effective Time, except as otherwise expressly
provided for in this Agreement, unless Tarragon and NIRT shall otherwise agree
(which agreement shall not be unreasonably withheld or delayed) in writing, the
businesses of each party shall be conducted only in, and such party and its
respective subsidiaries shall not take any action except in a manner consistent
with past practice; and each such party shall use its best efforts to preserve
intact its business organization (except that NIRT may convert to a California
corporation), to keep available the services of the current officers, employees
and consultants of such party and its respective subsidiaries and to preserve
the current relationships of such party and its respective subsidiaries with
persons with which such party or any of its respective subsidiaries has
significant business relations. By way of limitation, except as contemplated by
this Agreement, none of the parties to this Agreement nor any of their
respective subsidiaries shall, between the date of this Agreement and the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Tarragon and NIRT which consent
shall not be unreasonably withheld or delayed:

(a) amend or otherwise change its respective Declaration of Trust,
Articles of Incorporation or Bylaws or equivalent organizational
documents;

(b) except in connection with an agreement for Tarragon to acquire
Advisor simultaneously with the filing of the Nevada Articles of Merger
with the Secretary of State of the State of Nevada (the "Nevada Filing"),
or pursuant to the exercise of existing options, issue, sell, pledge,
dispose of, grant or encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of, (i) any shares of capital stock of
any class of such party or any subsidiary of such party, or any options,
warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of such party or
any subsidiary of such party (except that options may be granted to
employees of NIRT, Tarragon or the Advisor pursuant to the terms of the
NIRT or Tarragon Option Plans) or (ii) any assets of such party or any
subsidiary of such party, except for real estate transactions and
financings conducted at arm's length and for fair value;

(c) set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except that NIRT shall be entitled to pay distributions on
a quarterly basis in the amount per share NIRT paid on the Beneficial
Interests in the quarter preceding the date hereof;

(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

(e) (i) incur any corporate or unsecured indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of
any person in an amount in excess of $5,000,000; or (ii) enter into or
amend any contract, agreement, commitment or arrangement with respect to
any matter set forth in this subsection (e);

(f) make any material Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;

(g) take any action that would or is reasonably likely to result in
any of the covenants and agreements set forth in this Article VI or in
Article VII or any of the conditions set forth in Article VIII not being
satisfied as of the Closing Date; or

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(h) knowingly take any action that could reasonably be expected to
prevent the NIRT Merger from constituting a transaction qualifying under
Section 368(a) of the Code.

ARTICLE VII

ADDITIONAL AGREEMENTS

SECTION 7.01. Registration Statement.

(a) Tarragon shall cause the preparation and filing with the SEC of a
Registration Statement on Form S-4 in connection with the issuance of the
shares of Tarragon Common Stock in the NIRT Merger (including a joint proxy
statement and prospectus for use by both Tarragon and NIRT at meetings of their
respective security holders (the "Proxy Statement/Prospectus") constituting a
part thereof (the "S-4 Registration Statement") as promptly as practicable.
Each of Tarragon and NIRT shall promptly provide all necessary information for
inclusion in the Proxy Statement/Prospectus and the S-4 Registration Statement.
Tarragon shall also use all reasonable efforts to obtain prior to the effective
date of the S-4 Registration Statement all necessary state securities law or
"blue sky" permits and approvals required in connection with the NIRT Merger
and consummate the other transactions contemplated by this Agreement and will
cause the payment of all expenses incident thereto. Tarragon will use all
reasonable efforts to have the S-4 Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing and
promptly thereafter the Proxy Statement/Prospectus shall be available for
mailing to the respective holders of Tarragon Common Stock and NIRT Beneficial
Interests. As promptly as practicable after the S-4 Registration Statement
shall have become effective, NIRT and Tarragon shall mail the Proxy
Statement/Prospectus to their respective holders of Tarragon Common Stock and
NIRT Beneficial Interests. The Proxy Statement/Prospectus, shall include the
unanimous recommendation of the Board of Directors of Tarragon and the Board of
Trustees of NIRT in favor of the NIRT Merger (with the exception of William
Friedman, who has voted in favor of the NIRT Merger, but has agreed to abstain
from such recommendation).

(b) The S-4 Registration Statement and the information supplied by each
of NIRT and Tarragon for inclusion in the Proxy Statement/Prospectus shall not,
at (i) the time the S-4 Registration Statement is declared effective by the
SEC; (ii) the time the Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to the holders of Tarragon Common Stock and
NIRT Beneficial Interests; (iii) the time of the Stockholders' Meetings (as
defined in Section 7.02); and (iv) the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event or
circumstance relating to Tarragon or NIRT or any of their respective
subsidiaries, or their respective officers, directors, or trustees is
discovered by Tarragon, NIRT or Advisor which should be set forth in an
amendment or a supplement to the S-4 Registration Statement or Proxy
Statement/Prospectus, such party shall promptly inform Tarragon, and Tarragon
shall make appropriate amendments or supplements. The S-4 Registration
Statement, including the Proxy Statement/Prospectus, shall comply in all
material respects as to form and substance with the requirements of the
Securities Act, the Exchange Act and the rules and regulations thereunder.

SECTION 7.02. Stockholders' Meetings.

(a) Tarragon and NIRT shall, consistent with applicable law, call and
hold a meeting of the holders Tarragon Common Stock and NIRT Beneficial
Interest, respectively (the "Stockholders' Meetings") as promptly as
practicable for the purpose of voting upon the approval and adoption of this
Agreement and each of Tarragon and NIRT shall use its reasonable best efforts
to hold its Stockholders' Meeting as soon as practicable after the date on
which the Registration Statement becomes effective. Each of Tarragon and NIRT
shall solicit proxies in favor of the approval and adoption of this Agreement
and the NIRT Merger; NIRT shall solicit from holders of NIRT Beneficial
Interest proxies in favor of the NIRT Merger, and the incorporation of NIRT
into the California Corporation; and Tarragon shall solicit from holders of
shares of its Common Stock proxies in favor of the approval the acquisition by
Tarragon of Advisor simultaneously

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with the Nevada Filing, and each shall take all other action necessary or
advisable to secure the vote or consent of such holders required by applicable
Law.

(b) William Friedman and Lucy Friedman shall vote (or consent with
respect to) any shares of Tarragon Common Stock and NIRT Beneficial Interest
beneficially owned by each of them, or with respect to which each has the power
(by agreement, proxy or otherwise) or cause to be voted (or to provide a
consent), in favor of the approval and adoption of this Agreement at any
meeting of the holders of Tarragon Common Stock, NIRT Beneficial Interest or
Advisor at which this Agreement or the acquisition by Tarragon of Advisor
simultaneously with the Nevada Filing, shall be submitted for approval and
adoption and at all adjournments or postponements thereof (or, if applicable,
by any action of the holders of Tarragon Common Stock or NIRT Beneficial
Interest by consent in lieu of a meeting).

SECTION 7.03. Appropriate Action: Consents, Filings.

(a) Tarragon and NIRT shall use their respective reasonable efforts to
(i) take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the NIRT Merger, and Tarragon shall
do the same in respect of the acquisition by Tarragon of Advisor simultaneously
with the Nevada Filing, as promptly as practicable, (ii) obtain expeditiously
from any Governmental Authorities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Tarragon
or NIRT or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement, the contract agreeing to the
acquisition by Tarragon of Advisor simultaneously with the Nevada Filing (the
"Advisor Agreement"), as applicable, and (iii) as promptly as practicable, make
all necessary filings, and thereafter make any other required submissions, with
respect to this Agreement, the Advisor Agreement, and the NIRT Merger as
applicable, required under (A) the Securities Act and the Exchange Act, and any
other applicable federal or state securities Laws, and (B) any other applicable
Law; provided that Tarragon and NIRT shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, accepting all reasonable additions, deletions or changes
suggested by the other party in connection therewith. From the date of this
Agreement until the Effective Time, each party shall promptly notify the other
party in writing of any pending or, to the knowledge of the first party,
threatened action, proceeding or investigation by any Governmental Authority or
any other person (i) challenging or seeking material damages in connection with
the NIRT Merger or the Advisor Agreement, or (ii) seeking to restrain or
prohibit the consummation of the NIRT Merger or the Advisor Agreement.

(b) Tarragon and NIRT shall furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable Law (including all information required to be
included in the Proxy Statement/Prospectus and the S-4 Registration Statement)
in connection with the transactions contemplated by this Agreement.

(c) Each of Tarragon and NIRT shall give (or shall cause its respective
subsidiaries to give) any notices to third parties and use, and cause its
respective subsidiaries to use, their reasonable efforts to obtain any third
party consents necessary, proper or advisable to consummate the transactions
contemplated in this Agreement.

SECTION 7.04. Access to Information.

(a) From the date hereof to the Effective Time, each party hereto will
provide to any other party hereto (and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives,
collectively, "Representatives") access to all information and documents which
such party may reasonably request regarding the business, assets, liabilities,
employees and other aspects of such other party.

(b) From the date hereof to the Effective Time, each party hereto shall:
(i) provide to any other party hereto and its Representatives access at
reasonable times upon prior notice to the officers, employees, agents,
properties, offices and other facilities of such other party and its
Subsidiaries and to the

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books and records thereof and (ii) furnish promptly such information concerning
the business, properties, contracts, assets, liabilities, personnel and other
aspects of such party and its Subsidiaries as such other party may reasonably
request.

(d) No investigation by any party hereto, whether prior to the execution
of this Agreement or pursuant to this Section 7.04, shall affect any
representation or warranty in this Agreement of any party hereto or any party's
reliance thereon or any condition to the obligations of the parties hereto.

SECTION 7.05. Intentionally Omitted.

SECTION 7.06. Notification of Certain Matters. From and after the date of
this Agreement until the Effective Time, each party hereto shall promptly
notify the other parties hereto of (a) the occurrence, or non-occurrence, of
any event the occurrence or non-occurrence of which would be reasonably likely
to cause any condition to the obligations of any party to effect the NIRT
Merger not to be satisfied, and (b) the failure of any party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it pursuant to this Agreement which would be reasonably likely to result in
any condition to the obligations of any party to effect the NIRT Merger not to
be satisfied, provided, however that the mere delivery of any notice pursuant to
this Section 7.06 shall not by itself be deemed to be an amendment of this
Agreement and shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement. No
delivery of any notice pursuant to this Section 7.06 shall limit or affect the
remedies available hereunder to the party receiving such notice, in the event
that a representation or warranty made by any party herein shall not be true
and correct (giving effect to any standards of materiality set forth in such
Sections) as of the date hereof or as of the date when made (if a different
date) and as of the Effective Time.

SECTION 7.07. Stock Exchange Listing. Tarragon shall as promptly as
reasonably practicable prepare and submit to the NYSE a listing application
covering its outstanding Common Stock and the shares of Tarragon Common Stock
to be issued in the NIRT Merger and in connection with the Advisor Agreement
and shall use its reasonable efforts to cause such shares to be approved for
listing on the NYSE prior to the Effective Time; provided, however, such
listing application becoming effective shall not be a condition of Closing.

SECTION 7.08. Public Announcements. Each party shall consult with each
other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated
hereby. No party hereto shall issue any such press release or make any such
public statement without the prior consent of the others (which consent shall
not be unreasonably withheld), except as may be required by Law, the NASD,
NASDAQ or any national securities exchange.

SECTION 7.09 Indemnification.

(a) From and after the Effective Time, the Surviving Corporation shall
provide exculpation and indemnification for each person who is now or has been
at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer or trustee of NIRT (the "Indemnified Parties") to the same
extent as the exculpation and indemnification now provided to the Indemnified
Parties by NIRT immediately prior to the Effective Time in its Declaration of
Trust and regulations, as in effect on the date hereof; provided, that such
exculpation and indemnification covers actions on or prior to the Effective
Time, including, without limitation, all transactions contemplated by this
Agreement. In no event shall the Surviving Corporation be obligated to provide
directors' and officers' liability insurance except that the Surviving
Corporation shall obtain, at its expense, so-called "tail insurance" providing
for the extension of the directors and officers liability insurance maintained
by NIRT for a period of six years after the Closing Date if available at
commercially reasonable rates.

(b) The provisions of this Section 7.09 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Tarragon and NIRT.

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(c) In the event that the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 7.09, which obligations are expressly intended to be for the
irrevocable benefit of, and shall be enforceable by, each trustee and officer
covered hereby.

ARTICLE VIII

CONDITIONS TO THE NIRT MERGER

SECTION 8.01. Conditions to the Obligations of Each Party. The
obligations of the parties hereto to consummate the NIRT Merger is subject to
the satisfaction or, if permitted by applicable Law, waiver of the following
conditions:

(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the affirmative vote of the holders of at least a
majority of the outstanding shares of Tarragon Common Stock and NIRT Beneficial
Interests, respectively, in accordance with applicable Law and such party's
other organizational documents;

(b) no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction shall have been enacted, entered, issued, promulgated or
enforced by any Governmental Authority or a court of competent jurisdiction
which has the effect of making the NIRT Merger illegal or otherwise prohibiting
consummation of the NIRT Merger;

(c) the S-4 Registration Statement shall have been declared effective,
and no stop order suspending the effectiveness of the S-4 Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the SEC;

(d) Tarragon shall have received all state securities and "blue sky"
permits and approvals necessary to consummate the NIRT Merger;

(e) no court or governmental entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any Law (whether temporary,
preliminary or permanent) that is in effect and restrains, enjoins or otherwise
prohibits consummation of the NIRT Merger or the other transactions
contemplated by this Agreement (including the Advisor Agreement) or that is,
individually or in the aggregate with all other such Laws, reasonably likely to
have a Tarragon Material Adverse Effect or a NIRT Material Adverse Effect
(collectively, an "Order") and no governmental entity shall have instituted any
proceeding or threatened to institute any proceeding seeking any such Order;

(f) all conditions precedent set forth in the Advisor Agreement have been
satisfied; and

(g) all other necessary and material governmental and regulatory
clearances, consents, or approvals shall have been received.

SECTION 8.02. Conditions to the Obligations of Tarragon. The obligation
of Tarragon to consummate the NIRT Merger are subject to the satisfaction or,
if permitted by applicable Law, waiver of the following further conditions:

(a) (i) NIRT shall have performed in all material respects all of its
respective obligations hereunder required to be performed by such party at or
prior to the Effective Time; (ii) each of the representations and warranties of
NIRT contained in this Agreement shall be true and correct in all material
respects, in each case as of the date hereof and at and as of the Closing Date
as if made at and as of such time, it being understood and agreed by Tarragon
that this Section 8.02(a) shall be deemed to have been satisfied unless any
failure of performance or failure to be so true and correct, individually or in
the

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aggregate, would have a NIRT Material Adverse Effect; and (iii) Tarragon shall
have received a certificate signed by an executive officer of NIRT to the
foregoing effect;

(b) Since the date of this Agreement, there shall have been no NIRT
Material Adverse Change and Tarragon shall have received a certificate of the
chief executive officer or chief financial officer of NIRT, in such capacity,
certifying such effect;

(c) Tarragon shall have received an opinion dated the Closing Date from
counsel to Tarragon, based upon certificates and letters, which letters and
certificates are in the form agreed upon by the parties and dated the Closing
Date, to the effect that the NIRT Merger will qualify as a reorganization under
the provisions of Section 368(a) of the Code; and

(d) All consents and waivers (including, without limitation, waivers of
rights of first refusal) from third parties necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained, other than such consents and waivers from third parties, which, if
not obtained, would not result, individually or in the aggregate, in a Tarragon
Material Adverse Effect or a NIRT Material Adverse Effect.

SECTION 8.03. Conditions to the Obligations of NIRT. The obligations of
NIRT to consummate the NIRT Merger are subject to the satisfaction or, if
permitted by applicable Law, waiver of the following further conditions:

(a) (i) Tarragon shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time; (ii) each of the representations and warranties of Tarragon
contained in this Agreement shall be true and correct in all material respects,
in each case as of the date hereof and at and as of the Closing Date as if made
at and as of such time; it being understood and agreed by NIRT that this
Section 8.03(a) shall be deemed to have been satisfied unless any failure of
performance or failure to be so true and correct, individually or in the
aggregate, would have a Tarragon Material Adverse Effect; and (iii) NIRT shall
have received a certificate signed by an executive officer of Tarragon to the
foregoing effect;

(b) Since the date of this Agreement, there shall have been no Tarragon
Material Adverse Change and NIRT shall have received a certificate of the chief
executive officer or chief financial officer of Tarragon, in such capacity,
certifying to such effect;

(c) NIRT shall have received an opinion dated the Closing Date from
counsel to NIRT based upon certificates and letters, which letters and
certificates are in the form agreed upon by the parties and dated the Closing
Date, to the effect that the NIRT Merger will qualify as a reorganization under
the provisions of Section 368(a) of the Code; and

(d) All consents and waivers (including, without limitation, waivers of
rights of first refusal) from third parties necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained, other than such contents and waivers from third parties, which, if
not obtained, would not result, individually or in the aggregate, in a Tarragon
Material Adverse Effect or a NIRT Material Adverse Effect.

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ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

SECTION 9.01. Termination. This Agreement may be terminated and the NIRT
Merger may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated hereby by the stockholders of each of Tarragon and
NIRT:

(a) by written consent duly authorized by the Boards of Directors
or Trustees, respectively, of each of Tarragon and NIRT;

(b) by either Tarragon or NIRT if (i) any court of competent
jurisdiction in the United States or other United States Governmental
Authority shall have issued an order (other than a temporary restraining
order), decree or ruling, or taken any other action, restraining,
enjoining or otherwise prohibiting the NIRT Merger or the consummation of
the Advisor Agreement (provided, however, that neither party may
terminate this Agreement pursuant to this Section 9.01(b)(i) prior to six
months from the date of such issuance if the party subject to such order,
decree or ruling is using its reasonable best efforts to have such order,
decree or ruling removed, unless such order, decree or ruling shall have
become final and non-appealable), or (ii) the Effective Time shall not
have occurred on or before December 31, 1998; provide that the right to
terminate this Agreement under this Section 9.01(b) shall not be
available to any party whose willful, deliberate or knowing failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such
date;

(c) by either Tarragon or NIRT, if the Stockholders' Meetings shall
have been held and the holders of either the outstanding shares of
Tarragon Common Stock or NIRT Beneficial Interest shall have failed to
approve and adopt this Agreement at such meeting (including any
adjournment or postponement thereof);

(d) by Tarragon, upon a breach of any representation, warranty, or
agreement set forth in this Agreement such that the condition set forth
in Section 8.02(a) would not be satisfied (a Terminating NIRT Breach");
provided however, that, if such Terminating NIRT Breach is curable by
NIRT through the exercise of its best efforts and NIRT continues to
exercise such best efforts, Tarragon may not terminate this Agreement
under this Section 9.01(d) for a period of 30 days from the date on which
Tarragon delivers to NIRT written notice setting forth in reasonable
detail the circumstances giving rise to such Terminating NIRT Breach; or

(e) by NIRT, upon a breach of any representation, warranty, or
agreement set forth in this Agreement such that the condition set forth
in Section 7.03(a) would not be satisfied (a "Terminating Tarragon
Breach"); provided, however, that, if such Terminating Tarragon Breach is
curable by Tarragon through the exercise of its best efforts and Tarragon
continues to exercise such best efforts, NIRT may not terminate this
Agreement under this Section 9.01(e) for a period of 30 days from the
date on which NIRT delivers to Tarragon written notice setting forth in
reasonable detail the circumstances giving rise to such Terminating
Tarragon Breach.

SECTION 9.02. Effect of Termination. Except as provided in Section 10.01,
in the event of the termination of this Agreement pursuant to Section 9.01,
this Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of Tarragon or NIRT or any of their respective
officers, directors or trustees and all rights and obligations of any party
hereto shall cease; provided, however, that nothing herein shall relieve any
party from liability for, or be deemed to waive any rights of specific
performance of this Agreement available to a party by reason of, any willful
breach by the other party or parties of its or their willful breach of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.

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SECTION 9.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their Boards of Directors or
Trustees, as the case may be, at any time prior to the Effective Time. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.

SECTION 9.04. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of the other party contained herein or in any document delivered
by the other party pursuant hereto and (c) waive compliance with any agreement
or condition contained herein. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the party or parties to be
bound thereby.

ARTICLE X

GENERAL PROVISIONS

SECTION 10.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
and any certificate delivered pursuant hereto by any person shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to
Section 9.01, as the case may be. This Section shall not limit any covenant or
agreement which by its terms contemplates performance after the Effective Time.

SECTION 10.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (which may be by telecopy followed
by mail or personal delivery) and must be personally delivered or mailed by
registered or certified mail (postage prepaid, return receipt requested) or by
a nationally recognized overnight courier service to the respective parties at
the following addresses. Subject to the other provisions of this Agreement, any
party may change its address (or redesignate the person to whom such notice
shall be delivered) for purposes of this Agreement by giving notice of such
change to the other party pursuant to this Section 10.02. In each instance,
with respect to any such notice so given, although not required for
effectiveness of such notice, it shall only be effective upon receipt by the
party intended to receive same, and the party delivering such notice shall also
provide copies as set forth below:

if to Tarragon:

Tarragon Realty Investors, Inc.
3100 Monticello Avenue, Suite 200
Dallas, Texas 75205
Facsimile: (214) 599-2220
Attention: William S. Friedman

with a copy to:

Prager, Metzger & Kroemer PLLC
2626 Cole Avenue, Suite 900
Dallas, Texas 75204
Facsimile: (214) 523-3838
Attention: Steven C. Metzger, Esq.

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if to NIRT:

National Income Realty Trust
280 Park Avenue
East Building, 20th Floor
New York, New York 10017
Facsimile: (212) 949-8001
Attention: William S. Friedman

with a copy to:

Greenberg Traurig Hoffman Lipoff Rosen & Quentel
200 Park Avenue
New York, NY 10166
Facsimile: (212) 801-6400
Attention: Judith D. Fryer, Esq.

SECTION 10.03. Accounting Terms. All accounting terms used herein which
are not expressly defined in this Agreement shall have the respective meanings
given to them in accordance with United States generally accepted accounting
principles.

SECTION 10.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the NIRT Merger are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the NIRT Merger be consummated as originally contemplated to the
fullest extent possible.

SECTION 10.05. Entire Agreement: Assignment. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement shall not be assigned by operation of law or otherwise.

SECTION 10.06. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement shall be construed to create any rights on behalf of third parties
not signatories thereto except for Section 7.09.

SECTION 10.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.

SECTION 10.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nevada.

SECTION 10.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.

SECTION 10.10. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.

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IN WITNESS WHEREOF, Tarragon and NIRT have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.

TARRAGON REALTY INVESTORS, INC.

By: /s/ William S. Friedman
--------------------------------------------
Name: William S. Friedman
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------

NATIONAL INCOME REALTY TRUST

Agreed and Acknowledged
by the following with respect to
the provisions of Section 7.02(b):

/s/ William S. Friedman
- --------------------------
William S. Friedman

/s/ Lucy N. Friedman
- --------------------------
Lucy N. Friedman

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APPENDIX B

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT dated June 5, 1998 (this "Agreement") by and among
TARRAGON REALTY INVESTORS, INC., a Nevada corporation (the "Buyer"), TARRAGON
REALTY ADVISORS, INC., a New York corporation (the "Company"), WILLIAM S.
FRIEDMAN and LUCY FRIEDMAN (each of such individuals being hereinafter referred
to individually as a "Stockholder" and collectively as the "Stockholders");

WITNESSETH:

WHEREAS, the Company, is engaged in the business of advising and managing
the Buyer (the "Business");

WHEREAS, the Board of Directors of the Buyer and the Board of Trustees of
National Income Realty Trust, a California business trust ("NIRT"), have
approved an Agreement and Plan of Merger dated June 5, 1998 (the "Merger
Agreement") between the Buyer and NIRT which provides, subject to the
satisfaction of the conditions therein, that NIRT will be consolidated with and
into the Buyer and the holders of NIRT shares of beneficial interest will be
issued the Buyer Common Stock (as defined in Section 1.001) in a transaction
intended to qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), for federal income
tax purposes and, concurrent with the consummation of the Merger Agreement, the
Buyer intends to acquire all of the issued and outstanding capital stock of the
Company to the end that the Buyer, as the surviving entity consisting of a
combined real estate investment trust (as a corporation) would ultimately be
self-administered, which Merger Agreement is to be submitted to the shareholders
of each of the Buyer and NIRT for approval at special meetings to be held in the
near future;

WHEREAS, the Stockholders are the record and beneficial owners of all of
the issued and outstanding capital stock of the Company (the "Company Common
Stock"); and

WHEREAS, the Buyer desires to purchase from the Stockholders, and the
Stockholders desire to sell to the Buyer, all upon the terms and subject to the
conditions set forth in this Agreement, all (and not less than all) of the
Company Common Stock, and the business of the Company as a going concern.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:

ARTICLE I

ACQUISITION OF THE STOCK

SECTION 1.01 Exchange of Shares. Subject to the terms and conditions of
this Agreement, on the Closing Date (as defined in Section 1.04), the Buyer will
purchase and acquire from the Stockholders, and the Stockholders will sell,
convey and transfer to the Buyer, all (and not less than all) of the Company
Common Stock, solely in exchange for the shares of common stock, $.01 par value
per share of the Buyer (the "Buyer Common Stock") provided for in Article II
below. In furtherance thereof, the Stockholders are, simultaneously with the
execution and delivery of this Agreement, delivering to the Buyer the
certificates representing all of the Company Common Stock, duly endorsed for
transfer or accompanied by stock powers executed in blank for transfer

SECTION 1.02 Books and Records. On the Closing Date, in addition to the
delivery and transfer of the Company Common Stock to the Buyer, the Stockholders
are delivering, and causing the Company to deliver, to the Buyer all of the
stock books, records and minute books of the Company, all financial and
accounting books and records of the Company, and all referral, client, customer
and sales records of the Company.

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SECTION 1.03 Tax-Free Reorganization. The parties intend that the
transactions pursuant to this Agreement qualify as a tax-free reorganization
under the Code, and the parties shall report these transactions and otherwise
conduct their affairs so as to give effect to such intention.

SECTION 1.04 Closing. The closing for the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, 200 Park Avenue, New York,
New York 103 166 (or such other place as the parties may agree) (the date on
which such Closing takes place being the "Closing Date").

ARTICLE II

CONSIDERATION

SECTION 2.01 Buyer Common Stock. As consideration for the Company Common
Stock at the Closing, the Buyer will issue and deliver to the Stockholders (i)
an aggregate of 100,000 shares of Buyer Common Stock (in proportion to their
relative ownership of the Company Common Stock, as set forth in Exhibit A
attached hereto) and which the Buyer and the Stockholders agree have a value
which does not exceed $1,000,000 ($10 per share, based on the average price of
the Buyer Common Stock during a 20 day period following the issuance of the
Buyer's February 19, 1998 press release) and (ii) in proportion to their
relative ownership of the Company Common Stock, options to purchase 350,000
shares of the Buyer Common Stock, pursuant to Stock Option Agreements dated the
Closing Date, between the Buyer and each of the Stockholders. Such Stock Option
Agreement shall cover and provide for (x) 150,000 shares for 10 years at an
exercise price of $13 per share, (y) 100,000 shares for 10 years at an exercise
price of $15 per share, and (z) 100,000 shares for 10 years at an exercise price
of $16 per share, and shall be in a form mutually acceptable to Buyer and the
Stockholders.

SECTION 2.02 Employment Agreement.

(a) At the Closing, the Buyer or, at its designation, the Company shall
enter into an employment agreement with William S. Friedman, on terms mutually
agreeable to the Buyer, the Company, if applicable, and Mr. Friedman (the
"Employment Agreement") for a term of four years at a salary of $300,000 per
year. In addition to other terms and conditions customary to such contracts, the
Employment Agreement shall include a broad covenant by Mr. Friedman not to
compete with the Buyer and the Company and a right of first refusal in favor of
the Buyer with regard to any real estate investment opportunity which might come
to Mr. Friedman's attention. In addition, the Employment Agreement will provide,
among other things, that Mr. Friedman work substantially full time for the Buyer
and/or the Company and use his best efforts to transfer to the Buyer and/or the
Company the right to manage the real estate assets now or hereafter controlled
by him or his family.

(b) Pursuant to the Employment Agreement, at the Closing, the Buyer shall
grant Mr. Friedman stock options to purchase 650,000 shares of Buyer Common
Stock, pursuant to a Stock Option Agreement, dated the Closing Date, between the
Buyer and Mr. Friedman which will be in a form mutually acceptable to the Buyer
and Mr. Friedman for a term of 10 years and cover (x) 250,000 shares at an
exercise price of $12 per share, (y) 200,000 shares at an exercise price of $15
per share, and (z) 200,000 shares at an exercise price of $18 per share.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS

In connection with the sale and transfer of the Company Common Stock to the
Buyer, the Company and the Stockholders hereby jointly and severally represent
and warrant to the Buyer as follows:

SECTION 3.01 Title to the Company Common Stock. The Stockholders are the
valid and lawful record and beneficial owners of all of the issued and
outstanding Company Common Stock in the amounts and

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proportions set forth in Exhibit A attached hereto. All of the Company Common
Stock has been duly authorized and validly issued and is fully paid and
non-assessable, and at Closing will be free and clear of all pledges, liens,
claims, charges, options, calls, encumbrances, restrictions and assessments
whatsoever (except any restrictions which may be created by operation of state
or federal securities laws). At Closing, the Buyer will receive from the
Stockholders good, valid and marketable title to all of the Company Common
Stock, free and clear of all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities laws).

SECTION 3.02 Valid and Binding Agreement; No Breach.

(a) The Stockholders have full legal right, power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement constitutes the legal, valid and binding obligation of
the Stockholders; enforceable against the Stockholders in accordance with its
terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally, and except that the remedy of specific performance or similar
equitable relief is available only at the discretion of the court before which
enforcement is sought.

(b) Neither the execution and delivery of this Agreement by the
Stockholders, nor compliance with the terms and provisions of this Agreement on
the part of the Stockholders, will: (i) violate any statute or regulation of any
governmental authority, domestic or foreign, affecting the Company or either
Stockholder; (ii) require the issuance of any authorization, license, consent or
approval of any Governmental Authority (as defined in Article V); or (iii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree, note, indenture, loan
agreement or other agreement or instrument to which the Company or either
Stockholder is a party, or by which the Company or either Stockholder is bound,
or constitute a default thereunder.

SECTION 3.03 Organization and Qualification. The Company is a corporation
incorporated, validly existing and in good standing under the laws of the State
of New York and has the requisite corporate, and all necessary governmental
approvals to own, lease and operate the Company Properties (as defined in
Section 3.13) and to carry on its business as it is now being conducted, except
where the lack of such power, authority and approval would not, individually or
in the aggregate, have a Company Material Adverse Effect (as defined below). The
Company is duly qualified or licensed as a foreign corporation, to do business,
and is in good standing, in each jurisdiction where the character of the Company
Properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Company Material Adverse Effect. The term "Company
Material Adverse Effect" means any circumstances, change in, or effect on, the
Company when taken as a consolidated whole, which is, or could reasonably be
expected in the future to be, materially adverse to the operations, assets or
liabilities of the Company and its subsidiaries, if any.

SECTION 3.04 Articles of Incorporation and By-laws. The Company has
heretofore furnished to the Buyer complete and correct copies of the Certificate
of Incorporation and the By-Laws, each as amended, to date of the Company. Such
Certificate of Incorporation, By-Laws and equivalent organizational documents
are in full force and effect. The Company is not in violation of any provision
of its Certificate of Incorporation and By-Laws.

SECTION 3.05 Capitalization. The authorized capital stock of the Company
consists of 200 shares of Company Common Stock, no par value per share. As of
the date of this Agreement there were, and on the Closing Date there will be,
200 shares of Company Common Stock issued and outstanding, all of which were
validly issued, fully paid and nonassessable. The Company has not issued, sold,
pledged, disposed of, granted, encumbered, or authorized the issuance, sale,
pledge, disposition, grant or encumbrance of any shares of capital stock of any
class of the Company or any rights to acquire such shares or other equity
interests in the Company. Except as may be created by this Agreement, there are
no options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company

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or obligating the Company to repurchase, redeem or otherwise acquire or issue or
sell any shares of capital stock of, or other equity interests in, the Company.

SECTION 3.06 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Company, and, assuming
the due authorization, execution and delivery by the Buyer, constitutes a legal,
valid and binding obligation of the Company, enforceable against such party in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

SECTION 3.07 No Conflict, Required Filings and Consents.

(a) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the Certificate of Incorporation or Bylaws of the Company, (ii)
conflict with or violate any domestic (federal, state or local) or foreign law,
rule, regulation, order, judgment or decree (collectively, "Laws") applicable to
the Company or by which any property or asset of the Company is bound or
affected, except for such conflicts or violations that, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse Effect,
or (iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or other encumbrance on any property or asset of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any property or asset of the
Company is bound or affected, except for any such breaches, defaults or other
occurrences that, individually or in the aggregate, would not have a Company
Material Adverse Effect and will not prevent or delay the consummation of the
transactions contemplated by this Agreement.

(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) for applicable requirements, if any,
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended ("Securities Act") and state takeover laws,
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, individually or in the
aggregate, is not reasonably likely to have a Company Material Adverse Effect.

SECTION 3.08 Compliance with Laws, Permits.

(a) The Company is not in conflict with, or in default or violation of, (i)
any Laws applicable to the Company or by which any property or asset of the
Company is bound or affected, or (ii) any of the Company Permits (as defined
below), except for any such conflicts, defaults or violations that do not,
individually or in the aggregate, have a Company Material Adverse Effect.

(b) The Company has no pending, ongoing or future obligation, cost or
liability in respect of past noncompliance with any Environmental Law or in
respect of or relating to any Hazardous Substances. For purposes of this
Agreement, the following terms shall have the following meanings (i) "Hazardous
Substances" means (A) petroleum and petroleum products, by-products or breakdown
products, radioactive materials, asbestos-containing materials and
polychlorinated biphenyls, and (B) any other chemicals, materials or substances
regulated as toxic or hazardous or as a pollutant, contaminant or waste under
any applicable Environmental Law; and (ii) "Environmental Law" means any law,
past, present or future and as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment,

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or common law, relating to pollution or protection of the environment, health or
safety or natural resources, including, without limitation, those relating to
the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Substances.

(c) The Company is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders from all Governmental Authority necessary for the Company,
to own, lease and operate the Company Properties or to carry on the Company's
businesses ("Company Permits"), and no suspension or cancellation of any of the
Company Permits is pending or, to the Company's Knowledge (as defined in Section
3.21), threatened, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits, individually or in the aggregate,
would not have a Company Material Adverse Effect.

SECTION 3.09 Financial Statements.

(a) The Company's consolidated financial statements (including, in each
case, any notes and schedules thereto) for the year ended December 31, 1997 and
for the period ended March 31, 1998, each of which has been delivered to the
Buyer, were prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto), and each fairly
presented the consolidated financial position, results of operations and cash
flows of the Company as at the respective dates thereof and for the respective
periods indicated therein in accordance with United States generally accepted
accounting principles (subject, in the case of unaudited statements, to normal
and recurring year-end adjustments).

(b) The Company has delivered its undated, pro forma balance sheet to the
Buyer entitled "Projected Closing Balance Sheet." As of the Closing Date,
neither the Company's liabilities nor its net working capital deficit shall be
materially greater than that shown on the Projected Closing Balance Sheet and
the shareholders' equity (deficit) shall be substantially as shown thereon. At
the Closing Date, the Company shall own all material assets reflected on the
Projected Closing Date Balance Sheet.

SECTION 3.10 Absence of Certain Changes or Events. Except for actions
(including sales of assets, dividends and bonuses) which are designed to achieve
the financial condition reflected on the Projected Closing Balance Sheet prior
to the Closing Date and actions contemplated by this Agreement, since
December 31, 1997, the Company has conducted its business in a manner consistent
with past practice and there has not been (a) any event having a Company
Material Adverse Effect (b) any entry by the Company into any commitment or
transaction which would be material to the Buyer taken as a whole or (c) other
than pursuant to the contracts referred to in Section 3.05, any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase plan, or any
other increase in the compensation payable or to become payable to any officers
or key employees of the Company, except in the ordinary course of business
consistent in all material respects with past practice.

SECTION 3.11 Absence of Litigation.

(a) There is no claim, action, proceeding or investigation pending or, to
the Company's Knowledge, threatened against the Company, or any property or
asset of the Company, before any arbitrator or Governmental Authority which,
individually or when aggregated with other claims, actions, proceedings or
investigations or product liability claims, actions, proceedings or
investigations which are reasonably likely to result from facts and
circumstances that have given rise to such a claim, action, proceeding or
investigation, would have a Company Material Adverse Effect. As of the date
hereof, neither the Company nor any property or asset of the Company is subject
to any order, writ, judgment, injunction, decree, determination or award having,
individually or in the aggregate, a Company Material Adverse Effect.

(b) The Company has not received notice from any source that the Company
may be liable with respect to product liability or worker's compensation claims,
except for such claims that, if determined adversely to the Company, would not,
individually or in the aggregate, have a Company Material Adverse Effect.

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SECTION 3.12 Employee Benefits; ERISA.

(a) The Company has provided to the Buyer a list of all "employee pension
benefit plans" as defined in Section 3(2) of ERISA (sometimes referred to herein
as "Company Pension Plans"), "employee welfare plans" (as defined in Section
3(i) of ERISA) (sometimes referred to herein as "Welfare Plans"), and each other
plan, arrangement or policy (written or oral) relating to stock options, stock
purchases, compensation, deferred compensation, severance, fringe benefits or
other employee benefits, in each case maintained, or contributed to, (or
required to be maintained or contributed to) by the Company or any other person
or entity that, together with the Company, is treated as a single employer under
Sections 414(b), (c), (m) or (o) of the Code (each, together with the Company,
a "Company Commonly Controlled Entity"), (all of the foregoing being herein
called "Company Benefit Plans". The Company has made available to the Buyer true
and complete copies of (w) each Company Benefit Plan (or, in the case of any
unwritten Company Benefit Plans, descriptions thereof), (x) the most recent
annual report on Form 4400 filed with the Internal Revenue Service with respect
to each Company Benefit Plan (if any such report was required) and all schedules
thereto, (y) the most recent summary plan description (or similar document) for
each Company Benefit Plan for which a summary plan description is required or
was otherwise provided to plan participants or beneficiaries and (z) each trust
agreement and insurance annuity contract relating to any Company Benefit Plan.

(b) Except where non-disclosure would not have a Company Material Adverse
Effect, all Company Pension Plans and related trusts that are intended to be
tax-qualified plans have been, since the effective date of the Tax Reform Act of
1986, the subject of determination letters from the Internal Revenue Service
providing that such Company Pension Plans and related trusts are tax-qualified
and exempt from federal income taxes under Sections 401(a) and 401(a),
respectively, of the Code, and no such determination letter has been revoked
nor, to the knowledge of the Company, has revocation been threatened. No event
has occurred and no circumstances exist that would adversely affect the tax
qualification of such Company Pension Plan nor has any such Company Pension Plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its costs or require security under Section
302 of ERISA.

(c) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect: (i) each Company Benefit Plan has been administered in
accordance with its terms; (ii) the Company Benefit Plans are, and have been
administered, in compliance with the applicable provisions of ERISA, the Code,
and all other applicable laws; (iii) there are no investigations by any
governmental agency, termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Company Benefit Plans), suits or
proceedings against or involving any Company Benefit Plan or asserting any
rights to or claims for benefits under any Company Benefit Plan that could give
rise to any liability, and there are not any facts that would reasonably be
expected to give rise to any liability in the event of any such investigation,
claim, suit or proceeding.

(d) No Company Commonly Controlled Entity is required to contribute to any
"multi-employer plan" as defined in Sections 3(3) or 4001(a)(3) of ERISA or, has
completely or partially withdrawn from any such multi-employer plan where such
withdrawal has resulted or would result in any "withdrawal liability" (within
the meaning of Section 4201(b)(i) of ERISA) that has not been fully paid. No
Company Commonly Controlled Entity would incur any material withdrawal liability
if it were to withdraw from a multi-employer plan with respect to which it has a
contribution obligation. No Commonly Controlled Entity, nor any officer of any
Commonly Controlled Entity, nor any of the Benefit Plans which are subject to
ERISA, including, any trusts created thereunder or any trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4974 of the Code) or any other breach of
fiduciary responsibility that could subject any Company Commonly Controlled
Entity or any officer of any Company Commonly Controlled Entity to any tax or
penalty on prohibited transactions imposed by such Section 4974 or to any
material liability under Section 402(i) or (1) of ERISA. None of such Company
Benefit Plans has been terminated, nor has there been any "reportable event" (as
that term is defined in Section 4043 of ERISA) with respect thereto, during the
last five years.

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(e) The Company is not a party to any agreement, contract or arrangement
that could result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.

(f) To the Knowledge of the Company, the disallowance of a deduction under
Section 162(m) of the Code for employee remuneration will not apply to any
amount paid or payable by the Company.

(g) Except as would not have a Company Material Adverse Effect, no
liability under Title IV of ERISA has been incurred by any Company Commonly
Controlled Entity that has not been satisfied in full, and no condition exists
that presents a risk to any Commonly Controlled Entity of incurring a liability
under such Title, other than liability for premiums due the PBGC (which premiums
have been paid when due). To the extent this representation applies to sections
4064, 4069 or 4204 of Title IV of ERISA, it is made not only with respect to
each Company Pension Plan but also with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA in existence
during any portion of the five (5) year period ending on the Closing Date.
Except as would not have a Company Material Adverse Effect, no Company Pension
Plan or any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
Company Pension Plan ended prior to the Closing Date; and all contributions
required to be made with respect thereto (whether pursuant to the terms of any
Company Pension Plan or otherwise) on or prior to the Closing Date have been
timely made.

(h) Except as individually or in the aggregate would not have a Company
Material Adverse Effect, each Company Commonly Controlled Entity has complied in
all material respects with the requirement of Part 6 of Title I of ERISA,
Section 4980B of the Code and each other law or ordinance of any Governmental
Authority.

SECTION 3.13 Title to and Sufficiency of Assets. As of the date hereof the
Company owns good title to all of its assets constituting real and personal
property which is material to its business (excluding, for purposes of this
sentence, assets held under leases), free and clear of all encumbrances,
charges, claims, restrictions, pledges, security interests or impositions
(collectively, "Liens") except as set forth in the Company 1997 Balance Sheet.
Such assets, together with all assets held by the Company under leases, include
all tangible and intangible real and personal property, contracts and rights
necessary or required for the operation of the Company's business as presently
conducted, including raw land and properties under construction, are sometimes
referred to herein as the "Company Properties". None of the leases to or of all
the Company Properties are material to the Company or its business, and all of
such leases are in full force and effect and there is no reasonable expectation
of any material default or termination in respect of any such lease.

SECTION 3.14 Intellectual Property. "Company Intellectual Property" means
all trademarks, trademark registrations, trademark rights, trade names, trade
name rights, patents, patent rights, patent applications, industrial models,
inventions, invention disclosures, copyrights, copyright registrations, service
marks, service mark registrations, service mark rights, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights, data and information of any nature or form used or held for
use in connection with the business of the Company as currently conducted or as
currently contemplated by the Company together with all applications currently
pending for any of the foregoing. The Company neither owns or possesses any
Company Intellectual Property which is material, individually or in the
aggregate, to the Company or its business.

SECTION 3.15 Tax Matters. All representations and warranties made in
Section 3.15(b) with respect to Taxes are made to the best Knowledge of the
Company. As used in this Agreement, "Taxes" shall include all federal, state,
local and foreign income, property, sales, franchises, employment, excise and
other taxes, tariffs or government charges of any nature whatsoever, together
with penalties, interest additions to Tax with respect thereto. Subject to the
foregoing, and except as set forth in Schedule 3.15 attached hereto, or as would
not, individually or in the aggregate, have a Company Material Adverse Effect:

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(a) Filing of Tax Returns. The Company has filed all tax returns required
to be filed by it and such tax returns are in all material respects true,
complete and correct and filed on a timely basis.

(b) Payment of Taxes. The Company has, within the time and in the manner
prescribed by law, paid all Taxes that are currently due and payable, except for
those contested in good faith and for which adequate reserves have been taken in
accordance with general accepted principals consistently applied with the
Company's prior periods.

(c) Tax Liens. There are no tax liens upon the assets of the Company except
for statutory liens for current Taxes not yet due.

(d) Withholding Taxes. The Company has complied in all material respects
with the provisions of the Code relating to the withholding of Taxes, as well as
similar provisions under any other Laws, and has, within the time and in the
manner prescribed by Law, withheld and paid over to the proper governmental
authorities all amounts required.

(e) Extensions of Time for Filing. The Company has not requested any
extension of time within which to file any tax return, which tax return has not
since been filed.

(f) Waivers of Statute of Limitations. The Company has executed outstanding
waivers or comparable consents regarding the application of the statute of
limitations with respect to federal Taxes or tax returns for 1994 and all
subsequent years.

(g) No Deficiencies. The statute of limitations for the assessment of any
federal income Taxes has expired for all income tax returns of the Company or
such income tax returns have been examined by the Internal Revenue Service for
all periods through December 31, 1993. No deficiency for any income Taxes has
been proposed, asserted or assessed against the Company which has not been
resolved and paid in full.

(h) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or tax returns of the Company.

(i) Powers of Attorney. No power of attorney currently in force has been
granted by the Company concerning any Taxes or tax returns.

(j) Tax Rulings. The Company has not received a Tax ruling or entered into
a closing agreement with any taxing authority that would have a Company Material
Adverse Effect.

SECTION 3.16 Material Contracts. The only material contracts and agreements
to which the Company is a party are the Advisory Agreements with the Buyer and
NIRT which are referred to herein collectively as "Company Material Contracts".

SECTION 3.17 Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by the Company are with reputable insurance
carriers, provide full and adequate coverage for all normal risks incident to
the business of the Company and the Company Properties and assets, and are in
character and amount substantially equivalent to that carried by persons engaged
in similar business and subject to the same or similar perils or hazards, except
for any such failures to maintain insurance policies that, individually or in
the aggregate, would not have a Company Material Adverse Effect. The Company has
made any and all payments required to maintain such policies in full force and
effect. The Company has not received notice of default under any such policy,
and has not received written notice or, to the Knowledge of the Company, oral
notice of any pending or threatened termination or cancellation, coverage
limitation or reduction or material premium increase with respect to such
policy.

SECTION 3.18 The Company Common Stock. The Stockholders hereby confirm that
the Company Common Stock constitutes "restricted securities" under applicable
federal and state securities laws, and that the

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Company Common Stock may not be resold in the absence of an effective
registration thereof under federal and state securities laws or an available
exemption from such registration requirements. The Stockholders also confirm
that they have received no assurance whatsoever as to whether or when any of the
Company Common Stock will be registered under federal or state securities laws,
and that, accordingly, the Stockholders may be required to hold the Company
Common Stock indefinitely. The Stockholders confirm that they are financially
able to hold such securities indirectly ad are able to risk the loss of their
entire investments. The Stockholders further confirm that the Buyer has made
available to him and her all information which he or she deemed material to
making the decision to sell the Company Common Stock in exchange for the Buyer
Common Stock.

SECTION 3.19 Investments. The Stockholders are acquiring the Buyer Common
Stock for their account for investment, and not with a view to the resale or
distribution thereof in violation of any applicable securities laws.

SECTION 3.20 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with this
Agreement based upon arrangements made by or on behalf of the Company.

SECTION 3.21 Definition of Knowledge of the Company. As used in this
Agreement, the phrase "Knowledge of the Company" (or words of similar import)
means the knowledge of William S. Friedman.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE BUYER

In connection with the Buyer's acquisition of the Company Common Stock, the
Buyer hereby represents and warrants to the Stockholders as follows:

SECTION 4.01 Organization and Qualification. The Buyer (as of the date of
this Agreement and as of the Closing Date) is a corporation incorporated,
validly existing and in good standing under the laws of the State of Nevada and
has the requisite corporate power and authority to carry on its business as it
is now being conducted except where the lack of such power, authority and
approval would not, individually or in the aggregate, have a Buyer Material
Adverse Effect (as defined below). The term "Buyer Material Adverse Effect"
means any circumstances, change in, or effect on, the Buyer when taken as a
consolidated whole, which is, or could reasonably be expected in the future to
be, materially adverse to the operations, assets or liabilities, employee
relationships, customer or supplier relationships, earnings or results of
operations, financial projections or forecasts, or the business prospects and
condition (financial or otherwise) of the Buyer and its subsidiaries, if any.

SECTION 4.02 Articles of Incorporation and By-laws. The Buyer has
heretofore furnished to the Company and the Stockholders complete and correct
copies of the Articles of Incorporation and the By-laws, each as amended, to
date of the Buyer. Such Articles of Incorporation, By-laws and equivalent
organizational documents are in full force and effect. The Buyer is not in
violation of any provision of its Articles of Incorporation, By-laws.

SECTION 4.03 Capitalization. The authorized capital stock of the Buyer
consists of (i) 20,000,000 shares of Buyer Common Stock and (ii) 10,000,000
shares of special stock, par value $.01 per share, issuable in such series and
with such rights and designations as the Board of Directors of the Buyer may
from time to time determine (the "Buyer Special Stock"). As of March 9, 1998,
(a) 1,286,897 shares of Buyer Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable, (b) 160,000 shares of
Buyer Common Stock were reserved for future issuance pursuant to the Buyer's
Share Option Plans, and (c) no shares of Buyer Special Stock were issued and
outstanding. All publicly traded shares of Buyer Common Stock have been approved
for trading on the National Association of Securities Dealers, Inc. Automated
Quotation/Small Cap Market ("NASDAQ").

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SECTION 4.04 Authority Relative to this Agreement. The Buyer has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its respective obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Buyer and the consummation by the Buyer of the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Buyer are necessary to authorize this Agreement. This Agreement has been duly
and validly executed and delivered by the Buyer and, assuming the due
authorization, execution and delivery by the Company and the Stockholders
constitutes a legal, valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.

SECTION 4.05 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by the Buyer does not, and the performance of this
Agreement by the Buyer will not, (i) conflict with or violate the Articles of
Incorporation or By-laws of the Buyer (ii) conflict with or violate any domestic
Laws applicable to the Buyer or by which any property or asset of the Buyer is
bound or affected, except for such conflicts or violations that, individually or
in the aggregate, are not reasonably likely to have a Buyer Material Adverse
Effect, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Buyer pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Buyer is a party or by which the Buyer or any property or asset of
the Buyer is bound or affected, except for any such breaches, defaults or other
occurrences that, individually or in the aggregate, would not have a Buyer
Material Adverse Effect and will not prevent or delay the consummation of the
transactions contemplated by this Agreement.

SECTION 4.06 Compliance with Laws; Permits. The Buyer is not in conflict
with, or in default or violation of, (i) any Laws applicable to the Buyer or by
which any property or asset of the Buyer is bound or affected, or (ii) any of
the franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders from all Governmental
Authority necessary for the Buyer to own, lease and operate its properties or
carry on the Buyer's business, except for any such conflicts, defaults or
violations that do not, individually or in the aggregate, have a Buyer Material
Adverse Effect.

SECTION 4.07 SEC Filings; Financial Statements.

(a) The Buyer has filed all forms, reports and documents required to be
filed by it (and/or its predecessor in interest) with the Securities and
Exchange Commission (the "SEC") since January 1, 1995 and has made available to
the Company and the Stockholders all registration statements filed by the Buyer
with the SEC, including all exhibits filed in connection therewith (on all forms
applicable to the registration of securities) since January 1, 1995 and prior to
the date of this Agreement (collectively, the "Buyer SEC Reports"), and has
heretofore made available to the Company and the Stockholders complete (i.e.,
un-redacted) copies of each exhibit (which is in effect as of the date hereof)
to the Buyer SEC Reports filed with the SEC. The Buyer SEC Reports (i) were
prepared in all material respects in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations thereunder and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.

(b) Each of the consolidated financial statements (including, in each case,
any notes and schedules thereto) contained in the Buyer SEC Reports
substantially complied as to form with the applicable accounting requirements
and rules and regulations of the SEC and was prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto), and each fairly presented the consolidated financial position,
results of operations and cash flows of the Buyer as at the respective dates
thereof and for the respective periods indicated therein in accordance with
United States generally accepted accounting principles (subject, in the case
of unaudited

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statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to have a Buyer Material Adverse
Effect).

(c) Except as and to the extent set forth on the consolidated balance sheet
of the Buyer as of December 31, 1997, including the notes thereto (the "Buyer
1997 Balance Sheet"), the Buyer has no liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet, or in the notes thereto, prepared in accordance
with United States generally accepted accounting principles, except for
liabilities and obligations (i) disclosed in any Buyer SEC Report filed since
December 31, 1997 and prior to the date of this Agreement, (ii) incurred since
December 31, 1997 in the ordinary course of business which, individually or in
the aggregate, do not have a Buyer Material Adverse Effect, or (iii) incurred
pursuant to or as contemplated by this Agreement.

(d) The Buyer has heretofore furnished to the Company and the Stockholders
complete and correct copies of all material amendments and modifications that
have not been filed by the Buyer with the SEC to all agreements, documents and
other instruments that previously had been filed by the Buyer with the SEC and
are currently in effect.

SECTION 4.08 Absence of Certain Changes or Events. Since December 31, 1997,
except as contemplated by this Agreement or disclosed in any Buyer SEC Report
filed since December 31, 1997, there has not been (a) any event or events
having, individually or in the aggregate, a Buyer Material Adverse Effect, (b)
any change by the Buyer in its accounting methods, principles or practices, or
(c) other than regular dividends, of which none were paid in 1997 and $.10 per
share of Buyer Common Stock was paid in January 1998 to holders of record on
December 26, 1997, any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Buyer or any redemption,
purchase or other acquisition of any of its securities.

SECTION 4.09 Absence of Litigation. Except as disclosed in the Buyer SEC
Reports, there is no claim, action, proceeding or investigation pending or, to
the Buyer's Knowledge (as defined in Section 4.18), threatened against the
Buyer, or any property or asset of the Buyer, before any arbitrator or
Governmental Authority, which, individually or when aggregated with other
claims, actions, proceedings or investigations or product liability claims,
actions, proceedings or investigations which are reasonably likely to result
from facts and circumstances that have given rise to such a claim, action,
proceeding or investigation, would have a Buyer Material Adverse Effect. As of
the date hereof, neither the Buyer nor any property or asset of the Buyer is
subject to any order, writ, judgment, injunction, decree, determination or award
having, individually or in the aggregate, a Buyer Material Adverse Effect.

SECTION 4.10 Material Contracts. The Buyer has not received a written
notice that the Buyer is in violation of or in default under (nor to the
Knowledge of the Buyer does there exist any condition which upon the passage of
time or the giving of notice or both would cause such a violation of or default
under) any material loan or credit agreement, note, bond, mortgage, indenture,
lease, permit, concession, franchise, license or any other material contract,
agreement, arrangement or understanding, to which it is a party or by which it
or any of the properties or assets of the Buyer is bound, except as set forth in
the Buyer SEC Reports, nor to the Knowledge of the Buyer does such a violation
or default exist, except to the extent that such violation or default,
individually or in the aggregate, would not have a Buyer Material Adverse
Effect.

SECTION 4.11 Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by the Buyer are with reputable insurance
carriers, provide full and adequate coverage for all normal risks incident to
the businesses of the Buyer and the properties and assets of the Buyer, and are
in character and amount at least equivalent to that carried by persons engaged
in similar businesses and subject to the same or similar perils or hazards,
except for any such failures to maintain insurance policies that, individually
or in the aggregate, would not have a Buyer Material Adverse Effect. The Buyer
has made any and all payments required to maintain such policies in full force
and effect. Except as set forth in the Buyer SEC Reports, the Buyer has not
received notice of default under any such policy, nor has either received
written notice or, to the Knowledge of the Buyer, oral notice of any pending

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or threatened termination or cancellation, coverage limitation or reduction or
material premium increase with respect to such policy.

SECTION 4.12 Accuracy of Information. Neither this Agreement nor any other
document required to be provided by the Buyer or any of its respective employees
or agents to the Company and the Stockholders in connection with the
transactions contemplated herein contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
therein not misleading.

SECTION 4.13 Transactions with Affiliates.

(a) For purposes of this Section 4.13, the term "Buyer Affiliated Person"
means (i) any holder of 2% or more of the Buyer Common Stock, (ii) any director,
officer or senior executive of the Buyer, (iii) any person, firm or corporation
that directly or indirectly controls, is controlled by, or is under common
control with, Tarragon or (iv) any member of the immediate family of any of such
persons; but "Buyer Affiliated Person" does not include the Stockholders or the
Company or Tarragon Management, Inc.

(b) Except as set forth in the Buyer SEC Reports, since December 31, 1997,
the Buyer have not, in the ordinary course of business or otherwise, (i)
purchased, leased or otherwise acquired any material properties or assets or
obtained any material services from, (ii) sold, leased or otherwise disposed of
any material property or assets of the Buyer or provided any material services
to (except with respect to remuneration for services rendered in the ordinary
course of business as director, officer or employee of the Buyer), (iii) entered
into or modified in any manner any contract with, or (iv) borrowed any money
from, or made or forgiven any loan or other advance (other than expenses or
similar advances made in the ordinary course of business) to, any Buyer
Affiliated Person.

(c) Except as set forth in the Buyer SEC Reports, (i) the contracts of the
Buyer do not include any material obligation or commitment between the Buyer or
any Buyer Affiliated Person, (ii) the assets of the Buyer not include any
receivable or other obligation or commitment from a Buyer Affiliated Person to
the Buyer and (iii) the liabilities of the Buyer do not include any payable or
other obligation or commitment from the Buyer to any Buyer Affiliated Person.

(d) To the Knowledge of the Buyer and except as set forth in the Buyer SEC
Reports, no Buyer Affiliated Person of Tarragon is a party to any contract with
any customer or supplier of the Buyer that affects in any material manner the
business, financial condition or results of operation of the Buyer.

SECTION 4.14 Access to Books and Records. The Buyer has permitted the
Company and the Stockholders to have access to such of the books and records of
the Buyer as the Company and the Stockholders have requested in connection with
the transactions contemplated by this Agreement.

SECTION 4.15 Investment. The Buyer is purchasing the Company Common Stock
for its own account for investment, and not with a view to the resale or
distribution thereof in violation of any applicable securities laws.

SECTION 4.16 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Buyer.

SECTION 4.17 Buyer Common Stock to Be Issued in the Transaction. The shares
of Buyer Common Stock to be issued pursuant to the transactions contemplated
hereby will when issued pursuant to this Agreement, be duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, the Buyer's Articles of Incorporation or By-laws or any
agreement to the Buyer is a party or by which the Buyer is bound and will, when
issued, be registered under the Securities Act and the Exchange Act and
registered or exempt from registration under applicable state blue sky laws.

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SECTION 4.18 Definition of Knowledge of the Buyer. As used in this
Agreement, the phrase "Knowledge of the Buyer" (or words of similar import)
means the knowledge of William S. Friedman, Bruce Schitz and/or Robert L.
Irvine.

ARTICLE V

CERTAIN DEFINITIONS

For purposes of this Agreement, the term:

(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;

(b) "beneficial owner" with respect to any shares means a person who shall
be deemed to be the beneficial owner of such shares (i) which such person or any
of its affiliates or associates (as such term is defined in Rule l2b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or any person with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
such shares;

(c) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in the City of New York, New York;

(e) "Governmental Authority" means any United States (federal, state or
local), foreign or supra-national Government, or governmental, regulatory or
administrative authority, agency or commission or courts;

(g) "Real Estate" means, with respect to the Buyer and the Company, as
applicable, all of the fee or leasehold ownership right, title and interest of
such person, in and to all real estate and improvements owned or leased by any
such person or which is used by any such person in connection with the operation
of its business; and

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ARTICLE VI
ADDITIONAL AGREEMENTS

SECTION 6.01 Covenant Regarding Indebtedness. The Company and the
Stockholders covenant and agree that as of the Closing Date the Company will
have no more than $1,000,000 of indebtedness on its line of credit and that no
assets of the Company shall be subject to any Liens, security interests or other
encumbrances in respect of any other indebtedness and that the Stockholders will
cause any indebtedness in excess of such amount, and any Liens, security
interests, or other encumbrances in respect of indebtedness in excess of such
amount, to be discharged and satisfied in full as of the Closing Date. At the
Closing, the Buyer will assume in full the Company's indebtedness under a line
of credit with SouthTrust Bank in an amount of up to $1,000,000.

ARTICLE VII
RESTRICTIVE COVENANTS

SECTION 7.01 Acknowledgements. The Company and the Stockholders acknowledge
and agree that: (i) the business contacts, customers, suppliers, know-how,
trade secrets, marketing techniques and other aspects of the Business have
provided and will hereafter provide the Company with substantial competitive
advantage in the operation of the Business, and (ii) by virtue of their previous
relationships, the Company and the Stockholders have detailed knowledge and
possess confidential information concerning the Business.

SECTION 7.02 Limitations. Neither of the Company or the Stockholders shall
directly or indirectly, for itself, himself or herself, or through or on behalf
of any other person or entity at any time, divulge, transmit or otherwise
disclose or cause to be divulged, transmitted or otherwise disclosed, any
business contacts, client or customer lists, know-how, trade secrets, marketing
techniques, contracts or other confidential or proprietary information relating
to the Business of whatever nature existing on or prior to the date hereof
(provided, however, that for purposes hereof, information shall not be
considered to be confidential or proprietary if (i) it is a matter of common
knowledge or public record, (ii) it is generally known in the industry, or (iii)
the subject Stockholder can demonstrate that such information was already known
to the recipient thereof other than by reason of any breach of any obligation
under this Agreement or any other confidentiality or non-disclosure agreement).

SECTION 7.03 Remedies.

(a) The parties agree to submit any claim, controversy or dispute arising
out of or relating to this agreement (and attachments) or the relationship
created by this agreement to non-binding mediation prior to bringing such claim,
controversy or dispute in a court. The mediation shall be conducted through
either an individual mediator or a mediator appointed by a mediation services
organization or body, experienced in the mediation of real estate investment
trust business disputes, agreed upon by the parties and, failing such agreement
with a reasonable period of time after either party has notified the other of
its desire to seek mediation of any claim, controversy or dispute (not to exceed
fifteen 15 days), by the American Arbitration Association in accordance with its
rules governing mediation, at a mutually convenient place in Las Vegas, Nevada.
The costs and expenses of mediation, including compensation and expenses of the
mediator shall be borne by the parties equally. If the parties are unable to
resolve the claim, controversy or dispute within ninety (90) days after the
mediator has been appointed, then either party may bring a legal proceeding to
resolve such claim, controversy or dispute unless such time period is extended
by written agreement of the parties. Notwithstanding the foregoing, any party
may bring an action (1) for monies owed, (2) for injunctive or other
extraordinary relief, or (3) involving the possession or disposition of, or
other relief relating to, real property in a court having jurisdiction in
accordance with subsection (b) below without submitting such action to
mediation.

(b) With respect to any claims, controversies or disputes which are not
finally resolved through mediation or as otherwise provided above, each of the
parties hereby irrevocably submits itself to the nonexclusive jurisdiction of
the state courts of Clark County, Nevada, and the federal district court for the
Ninth Circuit. Each party hereby irrevocably agrees that service of process may
be made upon it in any legal proceeding relating to or arising out of this
agreement or the relationship created by this agreement by any

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means allowed by Nevada or federal law. Venue for any legal proceeding relating
to or arising out of this agreement shall be Clark County, Nevada; provided,
however, with respect to any action (1) for monies owed, (2) for injunctive or
other extraordinary relief, or (3) involving possession or disposition of, or
other relief relating to, real property, any party may bring such action in any
state or federal district court which has jurisdiction. With respect to all
claims, controversies, disputes or actions, this Agreement shall be interpreted
and construed under Nevada law applicable to contracts entirely made and
performed within Nevada (except for Nevada choice of law rules).

(c) In the event of any dispute under or arising out of this Section 7, the
prevailing party or parties in such dispute shall be entitled to recover from
the non-prevailing party or parties, in addition to any damages that may be
awarded, its or their reasonable costs and expenses (including reasonable
attorneys' fees) incurred in connection with prosecuting or defending the
subject dispute.

SECTION 7.04 Severability. It is acknowledged, understood and agreed that
the restrictions contained in this Section 7.04(a) are made for good, valuable
and adequate consideration received and to be received by the Stockholders, and
(b) are reasonable and necessary, in terms of the time, geographic scope and
nature of the restrictions, for the protection of the Buyer and the Company and
the good will thereof. It is intended that said provisions be fully severable,
and in the event that any of the foregoing restrictions, or any portion of the
foregoing restrictions, shall be deemed contrary to law, invalid or
unenforceable in any respect by any court or other tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, as to duration, geographic area or in any other
relevant respect, only to that extent necessary to render same valid and
enforceable, and any other of the foregoing restrictions shall be unaffected and
shall remain in full force and effect.

ARTICLE VIII

INDEMNIFICATION

SECTION 8.01 General.

(a) Without prejudice to any rights of contribution as between the Company
and the Stockholders, the Company and the Stockholders shall jointly and
severally defend, indemnify and hold harmless the Buyer from, against and in
respect of any and all claims, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties and reasonable attorneys' fees, that the Buyer may incur, sustain or
suffer ("Losses") as a result of any breach of, or failure by the Company and
the Stockholders to perform, any of the representations, warranties, covenants
or agreements of the Company and the Stockholders contained in this Agreement
or in any Exhibit(s) furnished by or on behalf of the Company or the
Stockholders under this Agreement.

(b) The Buyer shall defend, indemnify and hold harmless the Company and the
Stockholders from, against and in respect of any and all claims, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, that the Company
and the Stockholders may incur, sustain or suffer as a result of any breach of,
or failure by the Buyer to perform, any of the representations, warranties,
covenants or agreements of the Buyer contained in this Agreement.

SECTION 8.02 Limitations on Certain Indemnity.

(a) Notwithstanding any other provision of this Agreement to the contrary,
(i) neither of the Company nor the Stockholders shall be liable to the Buyer
with respect to Losses unless and until the aggregate amount of all Losses
incurred by the Buyer shall exceed the sum of $50,000 (the "Basket"), and (ii)
the Company and the Stockholders shall thereafter be jointly and severally
liable for all Losses in excess of the Basket, provided that the Company and the
Stockholders' maximum aggregate liability in respect of all Losses shall not, in
the absence of proven fraud by either of the Company and the Stockholders in
respect of any particular Losses, in any event exceed the limitations set forth
in Section 8.02(b) below; provided, however, that the Basket and such limitation
on liability shall not be available with respect to, and there shall not be
counted

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against the Basket or such limitation of liability, any Losses arising by reason
of (A) any breach by either of the Stockholders of Section 8.02 above, or (B)
any Losses involving proven fraud by either of the Stockholders.

(b) The Buyer shall be entitled to indemnification by the Company and the
Stockholders for all representations and warranties for a period of three
calendar months from the Closing Date, however, the Buyer shall be entitled to
indemnification by the Company and Stockholders for representations and
warranties relating to title to the Company Properties for as long as the
Company owns the Company Properties.

SECTION 8.03 Claims for Indemnity. Whenever a claim shall arise for which
any party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party or parties in writing within fifteen (15)
days of the indemnified party's first receipt of notice of, or the indemnified
party's obtaining actual knowledge of, such claim, and in any event within such
shorter period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to the extent reasonably possible) the amount of potential liability
arising therefrom. If an indemnifying party shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same or may
agree to submit the same to arbitration or, if unable or unwilling to do any of
the foregoing, such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indmenification hereunder. Failure
to deliver written notice to the indemnifying party or parties shall relieve
such indemnifying party of any liability only to the extent such failure to
notify is prejudicial to its ability to defend such action.

SECTION 8.04 Right to Defend. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the indemnified party or any of its affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through a single counsel of their own
choosing, to defend or prosecute such claim in the name of the indemnifying
party or parties, or any of them, or if necessary, in the name of the
indemnified party. In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim. If the remedy sought in any such action or demand
is solely money damages, the indemnifying party shall have fifteen (15) days
after receipt of such notice of settlement to object to the proposed compromise
or settlement, and if it does so object, the indemnifying party shall be
required to undertake, conduct and control, though counsel of its own choosing
and at its sole expense, the settlement or defense thereof, and the indemnified
party shall cooperate with the indemnifying party in connection therewith.

ARTICLE IX
POST-CLOSING EVENTS

SECTION 9.01 Announcements. No party hereto shall make any disclosure or
public announcement of the consummation of the transactions pursuant to this
Agreement, or of any of the terms thereof, without the prior review and approval
thereof by the Buyer (in the case of any proposed disclosure or public
announcement by the Company and the Stockholders) and the Company and the
Stockholders in the case of any proposed disclosure or public announcement by
the Buyer, such approval not to be unreasonably withheld or delayed.

SECTION 9.02 Bank Accounts. Upon the consummation of the transactions
pursuant to this Agreement, the Company and the Stockholders shall cooperate
with the Buyer to promptly modify to the Buyer's satisfaction the signatory and
access arrangements for all bank accounts and safe deposit boxes maintained by
or in the name of the Company.

SECTION 9.03 Further Assurances. From time to time from and after the date
hereof, the parties will execute and deliver to one another any and all further
agreements, instruments, certificates and other documents as may reasonably be
requested by any other party in order more fully to consummate the transactions
contemplated hereby, and to effect an orderly transition of the ownership and
operations of the Business.

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ARTICLE X
COSTS

SECTION 10.01 Finder's or Broker's Fees. Each of the Buyer, the Company and
the Stockholders represents and warrants that neither they nor any of their
respective affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with any of
these transactions.

SECTION 10.02 Expenses. The Buyer, the Company and the Stockholders shall
each pay all costs and expenses incurred or to be incurred by them,
respectively, in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement.

ARTICLE XI

CONDUCT OF BUSINESS PENDING THE CLOSING

SECTION 11.01 Conduct of Business by the Company and the Buyer. Each of the
parties hereto covenants and agrees that, between the date of this Agreement and
the Closing Date, except as otherwise expressly provided for in this Agreement,
unless the Company and the Buyer shall otherwise agree (which agreement shall
not be unreasonably withheld or delayed) in writing, the businesses of each
party shall be conducted only in, and such party and its respective subsidiaries
shall not take any action except in a manner consistent with past practice; and
each such party shall use its best efforts to preserve intact its business
organization to keep available the services of the current officers, employees
and consultants of such party and its respective subsidiaries and to preserve
the current relationships of such party and its respective subsidiaries with
persons with which such party or any of its respective subsidiaries has
significant business relations. Except as contemplated by this Agreement, none
of the parties to this Agreement nor any of their respective subsidiaries shall,
between the date of this Agreement and the Closing Date, directly or indirectly
do, or propose to do, any of the following without the prior written consent of
the Company and the Buyer which consent shall not be unreasonably withheld or
delayed:

(a) amend or otherwise change its respective Articles of Incorporation or
By-laws;

(b) except in connection with an agreement for NIRT to merge with and into
the Buyer (the "NIRT Merger") pursuant to the Merger Agreement simultaneously
with the Closing, or pursuant to the exercise of existing options, issue, sell,
pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of, (i) any shares of capital stock of any
class of such party or any subsidiary of such party, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of such party or any subsidiary of such party (except
that options may be granted pursuant to the terms of the Buyer's stock option
plans or (ii) any assets of such party or any subsidiary of such party, except
for real estate transactions and related financings conducted at arm's length
and for fair value;

(c) with respect to the Company, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;

(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;

(e) with respect to the Company, (i) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business and
consistent in all material respects with past practice and in an amount not in
excess of $100,000; (ii) authorize capital expenditures which are, in the
aggregate, in excess of $100,000 for such party and its subsidiaries taken as a
whole; or (iii) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this subsection (e);

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(f) make any material Tax election or settle or compromise any material
federal, state, local or foreign income Tax liability; or

(g) take any action that would or is reasonably likely to result in any of
the covenants and agreements set forth in this Article XI or any of the
conditions set forth in Article XI not being satisfied as of the Closing Date.

ARTICLE XII

CONDITIONS PRECEDENT; TERMINATION

SECTION 12.01 Conditions Precedent. All conditions precedent set forth in
the NIRT Merger Agreement have been satisfied, NIRT has been incorporated in the
State of California under the name National Income Realty Corporation and the
Articles of Merger to evidence completion of the NIRT Merger for filing with the
Secretary of State of Nevada is the only event to be completed, which shall be
completed simultaneously herewith.

SECTION 12.02 Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time by the
Stockholders and the Buyer:

(a) by the mutual agreement of the Stockholders and by the Buyer (by
written consent duly authorized by the Board of Directors of the Buyer); or

(b) by either the Stockholders or the Buyer if (i) any court of competent
jurisdiction in the United States or other United States Governmental Authority
shall have issued an order (other than a temporary restraining order), decree or
ruling, or taken any other action, restraining, enjoining or otherwise
prohibiting the NIRT Merger or the consummation of this Agreement (provided,
however, that neither party may terminate this Agreement pursuant to this
Section 12.02(b)(i) prior to six months from the date of such issuance if the
party subject to such order, decree or ruling is using its reasonable best
efforts to have such order, decree or ruling removed, unless such order, decree
or ruling shall have become final and non-appealable), or (ii) the Closing shall
not have occurred on or before December 31, 1998; provided that the right to
terminate this Agreement under this Section 12.02(b) shall not be available to
any party whose willful, deliberate or knowing failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date.

SECTION 12.03. Effect of Termination. Except as provided in Section 12.02,
in the event of the termination of this Agreement pursuant to Section 12.02,
this Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of the Company or the Buyer or any of their
respective officers, directors or trustees and all rights and obligations of any
party hereto shall cease; provided, however, that nothing herein shall relieve
any party from liability for, or be deemed to waive any rights of specific
performance of this Agreement available to a party by reason of, any willful
breach by the other party or parties of its or their willful breach of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.

SECTION 12.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their Boards of Directors at any time
prior to the Closing. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.

SECTION 12.05. Waiver. At any time prior to the Closing, any party hereto
may (a) extend the time for the performance of any obligation or other act of
any other party hereto, (b) waive any inaccuracy in the representations and
warranties of the other party contained herein or in any document delivered by
the other party pursuant hereto and (c) waive compliance with any agreement or
condition contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.

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ARTICLE XIII

FORM OF AGREEMENT

SECTION 13.01 Effect of Headings. The Section headings used in this
Agreement and the titles of the Exhibits hereto are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of the provisions hereof or of the information set forth in such Exhibits.

SECTION 13.02 Entire Agreement; Waivers. This Agreement and the other
agreements and instruments referred to herein constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party hereto
has made any representation or warranty or given any covenant to the other
except as set forth in this Agreement, the Exhibits hereto, and the other
agreements and instruments referred to herein. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.

SECTION 13.03 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

ARTICLE XIV

PARTIES

SECTION 14.01 Parties-in-Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.

SECTION 14.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (which may be by telecopy followed
by mail or personal delivery) and must be personally delivered or mailed by
registered or certified mail (postage prepaid, return receipt requested) or by a
nationally recognized overnight courier service to the respective parties at the
following addresses. Subject to the other provisions of this Agreement, any
party may change its address (or redesignate the person to whom such notice
shall be delivered) for purposes of this Agreement by giving notice of such
change to the other party pursuant to this Section 14.02. In each instance, with
respect to any such notice so given, although not required for effectiveness of
such notice, it shall only be effective upon receipt by the party intended to
receive same, and the party delivering such notice shall also provide copies as
set forth below:

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If to the Stockholders and the Company
Tarragon Realty Advisors, Inc.
280 Park Avenue
East Building, 20th Floor
New York, New York 10017
Facsimile: (212) 949-8001
Attention: William S. Friedman

If to the Buyer:

Tarragon Realty Investors, Inc.
3100 Monticello Avenue, Suite 200
Dallas, Texas 75205
Facsimile: (214) 599-2220
Attention: William S. Friedman

with a copy to:

Prager, Metzger & Kroemer PLLC
2626 Cole Avenue, Suite 900
Dallas, Texas 75204
Facsimile: (214) 523-3838
Attention: Steven C. Metzger, Esq.

or to such other address as any party shall have specified by notice in writing
given to the other party.

ARTICLE XV

MISCELLANEOUS

SECTION 15.01 Amendments and Modifications. No amendment or modification of
this Agreement or any Exhibit hereto shall be valid unless made in writing and
signed by the party to be charged therewith.

SECTION 15.02 Non-Assignability; Binding Effect. Neither this Agreement,
nor any of the rights or obligations of the parties hereunder, shall be
assignable by any party hereto without the prior written consent of all other
parties hereto. Otherwise, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.

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IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.

TARRAGON REALTY INVESTORS, INC.

By: /s/ William S. Friedman
--------------------------------------------
Name: William S. Friedman
Title: President and Chief Executive Officer

TARRAGON REALTY ADVISORS, INC.

By: /s/ William S. Friedman
--------------------------------------------
Name: William S. Friedman
Title: President and Chief Executive Officer

/s/ William S. Friedman
------------------------------------------------
William S. Friedman

/s/ Lucy N. Friedman
------------------------------------------------
Lucy N. Friedman

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[DUFF & PHELPS, LLC LETTERHEAD]

APPENDIX C

May 21, 1998

Board of Directors
Tarragon Realty Investors, Inc.
280 Park Avenue
East Building, 20th Floor
New York, NY 10017

Gentlemen:

You have asked Duff & Phelps, LLC ("Duff & Phelps"), as independent financial
advisor to the Board of Directors (the "Board") of Tarragon Realty Investors,
Inc. ("Tarragon" or the "Company"), to provide an opinion (the "Opinion") as to
the fairness, from a financial point of view, of the Merger Proposal, as
described below, whereby the Company would, among other things, become a
self-administered Real Estate Investment Trust ("REIT"). The Merger Proposal
consists of the consolidation of Tarragon and National Income Realty Trust
(NIRT) into a single entity utilizing Tarragon as the surviving entity. As no
explicit statutory authority permits a California business trust to merge with
and into a Nevada corporation, as a part of the transaction prior to the merger,
the Board of Trustees of NIRT shall cause NIRT to be incorporated in the State
of California under the name National Income Realty Corporation, which will then
consolidate by merger with and into Tarragon (the "Merger"). The Merger is to be
consummated pursuant to an Agreement and Plan of Merger to be dated June 5, 1998
between the Company and NIRT (the "Merger Agreement"). Pursuant to the Merger
Agreement, upon the effectiveness of the Merger, each issued and outstanding
share of beneficial interest of NIRT will be converted into and represent the
right to receive 1.97 shares of common stock of the Company (the "Exchange
Ratio"). The Merger Proposal also contemplates the acquisition by the Company
(simultaneously with the final consummation of the Merger) of Tarragon Realty
Advisors, Inc. ("TRA") which is the current contractual advisor to both the
Company and NIRT as well as certain employment arrangements and other related
transactions. Specifically, Duff & Phelps has been asked to determine whether
the Merger Proposal and the Exchange Ratio are fair to the Company and to the
stockholders of the Company, from a financial point of view.

<PAGE> 137

Board of Directors
Tarragon Realty Investors, Inc.
May 21, 1998
Page 2

QUALIFICATIONS AND INDEPENDENCE

Duff & Phelps, in the course of its regular business, advises boards of
directors, corporate managements, and other fiduciaries on financial and
fairness issues in connection with mergers and acquisitions, leveraged buy-outs,
restructurings, private placements, and employee benefit plans, among other
situations. Previously, Duff & Phelps has not provided any financial advisory or
other services to the Company or to NIRT.

Duff & Phelps is receiving a fee for providing the Opinion. Such fee is not
contingent upon either the issuance of a favorable opinion or the consummation
of the Merger Proposal.

SCOPE OF ANALYSIS

In conducting its analysis and in preparing the Opinion that the Merger Proposal
is fair from a financial point of view to Tarragon and to the Public
Stockholders, Duff & Phelps, among other things, (1) reviewed and analyzed the
terms of the Merger Proposal as described in the form of Merger Agreement and in
a draft Joint Proxy Statement/Prospectus of the Company (the "Proxy Statement")
to be filed as a part of an S-4 Registration Statement with the Securities and
Exchange Commission (the "SEC"); (2) analyzed certain historical, business and
financial information relating to Tarragon (including its predecessor company,
Vinland Property Trust) and NIRT, including but not limited to Tarragon's Annual
Reports to Shareholders and Form 10-Ks filed with the SEC for the fiscal years
ended November 30, 1991 through 1996, and fiscal year ended December 31, 1997;
NIRT's Annual Reports to Shareholders and Form 10-Ks filed with the SEC for the
fiscal years ended December 31, 1991 through 1997; and Tarragon's and NIRT's
10-Qs for the quarter ended March 31, 1998 (unaudited); (3) reviewed certain
internal financial analyses and forecasts for Tarragon and NIRT on a stand-alone
basis; (4) reviewed certain internal financial analyses and forecasts for
Tarragon and NIRT on a combined basis (the "Combined Entity") based upon the
terms of the Merger; (5) reviewed the advisory agreements by and among Tarragon,
NIRT, TRA and their respective affiliates; (6) reviewed internal operational and
financial information relating to TRA; (7) considered the pro forma effect of
the Merger on Tarragon's capitalization, earnings, cash flow, funds from
operations, book value and financial prospects; (8) reviewed current conditions
and trends with respect to the real estate industry and REITs, in general,
including interest rates and general business and economic conditions in the
markets where the Company operates; (9) reviewed the reported market prices and
trading volumes of Tarragon's and NIRT's common stock for recent periods; (10)
reviewed publicly available information concerning other companies deemed
comparable, in whole or in part, to Tarragon and NIRT, (11) reviewed certain
merger or change-of-control transactions that have occurred within the industry;
and (12) conducted such other financial studies, analyses and investigations as
it deemed appropriate.

<PAGE> 138

Board of Directors
Tarragon Realty Investors, Inc.
May 21, 1998
Page 3

As background for its analysis, Duff & Phelps held extensive discussions with
members of Tarragon's Board of Directors, and members of the senior management
of Tarragon and NIRT regarding the history, current business operations,
financial condition, future prospects and strategic objectives of Tarragon, both
in its present form and on a combined entity basis.

ASSUMPTIONS AND RELIANCES

In performing its analysis and rendering its Opinion, Duff & Phelps relied upon
the accuracy and completeness of all information provided to it, whether
obtained from public or private sources, and has not assumed any responsibility
for the independent verification of such information. With respect to financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates of the management of the
Company. Notwithstanding the foregoing, Duff & Phelps used procedures deemed
appropriate in order to analyze the reasonableness of the assumptions underlying
the Company's financial projections. Duff & Phelps did not make any independent
appraisals of the assets or liabilities of the Company nor those of NIRT.

Duff & Phelps has prepared its Opinion effective as of May 21, 1998. Its Opinion
is necessarily based upon market, economic, financial and other conditions as
they exist and can be evaluated as of such date. Unless Duff & Phelps has
withdrawn its Opinion due to subsequent material adverse changes in either such
market, economic, financial and other conditions, or in the business of Tarragon
or NIRT, this Opinion will remain effective at the closing of the Merger.

We understand that the Company may refer to, summarize and/or publish the
Opinion, in whole or in part, in connection with certain filings to be made with
the SEC and in certain materials to be distributed to the Company's shareholders
and to prospective investors in the Company. Duff & Phelps shall have the right
to review and to comment on that portion of any such materials that refer to its
Opinion.

<PAGE> 139

Board of Directors
Tarragon Realty Investors, Inc.
May 21, 1998
Page 4

CONCLUSION

Based upon and subject to the foregoing, Duff & Phelps is of the opinion that
the Merger Proposal and the Exchange Ratio are fair to the Company and to the
holders of Common Stock of the Company from a financial point of view.

Respectfully submitted,

/s/ DUFF & PHELPS, LLC

Duff & Phelps, LLC

<PAGE> 140
APPENDIX D

May 21, 1998

Board of Trustees
National Income Realty Trust
280 Park Avenue
East Building, 20th Floor
New York, NY 10017

Gentlemen:

You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, to National Income Realty Trust ("National"), as
of the date hereof, of the consideration to be received by National (the "Merger
Consideration") pursuant to a proposed Agreement and Plan of Merger (the
"Agreement") by and between National and Tarragon Realty Investors ("Tarragon").
As more fully described in the Agreement, each share of Common Stock of National
will be exchanged (the "Exchange Ratio") for 1.97 shares of Common Stock, of
Tarragon.

In preparing this opinion, we have relied on and assumed the accuracy and
completeness of all the financial and other information provided to us or
publicly available and have not assumed any responsibility for independent
verification of any such information. We have not conducted a physical
inspection of all of the facilities or assets of National, nor have we made or
obtained any independent appraisals of any such facilities or assets.

In connection with rendering our opinion we have reviewed and analyzed,
among other things, the following:

(i) A draft of the proposed Agreement and Plan of Merger between National
and Tarragon dated May 21, 1998.

(ii) Certain public information concerning National including its Annual
Report of Form 10-K for the year ended December 31, 1997 and its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and
the Annual Report on Form 10-K of

<PAGE> 141

Tarragon (formerly Vinland Property Trust) for the Fiscal year ended
December 31, 1997 and its Quarterly report on Form 10-Q for the quarter
ended March 31, 1998.

(iii) Certain internal information, primarily historical in nature,
concerning the business and operations of National, which was furnished
to us by National for use in our analysis.

(iv) Certain publicly available information concerning certain other
companies and transactions we deemed relevant.

We have also held discussions and interviewed members of the senior
management, of both National and Tarragon, regarding the past and current
business operations, financial condition, and future prospects of their
respective companies.

We have assumed that the financial projections prepared by the managements
of National and Tarragon represent the best current judgment of these
managements as to the future financial condition and result of operations of
National and Tarragon, and have assumed that the projections have been
reasonably prepared based on such current judgment. Further we have assumed that
the managements of National and Tarragon are unaware of any facts that would
make such information incomplete or misleading. We have also taken into account
our assessment of general economic, market, and financial conditions and our
experience in similar transactions.

Our opinion, necessarily is based upon regulatory, economic, market and
other conditions as they exist, and the information made available to us, which
we relied upon without independent verification, as of the date of this letter.
Subsequent developments may affect this opinion, and we do not have any
obligation to update, revise or reaffirm this opinion.

As you are aware, Gilford Securities Incorporated ("Gilford"), will receive
a fee for its services in connection with rendering this opinion to National. In
addition, National has agreed to reimburse Gilford for certain out of pocket
expenses, and to indemnify Gilford for certain liabilities which may arise from,
among other things, the delivery of this opinion.

This letter does not constitute a recommendation to any holder of National
Common Stock as to whether to vote in favor of the proposed merger contemplated
by the Agreement and does not address the underlying business decisions of the
Board of Directors of National to proceed with or effect such proposed merger.

The information contained in this opinion may not be used for any other
purpose, or reproduced, disseminated, quoted, referred to, or disclosed, or
otherwise made available to, or relied upon by any other party, or for any other
purpose, nor reference be made hereto or to Gilford, without the prior written
consent of Gilford; provided, however, that although the Opinion is solely for
the use of the Board of Trustees of

<PAGE> 142

National, it is acknowledged that such Opinion may be included in filings
required by The Securities and Exchange Commission and other regulatory agencies
which must approve this merger. When used, this Opinion will be reproduced in
such documents in full, and any description of, or reference to, Gilford or
summary of the Opinion in such documents will be in a form satisfactory to
Gilford and its counsel.

Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Merger Consideration (including the
Exchange Ratio) is fair to National, from a financial point of view.

Very Truly Yours,

Gilford Securities, Incorporated

By: /s/ RONALD WHITMAN WEISS
-------------------------------
Ronald Whitman Weiss
Senior Vice President
President

<PAGE> 143

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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS JOINT PROXY STATEMENT/PROSPECTUS CONSTITUTES NEITHER AN OFFER
TO SELL, NOR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY
THIS JOINT PROXY STATEMENT/PROSPECTUS, NOR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION.

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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
UNAUDITED PRO FORMA FINANCIAL
INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SELECTED FINANCIAL DATA OF TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SELECTED FINANCIAL DATA OF NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
THE SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ACQUISITION OF THE ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
MARKET PRICES; DISTRIBUTIONS AND
RELATED SHAREHOLDERS MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
DESCRIPTION OF TRII CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
COMPARISON OF CERTAIN RIGHTS OF
STOCKHOLDERS OF TRII AND
SHAREHOLDERS OF NIRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
INFORMATION ABOUT TRII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
RELATIONSHIPS WITH INDEPENDENT
PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
FUTURE PROPOSALS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

During the 25-day period following the effective time of the Merger, all
dealers effecting transactions in the shares of Common Stock of TRII, whether
or not participating in this distribution, may be required to deliver a copy of
this Proxy Statement/Prospectus.
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NATIONAL INCOME
REALTY TRUST

---------------
PROXY STATEMENT
---------------

TARRAGON REALTY
INVESTORS, INC.

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PROSPECTUS
---------------

7,586,000 SHARES
OF COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

September 10, 1998

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